The Lenders Title Insurance Policy has which characteristic?

The Lenders Title Insurance Policy has which characteristic?

• A. Follows loan if sold in the secondary market
• B. Covers vested free and clear title
• C. Both of the above
• D. Neither statement is correct

Answer: (A)

The Lenders Title Insurance Policy is designed to protect the lender’s security in the property that backs the loan. A defining feature is that the policy “follows the loan” if the loan is sold in the secondary market, so the new holder of the loan is still covered for title defects affecting the lender’s lien. It does not insure the owner’s vested or free-and-clear title; that is not the purpose of the lender’s policy. So the statement about following the loan is correct, while the statement about covering vested free and clear title is not characteristic of a lenders policy.

The Lenders Title Insurance Policy is designed to protect the lender’s security in the property that backs the loan. A defining feature is that the policy “follows the loan” if the loan is sold in the secondary market, so the new holder of the loan is still covered for title defects affecting the lender’s lien. It does not insure the owner’s vested or free-and-clear title; that is not the purpose of the lender’s policy. So the statement about following the loan is correct, while the statement about covering vested free and clear title is not characteristic of a lenders policy.