The Title Commitment (Lender’s Policy)

What is a commitment? Reflects the condition of title Sets forth requirements Eliminates the risk of future attacks on title Commits to issuance of policy for 6-month period − provided no changes in title occur prior to closing and requirements have been satisfied

Parts to a Title Commitment Schedule A – name of borrower, name of lender insured, amount of loan, legal description Schedule B, Section I – checklist of requirements to be cleared by borrower prior to close; outlines transaction Schedule B, Section II – exceptions to policy; items NOT insured by title company

Requirements Name of borrower or borrowing entity Organizational documents for borrower Copies of leases affecting the property Amount of the loan Any information for unreleased liens on the property (e.g. deeds of trust, etc.) Requirements putting property in borrower’s name

What is a policy? A contract whereby the insurer (underwriter) for valuable consideration agrees to indemnify the insured in a specified amount against loss through defect of title to real estate

Parts to a Policy Schedule A − same as commitment Schedule B, Part I − exceptions (same as Schedule B, Section II on commitment) Lender only: Schedule B, Part II − subordinate items

Standard Coverage Insurer insures that Borrower is owner of record No recorded defects, liens or encumbrances on the title Right of access to and from the property Marketable title to the property Insured mortgage is valid and enforceable

Standard Coverage (cont.) Does NOT insure against items not of record such as Taxes or assessments Defects that would be discovered by inspection Easements, liens or encumbrances Problems that a correct survey would disclose

Standard Coverage (cont.) Unpatented mining claims, patent reservations and water rights Labor or mechanics’ liens Rights or claims of parties in possession

Extended Coverage Lender receives same assurances as standard coverage Also protects against both matters which are shown by public records and certain matters which are not shown by public records

Standard vs. Extended Be sure to order ALTA extended for “extended coverage” − not ALTA standard