Why Do Lenders Require Title Insurance?
You may have noticed that today, mostly all lenders are requiring title insurance.
Despite the fact that the last thing a borrower wants is another cost at closing, title insurance has become a necessity.
So, why can’t we just rely on a lawyer’s opinion like we used to?
The primary reason is that title insurance will cover the lender for things that a lawyer’s opinion simply does not.
Perhaps the most important of these is fraud – namely, identity fraud.
A lawyer’s opinion does nothing to protect a lender for loss arising out this increasingly common crime. As an example, how do we know that John Smith, with legitimate John Smith ID, is the same person as the John Smith named on title?
The short answer is that we don’t.
And without title insurance, that mortgage could be a complete loss for the lender.
Secondly, the insurer will cover the lender’s legal costs.
If the mortgage validity, enforceability, or priority are challenged and require legal action; the cost incurred through legal fees can be quite significant. Having the insurance creates a substantial benefit to the lender.
Of course, there are the plethora of other covered risks that this type of insurance provides.
Benefits such as:
- Survey coverage
- Gap coverage
- Title problem coverage
In the end, title insurance provides an additional layer of protection for the lender (and most importantly the lender’s investors). Protection that is far greater than what is afforded by a lawyer’s opinion. That is why this particular insurance has now become the industry standard in Canada, especially for private and non-bank lenders.
The experts at Kokanee Mortgage are always at the ready to help with any questions regarding title insurance or any other lending issue. We have the answers you and your borrowers need. Let our underwriters show you just how easy and straightforward the lending experience can be.
