Any broker who has experienced frustration at the time it takes for a straightforward remortgage case to go through should consider recommending title insurance.
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Title insurance is a single premium policy and protects the lender and borrower from losses arising from disputes over the legal ownership of the property. It cuts out the need for a solicitor to carry out some of the work and can result in a dramatic reduction in the time needed to complete on the remortgage.
It is relatively common for a remortgage deal to take some 30 days to complete, even once the offer has been given. Where title insurance is in place, Platform has found the average completion time is reduced to around 10 days – and simple cases are often completed within three days of the offer being made.
Protecting the validity
A defective title means that there is a problem with the deeds – in other words the contract – relating to the property. They may be missing, destroyed, lost or in some way inadequate.
In legal terms, to be a good root of title, the documents must show the ownership of the whole legal and equitable interest in the land in question, contain a recognisable description of the property and must not contain anything that casts any doubt.
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If title insurance policy is in place, the insurance lasts as long as the mortgage and guarantees the loan is valid, enforceable and on a marketable title.
It covers a range of potential problems including unknown defects, fraud by or against the borrower, a defective lease, undocumented rights of way, restrictive covenants and adverse possession. In the case of known defects, deed of gift and transfer at undervalue.
Typically, the types of defects which could affect a property are a lack of a right of way, a lack of proper rights to run drains, pipes, wires or cables over a neighbouring property, a missing title document or where a management company owns a block of flats but has ceased to exist. Or, it could be that there is problem with an extension that perhaps did not have planning or building regulation consent.
In the case of a remortgage it is highly unlikely anything is going to go wrong because all the checks will have been carried out at the time of the first mortgage. But, a lender still needs to be certain and there is a remote chance of earlier problems that were not picked up on. So, the insurance acts as a safeguard and allows processes to be speeded up.
In the unlikely event of anything going wrong, while the insurance does not solve the problem, it means that nobody loses out financially.
Reducing the time
The title insurance provider should take over some of the work of the conveyancers, often using a web-based property transaction management system that substantially reduces the time it takes to complete.
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They may also have tried and tested panel solicitors who are adept at working online. E-conveyancing, where the solicitors aims to provide a faster service through making better use of technology is already proven to be effective. Those who are not using such advances are unlikely to be providing such a good service.
Information gathered by the system is often useful for lenders, since it shows how well – and how quickly – the solicitor has done their part of the work, the time taken to complete, any problems and how many remortgages fall through.
It is not often you can say there is a product at no or low cost which benefits the intermediary, lender and client.
Avoiding the market?
There are some IFAs in particular who avoid mortgage business because of the interminable delays. Although there are meant to be legal professionals on the case, the service is unacceptably slow, paperwork invariably lost and as a result of this, the broker constantly hassled by the client.
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If a deal is too long drawn out, then it is far more likely that the borrower may change their minds. They may look round for other deals or pull out altogether.
Certainly in the case of remortgages, title insurance is the solution and could mean it is worthwhile these IFAs reconsidering.
Title insurance is offered by a number of lenders, including Platform in conjunction with provider London & European (L&E), as part of a free legal fees package on the new range of remortgage products or it is also available as a one-off £350 fee.
L&E has issued over 600,000 policies and processes some 40,000 cases a year through its panel. Brokers should ensure the insurance provider is well established and uses a secure underwriter.
The L&E web panel management system, Complete, has a proven reduction in the offer to completion cycle by up to 80 per cent. Because work starts immediately, any potential problems and bottlenecks can be talked about before substantial deals can set in.
It means greater clarity all round since a target completion date is set as soon as a remortgage case is assigned. In addition intermediaries are kept in the loop, with progress checks available, meaning they can keep their clients informed.
Speed matters and remains a differentiator – those mortgage intermediaries and advisers who deal with remortgage clients are well advised to ensure title insurance is part of the deal.
