Bulletin: MU000044

Date:
January 28, 2002
To:
All Issuing Offices in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
RE:
Stewart Short Form Commercial Loan Policy

Dear Associates:

Stewart Title announces a new form for commercial lenders - our Short Form Commercial Loan Policy.

Coverages

Gap Coverage. This policy provides gap insurance as to matters arising between the date of closing or last examination and date of recording. The Date of Policy, like the ALTA Short Form Residential Loan Policy, is the stated date of settlement "or date of recording of the insured mortgage, whichever is later."

1992 ALTA Loan Policy. The Short Form Commercial Loan Policy incorporates the exclusions and conditions of the 1992 ALTA Loan Policy.

Estate or Interest in Land. This policy insures the title or interest (such as fee, lease, or easement) described in the insured mortgage.
Addendum. The Short Form Commercial Loan Policy may incorporate an Addendum, if specific additional exceptions are needed.

Endorsements/Affirmative Coverages. The Short Form Commercial Loan Policy may include the following additional coverages, if you mark them and if our Guidelines are met.

Tax Parcel. This insures that the land is not taxed with other land.

Subdivision Map Act. This insures against loss if the land was not properly subdivided in accordance with applicable state and local laws and regulations.

Future Advances. This insures priority of future advances over intervening matters, if the intervening matters were not known by the insured at the time of the advance.

Tax Deed. This insures that any insured appurtenant easement described in the mortgage has priority over a later tax deed against the servient estate (land subject to the easement).

Zoning. This insures against forced removal of existing improvements because of zoning violations.

Doing Business. This insures against unenforceability of the lien of the insured mortgage because making the loan violated doing business laws.

Usury. This insures against invalidity of the insured mortgage because of violation of usury laws of the state of the land.

ALTA Endorsement 6 (Variable Rate).

ALTA Endorsement 6.2 (Variable Rate - Negative Amortization).

ALTA Endorsement 8.1 (Environmental Protection Lien - Amended for commercial transactions).

ALTA Endorsement 9 (Restrictions, Encroachments, Minerals).

 

Schedule B also contains affirmative insurance. Taxes are not yet due and payable.

Covenants, conditions and restrictions have not been violated.

Covenants, conditions and restrictions do not contain provisions, such as assessment liens or reverters, that will prime the lien of the insured mortgage.

Use of easements will not interfere with existing improvements.

Use of the surface for mineral extraction will not damage existing improvements.

There are no adverse circumstances that would be disclosed by a survey.

Rights of tenants do not include superior rights of first refusal or options to purchase the land.

Schedule B. Schedule B insures against taxes and assessments that became due and payable before the date of policy.

Schedule B, like the ALTA Short Form Residential Loan Policy, contains insurance against violations of covenants, and against subsequent assessment liens that may attain priority over the lien of the insured mortgage.

Schedule B, like the ALTA Short Form Residential Loan Policy, insures against survey and encroachment matters.

Schedule B, like the ALTA Short Form Residential Loan Policy, insures against damage to the surface because of damage to existing improvements by reason of use of the surface for extraction or development of minerals.

Schedule B excepts to tenants in possession, but insures that any option or right of refusal in favor of a tenant is subordinate to the insured mortgage.

Guidelines

Type of Property: This Policy is designed for improved property used for commercial purposes, such as apartment, office and shopping center use. If you are requested to issue on other land, please call our underwriting personnel. This Policy is not designed for construction loans, agricultural land, industrial land, unimproved property or one-to-four family residences.

Mechanic's Liens: Always verify that any recent improvements have been completed and paid.

Closing: You may issue the policy immediately upon closing and funding if all requirements have been met. You do not have to wait until recordation, although the mortgage should be promptly filed for record after closing. Simply add the actual date of the closing after the Date of Policy, and leave the remaining language "or date of recording of the insured mortgage, whichever is later." This will provide gap coverage to the lender.

Examination: You may rely upon prior owner's policies, loan policies and commitments as starters. Otherwise do your customary search of the title. You must check the name of the current owners for judgment and tax liens for the applicable statutory period, and you must verify that no taxes are due and payable (unless paid at closing). You are not required to check the name of a buyer if you are insuring a purchase money loan. You must examine title to all interests, such as fee, leasehold or easement. If the estate is a leasehold, you must secure a current estoppel certificate from the lessor. You should be satisfied that any association assessments are paid current and any assessment liens are subordinate to the lien of the insured mortgage. If the examination discloses any matters other than standard easements, restrictions and minerals, you should add them to the addendum.

Commitment: If the commitment is issued only in contemplation of the Short Form Commercial Loan Policy (and not any other policy such as an Owner's Policy), you do not need to state specific Schedule B exceptions, if the examination discloses only standard easements, restrictions, and minerals. Instead, you may note in the commitment that: "The policy to be issued will contain our standard Schedule B exceptions for the Short Form Commercial Loan Policy."

Survey: We do not require a new or existing survey, if improvements have been in place more than two years. If an existing survey is available, you should review it. If you are aware of any major encroachments or conflicts, you should except to them in the addendum.

Inspection: We do not require an inspection if you secure a credible affidavit, disclosing tenants, and standard forms of major leases, if any. The leases should not include options or right of first refusal to buy the land.

Addendum: Use the addendum to add specific exceptions, if the examination reveals matters other than standard easements, restrictions, minerals and minor encroachments.

Tax Parcel: If you check this box, verify that the land is not assessed for taxes with other land.

Subdivision Map Act: If you check this box, verify by your examination that the land is properly subdivided or has been improved, taxed and owned by the present legal description for last two (2) years.

Future Advances: If you check this box, verify that the mortgage contains any disclosures or future advance description required by state law for commercial revolving credit loans. See Section 17.46 Revolving Credit Endorsements, Stewart Underwriting Manual, at http://www.vuwriter.com/ .

Tax Deed: If you check this box because the mortgage encumbers an appurtenant easement, verify that taxes have been paid on the servient estate (land subject to the insured easement) for all years up to and including the year of recordation of the instrument creating the easement.

Zoning: If you check this box, you should (1) verify zoning compliance by a letter from the zoning authority, or (2) verify zoning compliance by review of the zoning records, or (3) if the transaction does not exceed your underwriting contract for overlimits approval, verify that the existing improvements have been in continuous use for the past two (2) years.

Doing Business: You may check this box upon request, except in the states of Alabama, Ohio, or Vermont, if the insured (and the original lender if a different person) is a foreign corporate financial institution in good standing in its state of domicile. Otherwise, you must secure approval of underwriting personnel to provide this coverage.

Usury: You may check this box upon request on a business loan in a commercial transaction without approval of underwriting personnel if the loan exceeds $25,000, except in the following states:

Arkansas - secure approval from our underwriting personnel

California - secure approval from our underwriting personnel

Colorado - add exception at the end of the provision to "except any claim that the rate of interest exceeds 45% per annum?

Delaware - the loan must exceed $100,000

Georgia - the loan must be $250,000 or more

Hawaii - the insured mortgage must be a first lien

Louisiana - add exception at the end of the provision to "except any claim that an increase in the interest rate after default violates applicable law?

Maryland - the loan must exceed $75,000

Massachusetts - add exception at the end of the provision to "except any claim that the rate of interest exceeds 20% per annum?

Michigan - the loan must be $100,000 or more, or must be made to a domestic or foreign corporation

Minnesota - the loan must be $100,000 or more, or must be made to a corporation (which includes a corporation, limited liability company and limited partnership)

Montana - secure approval from our underwriting personnel

Nebraska - the loan must be made to a corporation, partnership, limited liability company, or trust

New Jersey - the loan must be $50,000 or more and not secured by 1-6 dwelling units

North Carolina - the loan must be made to a foreign or domestic corporation, limited liability company, or partnership substantially engaged in commercial pursuits for pecuniary gain

North Dakota - the loan must exceed $35,000, or the loan must be made to foreign or domestic corporation, foreign or domestic limited liability company, cooperative corporation or association, or trust

Ohio - the loan amount must exceed $100,000, or must be a business loan such as to a limited partnership, foreign or domestic limited liability company, or domestic or foreign corporation

Oklahoma - add exception at the end of the provision to "except any claim that the rate of interest exceeds 45% per annum?

Oregon - the loan must exceed $50,000, or be secured by a first lien on real property

Puerto Rico - secure approval from our underwriting personnel

Rhode Island - secure approval from our underwriting personnel

Tennessee - secure approval from our underwriting personnel

Vermont - the loan must be made to a corporation, or be incurred to finance in whole or in part income-producing business or activity

Wisconsin - the loan must be made to a corporation or limited liability company, or the loan amount must exceed $150,000

In some of the above states, additional usury exemptions may apply, and should be discussed with our underwriting personnel. If the state insurance department does not allow title companies to provide usury coverage, this box should not be checked.

ALTA Endorsements 6, 6.2, 9: If you check any of these boxes, verify compliance with our standard underwriting requirements. In Oklahoma, add this exception if you check the box for ALTA Endorsement 9: "The affirmative insurance as to minerals is hereby deleted." In Oklahoma, also add this exception at the end of paragraph 4 of Schedule B.

ALTA Endorsement 8.1: If you check this box, add the statutory exceptions, if any, for your state shown in 5.08.3 Environmental Protection Lien Endorsement, Stewart Underwriting Manual.

Underwriter Approval

You must secure the standard overlimits approval from our underwriting personnel for large transactions in accordance with your underwriting limits. That approval must include approval of each of the endorsements and other affirmative coverages that you are asked to provide in the Commercial Short Form Loan Policy.

Rate

Our rate for this policy is the same as for the applicable ALTA Loan Policy, together with any additional rates for the endorsements and extended coverage.

Filing

We are in the process of filing the Short Form Commercial Policy, where filing is required.

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:
5.08.3 The ALTA Environmental Protection Lien Endorsement
 
11.28 Loan Policies
 
17.46 Revolving Credit (Future Advance) Endorsements
Exceptions Manual:
None
Forms:
None