Lender’s Policy
Definition:
A lender’s policy is a type of title insurance that protects a mortgage lender against financial loss if a defect in the property’s title is discovered after closing. It ensures the lender has a valid, enforceable lien on the property up to the amount of the loan, safeguarding their financial interest until the mortgage is paid in full.
Lender’s Policy Information
A lender’s policy, also known as a **loan policy**, is typically required by mortgage lenders as a condition of financing a real estate transaction. It protects the lender—not the buyer—from title defects such as liens, undisclosed heirs, or recording errors that could affect ownership or the enforceability of the mortgage.
The policy amount usually equals the loan balance and decreases as the loan is repaid. While the lender’s policy remains in effect until the loan is satisfied, it does not protect the homeowner’s equity. Borrowers can purchase an **owner’s title policy** separately to cover their own interest in the property. Title insurance premiums are generally paid once at closing.
Florida Legal Definition
Under **Florida law** and the regulations of the **Florida Office of Insurance Regulation (OIR)**, a lender’s policy is a contract of indemnity that protects a mortgage lender’s interest in real property from losses due to title defects. Florida Statutes **§627.784** and **§627.7845** govern the issuance and regulation of title insurance policies, including lender’s policies.
The policy guarantees that the mortgage constitutes a valid lien on the property, subject only to exceptions stated in the title commitment. Title insurers in Florida must be licensed, and the rates for lender’s policies are set by the **Florida Administrative Code** to ensure uniformity across the state.
How It’s Used in Practice
In Florida real estate transactions, a lender’s policy is almost always issued when a buyer finances a property purchase. Title companies conduct a title search, prepare a commitment, and issue the lender’s policy at closing.
Mortgage lenders rely on this policy to protect their loan investment from undiscovered title problems. If a defect arises—such as an undisclosed lien or forged deed—the insurer covers the lender’s losses or defends their claim in court. Real estate attorneys and title agents play key roles in ensuring the policy complies with Florida’s title insurance laws and accurately reflects the lender’s security interest.
Key Takeaways
- A lender’s policy protects a mortgage lender from losses caused by title defects.
- It covers only the lender’s financial interest, not the homeowner’s equity.
- Florida regulates lender’s policies under §627.784 and §627.7845, Florida Statutes.
- The policy remains effective until the mortgage is paid off or released.
- Title insurers and agents must be licensed and follow Florida’s uniform rate structure.
Disclaimer: The information and opinions provided are for general educational, informational or entertainment purposes only and should not be construed as legal advice or a substitute for consultation with a qualified attorney. Any information that you read does not create an attorney–client relationship with Barnes Walker, Goethe, Perron & Shea, PLLC, or any of its attorneys. Because laws, regulations, and court interpretations may change over time, the definitions and explanations provided here may not reflect the most current legal standards. The application of law varies depending on your particular facts and jurisdiction. For advice regarding your specific situation, please contact one of our Florida attorneys for personalized guidance.
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