Well, maybe not literally, but 100% of first mortgage lenders cannot live without it. The American Land Title Association (ALTA) estimates title problems arise in 36% of property transactions. Why wouldn’t a lender want insurance protecting their security with those types of odds?
Whether a borrower is purchasing a new home or refinancing an existing one their lender will require the purchase of a lender’s title insurance policy. Such a policy protects the lender from loss or damage resulting from liens, encumbrances, or defects in the title to the property given as security in exchange for loan. In much the same way title insurance can protect property owners too.
The first step in issuing a policy of title insurance is the title search. The closing attorney performs or orders the title search which includes a search of the tax and deed records for the property given as security. The search is to determine if any taxes are owed, the names of the property owners, and whether there are any existing liens on the property, including mortgages, judgments, and tax executions.
The most common problems uncovered by a title search involve missing releases or satisfactions for paid off liens or mortgages, followed by misspelled names and incorrect legal descriptions. Although infrequent, the most troublesome title issue to correct involves estates of deceased property owners. Prior to closing and issuing a title policy the closing attorney will work to correct any issues found during the title search. But even the best title search cannot uncover forgeries, unknown heirs, or misindexed documents. That’s where title insurance comes in.
Lenders rely on title insurance to protect their asset (the loan) and insure the marketability of the debt (most all loans are packaged and sold to an investor). Homeowners when buying property should follow suit and protect themselves from loss too.
Contact us for a title insurance quote or check out our title premium calculators.
