A title search is an investigation into the ownership history of an asset. In Australian English, a title search is sometimes referred to as a "title examination" or "title due diligence".
A title search is conducted to identify any defects in the title to the asset. Defects in the title can include:
- Forged or fraudulent documents
- Unrecorded liens or encumbrances
- Unregistered interests
- Adverse possession
A title search can also reveal information about the asset, such as:
- The identity of the current owner
- The history of ownership
- The existence of any mortgages or other liens
- The zoning and use restrictions
A title search is an important part of the securitisation process. It helps to ensure that the investors in the securitisation have a valid claim to the cash flows from the underlying assets.
Here are some of the applications of title searches in securitisation:
- To protect investors: A title search helps to protect investors in a securitisation from the risk that their claims to the cash flows from the underlying assets will be challenged.
- To manage credit risk: A title search can be used to manage credit risk. For example, an issuer may require that a title search be conducted before the securitisation is issued. This will help to protect the securitisation from losses if there are defects in the title to the underlying assets.
- To create new products: A title search can be used to create new securitization products that meet the needs of different investors. For example, an issuer may issue a securitization with a different type of underlying asset, such as receivables or intellectual property. The title search will need to be adapted to the specific type of underlying asset.
It is important to note that a title search is not a guarantee of the validity of the title to an asset. However, it is an important step in the securitisation process and can help to reduce the risk of losses for investors.
A title search is sometimes referred to as a "title examination" or "title due diligence".