Enlarge By Joe Raedle, Getty Images A pre-foreclosure sign is seen in front of a home in Miami on Sept. 16. The decision by Old Republic National Title Insurance to stop writing new polices for certain foreclosures could have major ramifications for the housing industry. Old Republic National Title Insurance, among the nation's largest title insurance companies, will no longer write new policies for homes foreclosed upon by J.P. Morgan Chase and Ally Financial's GMAC Mortgage unit –– a sign that concerns about faulty foreclosure paperwork could now endanger new sales of foreclosed homes. Old Republic issued a bulletin to some agents stating that "the company will not insure title to any property which has been foreclosed by Ally Financial, Ally Bank or GMAC until further notice," according to a Sept. 29 copy of the memo. The concern is that other title companies will also refuse to issue policies for major lenders, which could have major ramifications for the housing industry. And Maryln Weiner, a title agent and real estate lawyer in Boca Raton, Fla., said she received a bulletin saying that Old Republic would also not insure title policy to a purchaser who has bought a property from Chase when the bank has foreclosed on the home and are now selling it to third parties. "They won't insure it after completion after the foreclosure," Weiner says. "This is going to set us back years. It's really going to be a mess. I think you're going to see actions to reopen foreclosures that already took place. This will have tremendous consequences and all title companies will do the same thing. We've never seen anything like this before." Mark Stopa, a lawyer in Florida who represents homeowners, says the implications are huge. Buyers will not purchase homes that have been foreclosed upon if they don't have insurance that it's a clear title, he says. "Would you buy the house? If there's questions about the title, you can't sell it, so who's going to buy it?" Stopa says. And homeowners who have purchased properties that were foreclosed upon could also find their ownership challenged. A bank could have foreclosed upon a property and sold it to a third party. Later, the former homeowner may now come forward and say the foreclosure judgment has to be set aside because of faulty documents. The current homeowner could find they no longer have any right to a home they had paid for, Stopa says, and in that case, they're likely to go to the title insurer and ask that their financial losses be covered. "That's why title insurers don't want to stick their necks out," Stopa says. And distressed homes, which include foreclosed properties and that now make up a significant number of housing sales, rose to 34% of sales in August from 32% in July; they were 31% in August 2009, according to the National Association of Realtors. If homes that are foreclosed upon don't sell, that will also lead to more housing inventory. About 1.9 million first-mortgage loan defaults, the first step in the foreclosure process, are expected in 2010, according to Moody's Analytics. Guidelines: You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. Read more