ALTA Owners' and Lenders' PoliciesReal Estate Influence
May 9, 2013 — 895 views
The ALTA Policy, (the American Land Title Association Policy) covers against the losses that can happen in issues regarding the transfer of title in the purchase of a policy. The policy also insures against easements involving boundary lines and unrecorded encroachments and provides coverage for unrecorded defects in the title.
The issues of the title are not federally regulated, so it comes under local and state property laws. The policy also covers additional risks like the assessments, unrecorded mechanic’s liens, encroachments, encumbrances, easements, mining claims, water rights and patent reservations, as well as impersonation of the owner.
Requirements for the ALTA
Before giving out the insurance, a survey of the property will be conducted by the insurance company. The basic purpose of the insurance is to see to that the lender has a valid lien that is enforceable. A policy will not be issued for a house with any title issues.
Types of Policy
ALTA policies will vary depending on many factors. This will include factors like to whom and where the policy is given, and who is the one paying for the title insurance. There are basically 2 types of ALTA policy. The first one is the Lender’s policy, which is valid for bank institutions, lending money to purchase the property. The second one is the Owner’s policy for those purchasing the property.
Lender’s Policy Terms
As per the ALTA rules, lender’s policy will be given out based on the amount of loan that is owned on the property. If a mortgage is a requirement of the sale, then the lender will also need a title insurance policy. Lenders require the policy to protect their interests against the event of a loss.
The policy insures the lender against the loss for the whole length of the loan and the invalidity of the deed of trust and note. The costs and attorney charges involved in the event of such a loss is also covered by the policy. The duration of the insurance will last up to the complete amount loan repayment. The policy also insures the claim of the lender above any other claims that can arise in the future.
Owner’s Policy Terms
A lender’s policy will not be applicable to the homeowner. So it is advised that a separate owner’s policy is purchased. According to the ALTA, an owner’s insurance policy will cover the purchase price of the home. The homebuyer will obtain the insurance policy with the owner’s title at the end of the deal. Some ALTA policies also will list deletions. This can include construction loans with broken priority or mechanical liens. As an owner, while obtaining the policy, try to obtain the maximum title insurance coverage that is available.
The Additional Terms
The ALTA policy allows its subscribers to add in certain extra endorsements in the contracts, as needed. This includes insurance against the conditions of the association of homeowners, the restrictions and covenants, as well as the accuracy of the boundary involved. To get the best out of the policy, find a title company that is a registered member of the ALTA, while buying or selling a property.