What Is Lender's Title Insurance?

Section B or Section C

This is one of the fees in the Fee Library that moves between sections depending on the lender. The rule says a service belongs in Section C, Services You Can Shop For, when the lender lets you choose the provider. When the lender picks the title company, or requires you to choose from its own list, the same policy belongs in Section B, Services You Cannot Shop For. The premium is the same policy either way. What changes is how much the figure can move between the Loan Estimate and the Closing Disclosure.

A lender that allows shopping must give you a written list naming at least one available provider for each service, separately from the Loan Estimate, and must state that you may choose a different provider.

One more detail from the rule's commentary: when an owner's policy and a lender's policy are bought together, title companies often price the second one at a discount. The Loan Estimate still shows the lender's policy at its full premium, without that adjustment.

The lender's title line on our sample

Our sample Loan Estimate is a fictional $382,500 conventional purchase. The lender allowed shopping for title, so the line "Title - Lender's Title Insurance, $1,150" sits first in Section C, above a $150 notary fee and a $650 settlement fee. Section C totals $1,950. The owner's policy, marked optional, appears separately in Section H at $1,350.

The report explained the $1,150 line and did not grade it. The grade went to Section A, the lender's own charges, which totaled $6,180 and landed $405 above the typical range in the public record. Title insurance is paid to a title company rather than the lender, so it is outside that total by design.

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Two policies, two beneficiaries

The lender's policy and the owner's policy insure the same title for two different parties. The lender's policy pays the lender if a title defect threatens the loan. The owner's policy pays you if a defect threatens your ownership or equity. The CFPB notes that if someone sues over a claim to the home, you are the first person responsible, which is why it suggests considering an owner's policy. The form marks the owner's policy "(optional)" and places it in Section H.

Names for the same line

Endorsements, which extend the policy for specific risks, are also title components. They carry the "Title -" prefix and sit in the same section as the policy they attach to.