Property title systems and market practices throughout Asia present considerable difficulties in establishing clean title to property. No Asian countries have Government-backed title registers and the quality and reliability, as well as access to, the deeds registers is patchy.
Title insurance from First American provides owners with an indemnity for loss suffered as a result of lack of beneficial ownership (i.e. that it is owned by the insured, together with the rights to use, lease, mortgage, dispose, etc). It covers financiers for underlying title issues as well as the validity, enforceability and priority of mortgage documentation. In the event of a claim, we defend on the insured's behalf and cover both legal costs of defence and any financial loss. Some of the risks our comprehensive policy covers include:
Lack of ownership
Fraud, forgery, duress & incompetency
Documents not being properly signed or authorised
Any defects in title
Encumbrances on title
3rd parties interests in the property
We cover any losses suffered by the insured as a result of the covered risk up to the insured amount, typically the value of the property. The insured may apply for an endorsement to cover appreciation in the property over time. The policy is no-fault, no negligence-based; the simple fact of a claim against the title or a loss is sufficient to make a claim on the policy.
The premium is a one-off up-front payment on purchase and the policy lasts as long as the ownership of the property or life of the loan (and runs with that loan, irrespective of subsequent packaging). This is a key point if exit strategies include a listing as title insurance will generally improve credit ratings. The policy also covers reps and warranties made on title upon sale by the insured.
To be in a position to issue the policy, we need to conduct due diligence on the underlying title and transaction. Our underwriters have unique, broad experience in property due diligence in emerging markets which we bring to our clients' team. We are able to work closely with our clients' own legal advisors to minimise duplication and focus efforts on specific areas of concern. We would ideally be brought into a transaction at the outset.
Even in a strong property known defects in a property title can have a significant marketability and value impact. Assessing the extent and impact of known defects can cause delay or cancellation of property transactions. First American's Defective Title Insurance policy provides a cost-effective and efficient solution to potential title issues by indemnifying buyers from the impact of claims against them on specific issues. Typical defects over which we are able to insure include:
Defective corporate execution
Missing or invalid powers of attorney or inheritance documentation
Title insurance can be used as a tool to facilitate acquisition of portfolios of properties, mortgages or non-performing loans and of companies with significant owned real estate assets.
With the development of the secondary mortgage market in Asia, transfers of mortgages to financial institutions are becoming more common. To provide security for title and financial warranties on a transfer of a portfolio of mortgages, the transferor will generally be required to give a buy-back guarantee or give a discount or reserve from the sale price. First American's Mortgage Portfolio Transfer Services offer an alternative cost-effective solution, either by title insuring the mortgage on origination or on the transfer.
The insurance is provided to the transferee. If the transferee suffers loss as a result of an insured defect, it will seek recourse from First American rather than transferring the mortgage in question back to the transferor or deducting an amount from the reserve. The benefits of this are that the transferor no longer has to give the traditional security for title defects and may remove the contingent liability from its balance sheet. The transfer can be completed more quickly, smoothly and efficiently. Costs and disbursements are reduced.