By: Steve Lash

During the foreclosure crisis, much of the attention has focused on the people who have lost their homes.

But what about the purchasers of the foreclosed properties faced with what 50 state attorneys general – including Maryland’s Douglas F. Gansler — say is the real possibility that those foreclosures contained paperwork errors?

The situation illustrates why buyers should always insist on having their own title insurance coverage, rather than relying on the title policy the lenders insist they purchase, says real-estate attorney Lawrence S. Conn, of Baxter, Baker, Sidle, Conn & Jones PA in Baltimore.

“This is exactly the type of title defect that title insurance is designed to protect,” Conn said of paperwork errors in the foreclosure process.

The lender’s title policy, though, protects only the lender. Anything beyond that, such as the buyer’s down payment, would require an owners’ title policy, which is only marginally more expensive.

A buyer neglects this added coverage at his or her own peril, Conn added.

“Make sure that in this climate, [purchasers] certainly have title insurance,” he said.