A Nations Lending Primer on Title Insurance
Our Nations Lending originators are sometimes asked about title insurance. Our loan officers tell their clients that unlike most insurance, title insurance covers what could have already happened and not what may happen in the future as it ends on the days it is issued and extends backward in time until the property is sold.
Some borrowers may not understand the purpose of title insurance and tell the Nations staff that they see it as an unnecessary expense. Yet title insurance protects the current owner from losses brought on by claims against the owner’s rights that weren’t known when a property was purchased. Claims against tile include incorrect boundaries, unpaid tax liens, previous seller fraudulently selling to multiple buyers, etc. In order to discover any attachments, liens and title defects a title search is performed prior to a loan closing.
Once a property has a clear title, a Title Insurance policy can be issued to protect the new homeowner from complications and any hidden hazards such as forged documents, undeclared marital status, inaccurate deed description, etc. An owner’s (buyer’s) Title Insurance policy is for the full value of the real estate purchase and is valid for as long as the current insured owners or their heirs own the property uninterrupted. If a claim arises against the homeowners, the title insurance company will be able to address any valid claims not found or addressed in the Title Search and to cover the costs of defending those claims.
Nations loan officers remind borrowers that title insurance premiums are a one-time, single payment made at closing. Lenders will also want to be protected from any claims and therefore a Lender’s Title Insurance policy is also required. The lender’s title policy in the amount of the loan and the amount of coverage declines each year as the mortgage balance drops. Once a loan is paid in full, the lender’s policy expires but the owner’s policy remains until the property is sold.