Alabama Title Insurance Practice Test 2025 – 400 Free Practice Questions to Pass the Exam

The classification of invalidity or unenforceability of the lien of the Insured Mortgage based on usury or truth-in-lending law as an exclusion from coverage is accurate because these specific legal issues are generally not covered by standard title insurance policies. Title insurance is designed to protect against defects, liens, or other encumbrances affecting the title to real estate, but it does have limitations.

When a mortgage is potentially unenforceable due to violations of usury laws or errors in complying with truth-in-lending requirements, it does not represent a title defect. Instead, it reflects a legal issue related to lending practices. Therefore, issues like these are specifically excluded from coverage, as they pertain to the validity of the terms under which the loan was executed rather than a title defect that could affect ownership or the equitable rights in regard to the property.

Understanding this classification is critical for parties involved in real estate transactions, as it highlights the importance of ensuring that mortgages comply with applicable laws to avoid potential future challenges to enforceability, which would not be covered by title insurance.