BofA Sues First American Over Title Insurance Claims

Posted by Orb Staff on March 22, 2010 No Comments
Categories : Residential Mortgage

Bank of America has filed a lawsuit against the First American Corporation, claiming the Santa Ana, Calif.-based title insurer has wrongly denied or failed to timely respond to more than 5,000 of Bank of America's claims related to title defects.

The claims are in relation to more than $500 million of loan losses tied to defaulted home equity loans and lines of credit, according to the complaint, which was filed in the North Carolina Superior Court. Title insurance – unlike mortgage insurance, which ensures loans will be paid in full – covers a lender's losses that are caused by title defects.

Bank of America's complaint explains that First American and its subsidiary, United General Title Insurance Co., had entered into an agreement with Fiserv appointing Fiserv as the agent of the insurers in connection with insurance policies issued by United General and First American to lenders that participated in Fiserv's QuickClose Lien Protection Insurance Program, including policies issued to Bank of America.

Fiserv marketed the QuickClose product as a replacement for conducting traditional title searches, the complaint continues.

‘A basic premise of the program was that a participating lender would no longer conduct title searches in connection with loans processed under the program in order to verify ownership or to identify existing liens on the collateral property," the complaint reads.

Under QuickClose, Bank of America was required to satisfy certain criteria before title was insured. Such criteria included gathering borrower affidavits regarding statements made in the borrower's loan applications, reviewing credit-bureau reports and asking borrowers about any secured mortgage shown on the credit-bureau reports but not disclosed in loan applications. If a bank fails to satisfy those requirements, its insurance coverage is wiped out.

First American has issued a statement saying it regrets that its "valuable customer, Bank of America, has chosen to file a legal action against the companies. However, we are hopeful that we will be able to resolve this matter outside of court with continued discussions."

First American further states that it expects Fiserv's practices to be scrutinized in this process.

Each of the claims at issue in the lawsuit falls into the following three categories:

  • lien-position claims (where Bank of America is not in the lien position in which it intended to be),
  • vesting claims (where Bank of America's mortgage was not signed by all owners of the property), and
  • legal-description claims (where the legal description attached to the bank's mortgage does not match the description contained in the last deed of record conveying the property to the owner.

SOURCE: Courthouse News

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