Which statement about the loan title policy is true?

Which statement about the loan title policy is true?

• A. It protects the borrower’s interests
• B. It protects the seller’s interests
• C. It protects the heirs’ interests
• D. It protects the mortgagee's (lender's) interest

Answer: (D)

The loan title policy is designed to protect the lender’s security interest in the property. At closing, a title policy is issued to the lender to insure against losses from defects in the title that could threaten the lender’s ability to foreclose or to enforce the mortgage. It covers issues that existed at the time of the policy and up to the loan amount, reflecting the lender’s risk exposure for the financed amount. Because its purpose is to safeguard the lender’s lien and its ability to recover the loan, it protects the mortgagee’s (lender’s) interest. It doesn’t insure the borrower’s equity or interests, nor the seller’s or heirs’ interests. Those would be addressed by an owner's title policy (if obtained) which protects the buyer’s or heirs’ rights in the property.

The loan title policy is designed to protect the lender’s security interest in the property. At closing, a title policy is issued to the lender to insure against losses from defects in the title that could threaten the lender’s ability to foreclose or to enforce the mortgage. It covers issues that existed at the time of the policy and up to the loan amount, reflecting the lender’s risk exposure for the financed amount. Because its purpose is to safeguard the lender’s lien and its ability to recover the loan, it protects the mortgagee’s (lender’s) interest.

It doesn’t insure the borrower’s equity or interests, nor the seller’s or heirs’ interests. Those would be addressed by an owner's title policy (if obtained) which protects the buyer’s or heirs’ rights in the property.