In one sentence
A borrower's indemnity covering the title company for the gap between closing and recording, when new liens could theoretically appear.
The longer version
Between signing and the mortgage actually recording, a window exists where an intervening lien could file. The gap indemnity backs the title company for that risk so it can insure the lien as of closing.
It is a routine closing document that lets the title company issue coverage without waiting for the recording to complete.
Common questions
- What is a gap indemnity?
- A borrower or seller's indemnity to the title company covering matters that might record between the title search's effective date and the recording of the closing documents.
- Why does a title company need a gap indemnity?
- So it can insure through the recording date without a search covering the gap. The indemnity shifts the risk of a new lien in that window back to the party who caused it.
- Is a gap indemnity the same as an owner's affidavit?
- They are related and often signed together. The affidavit states facts about liens and parties in possession; the gap indemnity covers matters arising after the search date.
Keep reading
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The due diligence checklist, built to be runChecklists as systems, not documents.
- The commercial loan closing processThe five stages from term sheet to funded.
- Commercial loan softwareWhere this sits in the lending stack.