Bulletin: SLS2013006

Date:
January 31, 2013
To:
All Issuing Offices
RE:
UNDERWRITING - Creditors' Rights Coverage for the Current Transaction

Dear Associates:

This bulletin reminds you that Stewart Title Guaranty Company no longer provides creditors' rights coverage arising out of the current transaction. We are prohibited by law from providing creditors' rights coverage arising out of the transaction creating the Insured Mortgage or vesting title in the owner who is the Insured. The law applies to any policy issued, delivered, or renewed on or after January 1, 2012. We are informed that an endorsement to a policy issued before January 1, 2012, is not considered a renewal of that policy for purposes of the law and does not violate the law if it does not provide creditors' rights coverage. 

You must comply with the following: 

  • Do not issue the 1970 ALTA Policy.
  • Do not delete the creditors' rights exclusion.
  • Do not issue a creditors' rights endorsement, such as the former ALTA 21-06 (Creditors' Rights).
  • Add the creditors' rights exception shown on Exhibit 1 (below) (paragraph A) in any assignment endorsement, unless it already appears in that endorsement.
  • Add the creditors' rights exception shown on Exhibit 1 (paragraph B) in any modification endorsement, unless it already appears in that endorsement.
  • Add the creditors' rights exception shown on Exhibit 1 (paragraph C) in any U.S. Policy, unless you issue the new U.S. Policy (12-3-12) recently approved by ALTA (where available, this policy includes a Creditors' Rights Exclusion). This exception has been approved by personnel representing the U.S. Department of Justice.

An additional creditors’ rights exception is not required in connection with an endorsement that does not involve an assignment or modification of a loan.

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.

 

EXHIBIT 1

CREDITORS' RIGHTS EXCEPTIONS


A. Creditors' Rights Exception for Assignment Endorsement (Not necessary for ALTA Endorsement 10-06 (2-3-10) or 10.1-06 (2-3-10))

This endorsement does not insure against loss or damage, and the Company will not pay costs, attorneys' fees, or expenses, by reason of any claim that arises out of the transaction creating the assignment by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws that is based on:

1.   the assignment being deemed a fraudulent conveyance or fraudulent transfer; or

2.   the assignment being deemed a preferential transfer.


B. Creditors' Rights Exception for Modification Endorsement (Not necessary for any ALTA Endorsement 11-06 or 11.1-06)

This endorsement does not insure against loss or damage, and the Company will not pay costs, attorneys' fees, or expenses, by reason of any claim that arises out of the transaction creating the Modification by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws that is based on:

1.   the Modification being deemed a fraudulent conveyance or fraudulent transfer; or

2.   the Modification being deemed a preferential transfer except where the preferential transfer results from the failure

a. to timely record the instrument of transfer; or

b. of such recordation to impart notice to a purchaser for value or to a judgment or lien creditor.


C. Creditors' Rights Exception for U.S. Policy

Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction vesting the Title as shown in Schedule A, is (a) a fraudulent conveyance or fraudulent transfer or (b) a preferential transfer.

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:
SLS2011020 Creditors' Rights Coverage for the Current Transaction
 
SLS2012008 Creditors' Rights Coverage for the Current Transaction - Reminder
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
ALTA Endorsement 10-06 (Assignment) Revised 02/03/10
 
ALTA Endorsement 10.1-06 (Assignment and Date Down) Revised 02/03/10 Technical Correction 08-01-16
 
ALTA Endorsement 11-06 (Mortgage Modification)
 
ALTA Endorsement 11.1-06 (Mortgage Modification with Subordination) (10/22/09)