Trouble in Paradise

Boracay, an island in the Philippines with one of the most beautiful beaches in the world, is a place everyone who loves sun should see.  The sand is spectacular, and the water is about 85 degrees F -- all year round.  

Like any beautiful place, it is hard to spend much time there before entertaining the thought of moving there -- even if it is just a conversation for fun over drinks.  It only takes a few minutes to find out that due to the overnight popularization of the island there is essentially no such thing as free and clear title for property on Boracay.  You can buy land there, you can build on it, but right as soon as you are done someone may show up and say -- "hey, that is my property"!

By comparison, we have been very lucky in the US.  More than just about any other nation, we have a veritable paradise of titles to property.  When you buy a house, you are nearly 100% certain to have clear title, and you can actually find someone to insure that should there be any issue, they will cover you (title insurance).  In most communities we have 150 or more years of title history -- further solidifying that the person who says they are the owner of the property is actually the owner.  In order for property to sell, one must know that the seller can sell it.  Any uncertainty and there will be no selling and no financing, and certainly no investing in improvements.

It appears that the same people that brought us the mortgage crisis have a chance to bring end our confidence in free and clear title to property.  Check out this piece in Business Insider. Bear in mind that the bankers would not have to cast a shadow on all titles in order to ruin the market.  Even if a small percentage of titles are tainted, the title insurance would get very expensive or dry up all together.  Without title insurance, there would be no mortgages.  Without mortgages we would all be going back to buying homes for cash -- you know like Americans did before the civil war.

So it is a good thing the foreclosure factories were stopped last week.  Let's hope we can get out of this without erasing our confidence in our ability to own property.