Question About Title Insurance...

Your title policy remains but there is a new policy for the new lender.

If the title policy remains, is it attached to the loan, lender, property, or borrower?

If the loan, then doesn't that go away on the refi and get replaced by a new loan (with it's own policy)?

If the lender, then either the same situation applies as for the loan, or I end up with two policiies associated with the same lender (i.e., refi with same lender as current loan).

If the property, then why does it need to have more than one title policy if the policy attaches to the property?

If the borrower...ummmmm....turkey is kicking in.

Well, you get the point. I'm still confused.

New loan, new policy every time. There to protect you and the lenders.

Why Lenders Require Title Insurance When Refinancing Your Loan
Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.



Q Why do I need to purchase a new title insurance policy on a refinanced loan?



A To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that their new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender.



Q Why does a Lender need title insurance?


A Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae. FannieMae, in order to protect its security interest in the loan, requires title insurance coverage. Even those lenders who keep original loans in their portfolio are wise to get a lenders policy to protect their investment against title related defects.



Q When I purchased my home, didn’t I also buy a lender’s policy?


A Perhaps. Who pays for the lender’s policy on a purchase loan varies regionally and by the terms of individual contracts. However, even if you did buy a lender’s policy when you purchased your home, the lender’s policy remains in force only during the life of the loan that was insured. If you refinance, the old loan is paid off ( the "life" of the loan expires) and a new loan is issued for with the lender will require a new title insurance policy.



Q What about my original title insurance policy?



A When you bought your home, you purchased a homeowners title policy. The homeowners’ policy stays in force as long as you or your heirs own the home. When you refinance, your lender will often require that you purchase a new lender’s policy to protect their new security interest in the property. Thus, you are buying a policy to protect your lender, not a new homeowner’s policy.



Q What could possibly have happened since I purchased my home which warrants a new lender’s policy?



A Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanic’s liens, child support liens or legal judgments recorded against you – events that could result in serious financial losses to an unprotected lender. Regardless if it has been only 6 months or less since you purchased or refinanced your home, a myriad of title defects could have occurred. While you may not have any title defects, many homeowners do. The only way for a lender to adequately protect itself is to get a new lender’s policy each time you purchase or refinance your home.



Q Are there any discounts available for title insurance on a refinance transaction?



A Yes. Title companies offer a refinance transaction discount or a short term rate. Discounts may also be available if you use the same lender for your refinance loan and your original loan. Be sure to ask your title company how they can save you money.

When you refinance a mortgage, the reason the new lender requires a new title policy is to ensure that there were no liens (except of course for the present mortgage), judgments or claims made against the property since you bought it or last refinanced it. However, you do not have to get a new owner's policy.

Socal - as AA mentioned when you refinance if it is a loan which has been less then 10 years you can get a discounted rate known as the re-issue rate. Should be automatic but I would check and make sure this is what they are quoting you.

There are 2 forms of title insurance: owner's title insurance and lender's title insurance.

Owner's title insurance is generally obtained at the time of purchase and protects you (the buyer) for an amount equal to the purchase price of the home for any issues that existed prior to the purchase of the property.  An owner's policy is not required, but highly recommended for all buyers, and it is transferable if you refinance and can be used for a discount on future title policies called a "re-issue credit".

Lender's coverage does not cover any of your interest, and exists solely to protect the lender (up to the amount of the mortgage, not the purchase price) from any title issues prior to the purchase date.  The reason a new lender requires a policy everytime you refinance is to insure title back to the issue of the previous policy.  If you buy a house in 2000 and title is clear, you may have an auto accident in 2002 and get a judgement that attaches to your house.  When you got to refinance in 2004, a new title search is done to find out that the liens on title have changed, and it could affect your ability to refinance at all, let alone the issues created with title insurance.

I hope this was helpful

Speaking of Title Insurance:

LandAmerica Title Insurance Bankruptcy Filing
Effective Immediately- No new title commitments or CPLs accepted. 

Grazi All.