Title Insurance for Mezzanine Financing

Summary

Mezzanine financing is commonly used in commercial real estate transactions because it offers borrowers a mechanism to increase loan proceeds available to finance their acquisition or development of real property while providing lenders with a relative streamlined process if they need to foreclose on the loan. Because mezzanine financing is secured by a pledge of the borrower's equity in the entity owning the real property, rather than an interest in the real property itself, traditional title insurance is not available for these loans. This practice note explains basic mezzanine debt structure and discusses the title insurance options available to mezzanine lenders, including a rundown of the requirements and necessary documentation for insuring a mezzanine loan and a discussion of issues related to the refinancing of mezzanine loans.