Real Estate Term:Lender's Policy

The Lender's Policy is separate from the Owner's Policy. This type of policy insures the validity and enforceability of the lien of the lender's mortgage or deed of trust. The lender's policy protects the lender for the amount of money lent against the property. Coverage under the Lender's Policy lasts as long as the loan secured by the mortgage or deed of trust has a balance. The title insurer's risk under a Lender's Policy is generally less than that of an Owner's Policy; as a result, insurers typically charge lower premiums for a Lender's Policy than would be charged for the same dollar amount of coverage on an Owner's Policy.

The American Land Title Association is a national trade association of title insurers. ALTA has created standard forms of title insurance policy "jackets" (standard terms and conditions) for Owner's, Lender's and Construction Loan policies. ALTA forms are used in most, but not all, states in the USA. ALTA also offers special endorsement forms for the various policies; endorsements amend and typically broaden the coverage given under a basic title insurance policy. ALTA does not issue title insurance; they provide the policy forms that title insurers issue. Some states such as Texas and New York may mandate the use of forms of title insurance policy jackets and endorsements approved by the state insurance commissioner for properties located in those jursidictions, but these forms are usually similar or identical to ALTA forms.

Title insurance premiums are regulated or fixed in some states including Texas and Florida. Other states do not regulate title insurance premiums but instead rely on the marketplace to do so.

Title insurance companies historically have not marketed extensively to the general public. This is because decisions about which type of coverage and which title insurer will issue a policy are most often made by real estate agents and mortgage lenders. Most purchasers and borrowers, who purchase or finance properties only rarely, are often wholly unfamiliar with issues of title (including the implications and risks of defective title) and title insurance, as well as other aspects of a real-estate transaction. Consumers have the right to participate in these decisions and may be able to save on the costs they incur if they do so.

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