Lenders should be aware that when it comes to real estate transactions involving a portfolio of properties, particular title insurance difficulties may develop that are unique to such transactions. As a result, lenders should ask for certain types of coverage and keep in mind the time concerns and state-specific issues that come with portfolio transactions.
One of the most common issues with portfolio transactions is the complications that arise from managing title insurance for portfolio transactions. For example, while single-property purchases only require a single lending policy, portfolio transactions may necessitate the use of multiple security instruments, which may lead to several complications such as the title firm refusing to offer a single insurance policy that covers all of the properties and excessive premiums due to the fact that several title policies are needed with the lender wanting the full loan amount to be covered by each policy.
Endorsement 12-06 of the American Land Title Association (ALTA), often known as a “tie-in” endorsement, resolves these issues and is required for many portfolio transactions. For instance, if a policy does not have enough coverage to make the lender whole on a claim, the tie-in endorsement allows the lender to collect from one of the other policies. Also, the title firm will be able to issue individual policies for each mortgaged property, with insured amounts equal to a grossed-up part of the entire loan amount, with the help of a tie-in endorsement.
Having a thorough understanding of correct title insurance coverage, state-specific intricacies helps lenders avoid unnecessary time delays and potential problems, resulting in a smooth closing. To read more on title insurance, click here.
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