Lender Title Insurance Protection: What is ALTA Title Coverage?
Background-Owner’s Title Insurance Policy
When purchasing 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 clear of all liens and encumbrances. Obtaining this information is usually done by applying for a title insurance policy with a title insurance company. A document (Title Insurance Commitment) is provided showing all relevant property information and all recorded liens and liens. Based on this commitment, the buyer can buy and close the transaction knowing that he is getting everything 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 body that prescribes what risks of loss the policy covers.
Key owner insurance protection
• Any defect or bond or encumbrance of the Title.
• Title not marketable.
• Absence of right of access to and from the Land.
• Violation of or compliance with any governmental law, ordinance, permit, or regulation (including those relating to construction and zoning) that restricts, regulates, prohibits, or relates…
• The exercise of eminent domain rights if a notice of exercise is recorded in the Public Registries, describing any part of the Land.
• The invalidity or unenforceability of the lien 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 ownership and lien information. The lender’s reason is to be sure that the money advanced will be properly protected and guaranteed by the real estate guarantee that supports the promissory note. If the lender has agreed to make a first position mortgage loan, collateral is required to show that the mortgage loan is in fact first position; a Lender’s Title Insurance Policy serves that purpose. In many cases, the lender invests more money in the transaction than the buyer. The lender, a bank or a private entity, needs just 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 bond or encumbrance of the Title. This Covered Risk includes, but is not limited to, insurance against loss from
• Title not marketable.
• 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 a notice of exercise is recorded in the Public Registries, describing any part of the Land.
• The invalidity or unenforceability of the lien of the Insured Mortgage on the Title. This Covered Risk includes but is not limited to insurance against loss of any of the following that prejudice the lien of the Insured Mortgage
Summary
Being a successful note lender or investor 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 have lender insurance on their note investments is because they don’t know it’s available; and consequently do not understand its benefits. Now that you know, don’t pass up the opportunity to avoid the risks that the ALTA Policy for Lenders protects against.