08.07.07
Let’s Go Back to the Old-Fashioned Abstract
FULL abstracts of title still exist. In many parts of the Midwest, each and every recorded document is “abstracted” into a book that is “continued” every time a property is sold, and handed off from owner to owner.
While some of the large Underwriters and Real-estate-company-owned title companies have tried hard to get rid of abstracts, the Bar Associations and many other knowledgeable people want to keep them. They are history, they represent the essence of title. In my opinion, the abstract is still the ideal information product. It shows every document - every easement- who holds it, what it is for, when it will expire, and its exact location. The same with Restrictions, Deeds, etc. I still love the traditional abstract, and those who take the time and care to prepare such an awesome product. A full abstract tells “The whole recorded truth.”
I believe the reason that some want to get rid of abstracts is that it is faster and cheaper to do without them. We all love faster, cheaper. But more importantly, without an abstract, there is no evidence of the fact that many searches being done today are of horribly poor quality. The poor quality of the search is then translated into the poor quality of the title product given to the homeowner.
I am also saddened by the shortcuts taken on title commitments. I had a call from a real estate agent the other day who asked my opinion on concerns he had on a title commitment from a large affiliated business title agent. His buyer was a Sr. VP for a major company, buying an Owner’s Policy on a very costly home. In looking at the commitment, I saw exactly what he was talking about. The areas of greatest concern for me were:
1) The Commitment specifically excluded any coverage assessments for Utility, water, sewer… and other assessments levied PRIOR to closing against current or prior owners, even though they DID charge the seller both for an “assessment search” and for an “evaluation” of that assessment search.
2) The policy generically excluded “Covenants, Conditions and Restrictions,” which I believe are one of the MAJOR reasons one buys an Owner’s Policy, especially in the swank area where this buyer was purchasing. (Seems to me the title agent was just too lazy to do his job.)
3) The policy generically excluded “Utility and Drainage Easements of Record, if any.” Again, I think the Title Industry owes it’s customers some kind of due diligence for a decent search. After all, wouldn’t YOU want to know if there was an easement in favor of six different parties over your property to get to the lake and park their boats? Or a 50 foot pipeline across the middle of the back yard? YIKES.
4) They did catch one recorded easement. (After all, the property was Torrens.) But, even after it was specifically requested, the Title Agent absolutely refused to provide any assistance as to its location (although they did charge for a plat drawing and inspection that did not show the easement.) How sad. After all, if you can’t figure out an easement, what the @%#! are you doing in the title business?
These (non-abstract) mini-searches and resulting title policies do, however, fit the current risk-underwriting philosophy, which is “Take all the short-cuts you can. Go for quick and easy (forget the quality that is due the homebuyer) and then let the Homeowner take the “hit” when easements, restrictions or assessments become a problem. No wonder the title industry is being chewed up and spit out by the media.
Robert Franco said,
August 9, 2007 at 2:18 pm
Excellent post, Jeanne. The old system of using “true abstracts of title” may have been cumbersome but it did have it’s advantages. I have mixed feelings about whether or not it should still be used. However, I think it would be best to see more thorough title searches used as a basis for title insurance. You are right, that the quality of the searches has suffered - I have seen many searches that are just plain sad.
As for the “short searches” and “blanket exceptions,” in my opinion they should never be used to issue an Owner’s Policy. The lenders rarely ever care about easements or restrictions, though I think they should. Therefore, short searches have found a place in the issuance of a Loan Policy. That is probably not a “good practice” but it has become very widely accepted.
I have only seen instructions from one underwriter requiring less than a full search for issuing an Owner’s Policy, but I would still never do it. Unfortunately, many do. When one of the major underwriter makes exceptions like that, it makes it hard for the others to maintain higher standards. It costs their agents more and takes them longer to prepare for a closing. That naturally causes more agents to gravitate to the underwriter with the worst standards.
If the underwriters don’t maintain the integrity of the product, who will?
Jeanne said,
August 9, 2007 at 3:26 pm
Thanks, Robert.
I do not seriously think we will ever go back to the old paper Abstracts of Title. But with the technology today, we should be able to SEE the equivalent of a full abstract of title online. With the Grantor-ee, Tract Indices and Miscellaneous Records online along with hyperlinks to the full source documents (i.e. copies of the originals) we should see it all.
Using these resources, I should think we could do a better job of actually LOOKING at the documents and preparing better title work. Do you think it is a lack of training, i.e. people do not know how to put the documents into the computerized index, or lack of training that we don’t know how to read and understand what we see?
I also cannot understand why Title Underwriters aren’t pushing for more backplants so we will be able to do full 20, 30, 40 year searches. In my opinion, title abstractors and examiners are doing a less than stellar job of servicing the public. We need to improve, and educate, educate, educate.
Robert Franco said,
August 14, 2007 at 1:40 pm
I do think that the indexing systems could be much better. I think the problem is simple: computer people don’t understand title and title people don’t understand computers.
I would agree that the quality of the searches has gone down. However, I think its because the industry doesn’t care. They are willing to use cheaper, untrained examiners and we have way too many of them in the market now. If the clients who order searches don’t care about quality, there is no incentive for the searchers to become more skilled. There are no minimum requirements to become an abstractor in most states… the field is wide open. It no longer self-regulates and the States have chosen not to get involved in that end of the process either.
Jeanne said,
August 14, 2007 at 7:49 pm
Unfortunately, I have to agree. In working with title plant posters from many locations, in both the public and private sectors, there seems to be an impression that posting a title plant is unskilled labor. If someone can type, management seems to think they can handle the work with little or no training or supervision within weeks.
While I acknowledge the index is just a pointer to view the original source document, if it is not correctly posted, the source document will never be found. Posting is a very important job, and it should really be recognized as a skilled position.
We all need to “Sing from the Same Hymnal” to push for better quality, education and communication with title plant people, especially County Recorders and the Big Title Underwriters who are posting.
Brendan said,
August 15, 2007 at 11:06 am
In New York, some counties (mostly the upstate ones) use Abstracts of Title and some counties (around NYC) don’t. Since the abstracts are certified and guaranteed, the Abstract Company is liable if any missed liens show up. We have produced a few abstracts for out-of-state customers covering properties located in counties which do not generally use abstracts, and have generally had very good feedback from those customers. Perhaps a return to abstracts is not out of the question.
When I started in the title business **mumble** years ago, a new abstractor spent several weeks with an experienced one LITERALLY looking over his shoulder, followed by several weeks of the experienced abstractor re-searching everything the new abstractor had done, followed by a period of reviewing everything and spot-checks of the searching. It took some time to train someone new, but when the training period was over, the new person could be trusted with most search orders, and was prepared to work on ever-increasingly complicated searches.