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Title insurance offers protection
against loss from defects in
title to
real property (forgeries,
encroachments,
dower claims, etc.);
and from the invalidity or
unenforceability of
mortgage liens. The following
discussion is for general information,
you should consult with your attorney
concerning specific legal questions
regarding Title Insurance.
It
is meant to protect an owner's
or lender's financial interest
in
real property against loss
due to
title defects,
liens or other matters. It
will defend against a lawsuit
attacking the title as it is insured,
or reimburse the insured for the
actual monetary loss incurred,
up to the dollar amount of insurance
provided by the policy.
Typically the real property
interests insured are
fee simple ownership or a
mortgage. However, title insurance
can be purchased to insure any
interest in real property, including
an
easement,
lease or
life estate. Just as lenders
require fire insurance and other
types of insurance coverage to
protect their investment, nearly
all institutional lenders also
require title insurance to protect
their interest in the
collateral of loans secured
by real estate. Some
mortgage lenders, especially
non-institutional lenders, may
not require title insurance.
Here's a real life example
of how title insurance can come
to the rescue. You have just purchased
a home in a new development and
decide to put a big swimming pool
in your back yard. While digging
the hole, your contractor breaks
through a municipal sewer line
that just happens to run through
and under your back yard. If the
easement for the sewer line was
recorded but was not disclosed
on your title insurance owner's
policy, the title insurer is liable
for damages (either the cost of
moving the sewer or the lessened
value of your home and property).
Owner's policy
The owner's policy insures a purchaser
that the title to the property:
- Is vested in that purchaser
and that it is free from
all defects, liens and encumbrances
except those which are listed
as exceptions in the policy
or are excluded from the
scope of the policy's coverage.
- It also covers losses
and damages suffered if the
title is unmarketable
- The policy also provides
coverage for loss if there
is no right of access to
the land.
- expanded forms of residential
owner's policy exist that
cover additional items of
loss.
The liability
limit of the owner's policy is
typically the purchase price paid
for the property. As with other
types of insurance, coverages
can also be added or deleted with
an endorsement. There are many
forms of standard endorsements
to cover a variety of common issues.
The premium for the policy
may be paid by the seller or buyer
as the parties agree; usually
there is a custom in a particular
state or county on this matter
which is reflected in most local
real estate contracts. Consumers
should inquire about the cost
of title insurance before signing
a real estate contract which provide
that they pay for title charges.
RE/MAX Valley Real Estate
can provide you detailed information
as to the cost of title search
and insurance before the real
estate contract is signed. Title
insurance coverage lasts as long
as the insured retains an interest
in the land insured and there
is no additional premium paid
after the policy is issued.
Lender's policy
This is
sometimes called a loan policy
and it is issued only to mortgage
lenders. Generally speaking, it
follows the assignment of the
mortgage loan, meaning that the
policy benefits the purchaser
of the loan if the loan is sold.
For this reason, these policies
greatly facilitate the sale of
mortgages into the secondary market.
That market is made up of high
volume purchasers such as
Fannie Mae and the Federal
Home Loan Mortgage Corporation
(Freddie
Mac) as well as private institutions.
The American Land Title Association
("ALTA") forms are almost universally
used in the country though they
have been modified in some states.
In general, the basic elements
of insurance they provide to the
lender cover losses from:
- The title to the property
on which the mortgage is
being made is either
- Not vested in name
of the mortgage loan
borrower,
- Subject to defects,
liens or encumbrances,
- Unmarketable.
- There is no right
of access to the land.
- The lien created by
the mortgage:
- Is invalid or unenforceable.
- Is not first in
line to any other lien
existing on the property
on the date the policy
is written.
- Is shown to be subject
to undisclosed mechanic's
liens under certain
circumstances.
-
Covers the cost of defending
insured interests against
attack.
1 and
2 above are important to the lender
if the lender must foreclose its
mortgage. Item 3 covers matters
that would jeopardize recovering
full value of the foreclosed property
in the resale.
There are also ALTA mortgage
policies covering single or one-to-four
family housing mortgages. These
cover the elements of loss listed
above plus others. Examples of
the other coverages are loss from
forged releases of the mortgage
and loss resulting from encroachments
of improvements on adjoining land
onto the mortgaged property when
the improvements are constructed
after the loan is made

See Also:
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