What type of risk does Loan Policy Covered Risk No. 11(b) specifically protect against?

The correct answer is related specifically to Loss of lien priority over certain assessments, which is a critical aspect of title insurance policies. Loan Policy Covered Risk No. 11(b) offers protection against the potential loss of priority that a lender may have over liens, particularly those that are assessed against the property after the loan has been secured but before the insured party has taken actual possession or before the lien has been recorded.

In the context of title insurance, priority is crucial because it determines the order in which various claims against a property will be paid in the event of a foreclosure or sale. If a new assessment lien is placed on the property after the loan policy is issued, and that lien has a higher priority than the loan, it can jeopardize the lender’s ability to recoup its investment in the event of a default. This protection ensures that lenders are safeguarded against scenarios where new assessments could infringe upon their secured interests, maintaining the integrity and priority of the existing mortgage.

Understanding this type of coverage is essential for anyone involved in real estate transactions. It highlights the necessity for lenders to ensure their financial interests are properly insulated against subsequent claims that might arise after their lien has been established.