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WHAT IS TITLE? (cont’d)
CHICAGO TITLE CALIFORNIA BUYER & SELLER GUIDE
Why Does the Lender Need a Policy on My Property?
For the lender, a title policy insures they have a valid and enforceable lien (deed of trust or mortgage) secured by the property, no one else other than those listed on the policy has a prior claim (or loan, etc.) and the party pledging the property as collateral does own the property being used as security for the loan. This protection remains in effect as long as the loan remains unpaid or the lender releases their lien.
The existence of a lender’s title policy encourages lenders such as banks, savings and loan associations, commercial bank, life insurance companies, etc., to loan money. Because they are lending other people’s money (savings or policy holder’s funds), they must be concerned with ways to recoup the amount loaned should the borrower fail to make their payments. The title company insures that the title to the property serving as the collateral is marketable in the event of foreclosure and the policy is backed by the integrity and solvency of the title insurance company. Of course, this benefits everyone– from the single family homeowner to the owner of a high-rise building.
What is a Title Search?
Before issuing a policy of title insurance, the title company must review the numerous public records concerning the property being sold or financed. The purpose of this title search is to identify and minimize title risks to issue a title policy acceptable to the owner before the owner takes title or to the lender prior to lending money.
Our research helps us to determine if there are any rights or claims that may have an impact upon the title such as unpaid taxes, unsatisfied mortgages, judgments, tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens, and encumbrances are identified in a “preliminary report” to applicable parties. Once identified, these matters can
be accepted, resolved, or extinguished prior to the closing of the transaction. In addition, you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction.
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