Lender's 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 present owners are, if they hold "good title", and if they can convey the property ownership (title) free and clear of all liens and encumbrances.
Obtaining this information is typically done by ordering a title insurance policy from a title insurance company.
A document is provided (title insurance commitment) showing all pertinent ownership information and all recorded liens and encumbrances.
Based on this commitment the purchaser can buy and close the transaction knowing he is getting all that he is legally entitled to receive.
Ultimately an Owner's Title Insurance policy is issued by the insurance company that insures the buyer of having "good title".
American Land title Association (ALTA) is the national entity that prescribes what risks of loss the policy covers.
Key Owner's Insurance Protection • Any defect in or lien or encumbrance on the Title.
• Unmarketable Title.
• No right of access to and from the Land.
• The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating...
• The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records.
• The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title Background-Lender's Title Insurance Policy The lender in a real estate transaction, either a bank or a private investor, also needs to know all of the ownership and encumbrance information.
The lender's reason is to be assured that the money being advanced will be properly protected and secured by the real estate collateral supporting the promissory note.
If the lender has agreed to make a first position mortgage loan, assurance is required that shows the mortgage loan is in fact in first position; a Lender's Title Insurance Policy services that purpose.
In many cases the lender is investing more money in the transaction than the buyer.
The lender, a bank or a private party, needs as much, if not more, insurance protection then 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 the Owner's policy and the Lender's policy covers.
Key Lender's Insurance • Any defect in or lien or encumbrance on the Title.
This Covered Risk includes but is not limited to insurance against loss from • Unmarketable Title.
• No right of access to and from the Land.
• The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to • The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records.
• The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title.
This Covered Risk includes but is not limited to insurance against loss from any of the following impairing the lien of the Insured Mortgage Summary Being a successful promissory note lender or investor means losses are minimized and gains are maximized.
There is no reason to assume risks of loss that can be insured against for a small price.
The primary reason many note investors have no Lender's insurance on their promissory note investments is because they are unaware that it is available; and, consequently they do not understand its benefits.
Now that you know, don't overlook the opportunity to avoid the risks that an ALTA Lender's Policy protects against.