A loan policy of title insurance that insures the lender's mortgage lien is valid, enforceable, and in the agreed priority position, up to the loan amount.
The longer version
Unlike an owner's policy, the loan policy protects the lender, follows the debt through assignments, and pays down as the loan amortizes. It insures against defects in title and lien priority that were not excepted on Schedule B.
At closing the insurer typically issues a marked-up commitment or pro forma, with the final policy delivered post-closing once the mortgage records. Chasing the final policy is a classic trailing item, and one reason post-closing checklists exist.
In Prodeal
In Prodeal it is a checklist line with a status, a due date, and a responsible party. The executed version lands in the deal's document set and carries into the closing binder.
Common questions
- What does a lender's title policy cover?
- It insures that the mortgage is a valid, enforceable lien with the agreed priority, subject only to the exceptions listed in the policy. Its coverage follows the loan when the loan is sold.
- Who pays for the lender's title policy?
- In commercial lending, the borrower usually pays for it as a closing cost, alongside the lender's other third-party costs.
- What is the difference between a lender's policy and an owner's policy?
- A lender's policy protects the mortgage lien up to the loan amount. An owner's policy protects the owner's title up to the purchase price. A lender cannot rely on the owner's policy.
- The commercial loan closing checklistWhat goes on the list and who owns each line.
- The post-closing audit trailWhat examiners ask for and how to have it ready.
- What lenders check in a closing binderFour reviewers, four different reads.
- Due diligence softwareThe request list, the owners and the dates in one place.