Lenders Taking Title by Foreclosure or Deed in Lieu: The Advantages of Obtaining an Owner’s Title Insurance Policy

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Lenders who make loans secured by real estate routinely obtain a loan title insurance policy insuring their lien position. Owners of real estate routinely obtain an owner’s title insurance policy insuring their title to the property. But what about when a lender becomes an owner by foreclosure or deed in lieu of foreclosure of their insured deed of trust? Can a lender rely on its loan title policy to insure its title to the property? If so, then should a lender rely on its loan policy, or should it obtain an owner’s policy?

Generally, coverage under a loan policy does continue after a lender takes title to the property. However, certain actions can jeopardize continued coverage, and there are advantages to obtaining an owner’s policy. Lenders about to take title should therefore consider the following traps for the unwary and benefits of an owner’s policy.

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Poyner Spruill LLP on:

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