By: Carrie Bay DSNews

The real estate listing and search site Trulia.com released the results of its biannual American Dream survey this week. The survey has tracked American attitudes toward homeownership since 2009.

by Jay MacDonald

When looking for ways to save on home insurance, many homeowners stop at a smoke detector, a security system and a multiline discount for insuring your home and vehicle with the same company.

But property and casualty companies have a variety of other lesser-known credits available that can shave your homeowners insurance premium by up to 25 percent.”

“Mitigating loss is a big part of who we are and what we do,” says Sean Meehan, second vice president of property strategy and design for Travelers Insurance of Hartford, Conn. “Yes, we pay claims. But at the same time, we want to help prevent claims, which lowers premiums in the long term.

Madelyn Flannagan, vice president of agent development, education and research for the Independent Insurance Agents & Brokers of America, or the “Big I,” agrees: “Insurers give a discount to encourage people to be more careful and to better understand the homes they’re insuring.”

Here are 10 “hidden” home credits that may be available through your agent to cut down the cost of home insurance. Discount estimates are courtesy of the Big I.

Gated Community: Have Peace of Mind

Do you live in a gated community? Your home insurer shares your peace of mind in knowing there’s a layer of security between you and home invaders, and may be willing to credit you for lessening their risk.

“That definitely falls under loss mitigation,” says Meehan. “If you live in a gated community, it’s a lot less attractive to a thief than a place that doesn’t have that security.”

In the larger scheme, where you live always affects the rates you pay. That’s logical, since some parts of town statistically pose more risk than others of vandalism and theft. But sometimes living in the country can actually cost more.

“If you live near your local fire department in a safe, quiet, easily accessible neighborhood, your homeowners rates might be lower than if your home is located off the beaten path,” says Meehan. “Your home may cost more to insure if you are many miles from the nearest fire department.”

Gated community credit: 5 percent to 20 percent.

New Wiring: Save Money and Lives

Want to scare your insurance agent? Tell him your teenage son rewired your house over the weekend. Then expect your premium to go through the roof.

The math is simple: house + old wires = fires. According to the U.S. Fire Administration, in a typical year, home electrical problems result in 67,800 home fires, 485 deaths and $868 million in property losses, according to a 2006 report. The USFA estimates that home wiring causes twice as many fires as electrical appliances.

Considering new wiring? Depending on the age of your home, you may qualify for a new wiring credit.

“New wiring, if it’s installed right, is much safer and less likely to cause any type of outages, shortages or fires,” says Meehan. “It can be an insurance eligibility issue, too, because a lot of companies are not as keen to write old knob-and-tube wiring because of the fire risk. It could limit your options.

New wiring credit: 10 percent.

Impact-Resistant Roofing: Grab a Hard Hat

Your roof is a major concern to your insurance company. Not only does it take a beating from wind, rain, hail and hurricane-blown debris, but once it’s compromised, the damage costs on a home insurance claim can rise dramatically.

So it comes as no surprise that, as more and more impact-resistant roofing materials have come to the market, insurers have been increasingly willing to offer rate discounts to homeowners as an incentive to invest in a “hard hat” for their abodes.

Your state’s department of insurance can direct you to information about impact-resistant UL 2218 standard roofing material, which is graded as Class 1 through 4, with Class 4 being the sturdiest. Insurers may require that your roofing material be tested by an approved laboratory before issuing a credit. The upgrade may also net you a tax deduction.

“Insurers definitely are giving discounts for Class 4 because, if your roof blows off in a rainstorm or nor’easter, the water damage is going to be substantial, resulting in a much larger claim,” says Flannagan. “They definitely want you to protect yourself against that.”

Impact-resistant roofing credit: 5 percent to 10 percent.

Claims-Free Credit: No Claims is Good News

You know that good-driver discount the auto insurance companies offer? A claims-free credit is the home insurance equivalent.

The reason is pretty simple: Your absence of claims keeps more money in your insurer’s pocket. And increasingly, they’re willing to pass some of that savings on to you by shaving your home insurance premium.

“That’s a fairly new discount, but almost every year we’re seeing more companies add it,” says Flannagan. “People who have been claims-free for 10 years can get like a 20 percent discount. I think a lot of companies are trying to reward longevity.”

Even if you’ve had a claim, you may still qualify for a long-term customer discount upon renewal if you’ve been insured for a certain number of years.

Claims-free credit: 20 percent

Homeowners Association: Keep Risk at Bay

As strange as it seems, some home insurance companies will give you credit for the company you keep — as long as that company is in the form of a neighborhood homeowners association, or HOA.

“I’ve heard that it’s because of the security aspects of HOA communities, with things like community watch,” says Flannagan. “Plus, people may have to maintain their home in a certain way in order to meet the requirements of a homeowners association’s restrictions and covenants.”

You don’t necessarily have to be a member of the homeowners association to take advantage of this discount; your home is simply considered less risky because of the involvement of your neighbors in keeping your community safe from thieves and vandals.

Homeowners association credit: 5 percent to 10 percent.

New Ratings Models: This Year’s Could Cost Less

Home insurance is a changeable business, in large part because real estate is a dynamic market. Actuarial experts crunch the numbers as neighborhood values rise and fall and construction costs ebb and flow in order to develop models that help insurance companies manage their risk.

Since your homeowners insurance rate naturally flows from these models, it follows that rates can change as well — sometimes in your favor. In some cases, new models are used to establish lower rates to attract new customers.

“Many insurance companies have tiered rating now, and if you don’t quite fit into the perfect mold because of something that might have been on your credit report, you could be paying more than necessary because you haven’t cleared that up,” says Flannagan.

“Even your address can have an impact on it, because when you bought that policy, CLUE, or Comprehensive Loss Underwriting Exchange, reports might not have been part of the underwriting, but now they are.”

New ratings credit: Call your agent. Sometimes, you can even save money by applying for a new policy with the same company.

New Home or Renovation: Have Fewer Safety Risks

In auto insurance, a new car will usually cost more to insure than an older model. In home insurance, however, the savings often goes to the new house or one that has been recently renovated.

The reason? New pipes don’t leak, new furnaces don’t malfunction, new electrical panels and wiring don’t cause fires, and new roofs, chimneys and foundations don’t lead to costly claims.

“We offer homebuyer discounts,” says Meehan. “The logic behind that is, you’ve had it inspected by a professional and a lot of times they’ve detected — and you’ve arranged to have an electrician fix — all those wiring issues. Usually, when you buy a new or even an existing home, that loss mitigation has been done because of the inspection process. It gives us a better understanding of what’s going on in that home.”

If you’re considering a renovation, check with your insurance agent first. They may have suggestions on how to tweak your project to maximize your home insurance savings.

New home or renovation credit: up to 25 percent.

Nonsmoker Credit: Kick the Habit for Lower Rates

Where there’s smoke, there’s fire. Unfortunately.

Even though the number of smokers nationwide is in decline, smoking remains the No. 1 cause of home fire fatalities in the United States. According to the U.S. Fire Administration, smoking caused 18,900 residential fires in 2007, killing 595, injuring 1,200 and causing $327 million in residential property loss.

Home insurance companies generally raise their rates if there’s a smoker in the household. Will they conversely offer you a discount if your home is smokeless?

“Yes, most companies do that,” says Flannagan. “With home insurance, it is one of those underwriting questions that does provide a credit for some policies in some states. It’s not a rating tier, however; you don’t go to a nonsmoker rate for home insurance the way you do with life insurance.”

Nonsmoker credit: 5 percent to 15 percent.

Mature Insured: Age Has its Privileges

Home insurers love retired customers because they tend to spend more time at home, where they might be able to detect a home hazard in the making — a gas leak, pipe break or smoldering electrical panel — and avert a disaster.

If you or your spouse are 55 or older and retired, and your home is your permanent residence, you may qualify for a mature insured credit.

“There is some data out there to support that people who are retired and therefore home more are able to avoid loss or identify loss sooner,” says Meehan. “During the day, if you’re working and have a pipe break, you won’t know it until you get home. But if there is someone home at the time, they go, ‘Oh, pipe broke,’ call people, boom; the loss is minimized. It’s a five-minute water run versus a five- or six-hour water run. You’re mitigating the loss immediately.”

Retired or 55+ credit: 10 percent to 25 percent.

High-Tech Sensors: Create a Safer Home

When we think of sensors that keep our home safe, most of us think of either a fire alarm or a security system. While these are both excellent and creditworthy loss-prevention devices, insurance companies are equally excited about a new generation of home sensors that can detect water or natural gas leaks before they become a claim.

Water sensors come in two varieties. Passive leak detectors are inexpensive stand-alone devices that emit an alarm and/or flashing light when moisture is detected. Active leak detectors signal a leak and shut off the water source. Active systems may be installed on individual appliances or as a whole house solution. Gas detectors are most often passive.

“Gas and water sensors are a great credit,” says Meehan. “The big-box stores helped create the culture of improving and protecting your home because you can go to Home Depot and Lowe’s and just buy this stuff. That drove companies to create solutions that people can self-install.”

Sensor credit: 5 percent to 10 percent.

Selling a home can be an emotional and even stressful process, especially in the current economic climate. For Realtors®, it can be just as stressful, if not more so. Persuading a seller to sell a home for less than they may have expected-or with more conditions than they might have wanted-is not an easy thing. As a real estate agent, you’re often in the position of trying to persuade a homeowner to lower their price a bit, or throw in that patio furniture the buyer really wants-but this is often a very sensitive, emotional process (i.e., someone’s dear aunt bought them the patio furniture, and they don’t want to give it up; or someone told them their house is worth $600,000, so how dare you tell them $500,000?). The Realtor® who doesn’t exercise compassion and sensitivity can incite defensiveness and quickly lose a client.

To avoid that, check out these six tips on how to level with a client, getting results for them and being gently assertive while remaining genuine and sensitive.

By NICK TIMIRAOS The Wall Street Journal

The Obama administration outlined on Friday its plans to begin shrinking the government’s broad support of the nation’s crippled mortgage market, a process that officials said could take several years and would include phasing out Fannie Mae and Freddie Mac.

Officials portrayed a housing-finance system that would include a role for both the public and private sectors, but would be different from the current system in that the government’s role would be smaller, underwriting standards would be tighter, and borrowers would be required to hold larger amounts of equity in their homes.

The proposal offered a series of short-term steps that would help attract private capital into the mortgage market, including a reduction in the maximum loan sizes that Fannie and Freddie can purchase and gradual increases in the fees the mortgage companies charge lenders. Both of those steps could make it more attractive for lenders and investors to buy loans without government backing, but they could also raise borrowing costs for millions of Americans and weigh on the nation’s home-building industry.

“The cost of mortgages is probably going to go up, and homeownership is probably going to go down,” said Daniel Mudd, the former chief executive of Fannie Mae who is now CEO of Fortress Investment Group. “Both of those things arguably could be a good thing.”

The administration said it would support allowing maximum loan limits to fall to $625,500 from $729,750 as scheduled on Oct 1. It also said it would push to increase minimum down payments to 10% on loans eligible for purchase by Fannie and Freddie. Insurance premiums charged on new loans backed by the Federal Housing Administration could also go up.

Administration officials said the process of transitioning to a post-Fannie and Freddie world would take at least five to seven years, in part because the housing market remains too fragile. Many analysts say the process, which includes dismantling, moving, or reassembling the firms’ infrastructure, could take even longer.

The long-awaited proposal was thin on specifics about what would replace Fannie and Freddie, which the government took over in 2008, and which have racked up $134 billion in taxpayer losses. Instead, it outlined three options that were designed to frame what promises to be a prolonged and heated political debate over how to structure the nation’s $10.6 trillion mortgage market.

The first of those would put the vast majority of the mortgage market in the hands of the private sector, where lenders would originate mortgages and securitize them without any government backing. The middleman role currently played by Fannie and Freddie would no longer exist.

The government’s role would be limited to the FHA and a few other smaller housing agencies, and their reach would be sharply reduced from current levels. The FHA backed 20% of all new mortgages last year. Some conservatives have called for such a private market.

The second option, championed by a handful of economists, would also create a mostly private market with a limited government backstop that would primarily become active buying or guaranteeing loans in periods when private lenders retreated during financial shocks.

The third option would create new privately owned companies to buy mortgages from banks and sell them as securities. Those securities would be explicitly guaranteed by the government as long as they meet certain criteria. The government would collect fees for that backing, just as the Federal Deposit Insurance Corp. insures bank deposits and regulates banks.

These new companies would essentially replace some of the functions filled by Fannie and Freddie. An array of academics and industry groups have backed such a proposal, and senior Obama administration officials, such as Treasury Secretary Timothy Geithner, have publicly discussed its merits.

The housing industry greeted the proposal coolly, and some mortgage industry officials criticized the administration for not providing more detail. “It was a political football that they punted back onto Congress’s side of the field,” said Joseph J. Murin, the former president of Ginnie Mae, a government-owned corporation that guarantees payments on mortgages backed by federal agencies.

Producing three different options, instead of one clear recommendation, reflects the fact that there isn’t a strong consensus within the administration or Congress, said Laurence Platt, a banking industry lawyer at K&L Gates in Washington. He described the proposals as “Goldilocks and the three options—one’s too hot, one’s too cold, one’s just right, but everyone disagrees which one is which.”

But the administration’s approach did attract support from Republican lawmakers, who have said the White House has been slow to address Fannie and Freddie’s future.

“On a number of these areas, we’re going to be on the same page, and that was encouraging, and to see it in writing is equally encouraging,” said Rep. Scott Garrett (R., N.J.).

Republicans face their own divisions over what kind of role the government should play in the market, while Democrats have generally said a federal backstop function is needed to ensure broad access to homeownership and the 30-year fixed-rate mortgage, in particular.

Many industrialized nations don’t have institutions like Fannie and Freddie, and instead rely more heavily on their banking systems to fund mortgages.

But some economists have noted that the mistakes in the U.S. private sector were far greater than the mistakes made by Fannie and Freddie. For example, private-label mortgage securities, which are not government-backed, have performed more poorly than those backed by the mortgage giants. Nearly 45% of private-label loans originated in 2006 had been 90 days past due at least once, compared with 13% for Fannie and Freddie, according to a report from the firms’ federal regulator published in September 2010.

“The part of the market that was the most private was also the worst,” said Michael Barr, a former assistant Treasury secretary who left the Obama administration in December. He said the report should help remind lawmakers that the government has long had a role backstopping mortgages. “People seem to think there’s a nostalgic world that we never had,” he said.

Housing advocates voiced alarm over proposals designed to cede more of Fannie and Freddie’s role to the private sector. “They’re bringing the fox to the henhouse,” said John Taylor, the CEO of the National Community Reinvestment Coalition.

The proposals are likely to set off a furious effort by the financial-services industry to protect generous subsidies and seek out new revenue sources. Investors haven’t been willing to buy mortgages that don’t have government backing primarily because there haven’t been enough steps taken to overhaul the market for private-label securities, said Joshua Rosner, of investment-research firm Graham Fisher & Co. “Investors are on strike,” he said.

His clients would buy securities without government backing “hand over fist” if the industry had adopted clear and transparent standards, said Mr. Rosner. “The industry isn’t doing that, because it’s playing for a guarantee.”

The rule was intended to prevent speculators from defrauding the government, but it also stifled the purchase and renovation of foreclosed homes by legitimate investors.

For years the federal government prohibited the use of Federal Housing Administration mortgage financing by buyers purchasing homes from sellers who had owned the property for less than 90 days. The idea was to prevent speculators from defrauding the government through quick flips of houses — often involving straw buyers and corrupt appraisers — at wildly inflated prices.

One side effect of that policy had been to stifle purchase-and-renovate projects by legitimate, small-scale investors who buy houses after foreclosure or loan defaults and then resell them in substantially improved condition. In many parts of the country, first-time and moderate-income buyers often sought to buy these fixed-up houses using FHA-insured mortgages with 3.5% down payments, but were prevented from doing so by the “anti-flipping” rule.

This left large numbers of foreclosed, vacant houses sitting unsold and deteriorating, with negative effects on the values of neighboring properties.

Last January, FHA Commissioner David H. Stevens announced a one-year suspension of that rule, permitting qualified buyers to obtain FHA mortgages on properties that were acquired by rehabbers less than 90 days before. The plan, set to expire at the end of this month, came with safeguards for purchasers, including inspections and multiple appraisals in some cases to document the amounts spent by investors on the improvements.

Vicki Bott, deputy assistant secretary for single-family housing at the FHA, confirmed in an interview that the agency expects to continue the policy for another year. Not only have first-time buyers responded overwhelmingly to the opportunity to buy “turnkey” renovated homes with low down payments, she said, but they have performed well on their mortgage obligations.

“Obviously we have concerns about flipping in general,” Bott said, but the FHA has seen none of the fraud problems, defaults and re-foreclosures that cost the agency millions in insurance payouts in earlier years.

Investor Paul Wylie, who with a group of partners and contractors specializes in acquiring, renovating and reselling foreclosed and distressed houses in the Los Angeles area, says the government’s policy “has been a very positive approach” because “it recognizes the role that [private investors] can play in helping the housing market get back on its feet.”

In the L.A. market, Wylie said, FHA financing accounts for 40% of all home purchases and 60% of purchases in predominantly Latino and African American communities.

Buying foreclosed houses “comes with a lot of risk factors,” Wylie said. “There’s no title insurance. We don’t have a good idea of the extent of the defects” inside properties that have been sitting vacant or vandalized for months. Some houses come with delinquent property taxes, which Wylie’s group typically must pay.

Two reports issued by the Financial Crimes Enforcement Network (FinCEN) show lenders and regulators filed 35,135 suspicious activity reports (SARs) related to mortgage fraud in the first half of 2010, up 7 percent from a year before.

But 78 percent of the suspicious activity reported in the first quarter of 2010 occurred more than two years ago, FinCEN said, compared with 44 percent during the same period of 2009.

There was a similar but less pronounced trend during the second quarter, when 74 percent of suspicious activity occurred more than two years ago, compared with 54 percent in the second quarter of 2010.

The discovery of mortgage fraud through mortgage industry loan review processes, quality control measures, regulatory and industry referrals, and consumer complaints often lags by two years or more, the FBI said in releasing its annual report on mortgage fraud in June.

Fannie and Freddie have made $13.3 billion in mortgage repurchase requests to lenders through Sept. 30, according to regulatory filings. Analysts expect that such repurchase requests — made when loans that are in default are found not to have met Fannie and Freddie’s underwriting standards — could ultimately cost lenders more than $100 billion.

The FinCEN reports attempt to identify areas where mortgage fraud continues to be a problem in more recent loans by ranking states, counties and metropolitan areas by the number of suspicious activity reports filed per capita that involve activity on or after Jan. 1, 2008.

During the second quarter, Nevada had the highest number of mortgage-related SARs per capita involving activity since Jan. 1, followed by Florida, California, Georgia, Maryland, North Carolina, Illinois, Washington, D.C., Washington and New Jersey.

Top 20 counties for mortgage fraud

Source: FinCEN

At the county level, four Southern California counties were ranked among the top 10: Los Angeles (1st), Orange (4th), San Diego (6th) and Riverside (8th). Rounding out the list were Miami-Dade, Fla. (2nd), Cook County, Ill. (3rd), Maricopa County, Ariz. (5th), Broward County, Fla. (7th), Clark County, Nev. (9), and Gwinnet County, Ga. (10th).

Within the 50 most populous metropolitan areas, Miami ranked highest in terms of subjects per capita after Jan. 1, 2008, followed by Atlanta, Las Vegas, Los Angeles, San Jose, Washington, D.C., Riverside, Orlando, Chicago and San Diego.

Although a majority of mortgage fraud-related SARs submitted in the first half of the year reported activities that took place between April 2006 and June 2008, they also revealed that fraud remains an issue with newer loans, particularly on distressed properties.

SAR reports referenced “short sale” 827 times during the first quarter of 2010, and “broker price opinion” 41 times — terms FinCEN said are sometimes associated with property “flopping” sales of foreclosed properties to straw buyers at artificially low prices. PreviewThe properties are typically flipped at a higher price.

So much has been written about short sales that sorting through all the suggestions can be confusing and exhausting.

Like anything else, the more you know and understand, the better equipped you are to be successful. Of course, short sales take more than knowledge. They also take patience, fortitude and a driving need to see the transaction through completion.

The best way to set yourself up for a successful short sale transaction is to:

1. Get educated. Register to HAFA certified courses through assetplanusa. Take time every day to read at least one article or blog post about short sales. Join short sale groups (in your area and on social networking sites like LinkedIn and Facebook) so you can talk to others who have closed short sales and know the people and the steps to get the transaction closed.

 

2. Research the property. When a short sale opportunity presents itself, talk to your local title company to find out about possible liens on the property, and talk to the mortgage holder to determine if the foreclosure process has already started. Once you know the property’s status, you’ll have a better idea of your next steps. And you may choose to decline the opportunity if the sale cannot be closed before beginning foreclosure proceedings.

 

3. Find out what the bank requires. More banks are looking for ways to clarify the short sale process and their transparency about that process is a step in the right direction. For example, Bank of America provides a road map of who does what in their “10 Tips to a Successful Short Sale,” available at http://realestateagent.bankofamerica.com/. Go to the bank’s website to learn what you can about their process and requirements. Talk to other short sale specialists in your area that have worked with that bank (networking groups can be a great resource for these types of questions).

    

4. Be the expert! The buyers and sellers are counting on their agents to do everything they can to close this sale. Be sure you know what you’re responsible for before contacting the bank. Short sales are not fun for anyone, so be sure you give the impression to the bank that you are a successful and competent real estate agent fully equipped to close this short sale. (Refer back to the first three steps.)

 

5. Complete every step of the process with accuracy, persuasion and persistence. Having thorough and complete paperwork can get you to the top of the Loss Mitigator’s pile. Be persuasive when laying out the hardship and home value. Have the facts to support what you say. Lastly, be persistent. Nice, but persistent. Ask what you can do to keep this moving forward. Ask for time frames and follow-up. These five steps are what successful real estate professionals do every day to sell short sale homes. Do them with excellence and you’ll improve your chances of having successful short sales.

It seemed too good to be true: You bought a house in foreclosure at a fraction of the former price. Maybe you even knocked out a wall or two and remodeled with all the money you saved.

But now thousands of foreclosures around the country may be invalid because of bank paperwork problems. Should you worry?

“Anyone who’s purchased a foreclosed property in the last three years should really be concerned,” says George Babcock, a Providence, R.I., attorney who represents homeowners who have been foreclosed on.

“They should call the attorney that did their closing and say, ‘Hey, do I have a problem?’”

Bank of America, JPMorgan Chase and other major lenders have frozen tens of thousands of foreclosures in at least some states while they review the paperwork for errors or mishandling.

For homeowners, there are several questions to ask. But first, experts say, they should check to make sure they have title insurance, which protects the homebuyer from any claim on the property that surfaces after the deal has closed.

Those claims can arise from unpaid taxes or legal glitches in the ownership documents. Most people who take out mortgages are required by their lenders to buy a policy. For those paying cash, it’s optional but highly advisable, especially now.

“If you’re a bona fide purchaser with title insurance and no knowledge of any irregularities in the transaction, courts are going to be extremely loath to set aside the sale,” says Diane Thompson, an attorney with the National Consumer Law Center.

This new twist to the foreclosure crisis is no trivial matter for the large and growing number of people buying homes out of foreclosure.

The foreclosure listing service RealtyTrac Inc. says that nearly 250,000 homes sold from April to June, or 24 percent, were in foreclosure. In Nevada, it was 56 percent. Arizona was next with 47 percent and California third with 43 percent.

The cost of title insurance varies by state and circumstance but is often roughly 0.5 percent of the mortgage — in the neighborhood of $1,000 for a $200,000 loan. Premiums are expected to rise as title companies brace for new claims.

A homeowner with title insurance shouldn’t have to worry if the previous owner stakes a claim to the home. Even a successful claim, experts say, would almost certainly end up with the title company settling with the evicted homeowner — not the new buyer out on the curb.

If they failed to make payments repeatedly, evicted homeowners might not be able to afford their old homes anyway, something a judge would consider. They’re more likely to seek a large check than a return to a house with an outsized debt.

The situation is murkier for people who bought their homes with cash and didn’t bother with title insurance. The issue of who has proper title in that situation could be uncertain.

“It is not clear, which is why the banks have imposed their own moratoriums on foreclosure,” says CEO Tim Dwyer of Entitle Direct Group, the holding company for EnTitle Insurance Co., an Ohio title insurer. “Potentially, you face a legal battle in that situation.”

Analysts expect the sudden questions to lead to a flurry of claims on homes now in the hands of other people, some spurred by lawyers trying to capitalize on the uncertainty.

“Lawyers who represent homeowners in foreclosure are going to see an explosion in demand,” said Tom Lawler, an independent housing economist in Virginia. In most cases, he noted, “it’s unlikely that the foreclosure will actually be reversed and the title will revert to the original borrower. But it’s possible.”

Babcock, for one, says his phones have been ringing off the hook with calls from people who were foreclosed on and want to know if he can get their houses back.

He has sent off dozens of letters to recent buyers of those homes, alleging that because of defects in the foreclosure process they don’t actually own the property, and suggesting impending legal action.

“I’m not saying that all of the titles are toxic,” he says. “But many, many, many are.”

Mark Stopa, a Tampa, Fla., lawyer who represents hundreds of homeowners facing foreclosure, contends that perhaps a quarter of cases have title problems that merit challenges.

Legal experts concede it’s possible that there may be a judge somewhere who’s disgusted enough with how the banks conducted themselves to throw out foreclosures. So if you’re the new owner of a foreclosed property and worried, what should you do?

First, check to make sure you have a title policy and the title is clear, which means there are no liens against the property and the ownership is clearly established.

The fee to have a title search conducted should be $35 to $100, according to Jason Biro, a 14-year veteran of the mortgage industry who now runs the nonprofit consumer advocacy firm Saving Your American Dream.

If no problems surface, you may still want to run another title search every six months or so if you are interested in selling anytime soon, given the current confusion, Biro says. If you’ve had the property four years or so, it should be OK, Stopa says.

Those who paid cash and without title insurance will not necessarily be forced to pack up and leave.

That’s because many states provide protections for those who bought in good faith, according to Biro — essentially anyone who wasn’t trying to exploit a flaw in the foreclosure system. So the buyer of a foreclosed property should still be able to fend off a title-related claim. The downside: That fight could entail significant legal expenses.

In the future, there may be a bigger issue — what happens to foreclosure sales if buyers are concerned that they can’t get title insurance. It’s rare, but not unheard of, for a title insurance company to be liquidated.

Yet another risk in the flagging economy is that the title insurance company is liquidated, leaving you without protection. That’s rare, but it does happen. Credit ratings agency A.M. Best Co. warned buyers as recently as last year of financial problems among some title insurers.

What about buying right now?

Rick Sharga, a RealtyTrac senior vice president, said buyers who are making a foreclosure purchase from a bank shouldn’t be concerned. He says they should just double-check to make sure it’s possible to get title insurance.

If the title insurance company won’t sell a policy on a property, you probably shouldn’t buy it, Stopa says.