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Thursday, October 14, 2010

Are Title Insurance Companies Bracing for a Tidal Wave of Claims? Nah.

National Moratorium
on Foreclosures

Surprise, Surprise . . . the same banking behemoths that recklessly originated trillions in dubious mortgages -- fuel for Wall Street's securitization juggernaut -- are apparently now running roughshod over the rights of delinquent borrowers as they seek to foreclose on their homes.

How big a problem is this?

And who's going to pay for it?


To investigate (a little), I checked the stocks of three, large publicly-traded title insurance companies.

My theory is that if hundreds of thousands (millions?) of homes were wrongfully foreclosed on, there is going to be a tsunami of title insurance claims in the offing, brought by Buyers of those homes who in fact . . . may own nothing.

So, is the stock market clobbering the largest, publicly traded title insurance companies, in anticipation of all those pending claims?

Claims? What Claims?


Three of the biggest, publicly traded title insurance companies -- Fidelity National, First American Financial, and Old Republic -- are all trading in the middle of (or above) their 52 week price ranges.

Which is certainly curious, given their presumed exposure to this brewing mess.

I don't have a ready explanation, but my guesses are: 1) the companies somehow don't do much business in the markets (FL, CA, Las Vegas) where the problem is greatest; 2) they've already reinsured or otherwise laid off the risk of those claims (or think they have -- can you say, "insolvent counter-party?"); and/or 3) the title insurance companies -- and their investors -- figure that the banks, not they, will ultimately bear responsibility.

And by "the banks," I mean "us" -- the taxpayers now standing behind those too-big-to-fail entities.

P.S.: maybe "tidal wave" should be "title wave."

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