Fidelity National Financial Inc. is backing down from a plan to require warranties from lenders limiting the company’s liability when insuring title on real estate-owned (REO) properties.

Bank of America, which is voluntarily providing such warranties to Fidelity, will continue to do so. But the nation’s largest title insurer is dropping a plan to require warranties from all lenders beginning Nov. 1, Bloomberg reports, citing an internal company memo to employees.

Fidelity’s chief legal officer, Peter Sadowski, told Bloomberg that other title insurers didn’t institute similar requirements, putting the company at a competitive disadvantage.

Old Republic and Stewart Title Guaranty Co. have said they continue to insure title on REO properties in the wake of media reports that the companies instituted restrictions on insuring foreclosed properties being sold by certain lenders implicated in the "robo-signing" scandal.

The American Land Title Association has held talks with lenders and other stakeholders aimed at convincing lenders to provide all title insurers with "appropriate indemnities" on REO properties.

Sadowski said Fidelity is now convinced that lenders’ heightened review of documents filed in foreclosure proceedings in the wake of the scandal provides adequate protection from "undue risk."

Fidelity’s internal memo cited new rules and procedures instituted by state courts and Fannie Mae and Freddie Mac’s federal regulator as reasons warranties aren’t needed, Bloomberg said.

The ultimate impact of the robo-signing controversy — in which employees for loan servicers have admitted to signing court affidavits in foreclosure filings without personal knowledge of what was in the documents — remains to be seen.

In some markets, fears that the controversy would restrict the flow of foreclosed properties onto the market haven’t materialized. But lenders are facing numerous lawsuits and a coordinated investigation by attorneys general in all 50 states.

At least six loan servicers — Bank of America, Wells Fargo, GMAC Mortgage, JP Morgan Chase, PNC Financial Services Group Inc. and Litton Loan Servicing — are reviewing foreclosure procedures and filings in 23 states where courts have jurisdiction over the process. Some voluntarily suspended or curtailed foreclosure proceedings in those states.

Bank of America and GMAC Mortgage have expanded their reviews to non-judicial foreclosure states, with Bank of America temporarily halting foreclosure sales in all 50 states on Oct. 8.

So far, loan servicers say their reviews haven’t turned up evidence that borrowers were foreclosed on improperly. 

Bank of America announced on Oct. 18 that it would begin resubmitting affidavits in 102,000 pending foreclosures in 23 judicial foreclosure states this week, which would allowing it to resume foreclosure sales in those states.

The bank also plans to resume foreclosure sales in the 27 remaining states as it completes reviews of its foreclosure procedures on a state-by-state basis.

In a blog post today, Redfin CEO Glenn Kelman said that the robo-signing scandal doesn’t seem to be affecting REO inventories.

"We’ve had only one deal go south because the bank wanted the foreclosed property back," Kelman said. "We expected to see fewer bank-owned listings activated, but in six of the eight markets we looked at over the past six weeks, the proportion of bank-owned listings being activated actually increased."

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