Escrow & Title
In Michigan, a mortgagee's title insurance policy decreases in value because:
AIt covers more risks over time
BThe coverage amount decreases as the loan balance is paid down✓ Correct
CIt expires after 10 years
DThe premium is refunded if no claims are made
Explanation
A lender's (mortgagee's) title insurance policy protects the lender up to the outstanding loan balance. As the loan is paid down, the insured amount decreases accordingly.
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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.
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.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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