When a borrower takes out a loan to buy a home she or he obtains title insurance that ostensibly protects the buyer from defects in the title such as recording mistakes, forged deeds and the like. The lender also gets insurance in the form of a loan policy that secures its interest in the value of the titled property. This policy, however, is not as strong as the title insurance policy, and when lenders foreclose on homes but do not pursue acquisition of the title insurance policy they can be exposed to additional risk. For more on this continue reading the following article from id supra,
In a time when foreclosures are all too common, many secured lenders end up taking title to the real properties securing their loans. One of the questions, then, is should a lender obtain an owner’s title insurance policy or is the loan title insurance policy sufficient?