Friday, October 15, 2010

America's outdated land title system

Economist Arnold Kling gives his thoughts on the growing foreclosure scandal:
If [George] Washington were to visit the county office where property records are maintained, he might feel right at home. Often, documents have the same legal format as in the 18th century, and they are maintained in pretty much the same manner.

On the other hand, if Washington were to visit a 21st-century financial firm that deals in mortgage securities, he would be thoroughly bewildered. There he would find computers maintaining records in electronic format that are far more complex than anything that existed in his day. ...

What has emerged in recent weeks as "the foreclosure scandal" represents the collision of this 21st-century computerized, global financial system with an 18th-century legal process for obtaining ownership rights to buildings and land. Indeed, the United States has one of the most backward land-title systems in the industrial world.

If we wanted, we could apply modern technology to the land-title process. We could base property boundaries on satellite photography rather than on surveyor's sketches. We could use precise coordinates for latitude and longitude instead of references to topographical features. We could maintain records in digital format, where they could be accessed on the Internet. ...

Doing so would provide a number of benefits. For instance, we could make property ownership sufficiently secure that we could do away with the wasteful, expensive service known as title insurance. ...

A modern titling system also would reduce the cost to mortgage lenders of complying with the process of recording a title. ...

When foreclosing on a property, the lender must, like any other seller, establish clear rights to the property before selling it. It is in that step — where the lender must produce the proper paperwork to comply with legal standards using antiquated recording methods — that many banks apparently took shortcuts, forged signatures or used documents that were only re-creations of the originals.


  1. FYI, our land title system has grown with the technology. You can go to a county recorders office and pull the deed yourself off of microfiche, or you can pulled a scanned image off their website from home. The information is at your fingertips. The system we have provides numerous checks to provide protection for property rights. Title insurance is a part of that system and has one of the lowest payouts of claims of any form of insurance as a testament to the strength of the system. Contrast this to the MERS system that the banks created which has created numerous inconsistencies, mistakes and outright fraud. Contrary to what the article says, the US has one of the best land title records systems in the world. If there is a superior system, please describe it and tell me what country uses it. Do you really want the title to your house to be based off a Google earth image? Satellite photography undergoes transformations that allow a flat image of the curved surface of the earth. The errors produced cannot be eliminated, they are a result of the coordinate transformations. The ignorance of this article is breathtaking. I'll give the author the benefit of the doubt and say that he is a little to excited by his new-found technological conveniences.

  2. I cant wait until everything is just stored on computer and a big solar storm hits earth. This would bring everyones value back to zero.

  3. "A modern titling system also would reduce the cost to mortgage lenders of complying with the process of recording a title. ..."

    What he's saying is that the New York Banks shouldn't have to pay property transfer tax.

    when you buy a house, you pay transfer tax which is part of the recording process.

    that tax makes all of wall street uneconomical, so they invented MERS so they could skip those taxes.

    In skipping those taxes, they lost the land records.

    F Them. Let them fail

  4. What arnold Kling forgets is there is no value in the Wall Street Mortgage securities market.

    If you wanted securities, you used to buy FNMA or FRMC bonds. Simple, easy, and the banks made sure the packages were all conforming.

    under Fannie and Freddie all these were handled right.

    Wall Street added no value and screwed it all up.

  5. If being a luddite means hating crooks,trollboys and paid schills then I guess this Electrical Engineer is a luddite. HA!

  6. I'm an Ozzie & they're reporting over here that you can buy houses in the US for unbelievably low prices. Over here we use the Torrens Title system which gives the registered propritor indefeasible title. Works well and pretty much impossible to commit fraud of any kind. Google Torrens Title and you'll see what I mean. Anybody got any good links as to how the US system for registration of land rights/title and types of holdings work as i wouldn't mind looking a little further into perhaps investing in the Boston area? Looking at flats, units etc. ie high returns low maintenance type rentals. I can be contacted at Cheers