A lender’s title insurance policy is typically required by each bank, lender or credit union to ensure that the loan is marketable or transferable to an agency such as Fannie Mae, Freddie Mac, the Department of HUD or the Department of Veterans Affairs. A title insurance policy also ensures that the lender has a first lien or priority on the property in relation to their debt, subject to a few exceptions.
Owner’s title insurance may be purchased to protect the new buyer against covered claims, liens or encumbrances that may arise in relation to the property, and a one-time premium will provide protection for as long as the customer owns or has liability in connection with the property.
Title insurance is substantially different from other types of insurance. Most insurance policies protect against future losses and events, and if the premium is not renewed each year, the coverage terminates. Owner’s title insurance, however, protects against losses from past events and essentially provides a warranty to the policyholder that the title to the property is free from most defects that might impair ownership rights. Owner’s title insurance is a one-time fee that protects the property owner for life.
Title Examinations and Property Searches
The purpose of a title search or examination is to ascertain the ownership of the property being transferred, debts or liens applicable and the terms or conditions related to the title insurance policy. This involves searching for and examining documents such as deeds, mortgages, wills, divorce decrees, court judgments, liens, municipality assessments and property tax records.
Fully Insured Closings and Witness Closings
At the closing or settlement of a purchase transaction, the seller executes and delivers a deed to the new owner, and the buyer typically signs new mortgage documents. Closing funds are then disbursed to the seller, the prior lender, real estate brokers, the title company and any other parties who are owed money. The documents are then recorded in County’s public record-keeping system.