Which statement about a mortgagee title policy is true?

• A. It protects buyers against title issues
• B. It protects lenders against loss due to title defects
• C. It guarantees mortgage approval
• D. It covers personal property damage

Answer: (B)

The key idea is that a mortgagee title policy safeguards the lender’s security interest in the property by insuring against title defects that could affect the lender’s lien. This policy is issued in the lender’s name and covers the amount of the loan, protecting the lender if a defect in the title (such as a forged signature, undiscovered lien, or recording error) would undermine the lender’s ability to enforce the mortgage. It doesn’t insure the buyer, it doesn’t guarantee your loan will be approved, and it doesn’t cover personal property damage—that would fall under other types of insurance. In short, a mortgagee title policy protects the lender from losses due to title defects.