Bulletin: SLS2012011

Date:
July 03, 2012
To:
All Issuing Offices
RE:
Deeds in Lieu of Foreclosure

Dear Associates:

Deeds in Lieu of Foreclosure are becoming more common due to the increased volume of loans in default.  This bulletin is sent to remind you of Stewart’s underwriting requirements when insuring a transaction involving a Deed in Lieu of Foreclosure in the chain of title. 

When asked to insure through a Deed in Lieu of Foreclosure, please consider the relevant guidelines posted in Section 4.12 of the Underwriting Manual on Virtual Underwriter, which can be found at the following link:

http://www.vuwriter.com/vumanuals.jsp?displaykey=UM00000002

Additionally, when considering vesting through a Deed in Lieu of foreclosure, please note the following: 

  • A Deed in Lieu of Foreclosure must be accompanied by an Estoppel Affidavit.  The Estoppel Affidavit may not be recorded.  You must request a copy of the Estoppel Affidavit from the lender for review.  If all of the language contained in the Estoppel Affidavit appears in the Deed in Lieu of Foreclosure, a separate Estoppel Affidavit may not be necessary.  Stewart’s Deed in Lieu of Foreclosure Affidavit and Estoppel Certificate can be viewed on Virtual Underwriter at the following link: 

http://www.vuwriter.com/vuforms.jsp?displaykey=FM126841696300000076 

  • Please request a copy of any existing off-record settlement agreement between the lender and the borrower.  The off-record settlement agreement pertaining to the Deed in Lieu of Foreclosure often contains contingencies.  If upon review of the settlement agreement you observe a contingency and you cannot confirm that all requirements were satisfied, please consult with an Underwriter prior to insuring. 
  • If you are asked to insure a subsequent transfer of a property acquired by a deed in lieu of foreclosure, you must check for a bankruptcy filed by the borrower (i.e., the grantor of the Deed in Lieu of Foreclosure).  If you locate a bankruptcy filed within 90 days of the execution of the Deed in Lieu of Foreclosure, please consult with an Underwriter prior to insuring. 
  • Please do not assume that the Deed in Lieu of Foreclosure automatically extinguishes the recorded security instrument (Deed of Trust, Mortgage, etc.) from the property.  You must continue to show the security instrument on any preliminary title commitment or title report.  Do not remove the security instrument from a final policy without a proper release, reconveyance or satisfaction, unless you receive underwriter approval. 
  • Please note that the Deed in Lieu of Foreclosure does not eliminate any subordinate liens on the property.  You must continue to show the subordinate liens on any preliminary title commitment or title report.  Do not remove the subordinate liens from a final policy without proper releases. 
  • You may be asked by a customer for advice pertaining to how their execution of a Deed in Lieu will impact them personally (tax obligations, credit issues, etc.).  Do not attempt to answer these questions.  Refer your customer to an attorney for legal advice on these issues.

The bullet point items above are not the exclusive requirements for insuring title based on a Deed in Lieu of Foreclosure – please consult the previously referenced Section 4.12 of the Underwriting Manual for a more expansive list of requirements and factors to be considered.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.  

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:
4.12 Deeds In Lieu Of Foreclosure
Exceptions Manual:
None
Forms:
STG Deed In Lieu of Foreclosure Affidavit and Estoppel Certificate