Top 6 Developments for the Title Industry in 2012

1. Home prices continue to deteriorate – Supply will continue to exceed demand and available financing. Possibly 10 million homes are lurking in shadow inventories and invisible inventories. An annualized sales rate of about 1 million homes results in a 10 years supply of homes. The sales rate will increase to about 1.5 million in 2014. Homes coming to market will not subside until 2015.

2. MERS difficulties stabilize – The mechanics of the nominee trustee system is largely well known to the marketplace. No significant new developments will materialize. The problems associated with the process will be resolved one at a time over the next 24 – 30 months. Legal interpretations will eliminate many of the conflicts. A few outlier issues will remain, but nothing significant. The fact that borrowers actually owe money to some entity does not go away, and courts will more frequently rely on good faith representations of lenders. Attorneys for lenders will increasingly rely on the argument that the borrowers themselves agreed to the nominee trustee system in executing the deed of trust, as in this legal opinion.

3. Increased activity with distressed property – The percentage of properties on the market which are a result of a default will increase. Processing foreclosure properties will be the norm, and traditional sales will be the exception. Real estate brokers who will be successful in this decade have already developed the business practices to account for this. Even financial giant Barclays expects a “triple dip” in housing, with another drop in prices looming. Merrill Lynch predicts a 10% increase in foreclosure sales.

4. Non-traditional legal activity –  The solutions to many real estate title problems will be processes which have been rare until this decade. Quiet title actions are more frequently used by individuals and lenders to clear defects. Slander of title will be claimed more often when incorrect records are recorded. The business of correction and remediation of errors will be a lucrative niche market for attorneys and professional title abstractors.

5. Municipal budget effects on recorders offices – Tax revenues for counties and cities will plummet. Budget allocations to all departments including recorders offices will subsequently suffer. Expect staffing shortages, and possibly less accuracy in records. Lower recording volume may help take up some of the slack.

6. Higher standards in abstracting (less offshoring, more complex searches, etc.) The demand for run-of-the-mill title searching will be feeble at best. Traditional sales and refinances will almost be the only market for thin searches. Foreclosures will require more complex searching and higher standards for he abstractor. Quiet title actions and investigations of defective titles need a more experienced searcher. For many of these searches, offshoring or electronic searches will be insufficient.