The Long and the Short of it

After the excitement and stress of a purchase or refinance settlement has concluded, title companies focus on producing a title policy: the final, binding contract that lays out the holder’s coverage.  Similar to title commitments, each policy is made up of a Schedule A and Schedule B.

Schedule A will outline details of the coverage, including the maximum coverage amount, the effective date of the policy, the vested parties eligible to submit a claim, the address of the insured property, and the tenancy of the vested parties.  Some endorsements will also be listed, depending on the state and policy form.  Schedule B, meanwhile, will outline the exceptions from coverage.  Specifically, it will list any title item under which the insured parties would not be eligible to claim insurance. These exceptions directly correspond to those disclosed on the title commitment prior to settlement.

Title policies can be issued in Long Form or Short Form configuration.  Long Form policies cannot be issued until the recording information has been received back from the county recorder’s office.  Short Form policies, on the other hand, can be issued immediately after the loan has been successfully funded, making them the preferred form for qualifying transactions.  Unfortunately, the Short Form can only be issued on 1-4 family homes and loan amounts less than $500,000.00.  Not to worry, though; both forms offer exactly the same type and amount of coverage.

Although lenders and buyers share the same peace of mind and security when investing in title insurance, policies are tailored differently to each party.  While lender’s policies always cover the amount of the loan they extend, an owner’s policy will cover the entire purchase price of the home.  In fact, if home improvements are imminent, a new owner’s policy could be provided above the purchase price to cover those improvement costs.  Typically, owner’s policies are unnecessary for refinances as the initial policy will insure the buyer for the entirety of the time he/she owns the home.  However, an additional owner’s policy could be issued if a refinancing loan amount exceeds the amount of the initial purchase price.  For more details on policy contents, forms, and protections, contact your Client Advocate today

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