Can private lenders get an ALTA title policy?

Question

Do any escrow officers, title professionals or private lenders happen to know if a private lender can obtain an ALTA title policy (lender's policy)? I'm in the process of doing my first loan (as a private lender) and I've requested a lender's title policy (ALTA policy). However, the escrow officer at the title company handling the closing says she cannot issue ALTA policies to individual/private lenders and can only get CLTA policies (owner's policy).

Just wondering if that's standard or if perhaps that's a limitation of her title company (it's a major title company if it helps).

@Tom Gimer @Shannon Wright ?

Just wondering if that's standard or if perhaps that's a limitation of her title company (it's a major title company if it helps).

@Tom Gimer @Shannon Wright ?

Account Closed · Answer

Really good question.  Hopefully somebody here can figure it out.

This is an email I got from title for a hard money loan I did some time ago:

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A CLTA loan policy will be issued ( needs to be listed in the lenders instructions to title). Or we can offer Standard Coverage --2006 ALTA Loan Policy with Western Regional Exceptions to hard money beneficiaries if a CLTA loan policy is not acceptable to the beneficiary.  No additional endorsements will be given other than the 100 & 116

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After my questioning this I got this response:

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First  America  as our underwriter  has  indicated to us  that  CLTA  coverage is the available  coverage on hard money loans.  Typically , a hard money loan would be considered  a loan which is not  through  a  Bank. For example  ,  individual beneficiaries etc.

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I went around with them and ended up getting a ALTA policy with exceptions.  I read the exceptions, the best I can tell is the ALTA with exceptions is watered down to basically be a CLTA policy.  But I really don't know.

This is the first time I heard this.  I have done many HML before and always gotten a lenders ALTA policy.  Although I never heard this before, I'm guessing all the ALTA policies I have gotten have the exceptions, I just never looked closely and the other title companies never mentioned it.

Tom Gimer · Answer

@Kyle J. This may be a California-specific question. That said, since you asked... as a lender I would not allow the title company/insurer to limit my coverage (ALTA being broader than CLTA) without a valid, verified reason... in writing. My initial reaction to the question is demand the ALTA policy. If the buyer has to pay significantly more (this may be the real issue), so be it. If there are specific issues, they should be addressed via exceptions to an ALTA policy.

We issue ALTA policies all the time to private lenders... on the east coast. The "type" of lender involved has nothing to do with underwriting.

Jay Hinrichs · Answer

that seems odd.. I have gotten ALTAs as a matter of routine.  although we were a HML .. Maybe Tom knows.

I have had clients get ALTA buyers policies on big MF they paid cash for.   they vested in their LLC..

Jay Hinrichs · Answer

it get that.. but do look to see what risk your collateral would have .. if its vanilla houses.. In CA .. not much risk there.

the main risk I would be wanting is access.. and protection of forgery.. those are musts.. to me.

Kyle J. · Answer

Primarily just because it covers more and offers the broadest form of coverage/protection for me (as the lender).

Jay Hinrichs · Answer

@Kyle J.  is there some specific reason you want an alta.. we just ordered them becasue3 that's what we did,

if this is a home in a lot and block subdivision not sure you need to fret the alta..

Kyle J. · Answer

@Tom Gimer This is what she wrote to me in an email: “We do not issue ALTA loan policies to individual lenders. I do private loans and all I ever am able to get is a CLTA and I work for a title company.”

(The way I read that is she is a private lender too and is claiming she can’t even get an ALTA policy for her own loans.)

Interesting that others seem to have been able to issue/obtain ALTA policies. Further makes me wonder if it’s some sort of limitation associated with this particular title company.

Can private lenders get an ALTA title policy?

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