Title insurance for prime lenders on the rise

London & European have forecasted a surge in the uptake of title insurance policies by prime lenders, particularly building societies.

Christian Bearman, director at London & European, a provider of insurance services and solutions explains: “We’ve experienced a 116 per cent increase over the past year in inquiries from this community as its focus has shifted from growth or market share to risk. Since the credit crisis began just over a year ago, it has become clear that the prime market has recognised the value that title insurance can deliver in adding an extra layer of security to their mortgage portfolios. What has been an accepted risk management tool amongst non-standard lenders for several years is now fast gaining equal status amongst building societies and other prime lenders.”

Bearman points out the prime lending community faces three major risk categories which are rising exponentially in the current climate: repossessions, mortgage fraud, and solicitor negligence.

Repossessions continue to rise and with 25% of all UK property transactions having a title defect which could make a property unsalable, the risk to a building society or high street lender of not being able to recoup its investment in full is significant. Title insurance offers an effective risk management tool as it covers losses against existing and historical title problems.

Few realise, however, that title insurance also covers fraud and forgery by a borrower or solicitor – an area of growing importance. A recent survey by Nationwide stated that mortgage fraud has become endemic and the Solicitors Regulation Authority, the legal regulator in England and Wales, is investigating as many as 60 lawyers for alleged mortgage fraud after complaints more than tripled in three years.

Bearman concludes: “Building societies and high street lenders are in unparalleled territory in terms of risk and liquidity challenges. Title insurance offers an increasingly attractive proposition in helping them manage their risk exposure more effectively both now and in the future.”