Insuring Title to Property After a Mortgage Foreclosure Just got a Little Harder… but we can Help!
Lack of Standing Defense - Amendment to RPAPL Section 1302
New section 1302-a of the Real Property Actions and Proceedings Law, which applies to “home loans*” and went into effect on December 23, 2019, preserves defendants’ rights to raise the defense of lack of standing until the gavel falls at a foreclosure sale, in cases where any defendant failed to raise the defense earlier in a foreclosure proceeding. To make matters more difficult, the defense of lack of standing survives a foreclosure action where a defendant defaulted (failed to appear or answer). This means that subordinate lenders or other creditors can raise the defense, even after a new owner has purchased the foreclosed property!
Some Title Companies Will No Longer Insure
Obviously, this presents a serious problem for title insurers, who are almost always called upon to insure titles to homes coming out of mortgage foreclosures. There is a strong probability that either the foreclosed homeowner or a creditor will raise the defense of lack of standing, especially in cases where there was a default in appearing or answering.
Due to this increased risk for title insurers, many of the largest title companies (including the Fidelity Family of title insurers: Fidelity National, Chicago Title, Commonwealth, Lawyers Title and National Title of New York) have imposed an absolute ban against insuring titles made through such foreclosures.
Old Republic Makes it Possible
At Vanguard Research & Title Services, Inc., however, we have the ability to provide title insurance via a number of underwriters, including Old Republic National Title Insurance Company. Fortunately for us (and for you, if you need title insurance for a foreclosed home mortgage), Old Republic’s approach is more circumspect regarding such titles. With Old Republic, not every title that has been through a home foreclosure will be denied title insurance!
At Vanguard, we have received permission to insure home foreclosure titles on a case-by-case basis. We will review the foreclosure action, and for the many titles that will meet Old Republic’s criteria, we will insure for both owners and mortgage lenders.
Vanguard Research & Title Services, Inc. is pleased to be able to provide this exceptional service to home buyers and their attorneys.
If you need title insurance, even with difficult titles, contact your Vanguard Research & Title Services, Inc. office and ask to speak with one of our title officers!
* Home loans are defined to mean loans for “a 1- 4 family owner occupied property where the debt was incurred for personal, familial or household purposes.”