Title insurance in Massachusetts: lender and owner policies

What the title exam checks

Every purchase in Massachusetts is closed by an attorney, and part of that work is the title examination: a search of the public records for the history of ownership and anything that affects it. For a purchase-money first mortgage on a one- to four-family home the borrower will occupy, state law requires the lender’s attorney to certify title to both the lender and the borrower. For recorded land the search must cover at least 50 years, starting with a warranty or quitclaim deed, and includes the registry of deeds and the relevant probate records. For registered land it can start with the current owner’s Land Court certificate of title, with bankruptcy indexes and federal and state liens still checked.

The certification states that you hold good record title, subject to the exceptions it lists, such as easements, restrictions or a condo master deed. The attorney’s liability under it is limited to the price you paid, and it stays in effect for you while you own the home. An attorney who willfully fails to give the borrower this certification commits an unfair practice under the consumer protection law.

A certification is a professional opinion about the records. It does not pay for a loss caused by something the records do not show, such as a forged signature or an heir nobody knew about. That gap is what title insurance fills.

Lender’s policy and owner’s policy

There are two policies, and they protect different people. Most lenders require a lender’s policy as a condition of the loan; the buyer usually pays for it. If you buy with cash, there is no lender’s policy, and the owner’s policy is the only title coverage you can buy.

What an owner’s policy covers, and what it does not

An owner’s policy covers losses from title problems that existed before you bought and were not excluded. The consumer guides from the CFPB and from state insurance regulators give examples: a lien for a prior owner’s unpaid taxes or for a contractor who was never paid, an error in the public records, a claim by an heir, and a forged deed or release. If a covered claim is made against your title, the insurer pays to defend it and pays covered losses up to the policy amount.

Three things are outside a standard policy. Problems that arise after closing, such as a contractor you hire later. Items the policy lists as exceptions, which often include easements, recorded restrictions and matters a survey would show, such as where a fence sits relative to the lot line. And the general exclusions printed in the policy form. Some title insurers offer an enhanced owner’s policy or endorsements that cover certain later risks; ask what they add, what they cost and whether they are available for the property.

Before closing your attorney will receive a title commitment, the insurer’s offer to issue a policy on stated terms. Ask for a copy and go through its list of exceptions with the attorney. If an exception concerns something you care about, such as a shared driveway, a right of way across the yard or a boundary question, ask whether it can be removed, narrowed or covered by an endorsement before you close.

What it costs and how to compare

Both premiums are paid once, at closing. Who pays follows the contract and local custom; in Massachusetts the buyer usually pays for title insurance, as our closing costs guide explains. Your attorney or the title agent can give you the premium for each policy in writing, and the total is usually lower when both policies are bought from the same insurer at the same time.

On the Loan Estimate and Closing Disclosure, every title charge begins with “Title –”, and a separate insurance product that you choose to buy is marked “(optional)”; the federal commentary uses the optional owner’s policy as its example. Federal disclosure rules can make the premiums on the Loan Estimate look different from the title company’s own itemization. The CFPB’s advice is to compare the total of all title charges.

You can usually choose your own title services rather than the provider the lender lists. A seller may not make the sale conditional on your buying title insurance from a particular company; that is barred under RESPA.

Title problems that hold up closings

Most title issues are found in the exam and fixed before closing. Issues that can delay a closing include the following, with how they are usually handled.

• A mortgage that was paid off but never discharged. The lender that was paid must record a discharge, or deliver it to the closing attorney, within 45 days. If it does not, a Massachusetts attorney can record an affidavit of payoff under the statute. Ask the seller early for payoff letters and old discharge copies.
• A very old mortgage still on record. State law treats many old mortgages as discharged after a set period, generally 35 years from recording when no term is stated, or 5 years after the stated maturity, unless an extension or affidavit was recorded. The attorney decides whether it applies.
• An estate in the chain of title. If a past owner died, the probate records must show who inherited and who had authority to sell. A missing heir or an unfinished probate can delay closing until it is cured.
• Boundaries, easements and encroachments. A driveway shared with a neighbor, a fence over the line or an unrecorded path all show up as exceptions or survey questions. Raise them during your inspection period if they matter to you.
• Liens and unpaid charges. Municipal charges, condo fees, tax liens and contractor liens are usually paid from the seller’s proceeds at closing. The attorney orders a municipal lien certificate and, for a condo, a certificate showing the unit’s common charges are paid.

Your steps, in order

Title work runs on the contract dates, so the order matters.

• When your offer is accepted, ask your lender who the closing attorney will be, and whether you may choose your own title services.
• Ask the attorney or title agent for a written quote for the lender’s policy and the owner’s policy, separately and together, and whether an enhanced owner’s policy is available.
• When the title commitment arrives, read its exceptions with your attorney and raise any exception that affects how you plan to use the property.
• Compare the title lines on your Loan Estimate and Closing Disclosure as totals, and ask about any change before closing day.
• Keep the owner’s policy and the attorney’s certification with your deed. Your heirs will need them if a claim ever arises.