That has led some title insurers to pull back on their demands and give banks the benefit of the doubt.

The stakes are high for the real estate market. Without title insurance, home sales cannot happen, and the glut of foreclosed homes in the United States cannot be sold.

Some title insurers have slowed underwriting policies because they are unsure how much they may have to pay for the foreclosure mess. That may be weighing on the housing market.

In recent weeks, banks have come under fire for using sloppy paperwork to foreclose on homes.

Title insurers protect the buyer of a home against claims that prior owners still legally own the property. If banks have improperly foreclosed, the wronged borrowers could create an influx of lawsuits that title insurers would have to defend.

Banks are reluctant to sign a sort of model industry agreement to take on insurers' legal costs, because it could expose them to the suggestion they did something wrong, industry representatives said.

"If this is going to be done it makes more sense as a targeted solution that's mutually agreeable to the parties that are directly affected," said Bob Davis, executive vice president for mortgage, markets and public policy at the American Bankers Association, in an interview.

OPERATING IN OBSCURITY

Until now the title insurance industry has operated in relative obscurity. Most people have never heard of title insurance, unless they have bought property.

The four largest national title insurers — Fidelity National Title, First American Financial, Stewart Information Services and Old Republic International — control 90 percent of the market alongside much smaller independent insurance companies.

Stewart, citing the model industry agreement, said Thursday it was ready to issue insurance "to purchases of foreclosed properties from institutional lenders representing that they have followed all applicable legal processes" — a signal it wants lenders to accept the agreement before it writes policies.

On the other hand, First American said on a conference call with analysts it was giving up on pushing a deal given changes the banks had made in their processes.

We do not think a general indemnity is necessary," Chief Executive Dennis Gilmore said on a conference call.

Analysts say the future of such an agreement is very questionable and title insurers may have to do without.

"If there is no master agreement, I expect individual title insurers will negotiate with individual banks," said Jerry Bruni, who owns Fidelity National stock and oversees $425 million at J.V. Bruni and Co in Colorado Springs, Colorado.

The ultimate fate of the agreement could affect the appeal of the sector to investors.

With the exception of Old Republic, shares in the sector are down anywhere from 3 to 7 percent this year, against a 10.3 percent gain for the S&P insurance index.

"There is a lot of uncertainty what's going to happen, which is why shares are where they are," Bruni said.

PUSHING CONSENSUS

The largest U.S. title insurer, Fidelity National, has already reached an agreement with Bank of America Corp. But the origin of the document goes back to the insurers' trade group, the American Land Title Association, and federal housing giants Fannie Mae and Freddie Mac, which contemplated making it mandatory.

"We made the case for the requirement of this indemnification by Fannie and Freddie," said ALTA President Kurt Pfotenhauer, referring to proposals for Fannie and Freddie to require indemnification. "So far, we've obviously not won that argument."

Bankers say that the market has remained broadly functional without an umbrella agreement with title insurers.

"Rather than make it a blanket it makes sense to us to have it as an option that would apply to special circumstances where the companies are willing to grant that indemnity," the ABA's Davis said.

But the title insurance industry, for its part, is warning that a blanket agreement is needed to keep the market moving.

Without an umbrella indemnity agreement, "it would take more time and consideration to do some of the (foreclosure) sales and could make title insurance less available to some markets," Pfotenhauer said.