Bulletin: NY000381

Date:
November 10, 2008
To:
All New York State Office Counsel, Managers and Agents
RE:
Part I. TIRSA Endorsement Revisions (Effective November 1, 2008)/Part II. TIRSA Rate Manual Revisions (Effective November 1, 2008)

I. TIRSA ENDORSEMENT REVISIONS

A) The Standard New York Endorsement (Loan Policy) and the Standard New York Endorsement (Owner's Policy) have been amended to delete Item 1 and renumber the remaining items accordingly. Removal of Item 1 (which deleted Covered Risk (c), which provided specified coverage regarding encroachments, encumbrances, etc. that would be disclosed by an accurate and complete survey of the land) from both Standard New York Endorsements makes it clear that New York standard policies will include the survey coverage (as set forth in Covered Risk 2(c)) that was contemplated in the recently approved 2006 ALTA Loan and Owner's Policies.

B) The Standard New York Endorsement (Loan Policy) has also been amended to delete current Item 3. Removal of Item 3 (which deleted Covered Risk 11 and included certain replacement language) from the Standard New York Endorsement (Loan Policy) now conforms the coverage provided to lenders with respect to specified mechanic's liens in New York to the coverage that was contemplated (as set forth in Covered Risk 11) in the recently approved 2006 ALTA Loan Policy.

C) The Waiver of Arbitration Endorsement has been amended to remove the words "and Stipulation Section" from subsections (A) and (B) and to remove the word "Number" from subsection (C). These clerical amendments update the Waiver of Arbitration Endorsement to reflect the language used in the 2006 ALTA Owner's and Loan Policies and in the TIRSA Owner's Extended Protection Policy. It is a purely linguistic change to confirm that the endorsement's language precisely follows the language of the respective policies.

D) TIRSA's issuance of a new TIRSA Co-Insurance Endorsement, approved by the Insurance Department, simplifies transactions that, because of the amount of insurance needed or other facts, require two or more insurers to cover the entire risk. Under TIRSA's new Co-Insurance Endorsement in all co-insurance situations there will be one policy, which will be issued by the Issuing Co-Insurer. It is to that policy that the TIRSA Co-Insurance Endorsement will be attached to indicate the proportionate amount of the entire risk that each co-insurer will assume. The TIRSA Co-Insurance Endorsement will facilitate, simplify and standardize the co-insurance process. TIRSA has mandated that there be no charge for the Co-Insurance Endorsement.

THE IMPLEMENTATION DATE FOR USE OF THESE REVISED ENDORSEMENTS IS NOVEMBER 1, 2008.

The new endorsements are available online in the Stewart Agent Resource Center. To access the Agent Resource Center, go to www.stewartnewyork.com and click on “Agent Log-In”. You will need your Agent ID number to access the Resource Center. If you do not know your agent ID number, please call 212-922-0050.

II. REVISIONS TO SECTIONS 1(K), 19 AND 25 OF THE TIRSA RATE MANUAL

A) Section 1(K) of the TIRSA Rate Manual has been amended to permit expanded coverage under a policy other than a Loan policy when the public record owner of a property acts as a nominee pursuant to a written agreement. This change was requested because certain real property transactions in New York are structured in such a manner that the beneficial owner of the property desires to remain anonymous in the public record, which refers only to a nominee. Nevertheless, along with the nominee listed as the owner on the public record, the beneficial owner should be covered as an Insured under the policy solely with respect to its interest reflected in its written agreement with the nominee. This change confirms that, in such situations the Insured is defined to include not only the owner of record (i.e. the nominee) but also the beneficial owner of the property.

B) Section 19 of the TIRSA Rate Manual has been amended to add sub-section (B). Section 19 now directs that when two or more Loan policies are issued simultaneously for identical property, the pricing for the Loan policies is based on the aggregate amount of the loans, specifically, the total of the premiums for the multiple policies should be calculated as if there was only one policy issued for the entire aggregated amount of the Loan policies. However, since the premium for a Construction Loan policy is based (under Section 12 of the TIRSA Rate Manual) on the Owner's rate, in the situation where there are one or more non-Construction Loan policies issued simultaneously with one or more Construction Loan policies, each Loan policy must be priced separately, at the applicable rate per thousand for that type of Loan policy starting from the amount of insurance of the prior Loan policy. To assure uniformity in the calculation of the total aggregate premium for policies issued simultaneously, it is desirable to establish the order in which the multiple policies will be priced, which is what Section 19(B) accomplishes.

Section 19(B) now provides that when mortgages are aggregated pursuant to Section 19, the rates for each mortgage shall be determined in accordance with their priority as reflected in the policies issued to insure each mortgage - in other words, the rates for each policy shall be based on the actual priority of each loan as reflected in the policies. For example, the first of the several mortgages (whether it is a Construction Loan mortgage or a non-Construction Loan mortgage) will be calculated from dollar one, at the rate specified in the Rate Manual applicable for that type of mortgage, up to the Amount of Insurance as stated in the policy. The mortgage in the second position will then be calculated, at the rate specified in the Rate Manual applicable for that type of mortgage, starting at the Amount of Insurance set forth in the policy insuring the prior mortgage up to the aggregated amount of the policies insuring the first and second mortgages. The mortgage in the third position will then be calculated, at the rate specified in the Rate Manual applicable for that type of mortgage starting at the aggregate of the Amounts of Insurance set forth in the policies insuring the prior mortgages up to the aggregated amount of the policies insuring the first, second and third mortgages. Calculations continue thereafter in the same way for any additional mortgages that are eligible for aggregation under Section 19.

The following Exhibit A is an example showing how the revised Section 19 actually applies in practice. Revised Section 19 now promotes consistency in the calculation of the total aggregate premium where policies covering Construction and non-Construction Loans are issued simultaneously:

EXHIBIT A

Facts: The hypothetical Transaction involves three simultaneously issued Loan policies, not eligible for a discounted premium under any provision of the TIRSA Rate Manual. These policies insure, in their respective order of priority, the following mortgages: first, a non-Construction mortgage in the amount of $500,000; second, a construction mortgage in the amount of $1,000,000, and third, a non-Construction mortgage in the amount of $750,000. the property is located in Zone 2.

Correct Calculation of Premium Under Section 19(B): Proposed Section 19(B) clarifies that the proper calculation of the premiums for the simultaneously issued Loan policies, in the above hypothetical transaction, must follow the order of priority of each simultaneously insured mortgage. The calculation of each policy’s premium is as follows:

Type of Loan & Priority

Type of Rate used

No. of Thousands

Rate Per/Thousand

Calculated Premium

Reported Premium – Each Loan Policy

 

 

 

Owner’s

Loan

 

 

1st Mortgage for $500,000

Loan Rate

35

Minimum Loan Rate

$344.00

 

Loan Rate

15

 

5.55

$83.25

 

Loan Rate

50

 

4.54

$227.00

 

Loan Rate

400

 

3.64

$1,456.00

$2,110.00*

2nd Mortgage for $1,000,000

Construction Loan**

500

3.98

 

$1,990.00

 

Construction Loan**

500

3.66

 

$1,830.00

$3,820.00

3rd Mortgage for $750,000

Loan Rate

750

 

3.05

$2,288.00

$2,288.00

Total Liability

 

$2,250.00

 

$8,218.00*

 

 

As the above table demonstrates, the total premium for the three Loan policies issued simultaneously for the hypothetical transactions would be $8,218.00 pursuant to the proposed Section 19(B) of the TIRSA Rate Manual. Stated in the far right hand column of the above chart, is the premium to be reported for each of the simultaneously issued loan policies.

*As rounded to the nearest dollar pursuant to

**Section 12(A) of the TIRSA Manual provides that the rate for a Construction Mortgage is the Owner’s Rate.

C) Section 25 of the TIRSA Rate Manual has been amended in several respects.

First: TIRSA has added a reference in Subsection A to the new TIRSA Co-Insurance Endorsement (which is discussed above regarding endorsements) as an approved endorsement for which there is no charge. This is a purely clerical change to the TIRSA Rate Manual to make the list of endorsements in Section 25(A) complete to now include the new TIRSA Co-Insurance Endorsement. The new TIRSA Co-Insurance Endorsement, which is derived from a Co-Insurance Endorsement drafted by ALTA, is a new form that has not previously been used in New York.

Second: Section 25 has been amended to add the words "full applicable" before the words "loan rate" in subsections (C)(1), (5), (12), (13) and (14). Subsection (C) is also now amended to add a definition of the term "full applicable loan rate". The effect of these amendments is to clarify the TIRSA Rate Manual's treatment of Construction Loan mortgages and non-Construction Loan mortgages. With these changes, the new Section 25(C) makes clear that (consistent with Section 12 of the TIRSA Rate Manual) when endorsements requiring the payment of a special risk premium are issued in connection with a policy insuring a Construction Loan mortgage, the "full applicable loan rate" shall mean the full unreduced Owner's rate as set forth in the rate table. By contrast, when endorsements requiring the payment of a special risk premium are issued in connection with a policy insuring any mortgage that is not a Construction Loan mortgage, the "full applicable loan rate" shall mean the loan rate.

Third: Section 25 has been amended to include a new Subsection (D), which provides a rule for computing the amount of additional premium due for the issuance of endorsements attached to policies covering multiple Construction and/or non-Construction Loan. Referring to Section 19 (as amended), Subsection (D) makes clear that the cost of each such endorsement shall be determined as if the policy to which it is attached were the only policy being issued.

Fourth: Section 25 has been amended to add a new subsection (E), which provides a rule for allocating the cost of endorsements among co-insurers. As approved by the Insurance Department, the new Section 25(E) now sets forth the rule for allocating among co-insurers the cost of endorsements attached to policies issued by co-insurers.

Fifth: To accommodate the approved amendments to Section 25, former subsection (D) has been re-designated as Subsection (F).

THE IMPLEMENTATION DATE FOR THESE TIRSA RATE MANUAL REVISIONS IS NOVEMBER 1, 2008.

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:
NY000380 New TIRSA Endorsements and Rate Changes (Correction)
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None