Joseph L. Petrelli, ACAS, MAAA, FCA President, Demotech, Inc.

Source: Performance of Title Insurance Companies

In Consideration of the Provisions and Stipulations herein, the Property and Casualty Insurance Company, for the term of this date at 12:01 a.m. to one year later at 12:01 a.m. at the location of the property involved, does insure…

Subject to the exclusions from coverage, the exceptions from coverage contained in Schedule B and the conditions and stipulations, the Title insurance company, insurer, as of the Date of Policy shown in Schedule A, against loss or damage…

While Title insurance coverage looks backward from a certain date, P&C insurance coverage looks forward, utilizing a finite future period, to evaluate liability. The timeframe of coverage and cost containment activities are a fundamental difference between Title and P&C coverages. This distinction for Title underwriters has not been properly reflected in financial reporting requirements.

 Order Entry ◦ Verify property address ◦ Verify owner(s) ◦ Legal Description  Run the Chain ◦ Run names and nicknames ◦ Determining encumbrances or possible encumbrances ◦ Back ground – determining and indication of legal incompetence – conservator, bankruptcy, etc. ◦ Impairments in chain of Title ◦ Determine adverse claims ◦ Interest which affects tenancy ◦ Property tax

 Examination ◦ Legal Description ◦ Conveyances ◦ Execution ◦ Notarization ◦ Evidence of fraud, forgery, competence, etc.

 Matters Affecting ◦ Covenants and restrictions ◦ Easements ◦ Rights of first refusal ◦ Judgment of lien ◦ Market requirement to cure ◦ Indemnities ◦ Review prior transaction ◦ Application of statute of limitations

 Matters Affecting (cont.) ◦ Update for last minute items ◦ Fallout ◦ Review tax certificate ◦ Reconcile difference with tax discrepancies ◦ Check for outstanding tax sales ◦ Review survey for adverse matters ◦ Verify legal access ◦ Mineral reservations ◦ Geographic posting

 Processing ◦ Review commitment for requirements ◦ Verify tax certificate matches legal description ◦ Order demands for all requirements (payoffs, H.O.A., etc.) ◦ Call county to check tax payment status and if any prior/special taxes ◦ Verify water/sewer/storm drainage information ◦ Prepare P.O.A. if needed confirm acceptance with lender

 File Work Up ◦ Verify sellers names on contract match vesting ◦ In a refinance, verify borrowers names match vesting ◦ Ensure all Title requirements are addressed on the settlement statement ◦ Comply with terms of real estate contract ◦ Comply with requirements in lender’s closing instructions ◦ Verify borrowers names on loan document match contract

 Closing ◦ Ensure all documents are executed properly ◦ Correctly notarize all appropriate documents ◦ Comply with lender’s funding requirements ◦ Ensure no disbursements are made without all funds being received  Post-closing ◦ Disburse all funds per HUD-1 ◦ Return lender’s package ◦ Record documents in correct order

 An expense directly allocated to a particular claim.  Addressing specific defects and matters in Schedule B?

Consisted of 83 policies from Colorado, issued between October 30, 2001 and March 5, 2009 with a majority of the policies from 2008 and 2009.

There were 4,233 possible incidents in the sample of 83 policies.

A sample of 83 policies revealed 888 items that needed to be addressed, about 11 per policy.

TOTAL AGENCY CHARGES LOSS MITIGATION CHARGES TOTAL COST$ 168,144.04$ 94, AVERAGE COST PER HUD-1$ 2,025.83$ 1, DISCOVERED INCIDENT$ $ PER POSSIBLE INCIDENT$ 39.72$ 22.29