Escrow & TitleIntermediateDelaware Exam

What is the difference between a lender's (mortgagee's) title insurance policy and an owner's (mortgagor's) title insurance policy?

AThere is no difference; both cover the same risks
BThe lender's policy covers only the loan amount and decreases as the loan is paid down; the owner's policy protects the full purchase price and remains constantCorrect
CThe owner's policy is required; the lender's policy is optional
DThe lender's policy covers physical damage; the owner's policy covers title defects

Why The lender's policy covers only the loan amount and decreases as the loan is paid down; the owner's policy protects the full purchase price and remains constant Is Correct

Answer B: The lender's policy covers only the loan amount and decreases as the loan is paid down; the owner's policy protects the full purchase price and remains constant

A lender's title policy protects the lender up to the loan amount and decreases as the mortgage is paid down. An owner's policy protects the buyer's equity for the full purchase price and remains at that amount.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.

Key Escrow & Title Terms in This Question

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.

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