We in real estate often talk about foreclosures collectively as if they were a body of moving water. If a bank is processing a “stream” of foreclosures, and the “inflow” increases, they might have a logjam, a bottleneck, a clogged pipeline.

I think this metaphor is perfectly appropriate (and not just because the subprime mortgage crisis nearly drowned our economy!) Seriously, reading news about foreclosures is something like wading through a lazy river. For example, data aggregator RealtyTrac recently reported that foreclosure rates across the nation have been dropping. But you won’t find the cause of this drop in today’s news—economic trends surface months late in the foreclosure industry. You see them coming slowly from a mile away, and they are unavoidable.

Why so sluggish? Well, there are two main causes.

For one thing, a homeowner doesn’t default the very moment that economic trouble starts to brew. If a company begins seeing decreasing profits in January, they might not lay off Joe Homeowner until May. Then, Joe Homeowner might not default on his mortgage until September. This delay contributes to the foreclosure “lag.”

Secondly, foreclosures take time to process. A lot of time. On average more than a year and a half after the original default, according to a recent report put out by Lender Processing Services. Here’s why: mortgage debts are often sold to third party trusts and traded on the market. Before a foreclosure can be authorized, lenders must submit an affidavit that testifies that the chain of the debt’s ownership has been accounted for and the homeowner has in fact defaulted. There has to be some accountability, right? We’re dealing with people’s houses here!

So, keeping these factors in mind, what explains the recent drop in the foreclosure rate?

After the subprime mortgage crisis late last decade, when homeowners began defaulting on mortgages in droves, banks suddenly had a huge amount of foreclosures to process—heaps and heaps of paperwork for attorneys to go over. However, many of these attorneys cut corners to expedite the process. Foreclosures were processed improperly, with incidences of falsified documents and signatures.

This practice was revealed in late 2010 to enormous public outcry. Now not only must each foreclosure be scrutinized in a time-intensive verification process, but lenders must also look backward, retroactively finding supporting documents for past foreclosures. The mess won’t sort itself out, right? Many states have also started requiring that judges review foreclosures before they are processed—an extra step.

So rather than indicating that fewer homeowners are defaulting, the drop in foreclosures is the result of an administrative bottleneck. But you know what? That’s a good thing. It’s good that this mess is being sorted out so we can move forward again. It’s good that the industry is taking accountability seriously, and taking the time to do the job right. We are still wading through the foreclosure pipeline: just a bit more slowly now, and a lot more carefully.

Buying a home today is more complicated than it used to be, as anyone who has tried to do so or who works in the industry can tell you. Foreclosures and short sales present particular challenges unique to those types of closings.

It is vitally important that every participant in the closing process, from lender to title agent to buyers and investors, understand these unique challenges. It is also necessary to understand the best industry practices for ensuring that the title is executed properly. This helps all parties avoid the hassle and expense of title insurance claims later on.

Particularly if you are investing in a distressed property, you need to understand how title insurance works. In a traditional real estate transaction, there are two main parties involved: the buyer and the seller. The buyer and seller negotiate a price and contract terms for the sale of the property. Unless he or she is paying in cash, the buyer is responsible for obtaining title insurance to protect the bank that lends the money for their loan.

This becomes more complicated when a distressed property is being sold. In a short sale transaction, a new party enters the picture: the mortgage lender (usually a bank.) In this instance, after the buyer and seller have negotiated a contract, the mortgage lender must approve it before it goes through.

In the case of a foreclosure, bank-owned or real estate-owned (REO) transaction, this becomes yet more complicated. In this case, the two major parties are the homebuyer and the mortgage bank, which is the seller in this case because they own the property.

In this case, the homebuyer submits a normal “as is” real estate purchase contract to the listing agent, who usually represents the bank. Then the listing agent submits the terms to the bank, which will typically come back with a “counter offer” intended to give the bank the upper hand during the closing process.

In the case of all of these types of real estate transactions, a title company or title agent will oversee all closing details. They will serve as a communicator and facilitator between the homebuyer, the seller or bank, and the mortgage lender (assuming the buyer is seeking a mortgage.) They may also act as a liaison with the condo or homeowner’s association, surveyors, pest control companies, and various other service providers. Title agencies also frequently hold and manage escrow money for the parties, as well as researching the status of real estate taxes, utility bills and association fees.

In most instances the most important duty of the title agency is to research the ownership history of the property. This includes looking into association fees, utility bills, real estate taxes and the “chain of title.” The chain of title lists previous owners of the property and any liens, complications, encumbrances or claims that might be levied against the property. Once these issues have been solved, the title agent issues title insurance and gives the document demonstrating evidence of ownership (called the “title”) to the new owner of the property.

Essentially, there are two ways to convey title. Titles can either be marketable or insurable.

A marketable title is a traditional title, issued to the buyer after the title agent has solved all outstanding liens, issues or encumbrances against the property.

An insurable title, on the other hand, is issued when there is a possibility of complicating issues with the property title. These issues may include unreleased liens, deed related matters, unpaid fees or any number of problems. In this case, the title company will assess risk and decide whether to assume that risk. In some cases, this may result in diminished coverage for the title holder (buyer.) In the case of foreclosure and REO real estate transactions, unless a buyer wants to pay for title costs and insurance, they will normally receive an “insurable” title.

This may sometimes lead to complications later on if buyers decide to refinance or sell their property. In most cases, any title defects left on the property will need to be cured before a new real estate transaction or refinance can be closed.

Bay National Title is an expert in REO and foreclosure transactions. We pride ourselves on thorough title searches and effective insurance for all involved parties. Additionally, our experienced staff can walk you through this process, explaining all of the details, whether you are a buyer, seller, lender, investor or any other stakeholder in the real estate transaction.

To learn more about Bay National’s REO and foreclosure-specific offerings, give us a call at 727-449-8733.

Bay National Title Company (formerly Bay Title and Escrow) has recently launched a national licensing initiative. Many clients say to us, “We wish we had a Bay Title in ‘x’ state.” This initiative is our response to that wish!

We realize that it is important to our clients to have a title insurance agency with the flexibility to write title insurance across the nation. For this reason, we seek to expand our footprint as much as possible through both licensing and work-shares. Currently, we are able to write title insurance in over forty states, and we are in the process of expanding even further.

We want you to be able to think of Bay Title as a “one-stop shop” for all of your title insurance and settlement services needs, and that is why we have embarked on this project. It is also why we seek to go above and beyond for our clients every single day. We reward our employees for providing exceptional service, and we always make sure to take care of our current clients, since they are the most valuable asset we have.

Our national licensing project will launch Bay Title forward into an exciting and productive future, increasing our reputation as a world-class title insurance agency that truly cares about its clients. We hope that you will consider opening orders with us in new states, and that you will think of us the next time you have a need for title insurance and customized closing services.

If you have any questions, don’t hesitate to contact us either via email at info@baytitlecompany.com or by calling us at 727-449-8733 or toll-free at 888-351-6818. As always, we look forward to hearing from you.

Bay National Title Company is proud to announce our partnership with Homes for Our Troops. We have created a fundraiser to help HFOT build a handicap-accessible home for SSG Juan Roldan, a veteran of the war in Iraq.

SSG Juan Roldan suffers from two above-the-knee leg amputations, a spinal cord injury and traumatic brain injury. SSG Roldan, who also experienced life-threatening blood loss after an EFP explosion in Iraq, says he owes his life to the quick-thinking crew members who saved him. Airlifted to a local hospital and then to Landstuhl, Germany, SSG Roldan required stabilization before being sent to Walter Reed Army Medical Center where he awoke from a coma after more than two weeks. SSG Roldan worked for over three months to learn to speak again. More than three years after his injuries, SSG Roldan continues to receive treatment at WRAMC today.

SSG Roldan enjoys spending time with his family, especially his daughter, Bryana. He also enjoys skiing, playing basketball and lifting weights. His goal is to be able to walk again, and to be able to do all of the things that he enjoys and at one point believed he might never be able to do again. He also hopes to attend school and would like to work to help people who need assistance in the future.

Our goal is to raise $50,000.00 toward building SSG Juan Roldan a handicap-accessible home through HFOT.

You help just by doing business with us. Bay National Title will donate 3% of all sales until this goal is met.

In addition, if you would like to make a donation to this worthy project, we will match it. You can do so here. After you have donated, please email your receipt to info@baytitlecompany.com.

Below you will find a video about SSG Juan Roldan, for whom Bay National Title is currently working to build a home:

Homes for Our Troops is a nonprofit, nonpartisan 501(c)(3) organization that was founded in 2004 with the mission of building homes for severely disabled veterans. They raise donations of money, materials and labor and work with the Veterans Administration to provide homes free of cost to men and women who have served our country. Their mission is to build homes that provide disabled troops with the maximum possible amount of mobility and independence. Charity Navigator has awarded them the highest rating of four stars, and the American Institute of Philanthropy ranks Homes for Our Troops among the best charities in the nation serving troops and veterans.

Bay National Title Company (formerly Bay Title & Escrow) welcomes you to our new website. In addition to its facelift, the new site features updated content and improved navigation to make it even easier for our clients to do business with us. In conjunction with the launch of our new website, Bay Title has expanded its licensing footprint throughout the U.S., enabling it to offer title insurance and settlement services to a wide variety of clients all over the country. We’ll write more about that in an upcoming blog post.

We at Bay Title strongly believe in the importance of offering our clients the utmost in service, whether that means quick turn-around on a title order or providing them with a website that facilitates their needs. Our online order form will allow you to open orders with us without even picking up the phone or writing an email, and our links to Res.Net and Equator will make filing REO and default title orders with us a breeze.

We have also included information on the two philanthropic organizations that Bay Title currently supports, Homes for Our Troops and Moving Hearts. Both pages contain information about our involvement with those groups, as well as videos that explain their mission and put a human face on these very worthy causes. We strongly encourage you to visit these pages, explore the organizations’ sites and to consider donating. Bay Title will match all contributions.

Thank you so much for visiting our new site. We hope that you will find it useful, and urge you to check back often for updates. In the meantime, you might find some of the following pages of interest:

Our philanthropic activities:

Homes for Our Troops
Moving Hearts

Title Tools:

Fast Order Form
Title Premium Calculator
Title Insurance FAQs

About Bay Title:

What Makes Us Different
Nico The Title Dog

If you have any questions or comments, please send them to info@baytitlecompany.com or leave a note in the comments section of this post.

Bay National Title Company is very proud to announce our support of the Moving Hearts Foundation, which seeks to increase awareness about organ donation. Many people die every year simply because not enough organs are being donated, and much of this problem is related to a lack of awareness.

Kelly Perkins is a heart transplant recipient and the founder of Moving Hearts. She and her husband Craig travel around the world climbing mountains and raising awareness about the importance of organ donation. Bay Title’s president, Evan Grimm, recently climbed Batian, the tallest peak on Mt. Kenya, with Kelly and Craig.

Moving Hearts relies on donations to continue their work, and Bay Title will match any donation you make via Moving Hearts. Simply email your receipt to info@baytitlecompany.com.

Donations of $100 or more will receive a signed copy of Kelly’s book, Climb of My Life.

Evan Grimm, president of Bay National Title Company, had this to say about the experience of climbing with Kelly: “One of the reasons I thought it was important to get involved with this project was that in meeting Kelly and joining her on this climb I couldn’t stop thinking, “Wow, what an amazing person, the world would really be a lesser place without her,’ and that would lead me to think about how many exceptional individuals like Kelly we lose every year, just because people don’t pay attention to this.”

Visit our Moving Hearts page to learn more about the organization.