Title Insurance Refused on a foreclosed property?

[Jacob Beg]

Hi All:

Hoping to get some feedback on something I never encountered before. I mistakenly posted this on another forum but am unable to delete it there so apologies for the repetition.

We purchased a property through trustee foreclosure sale in MD, where the first and only trust was being foreclosed. During title search, it was discovered that there is a certificate of release of lien filed in the land records of the county. On the face of it, the trust had been paid off many months ago and the trustee's foreclosure was either unlawful or impermissible.

We brought this to the trustee's attention. The attorney for the trustee, having inquired with the lender, confirmed that it is a mistake. That didn't provide us much solace as the title insurance was refused and that the title was clearly not marketable.

The trustee finally obtained a summary court order declaring that "certificate of lien of release" as void, and that the foreclosure was valid. Even with this court order, the title insurance company is refusing title insurance. Previous owner died and there was an estate involved. On the face of it, no objection was raised to the foreclosure procedure and there is no suggestion whatsoever that foreclosure procedure itself was defective. The underwriter does not want to touch it and considers that some descendant might have some claim. It's an overly conservative approach, but I am reluctant now.

We can pay cash and the property has significant equity after repairs are carried out. I am concerned that if we quickly carry out the repairs and put it up for sale, a potential buyer reliant on financing won't get title insurance and we will be stuck with it. Is there any sub-prime or high risk equivalent insurers in title insurance world? Any suggestions.

• 1