Q: What’s the difference between a mortgagees policy and a lender’s policy?
A: There is no difference. Essentially a policy provided to a lender insures the validity and priority of the lien insured. In Texas, that is now called a Loan Policy. Prior to 2008, the Texas form was called a Mortgagee Policy of Title Insurance. The form and name were changed in 2008 by the Texas Department of Insurance that promulgates all title insurance forms used in Texas, so that the coverage and name more closely tract those forms widely used across the United States called the ALTA (stands for American Land Title Association) policies. The Loan Policy is often issued simultaneously with an Owner’s Policy when the transaction is a purchase. Issued simultaneously in the same transaction, the premium (charge) for the Loan Policy and Owner’s Policy is greatly reduced and is always the “best deal” for the consumer.
Title insurance is an insurance policy that is meant to protect your property from future claims of ownership by another party. When we “open title” on a property, we start by researching the history of a property as far back as records go. In Texas, that can mean that we are tracing each transfer of title sometimes as far back as the Spanish land grants from the 1800’s. As you can imagine, most property has changed hands many, many times since then by sale, inheritance, marriage, divorce, foreclosure, and bankruptcy to name a few. Most properties have changed shape and size from the original grants that were thousands of acres in size. Every time a transfer happens, there is the opportunity for error in title to arise. Errors could cause a buyer not to have full ownership of a property.A Real Life Example (Names have been changed to protect the privacy of individuals involved.)I recently ran across a situation when a buyer wanted to find out the name and address of the legal owner of a property they were interested in buying. Though the property was not listed for sale, they wanted to write a letter to the owner to see if they were interested in selling. The buyers had done some research in the neighborhood and learned from a neighbor that the owner had recently died. They asked us to find out whether or not this was true and who currently holds legal title to the property.In doing some research, our title department researcher found that the most recent deed to the property was from 1959 in the name of “Joe Johnson.” In 1999 Joe Johnson recorded a document giving “Jane Johnson” his Power of Attorney. Then, researching further, we found a probated will for Jane Johnson. Jane is now deceased. The property taxes are paid current, but according to county records, Joe Johnson (deceased) is still the deed holder, Jane Johnson who had Joe’s power of attorney most recently is also deceased. Now a “Brad Johnson” seems to have some administrative control of the property and is paying the taxes. What we don’t know is if Brad is an heir, and if there are additional heirs who might have a claim to the property.In this situation, the taxpayer may or may not be the owner of the property in question. The potential buyer is requesting more extensive research so that they may write a letter to the current heir / heirs or legal owners. This lack of recorded deed transfer would certainly have to be cleared up before a title policy to a new owner could be issued and the buyer could rest assured that they indeed purchased the property from the legal owner.
