tall old buildingIn my previous article, I discussed owner’s title insurance and gave everyone a breakdown of what that is and why it is vitally important in the course of any real property transfer. To briefly recap, owner’s title insurance is a non-casualty insurance policy that I, as a licensed title agent, issue to a buyer or transferee of real property (the insured) that indemnifies the insured from any loss or damage resulting from a defect existing on the property (i.e. lien, unsatisfied mortgage, forged deed) as of the date they acquire title to the property.

So then what is a loan title insurance policy?

Loan title insurance policies come into play whenever you, as buyer, are buying a piece of real property, but you are using financing (a lender – Wells Fargo, Flagler Bank, or even seller, non-institutional financing, or hard money financing) to purchase a property.

So why does your lender want another title insurance policy? Unlike an owner’s policy which indemnifies the buyer (new owner) from any loss or damage that could arise as a result of the interests or possible claims of any third party, a loan title insurance policy ensures the lien of the lender’s mortgage has priority in lien against the lien of any other party. In other words, insuring that there is no other possible lienor that has a lien with greater power or interest in the property that could foreclose on the property, before the lender that is granting the mortgage to you to buy the property.

Stay tuned for my next article that will discuss lien priority in greater depth.