Lender’s Title Insurance Protection: What is ALTA Title Coverage?
History-Owner’s Title Insurance Policy
When buying a home or other real estate, the buyer needs to know who the current owners are, if they have “good title,” and if they can convey ownership (title) to the property free of all liens and encumbrances. Obtaining this information is usually done by applying for a title insurance policy from a title insurance company. A document (title insurance commitment) is provided showing all relevant ownership information and all recorded liens and encumbrances. Based on this commitment, the buyer can buy and close the transaction knowing that he is getting everything that he is legally entitled to receive. Ultimately, the insurance company issues an owner’s title insurance policy that assures the buyer that they have “good title.” The American Land Title Association (ALTA) is the national entity that prescribes what risks of loss the policy covers.
Key owner insurance protection
• Any defect or connection or encumbrance of the Title.
• Non-marketable title.
• Absence of right of access to and from the Land.
• Violation of or compliance with any governmental law, ordinance, permit, or regulation (including those related to construction and zoning) that restricts, regulates, prohibits, or relates…
• The exercise of eminent domain rights if there is a notice of the exercise in the Public Registries, describing any part of the Land.
• The invalidity or unenforceability of the encumbrance of the Insured Mortgage on the Title
Background: Lender’s Title Insurance Policy
The lender in a real estate transaction, whether it is a bank or a private investor, also needs to know all the property and lien information. The lender’s reason is to be sure that the money advanced will be properly protected and secured by the real estate collateral backing the note. If the lender has agreed to make a first mortgage, collateral is required to show that the mortgage is in fact first; a Lender’s Title Insurance Policy provides services for that purpose. In many cases, the lender puts more money into the transaction than the buyer. The lender, a bank or a private entity, needs as much, if not more, insurance protection than the buyer.
What is a Lender’s Title Insurance Policy?
The ALTA (American Land Title Association) is the national entity that prescribes what risks of loss are covered by the Owner’s policy and the Lender’s policy.
key lender insurance
• Any defect or connection or encumbrance of the Title. This Covered Risk includes but is not limited to insurance against loss due to
• Non-marketable title.
• Absence of right of access to and from the Land.
• Violation of or compliance with any governmental law, ordinance, permit, or regulation (including those related to construction and zoning) that restricts, regulates, prohibits, or relates to
• The exercise of eminent domain rights if there is a notice of the exercise in the Public Registries, describing any part of the Land.
• The invalidity or unenforceability of the lien on the Insured Mortgage on the Title. This Covered Risk includes but is not limited to insurance against loss of any of the following that harm the right of retention of the Insured Mortgage
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Being a successful lender or investor of notes means that losses are minimized and profits are maximized. There is no reason to take risks of loss that you can insure against for a small price. The main reason many note investors don’t carry lender insurance on their note investments is because they don’t know it’s available; and, consequently, they do not understand its benefits. Now that you know, don’t miss out on the opportunity to avoid the risks that the ALTA Lender Policy protects against.
