Title Insurance: A policy that protects the lender against losses from defects in title—undisclosed liens, forged documents, recording errors, boundary disputes, or competing ownership claims. Freddie Mac requires a Lender's Title Policy on every loan, and the Pro Forma (draft policy) must pass counsel review before closing.
Why Does Title Insurance Matter for Agency Loans?
You've passed underwriting. The commitment letter is signed. Insurance is cleared. Then the lender's attorney flags three Schedule B exceptions—and your closing slips two weeks.
Title work is the silent killer of closing timelines. Unlike NOI analysis or appraisal disputes, title issues are binary: either the exception is cleared, or the deal doesn't close. There's no "credit exception" for an unresolved lien.
Order Title on Day One: Title work has the longest lead time of any closing requirement. Don't wait for the commitment letter—order title the day you sign the application. Every day of delay compounds at the end.
What Are the Title Insurance Requirements?
Freddie Mac requires specific title insurance coverage on every loan:
| Requirement | Standard | Notes |
|---|---|---|
| Policy Type | ALTA Loan Policy (2006 or later) | Lender's policy, not owner's |
| Coverage Amount | Equal to loan amount | Minimum; can be higher |
| Named Insured | Servicer "and/or its successors and assigns" | Exact language required |
| Endorsements | ALTA 9 (Restrictions), ALTA 3.1 (Zoning), others as needed | State-specific requirements |
| Survey | Current ALTA/NSPS survey | Within 90 days of closing |
What Is the Title Commitment vs. Title Policy?
Understanding the difference between these documents is critical:
| Document | When Issued | Purpose |
|---|---|---|
| Title Commitment | 2-3 weeks after order | Preliminary report showing current title status and requirements for insurance |
| Pro Forma Policy | After curative work | Draft of final policy showing exact coverage—sent to lender's counsel for approval |
| Title Policy | After closing | Final insurance policy issued after recording |
The Pro Forma Review: Freddie Mac's counsel (typically Carlton Fields or similar) reviews every Pro Forma before clearing to close. They will flag Schedule B exceptions, missing endorsements, and language issues. Budget 3-5 business days for this review—and expect comments that require title company responses.
What Is Schedule B and Why Does It Kill Deals?
Schedule B is the "exceptions" section of the title commitment—items the title company will not insure against. Some exceptions are standard (recorded easements); others are deal-killers (unreleased liens).
Schedule B-I: Requirements
These are items that must be satisfied before the policy can be issued:
| Common Requirement | What It Means | How to Clear |
|---|---|---|
| Pay off existing mortgage | Current lender must be paid at closing | Payoff letter from existing lender |
| Release of prior liens | Old liens must be discharged of record | Recorded satisfaction/release document |
| Proof of entity authority | Borrower entity must be in good standing | Certificate of good standing, resolutions |
| Updated survey | Survey must show no encroachments | ALTA/NSPS survey within 90 days |
| Tax/assessment clearance | Property taxes must be current | Tax certificate or escrow at closing |
Schedule B-II: Exceptions
These are matters that will remain as exceptions to coverage—things the title company won't insure against:
| Exception Type | Freddie Mac Position | Resolution |
|---|---|---|
| Standard exceptions (survey, taxes) | Must be deleted or insured over | Survey endorsement, tax search |
| Recorded easements | Acceptable if don't impair use | Review for impact on property |
| CC&Rs/Restrictive covenants | Acceptable if don't prohibit use | Review for multifamily restrictions |
| Mechanics liens | Must be released or bonded | Lien release or surety bond |
| Judgment liens | Must be paid and released | Satisfaction of judgment |
| UCC filings | Must be terminated if against property | UCC-3 termination statement |
The "Old Lien" Trap: A lien from a 2017 refinance that was paid off but never released of record? That's your problem now. You'll need to track down the original lender, obtain a release, and get it recorded—which can take weeks. Check title history early and flag any unreleased documents immediately.
What Endorsements Does Freddie Mac Require?
Endorsements are additions to the standard policy that provide specific coverage. Freddie Mac requires several:
| Endorsement | ALTA Form | Purpose |
|---|---|---|
| Zoning | ALTA 3.1 | Confirms property is zoned for multifamily use |
| Restrictions/Encroachments | ALTA 9 | Insures against restriction violations and encroachments |
| Survey | ALTA 25/25.1 | Deletes standard survey exception based on current survey |
| Environmental Lien | ALTA 8.1 | Insures against environmental protection liens |
| Access | ALTA 17/17.1 | Confirms legal access to public road |
| Contiguity | ALTA 19 | Confirms multiple parcels are contiguous (if applicable) |
| Tax Parcel | ALTA 18/18.1 | Confirms property is separately assessed for taxes |
The ALTA 8.1 Trap: Many borrowers assume the ALTA 8.1 endorsement covers all environmental protection liens. It doesn't. Freddie Mac strictly negotiates this endorsement to cover only state-specific statutes that grant "super lien" status (priority over the mortgage). If your state statute doesn't grant super lien status, you can't get that specific coverage—and counsel will strike it from the Pro Forma.
State-Specific Endorsements: Endorsement availability varies by state. Some states don't allow certain ALTA endorsements. Your title company will advise on alternatives—but flag this early so lender's counsel isn't surprised.
What Is the Mortgagee Clause?
The mortgagee clause names the lender as the insured party. Freddie Mac requires specific language:
their successors and/or assigns, as their interests may appear
| Clause Element | Requirement | Why It Matters |
|---|---|---|
| Named Insured | Servicer name (not "Freddie Mac") | Servicer is loss payee on behalf of Freddie |
| Successors/Assigns | Must be included | Allows transfer of policy if loan is sold |
| Address | Servicer's specified address | Notices must go to correct location |
| Loan Number | Reference on policy | Identifies the specific loan |
What Are Common Title Issues That Delay Closings?
1. Unreleased Prior Liens
A mortgage or lien that was paid off but never released of record. The old lender must provide a release/satisfaction document, which must then be recorded.
| Timeline to Clear | 1-3 weeks (if lender is cooperative) |
| Worst Case | Lender out of business; need court order |
| Prevention | Pull title commitment early; flag unreleased items immediately |
2. Address/Legal Description Mismatches
The property address on the insurance policy doesn't match title. Common with properties that span multiple parcels or jurisdictions.
| Example | USPS says "Wyandotte" but tax records say "Lincoln Park" |
| Resolution | Use the legal jurisdiction per tax records, not postal address |
| Documents to Prove | Tax certification, assessor's plat map |
3. Survey Encroachments
The survey shows a building, fence, or improvement crossing the property line—either onto your property or off of it.
| Minor Encroachment | Fence 6 inches over line—often insured over |
| Major Encroachment | Building over easement—requires resolution |
| Resolution Options | Encroachment agreement, easement modification, survey endorsement |
4. Missing Entity Documents
The borrower entity isn't in good standing, or the title company can't confirm authority to sign.
| Required Documents | Certificate of Good Standing, operating agreement, resolutions |
| Common Issue | Annual report not filed; entity administratively dissolved |
| Resolution | File missing reports, pay fees, obtain reinstatement |
The Judgment Search: Title companies search for judgments against the borrower entity and key principals. A personal judgment against the guarantor can attach to the property. Disclose any litigation or judgments to your lender early—surprises at title kill deals.
How Do I Coordinate Title with Other Closing Requirements?
Title, insurance, and payoff all have date-sensitive documents that must align:
| Document | Date Sensitivity | Coordination Point |
|---|---|---|
| Title Commitment | Effective date must be updated at closing | Date-down endorsement at closing |
| Survey | Must be within 90 days of closing | May need recertification if delayed |
| Payoff Letter | Good-through date must cover closing | Update if closing slips |
| Insurance Binder | Effective date must match closing | Coordinate with title for exact date |
| Rate Lock | Expiration date drives closing deadline | All title work must clear before lock expires |
When Closing Slips: If Freddie Mac delays the commitment, immediately notify your title company, insurance agent, and existing lender. Each has documents with effective dates that must be updated. A one-week slip can cascade into three weeks if you don't communicate immediately.
What Is the Title Clearance Checklist?
Pre-Closing Title Requirements
- Title Commitment: Reviewed and all Schedule B-I requirements identified
- Prior Liens: All paid liens have recorded releases
- Entity Status: Borrower in good standing; authority documents provided
- Survey: Current ALTA/NSPS survey with no unresolved encroachments
- Taxes: Current year taxes verified; escrow or payment arranged
- Pro Forma: Draft policy prepared with all required endorsements
- Counsel Review: Lender's attorney has approved Pro Forma
- Mortgagee Clause: Correct servicer name and language confirmed
What Does Title Insurance Cost?
Title insurance is a one-time premium paid at closing. Costs vary significantly by state:
| State Type | Typical Premium | Example |
|---|---|---|
| Regulated states | Fixed by state insurance commissioner | Texas, New York, Florida |
| Competitive states | Negotiable; shop around | California, Illinois, Michigan |
| Typical range | $2,000 - $10,000 on $2M loan | 0.1% - 0.5% of loan amount |
| Endorsements | Additional $500 - $2,000 total | Varies by type and state |
Reissue Credit: If you're refinancing and can provide the prior owner's title policy, you may qualify for a "reissue" or "refinance" rate—typically 40-60% off the full premium. Always ask.
The Bottom Line: Title work is where deals go to die quietly. Order title on Day One, review the commitment immediately, and flag any unreleased liens or curative items. The Pro Forma must pass lender's counsel review before you can close—and that review will surface issues you didn't know existed. Build 2-3 weeks of buffer for title clearance, and communicate immediately when closing dates shift.