Lender's policy
Lender's title insurance in North Carolina
The policy your lender requires, what it protects, and how the filed NC rates price it.
What a lender's title policy is
A lender's title policy (also called a loan or mortgagee policy) insures the mortgage lender that its deed of trust is valid and has the priority it expects. Most lenders require one on every loan, and the borrower usually pays for it at closing. It protects the lender, not you.
NC DOI explains that most lending institutions will not lend on a property unless a lender's or mortgagee title policy is purchased, that investors who buy loans often require it, and that its coverage decreases and eventually disappears as the loan is paid off. It also says plainly that a lender's policy does not protect you. NC Department of Insurance, Title Insurance The CFPB factsheet describes it as protecting the creditor against problems with or challenges to the title and imposing a duty on the underwriter to defend the creditor's interest in certain title issues. CFPB TRID title insurance factsheet
Where it appears on your loan paperwork
On the Loan Estimate, lender's title insurance appears in the Loan Costs table, under either Services You Cannot Shop For or Services You Can Shop For, depending on whether your lender lets you shop for it. It usually carries a label like "Title, Premium for Lender's Coverage." On the Closing Disclosure it appears under Services Borrower Did Not Shop For or Did Shop For. CFPB TRID title insurance factsheet
One quirk catches many buyers on purchases. Federal disclosure rules can require the Loan Estimate and Closing Disclosure to show the lender's policy at its full premium and the owner's policy as the difference, even though the title agent prices them the other way around under the simultaneous issue rule. The CFPB acknowledges that the itemized list you get at closing can differ from what is on your Loan Estimate or Closing Disclosure, and that this does not necessarily mean you are being charged the wrong amount. CFPB, What is owner's title insurance? If the numbers look different from our calculator, that is often why; ask your attorney to walk you through the total.
How the lender's premium is calculated in NC
The policy amount is the principal amount of the loan. NC Department of Insurance, Title Insurance How the premium is figured depends on the transaction:
| Situation | Lender's policy premium under the filed manual | Rule |
|---|---|---|
| Purchase with an owner's policy | $28.50 simultaneous issue charge per loan policy; the main premium is figured on the owner's coverage (or the total loan coverage if higher) | PR-4 |
| Refinance, or a purchase with no owner's policy | Regular rate on the loan amount, minimum $56 | PR-1, PR-2 |
| Property insured in the last 15 years and the prior policy is provided | 50% of the regular rate up to the prior policy amount, regular rate above it | PR-5 |
| Expanded coverage residential loan policy | Applicable rate plus 20% of the regular rate, on qualifying one to four family homes | PR-3 |
| Residential endorsements ALTA 5, 8.1 or 9 | $23.00 each | PR-10 |
What borrowers should check
- The policy amount matches your loan amount.
- On a purchase, you know whether you are also buying an owner's policy, because that changes how the two premiums are figured.
- On a refinance, you have told your attorney about your prior policy so the reissue credit can be considered.
- The title agent named on your file is one you chose or agreed to. You can choose your title insurance provider. NC Department of Insurance, Title Insurance
For lenders and processors
Ironwood issues ALTA loan policies underwritten by First American Title Insurance Company on North Carolina residential loans closed by NC attorneys. Send closing instructions, endorsement requirements and mortgagee clause details with the order, or ask the closing attorney to include them. More detail is on our page for lenders.
How long the loan policy lasts
A lender's policy protects the insured lender and later holders of the loan for as long as the loan is outstanding. When the loan is paid off, by sale or refinance, that policy no longer protects anyone, which is why a new loan needs a new loan policy. Coverage under the loan policy is tied to the debt, so the amount of insurance effectively declines as the loan is paid down. NC Department of Insurance, Title Insurance
The borrower pays for this policy in North Carolina under the usual contract terms and lender requirements, but it does not protect the borrower's equity. Only an owner's policy does that. CFPB, What is owner's title insurance? If you are buying a home, those two facts together are the main reason the owner's policy is worth a look.
A quick reading guide for the loan policy
When the final loan policy issues, it goes to the lender, but borrowers can ask for a copy. Schedule A shows the insured lender, the amount and the recorded deed of trust. Schedule B lists exceptions, such as easements, restrictions and taxes not yet due, that the policy does not cover. Any endorsements are attached at the end. The same structure appears in the owner's policy, which is the one written for you.
Questions people ask
Does a lender's title policy protect me as the borrower?
No. The NC Department of Insurance states that a lender's policy does not protect you. Only an owner's policy names you as the insured.
Why is my lender's title premium only $28.50?
On a purchase where an owner's policy is issued at the same time, the NC rate manual charges a single premium on the owner's coverage plus a $28.50 simultaneous issue charge for each loan policy.