What is the main risk covered by a mortgagee title policy?

The main risk covered by a mortgagee title policy is the priority of mortgage claims. This type of insurance is specifically designed to protect the lender's interest in the property that is being used as collateral for a loan. In the event that there are outstanding liens, claims, or other encumbrances on the property that were not discovered during the title search, the mortgagee title policy ensures that the lender's mortgage takes precedence over such claims.

This is crucial because if a borrower defaults on the loan, the lender needs to be able to foreclose on the property without risk of losing their investment to other creditors with competing claims. The policy covers legal costs and damages that may arise from disputes concerning the priority of the mortgage, thus safeguarding the lender's financial position in the transaction.

The other options, such as lawsuits against the homeowner or default on rental agreements, are not specific to the lender’s interests and lie outside the scope of what a mortgagee title policy is intended to cover. While loss of property value is a concern for property owners, it does not directly relate to the specific protections offered by mortgagee title insurance.