America's outdated land title system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.