To provide an assurance of title, industry personnel must search
numerous public documents, including tax, court judgment, deed,
Federal and encumbrance records. These records are usually maintained
by county officials, indexed based on their needs, and frequently
dispersed throughout a county. To search these records
efficiently, members of the land title industry often reproduce and
reindex these documents into databases called title plants. In
some states such as New Mexico, Oklahoma and Texas, the use of
the title plants to produce an abstract or title insurance policy
is mandatory.
Once the records have been searched and organized into a series of documents (sometimes called an abstract of title), the parties to the transaction must be assured that the status of the title to the property is as represented. The most prevalent practice is to obtain title insurance; however, in some parts of the United States, an attorney's opinion based on an abstract or search of the public records is still utilized. State and Federal banking laws and the secondary mortgage market (Fannie Mae, Freddie Mac, etc.) almost always require that a loan secured by real estate be insured by a Mortgagee Policy of Title Insurance. Purchaser's of real estate are often insured by an Owner's Policy of Title Insurance; and if both the owner's and lender's policies are issued simultaneously, the owner can often obtain coverage to protect his equity at very little additional cost.
Before any title insurance policy may be issued, the abstracted records must be examined and an opinion of title prepared (sometimes this is a Commitment for Title Insurance). The industry utilizes both attorneys and trained lay people to examine the title and form the opinion. This underwriting function is normally performed by title insurance agents in local offices assisted by the insurer's underwriting counsel staff.
Note: Thanks to the American Title Association for these concepts.
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Last modified by EF on May 15, 2006