Which policy protects the lenders who take the property as collateral for a loan and reduces as payments are made?

• A. Suit quiet title
• B. Title insurance
• C. Mortgagees/lender's policy
• D. Mortgagors/borrow's policy

Answer: (C)

The idea here is about who title insurance protects and how the coverage relates to the loan. The policy designed to shield the lender’s interest in the property is the mortgagee’s (lender’s) title policy. It covers the lender up to the unpaid loan amount, and as the loan is paid down, the amount at risk—and thus the policy’s coverage—effectively decreases. This aligns with the lender’s ongoing risk since the property serves as collateral for the loan.

By contrast, an owner’s title policy protects the homeowner’s equity, not the lender, and is not tied to the loan balance. Suit quiet title is a legal action to resolve title disputes, not a protection policy. The idea of a “mortgagors/borrower’s policy” isn’t the standard distinction used in title insurance.