To my knowledge, there is no particular regulatory requirement to obtain title insurance on a 1st lien position loan (of any kind for that matter). As a matter of bank policy or if we intend to sell the loan and the investor would require it - we might want to get insurance.

But, if it's a loan or line that we are keepoing in our portfolio, we do HAVE to get title insurance.

Am I correct?

I would think if the loan was in the bank portfolio that you would want title insurance incase there are claims.

I would think that this would become a safety and soundness issue.

Not for sure just thinking out loud.

Title insurance is the safest (especially when the borrower usually pays for it). I've seen attorneys' prepare a title opinion in lieu of title insurance.

There is no regulatory requirement to get title insurance. Any number of banks will close on a title opinion as proof of ownership and the legal description. As was pointed out above, it all has to do with your bank's comfort level because there's not insurance being purchased. You also have to recognize that you can never decide to sell that loan as is because all investors require title insurance to insure their lien position.

Like many other issues, this is a risk issue. The bank needs to consider the risks, alternate ways to mitigate the risk, and understand they won't be able to sell the loans without title insurance (not in a normal sale, anyway). It is a safety and soundness issue and management should be prepared to defend their decision with an assessment of the pros and cons.