As a private money lender, lending money to another person may seem as simple as recording a lien instrument against the property and determining a payback procedure through a Promissory Note. Reality is quite the contrary. Unreleased liens, illegal deeds and forged signatures abound within the confines of each County's Recorder's office. You can't blame the recorder's office, for as long as you have a proper margin and the correct type size, they will record a cocktail napkin. Their job is to record, not investigate.

Title Insurance comes to the rescue on a white horse, proclaiming truth and justice for the private lender and commercial lender alike. Title Officers search through every conceivable recordation on a property, looking for a reason not to insure against future controversy. Once the Title Officer has relented, he/she sets a list of conditions which must be satisfied for the Title Insurance Company to provide Title Insurance. The Escrow Officer oversees the fulfillment of the Title Officer's requirements, and the Title Policy is written.

In theory, Title Insurance works much the same way as other types of insurance. Title Insurance provides coverage for the amount invested, or lent, to protect against title problems which would normally cause a lien to change position or disrupt the validity of a lien.

This type of coverage is offered to lenders through Title or Escrow Companies. A private person lending money directly to another person has no guarantee a lien is in the appropriate position or if an unreleased deed is clouding the title. Title Insurance allows lenders to sleep well at night knowing if a problem does arise, the Title Insurance will cover them for the amount of their initial investment.