Florida Broker Practice Exam

What does the lender's title insurance policy benefit primarily?

1. The mortgage broker

2. The borrower

3. The mortgage lender

4. The title searcher

The correct answer is: The mortgage lender

The lender's title insurance policy primarily benefits the mortgage lender by protecting their interest in the property that serves as collateral for the loan. When a lender provides financing for a property, they want to ensure that they have a legitimate claim to that property in the event that any issues arise with the title, such as undisclosed liens, legal claims, or title defects. If a problem with the title emerges after the loan has been issued, the lender's title insurance policy would cover legal fees and any losses associated with the title claim, up to the policy limit. This protection is vital for lenders because it minimizes their risk when extending credit, ensuring that they can recover their investment should the need arise. In contrast, while the borrower may also have their own title insurance (which protects their equity in the property), the lender's policy specifically safeguards the financial interests of the mortgage lender. The other options do not reflect the primary beneficiary of this insurance; the title searcher's role, for example, is more about identifying potential title issues rather than being directly protected by the policy.