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Title Insurance: Mortgage and Owner's
Title insurance offers you financial protection and legal representation against potential claims to the title of the property made by a third party. Even with a careful title examination conducted and reviewed by experts, there are hidden hazards that may arise after closing that could not have been detected or cured before closing. These hazards may involve funds due, undetected liens or mortgages, fraud, unknown heirs, mistakes in deeds or recording, or even challenges to actual ownership.
Even if a claim is not valid, there are legal costs in defending a claim, and the title insurance provides the litigation support that would otherwise be the financial burden of the owner or lender. The title insurance also guarantees marketable title, so that the owner can sell or refinance the property, even if an issue arises.
There are two types of title insurance. The first is Mortgage Title Insurance, which protects the lender’s investment in the property against title claims. If you are obtaining a mortgage loan to purchase your home, the lender will usually require you to purchase a Mortgage Title Insurance policy. This is typically handled by the lender’s closing attorney, and the premium charge is included in the “Title Services and Lender’s Title Insurance” portion of the Good Faith Estimate and Line 1101 of the HUD-1 Settlement Statement. The Mortgage Title Insurance policy is a one-time purchase for each mortgage obtained, so a new policy will be required for any refinance loan or second mortgage, even with the same lender.
The other type of title insurance is Owner’s Title Insurance, which protects the property owners for as long as they own the property; the owners continue to be protected if they sell the property and convey it by Warranty Deed or Limited Warranty Deed to someone else.
It is important to understand that the Mortgage Title Insurance provides no protection for the owner, and a lender will not file a claim on behalf of the owner. Owner’s Title Insurance is also issued by the closing attorney, and the premium is based on the purchase price of the property. A simultaneous issue discount will apply when both the Mortgage policy and the Owner’s policy are issued at closing. There are also two types of Owner’s Title Insurance, basic and “enhanced”; the enhanced policy provides much more coverage to the owner, including many survey issues and increased coverage (125% - 150%) as the value of the property goes up. Click here for a comparison in chart form: Chicago Title's Comparison of Basic and Enhanced Owner’s Title Policy analysis.
The Fryer Law Firm strongly recommends the purchase of Owner’s Title Insurance with enhanced coverage, which gives the purchasers the protection of a national underwriter. If the Owner’s coverage is declined, the attorney fees for the closing will be higher to cover the full cost of conducting the transaction.
The Fryer Law Firm is an issuing agent for three (3) major title companies:
Chicago Title 404-303-6300 www.ctic.com
First American 404-250-1604 www.firstam.com
Old Republic 770-475-6199 www.oldrepublic.com