Various insurance products have recently appeared in the mortgage lending market which give the lenders lien protection, without requiring a title search. These products go by several different names including: Mortgage Impairment Insurance, Mortgage Lending Activities Protection Policy, Processors Liability Policy, Radian Lien Protection, Lien Priority Guarantee and Lender Master Protection Program. Some of the companies that offer these products include Radian Guaranty, Zurich North American (through ZC Specialty and Fidelity & Deposit), Travelers, Great American, Cigna, AVEMCO, AIG, Chubb, Bankers Trust, and. By using only an owners affidavit and a credit report, not an attorneys opinion based on a search of the public records, these products insure the priority of a lenders lien.
We at the North Carolina Land Title Association (along with the American Land Title Association) believe that these products pose a serious threat to consumers property interests and to the integrity of the real property public records systems. Our systems of independent title searches and closings have developed over the centuries to protect the public records reflection of title and, thereby, the ownership interests of purchasers. We believe that lien priority insurance providers should be subject to the same licensing requirements as title insurers and adhere to our title insurance rules and regulations, especially those requiring a search of the public records and opinion on title by a licensed North Carolina attorney. Lien priority insurance is insurance of an interest in a real estate title, i.e. title insurance. But the companies that offer these other products file them with the Department of Insurance as "minor" additions to Property and Casualty products or as Surplus Line products, thereby evading filing requirements and the structural safeguards which have protected the integrity of real estate titles in North Carolina. We believe that these companies should not be able to evade Department of Insurance title insurance regulations by filing their title products as P&C insurance and Surplus Lines.
The consumer is also at danger with this system. With loans being filed without searches, chains of title will increasing become corrupted with errors. These difficult chains will eventually lead to higher search costs to the purchasers. Also, since these products insure only the lenders and there is no provision for a simultaneous owners policy, the consumers will have fewer opportunities to insure themselves. And consumers could be subjecting themselves to liability for legal conclusions made in their borrowers affidavit. For example, do all consumers understand that an equity line of credit is a lien on their home?
Help us educate the lenders, borrowers, associations, regulators and legislators in our state about the high risk to consumers and to the integrity of our public records of real estate titles. Also, please help us identify these companies and encourage them to act responsibly and with a view toward the long-term viability of the record title systems in this country.