Bulletin: MU000043

Date:
January 17, 2002
To:
All Issuing Offices in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia,
RE:
ALTA Expanded Coverage Residential Loan Policy (10/13/01); Short Form Expanded Coverage Residential Loan Policy (2001)

Dear Associates:

New Form The American Land Title Association adopted the Expanded Coverage Residential Loan Policy (Exhibit 1) on October 13, 2001. We are in the process of filing this form, where filing is necessary and possible.

This Policy is similar to our Gold Loan Policy, currently available in several states. It also has many of the coverages offered in the Homeowner's Policy of Title Insurance.

New Coverages

The Expanded Coverage Residential Loan Policy includes the following new standard coverages (Covered Risks):

Automatic incorporation of the following ALTA Endorsements:

ALTA Endorsements 4 (Condominium);

ALTA Endorsement 5 (Planned Unit Development);

ALTA Endorsement 6 (Variable Rate Mortgage);

ALTA Endorsement 6.2 (Variable Rate Mortgage ? Negative Amortization);

ALTA Endorsement 8.1 (Environmental Protection Lien); and,

ALTA Endorsement 9 (Restrictions, Encroachments, Minerals).

You do not need to mark boxes or attach these endorsements: these endorsements are automatically included.

Revolving credit coverage for future advances.

Modification coverage ? it automatically covers advances made or changes in the interest rate subsequent to a modification of the insured mortgage after Date of Policy.

Zoning

Building permits

Subdivision Map Act

Post-policy forgery of the lender's signature on enumerated documents

Location - street address and residence

Tax parcel - the land is not taxed with other property

Survey coverage - including post-policy encroachments

Damage to improvements from use of surface for extraction of minerals, water or other substances

Supplemental real estate taxes

Usury coverage if the mortgage is insured as a first mortgage

Insurance of map, if any map is attached

Insurance of actual pedestrian and vehicular access

25% increase in insurance coverage, so that insurance is 125% of amount stated in Schedule A

Rate

The Expanded Coverage Residential Loan Policy will have a premium charge of 110% of the applicable cost of the Standard Loan Policy (unless a higher rate is filed in your state), plus any endorsement charges for the incorporated endorsements applicable to the transaction. The additional premium charge, other than endorsement charges, shall not apply if the Expanded Coverage Loan Policy is issued simultaneously with the ALTA Homeowner's Policy of Title Insurance.

Guidelines

(1) Issue only on one-to-four family residence or residential condominium;
Issue only if improved property. Verify by review of tax/assessment search;
Add address for land in Schedule A;

(4) Issue on first liens only;

(5) Issue only if lender is institutional lender commonly making residential loans (do not issue if lender is an individual);

(6) Do not issue if loan is for construction or repair of improvements (Must verify that all bills paid on any prior construction within lien period);

(7) Issue only on (i) platted lot or metes and bounds tract not exceeding 25 acres; or (ii) condominium unit.

(8) Verify by tax/assessment search that separately assessed;

(9) Verify with homeowner's association that assessments paid current and that any right of first refusal will not be exercised in the current transaction (if there is a right of first refusal);

(10) If a map of the land is attached (not required on policy), verify that description same as Schedule A description;

(11) Sellers must execute the ALTA Homeowner's Policy of Title Insurance/Expanded Coverage Loan Policy Affidavit (Exhibit 2). If no sale, require borrowers to execute ALTA Homeowner's Policy of Title Insurance/Expanded Coverage Loan Policy Affidavit.

(12) No inspection or survey is required;

(13) Verify homeowner's assessment liens subordinated to insured mortgage (e.g. as purchase money or first lien). If condominium or uniform act subordinates lien to some assessments, a specific exception in Schedule B is required. If the assessment lien of a covenant is not subordinate, specifically state in Schedule B.

(14) Separately and specifically except to easements, assessment liens and options or first refusals set forth in covenants;

(15) Absent the lender's instructions to the contrary, the policy may be dated and issued on date of settlement/closing if your requirements have been met, the funds have been disbursed and you are in a position to record. Show the settlement date as the Date of Policy ? you do not need to show recording information.

COMMON QUESTIONS

Will I be liable if there is a claim because of the additional, new coverages of the Expanded Coverage Loan Policy?
No, the title insurance agent is not liable for claims that result from the new coverages of the Expanded Coverage Loan Policy, so long as you comply with the requirements discussed in this bulletin.

Do I have to check for building permits or zoning?
No.

Do I have to require a survey?
No.

Do I have to make an inspection?
No.

If I know of a specific problem, such as a restriction, zoning or building permit violation (for example, I happened to see it in the seller disclosure or the seller disclosed it in the seller's affidavit), how do I make an exception?

Except to the issue (such as zoning or restriction violation or major encroachment known by you) in Schedule B and then add in the same paragraph the following "No insurance is given pursuant to the Covered Risks as to this matter."

What if I cannot determine the street address of the land?

If you cannot determine the address, delete the phrase "Street Address of the Land" in Schedule A, and add an exception in Schedule B stating "No insurance is given pursuant to the Covered Risks as to the Street Address of the Land."

What if I actually know about a minor encroachment, and want to insure against enforced removal?

Except to the encroachment and then add in the same paragraph the following: "This exception does not limit the insurance coverage in the Covered Risks against forced removal."

Can I issue the Expanded Coverage Loan Policy if the seller refuses to sign the affidavit?

Yes. You can issue the Expanded Coverage Loan Policy without the affidavit in two situations:

(1) You can issue without the seller's affidavit if the seller has not lived on the insured land. For example, if the seller is a relocation company and refuses to sign, you can still issue the

Expanded Coverage Residential Loan Policy.

(2) You can issue without the seller's affidavit if your local Stewart Underwriting Personnel agree to waive the affidavit. For example, because of local custom, the seller's affidavit is not secured in California. If reasonably possible, we prefer that you then review any seller's disclosure that is given to the buyer.

What if I cannot comply with these guidelines?

If you cannot comply with our underwriting guidelines, please call our underwriting personnel.

Do I have to add an exception for environmental lien statutes in Schedule B?

No.

Short Form

We also have a Short Form Expanded Coverage Residential Loan Policy (Exhibit 3).

This Policy also automatically incorporates ALTA Endorsements 4, 5, 6, 6.2, 8.1, and 9.

You may issue the Short Form Expanded Coverage Residential Loan Policy if you comply with the Guidelines in this Bulletin for issuance of the Expanded Coverage Residential Loan Policy.

If you have any questions, please do not hesitate to call the National Legal Department in Houston, Texas at 800-729-1902.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
ALTA Expanded Coverage Residential Loan Policy 2001