TITLE POLICIES Flashcards
STANDARD LENDERS POLICY
The standard policy covers you for defects and liens in the history of your title through the date and time the mortgage/deed of trust is recorded in public records.
ALTA EXPANDED COVERAGE RESIDENTIAL LOAN POLICY
Provides enhanced coverage, protecting you from additional risks, including some that might occur after the mortgage/deed of trust is recorded.
LENDERS TITLE INSURANCE
If buying or refinancing a property, whether strictly land or with a home, a lender will require their lien position is insured. What does that mean? A lender providing a first mortgage loan must verify their lien is in first position. Therefore, if there is an existing mortgage on the property, it must be satisfied before or at closing. Otherwise, the new loan would be in second or worse position. When lenders are providing first mortgage rates, they require first lien position. Additionally, the most important reason comes to foreclosure. In the case of foreclosure, whoever is in first position, gets paid first.
Lender’s title insurance does what it says – it insures the lender against anything missed during the title search or legal claims against the owner’s property. The title search states the ownership and lien status of the property, then title insurance protects the lender in case something was missed. Finally, the lender will require insurance in the amount that fully covers their loan size. If the loan amount is $200,000, the lender’s policy must be $200,000. Does the lender pay for the lender’s insurance? Sorry, but no. This is a borrower cost, and yes, it protects the lender. But, the borrower must pay it for the lender to provide the loan.
Similarly, the lender’s title insurance covers banks and other mortgage lenders from unrecorded liens, unrecorded access rights, and other defects. In case of a borrower’s default, if there are any issues with the property’s title, a lender would be covered up to the mortgage amount.
