Escrow & Title
A lender's title insurance policy (loan policy) protects:
AThe buyer/owner against title claims
BThe lender's security interest up to the outstanding loan balance✓ Correct
CBoth the buyer and lender jointly
DThe title company's liability for errors in the title search
Explanation
A lender's policy protects the mortgage lender's security interest. It is typically required by lenders and decreases in coverage as the loan balance is paid down.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Math Concepts
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