Closing questions
What amount is the lender's policy issued for?
The lender's policy is written at the loan amount, at a simultaneous issue rate when an owner's policy is issued too. How changes before closing are handled.
What amount is the lender's policy issued for?
Quick Answer
Schedule A of the lender's policy recites the amount, and that figure comes from the note rather than from the purchase price. A seven hundred fifty thousand dollar loan on a one million dollar purchase produces a lender's policy at the loan amount and an owner's policy at the price.
Coverage on the lender's side is measured by the lender's loss, so it declines as principal is paid down and terminates when the loan is satisfied. That is the structural reason a lender's policy is not a substitute for owner's coverage.
Simultaneous issue is the New York pricing rule that matters here. When both policies are issued on the same transaction, the lender's policy is written at the simultaneous issue rate rather than at a full standalone premium, which is why buying both together is materially cheaper than buying them apart.
On a CEMA the amount analysis has two parts: the assigned principal carried forward and the new money in the gap mortgage. The lender's policy insures the consolidated lien, and the mortgage recording tax calculation runs off the new money rather than the total.
Changes late in the file are common. A loan amount adjusted after appraisal or after a rate change flows through to the commitment, to the endorsement set, and to the premium on the settlement statement. Confirm the final figure before the statement is circulated.
Does the lender's policy amount decrease over time?
In effect, yes. The policy insures the lender's loss on the mortgage, and that loss shrinks as the principal amortizes. When the loan is paid off or refinanced with a new lender, the policy ends. An owner's policy behaves differently and stays at its stated amount.
What is the simultaneous issue rate?
It is the filed rate that applies when an owner's policy and a lender's policy are issued on the same transaction, covering the same land. The lender's policy is written at a reduced charge rather than a second full premium. It applies only when both policies issue together on that closing.
What else should you read before closing?
In the glossary
- Lender's policyTitle insurance protecting a lender's lien position, issued in the loan amount. Its coverage falls as the principal balance falls and ends when the...
- Simultaneous issueIssuing an owner's policy and a lender's policy together on one transaction, which reduces the charge for the loan policy under the filed New York ...
- Schedule AThe part of a title commitment or policy naming the insured, the policy amount, the current owner, the estate insured and the legal description of ...
- Premium (title insurance)The one-time charge for a title policy, computed from the filed New York rate schedule by amount of insurance, plus any endorsement and search-rela...
- CEMA (Consolidation, Extension and Modification Agreement)An agreement in which an existing mortgage is assigned and consolidated with new financing rather than being satisfied and re-recorded. It requires...
Questions this raises
- What is the difference between an owner's policy and a lender's policy?An owner's policy insures the buyer for the purchase price. A lender's policy insures the bank for the loan amount. How the two differ on a New Yor...
- When does the reissue rate apply?Producing a prior owner's or lender's policy within the reissue period lowers the New York premium. Where to find the old policy and what qualifies...
- How does a CEMA work at closing?A CEMA assigns the old mortgage instead of satisfying it, so New York mortgage recording tax is paid only on new money. The documents and the seque...
The statute itself
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