Bulletin: NM2014005

Date:
November 05, 2014
To:
All New Mexico Issuing Offices
RE:
RATES AND/OR FORMS UPDATE - No Change in Rates and Revised Rules for New Mexico Title Insurance Non-Rate Matters Adopted

Dear Associates:

Pursuant to the authority granted in Section 59A-30-4 NMSA 1978, the Office of the Superintendent of Insurance (OSI) held the biennial rate and non-rate hearing in Santa Fe on November 4-8, 2013. The final orders in the rate matter and non-rate matters have been issued and the regulations have been published in the New Mexico Register, as required by law.

Rate Matters

The current existing rates for all title insurance policies, commitments, and endorsements will remain in effect until sometime after the next rate hearing, which is scheduled to occur in November of 2015.

Non-Rate Matters

The OSI issued its initial Order on May 21, 2014, and its final Order on the non-rate matters on June 12, 2014. Portions of that final Order were published in the New Mexico Register on July 31, 2014, and became effective August 1, 2014; the rest of the Order was published August 15, 2014, and became effective August 15, 2014.

The publication in the New Mexico Register of the non-rate Order in two separate publications resulted in some inconsistencies and incongruities in the period from August 1, 2014, to August 15, 2014. For example, the construction loan policy form was decertified effective August 1 (though reinstated by subsequent order), but the new regulations implementing the new construction loan forms did not become effective until August 15. Also, the pricing rules for loan policies insuring construction loans were not effective during the August 1 to August 15 time period. There are a few minor inconsistencies in the non-rate Order that the New Mexico Land Title Association and the Title Insurance Bureau are working to correct, and further guidance will be forthcoming regarding those particular issues as they are resolved.

The new forms adopted by the Order became effective August 1, 2014, and certain forms were decertified effective August 1, 2014. The decertified forms cannot be used on or after August 1, 2014. With respect to the newly promulgated forms, there are two rules:  if a form was promulgated on August 1, and there is no corresponding rule change, then the form may be used starting on August 1. If the form was promulgated effective August 1, but the corresponding rule was not published until August 15, then that form may not be used until August 15.  

This Bulletin summarizes the non-rate matter changes to the New Mexico title insurance regulations found in the New Mexico Administrative Code (NMAC) §§13.14.1.1 to 13.14.19.16. As summarized below, many of the changes are designed to adopt the current versions of the ALTA forms and to bring New Mexico into closer conformity with the current ALTA forms. Please note that the New Mexico promulgated forms are not always identical to the ALTA forms, so agents and their customers need to be aware of the possibility that a particular New Mexico form does not match the corresponding ALTA form exactly. Also, New Mexico has not adopted all of the most currently promulgated ALTA forms (such as the new ALTA 9 series, the ALTA 35 Series, or the ALTA 36 Series energy project endorsements), so those ALTA forms that have not been adopted are not available for issuance in New Mexico.

For the most part, none of the new forms have affected our underwriting guidelines and standards, and you should continue to follow those, unless otherwise specifically noted or instructed by an underwriter. For reference purposes, this Bulletin does highlight certain underwriting criteria with respect to certain of the new forms.

Amendment to NMAC §13.14.18.14 - Corrects Owner’s Policy (Effective August 1, 2014)

This correction to the Owner’s Policy form (NM 1) reflects the proper placement of the qualifier in Section 5 “Covered Risks,” so that the “notice” condition applies to Subsections 5(a), (b), (c) and (d). The notice condition in the prior promulgated form could have been interpreted as applying only to Subsection 5(d) instead of to all of the intended Subsections 5(a) through 5(d). This change matches the ALTA Owner’s Policy 2006 form.  

Amendment to NMAC §13.14.18.103 and .104 - Adopts the 2011 versions of Closing Protection Letters (Effective August 1, 2014)

These amendments decertify the existing forms of closing protection letters and promulgate in their stead the ALTA forms (revised 12-01-11). Note that these are not the most current ALTA forms, which were last revised by ALTA on 4-2-14. Consistent with New Mexico law, these newly promulgated forms delete the arbitration provisions found in the corresponding ALTA forms. The adopted forms are the Closing Protection Letter-Single Transaction, used solely for a specific transaction (NM 81), and the Closing Protection Letter-Multiple Transactions (NM 81.1), used as a master closing protection letter to cover any transaction closed by the title insurance agent on behalf of the lender recipient of the closing protection letter. The single transaction form of the letter is available through Stewart’s closing protection letter generating system found at www.stewarticl.com. If you receive a request to have Stewart issue the multiple-transaction form of the letter, please contact your underwriter.   

Construction Loan Policy Amendments - Adopts a new process for insuring construction loans, including mechanic's lien coverage, and issuing related down date endorsements (Fully effective August 15, 2014)

The structure and forms for insuring construction loans has completely changed. The construction loan policy form has been decertified. Construction loans will be insured using the standard Loan Policy, form (NM 2), subject to a two-year claim made limitation if the insured loan is a true construction loan. In addition, new forms of endorsements for mechanic's lien coverage and a new form of down-date endorsement has been promulgated. Even though some of the new regulations were made effective on August 1, the new process for insuring construction loans became fully effective August 15, 2014. The underwriting standards for insuring construction loans and providing mechanic's lien coverage have not changed.

Amendment to NMAC §13.14.18.15 - Corrects typographical error in Loan Policy (Effective August 1, 2014)

This amendment corrects certain typographical errors in the Loan Policy (NM 2), so that the word “all” modifies “assessments” on the pre-printed Condo and PUD endorsements that are incorporated into the policy by reference. This does not affect any change in coverage.

Amendment to NMAC §13.14.18.85 - Adopts the current form of Short Form Residential Loan Policy (Effective August 1, 2014)

This amendment decertifies the existing Short Form Residential Loan Policy (NM 63) and promulgates in its stead the current ALTA form (revised 12-3-12). It also includes water rights as an exception to the policy coverage, which makes it consistent with the rest of the promulgated policies in New Mexico and makes certain other minor corrections.  

Amendment to NMAC §13.14.18.53 - Adopts the current form of U.S. Policy (Effective August 1, 2014)

This amendment decertifies the existing U.S. Policy (NM 34) and promulgates in its stead the current ALTA form (revised 12-3-12).

Amendment to NMAC §13.14.6.19 - Conforming change to U.S. Policy down-date endorsement (Effective August 1, 2014)

This amends the rule governing U.S. Policies to be consistent with the newly promulgated NM 34. The rule deletes references to the previously decertified NM 7 and the related previously decertified down date endorsement (NM 27).

Amendment to NMAC §13.14.10.16 - Clean up change to U.S. Policy premium (Effective August 1, 2014)

The rule is deleted as obsolete since the NM 7 was previously decertified and is no longer a promulgated form.

Amendment to NMAC §13.14.18.60 - Adopts the current form of ALTA Limited Pre-Foreclosure Title Insurance Policy (Effective August 1, 2014)

This rule decertifies the existing foreclosure title policy (NM 41) and promulgates in its stead the current version of the ALTA Limited Pre-Foreclosure Title Insurance Policy (revised 12-3-12). The new form of policy specifically enumerates the types of defects covered by the policy, unless excepted in Schedule B. The prior form had a more generic statement of coverage. The new form also expressly confirms that the policy is a contract of indemnity and not an abstract of title.

Amendment to NMAC §13.14.18.61 - Adopts the current form of date-down endorsement to the Limited Pre-Foreclosure Title Insurance Policy (Effective August 1, 2014)

This rule decertifies the existing form of down date endorsement (NM 42) to the Foreclosure Title Insurance Policy and promulgates in its stead the current version of the ALTA endorsement (adopted 12-3-12).

Amendment to NMAC §13.14.9.18 - Clarifies the effective date of rate changes (Effective August 15, 2014)

This amendment clarifies the date on which any title insurance rate changes become effective. As amended, the rule now tracks the effective date of the rate order issued by the OSI as a result of the biennial hearing process and as published in the New Mexico Register.

Adopt new rule as NMAC §13.14.18.86 - Adopts the current form of Policy Authentication Endorsement (Effective August 1, 2014)

This new rule promulgates the current ALTA form of Policy Authentication Endorsement 39-06 (adopted 4-12-13) as the NM 86. The purpose of this endorsement is to confirm coverage under a policy that is signed electronically or which lacks a “wet” signature. This endorsement may be issued contemporaneously with the policy(ies) or may be issued subsequently. The two conditions to issuance are that a policy number has been assigned and that there is a Date of Policy. It can be issued on either an owner’s policy or a loan policy. There is no promulgated rate for this endorsement.

Amendment to NMAC §13.14.5.9 - Corrects typographical errors in commitments and addresses new construction loan policy issues (Effective August 1, 2014)

This amendment corrects certain typographical errors in standard exception 10, removes the quotation marks from standard exception 7, and addresses the changes otherwise made with respect to construction loans by referencing the two-year claims made limitation.  

Amendment to NMAC §13.14.9.39 - Makes regulatory refinance discounts match statutory refinance discounts and clarifies certain provisions (Effective August 15, 2014)

This amendment amends the regulatory refinance discount rate structure to match the statutory refinance rate structure under §59A-30-6.1 NMSA 1978. As such, there will now be only a single refinance discount structure, unless the transaction otherwise qualifies for the subsequent issue rate under NMAC §13.14.9.36. The amendment also clarifies that the rule applies only where the refinancing borrower is the same borrower whose lender was previously insured under a loan policy insuring the same property.  

Amendment to NMAC §13.14.18.87 - Adopts the current form of completed structure zoning endorsement (Effective August 1, 2014)

This amendment decertifies the existing NM 65 Zoning-Completed Structure Endorsement and adopts the current ALTA form 3.1-06 (adopted 10-22-09). The new form clarifies that the coverage for loss due to a prohibition of use with any structure is limited to the five enumerated matters (area, floor space, setback, height, or parking spaces). As a reminder, issuance of this endorsement requires an acceptable zoning report or equivalent, an acceptable ALTA-ACSM survey, and underwriter approval.

Amendment to NMAC §13.14.18.112 - Adopts a new zoning endorsement for land under development (Effective August 1, 2014)

This new rule adopts a new zoning endorsement, the NM 65.1 Zoning-Land under Development Endorsement based upon the current ALTA form 3.2-06 (adopted 04-02-12). This new endorsement applies to those transactions where neither the vacant land zoning endorsement (NM 64) nor the completed structure endorsement (NM 65) will apply. This endorsement will provide coverage for proposed buildings to be constructed on the insured land, if they are built in accordance with site and elevation plans that are specifically identified in the endorsement. There are still some unresolved issues with this new endorsement. The forms table identifies this endorsement as the NM 87, and the transaction code is called out as 8700. The NMLTA is working with the OSI to try to address this inadvertent error, but until further notice, please report the NM 65.1 under transaction code 8700.

Amendment to NMAC §13.14.10.48 - Establishes premium for the new land under development zoning endorsement (Effective August 1, 2014)

This new rule establishes the premium rate for the newly promulgated NM 65.1 Zoning-Land Under Development Endorsement. This new endorsement is priced the same as the Zoning-Completed Structure Endorsement. It costs 23% of the full basic premium rate (which is the undiscounted owner’s policy premium rate) and retains the same underwriter-agent splits for policies in excess of $27,000,000. There is an unresolved issue with one aspect of the pricing for this new endorsement. The regulation inadvertently fails to state that there is a minimum charge for the NM 65.1. As such, there is no minimum charge, and the premium is 23% of the full basic premium rate.

Amendment to NMAC §13.14.8.16(B)(2) - Makes a technical correction (Effective August 1. 2014)

This amendment makes a technical correction to the rule to delete the reference to modification of standard exception 7. The ability to modify exception 7 was eliminated by regulation several years ago.  

Amendment to NMAC §13.14.18.64 - Adopts the current form of Residential Limited Coverage Junior Loan Policy (Effective August 1, 2014)

This amendment decertifies the existing form of Residential Limited Coverage Junior Loan Policy and promulgates the current ALTA form (revised 8-01-12) as the new NM 45-Residential Limited Coverage Junior Loan Policy. Note that New Mexico has not promulgated the Short Form Residential Limited Coverage Junior Loan Policy.  

Amendment to NMAC §13.14.18.65 - Adopts the current form of down date endorsement to Residential Limited Coverage Junior Loan Policy (Effective August 1. 2014)

This amendment decertifies the existing form of date down endorsement for the Residential Limited Coverage Junior Loan Policy and promulgates the current ALTA form JR1 (revised 8-01-12) as the NM 46-Downdate Endorsement to Residential Limited Coverage Jr. Loan Policy JR1.

Amendment to NMAC §13.14.18.66 - Adopts the current form of future advance down date endorsement to Residential Limited Coverage Junior Loan Policy (Effective August 1, 2014)

This amendment decertifies the existing form of date down endorsement for the Residential Limited Coverage Junior Loan Policy dealing with future advances and promulgates the current ALTA form JR2 (revised 8-01-12) as the NM 47-Downdate Endorsement to Residential Limited Coverage Jr. Loan Policy JR2 (Future Advance).

Amendment to NMAC §13.14.18.36 - Adopts the current form of leasehold endorsement to Owner’s Policy (Effective August 1, 2014)

This amendment decertifies the existing form of Leasehold Owner’s Endorsement and promulgates the current ALTA form 13-06 (revised 4-02-12) as the NM 20. The revised ALTA form amended certain definitions, including “Personal Property” and “Tenant Leasehold Improvements,” clarified the “Valuation of Estate or Interest Insured” and additional items of loss, added coverage for the cost of restoring the property to the extent damaged by an “Eviction,” and made some other minor corrections. A leasehold endorsement must be issued in connection with any owner’s policy that insures a tenant’s leasehold estate. The leasehold endorsement is not appropriate for insuring a landlord’s leasehold interest.

Amendment to NMAC §13.14.18.37 - Adopts the current form of leasehold endorsement to Loan Policy (Effective August 1, 2014)

This amendment decertifies the existing form of Leasehold Loan Endorsement and promulgates the current ALTA form 13.1-06 (revised 4-02-12) as the NM 21. The changes to the lender form mirror the changes to the Owner’s Policy leasehold endorsement. As with the owner’s policy, this endorsement must be issued on any Loan Policy where the insured mortgage is secured by the borrower tenant’s leasehold estate.

Amendment to NMAC §13.14.8.23 - Confirms the promulgation of two forms of Loan Policy Aggregation Endorsement, the NM 60 and the NM 60.1. (Effective August 1, 2014)

This amendment promulgates the NM 60.1 form of Loan Policy Aggregation Endorsement in addition to the existing NM 60. The NM 60.1 is the ALTA 12.1-06 State Limits form. The NM 60.1 would be used only in those cases where the title insurer’s self-imposed or statutory limits for single risks might limit the aggregate amount of insurance in the state. Issuance of the NM 60.1 will be rare in New Mexico and will usually require senior underwriter approval. Please contact your Stewart underwriter if you are asked to issue the NM 60.1. Please note that the forms table erroneously calls the NM 60.1 the NM 8. There is no NM 8, so please report this form using the NM 60.1 and the transaction code 6001.

Amendment to NMAC §13.14.10.43 - Clarifies rule dealing with the Aggregation Endorsements (Effective August 1, 2014)

This amends the rule dealing with the Aggregation Endorsement to include a reference to the NM 60.1 and confirms that the rates are the same for the NM 60 or the NM 60.1.

Amendment to NMAC §13.14.17.12 - Updates the transaction codes to correspond with the newly adopted forms and regulations (Effective August 1, 2014)

This amendment updates the transaction codes so that they are current and match the current forms and endorsements. You must use the new forms and related new codes effective August 1, 2014. As otherwise noted herein, there are a few inconsistencies in the new transaction codes, which may be fixed by the OSI, but until then, please report using the codes in the regulations.

Amendment to NMAC §13.14.18.13 - Updates the list of currently promulgated forms (Effective August 1, 2014)

This amendment updates the list of current promulgated forms consistent with the Order from the 2013 biennial hearing.

Amendment to NMAC §13.14.18.9 - Makes a technical correction to regulation prohibiting alteration of promulgated forms (Effective August 1, 2014)

This amendment corrects an inadvertent omission from the last version of this rule. When the rule was last amended, the amendment was not included in the final NMAC. This clarifies the long-standing understanding that the promulgated forms cannot be changed, except in the very limited circumstances allowed by law.

Amendment to NMAC 13.14.3.11 - Clarifies the premium splits between underwriters and agents (Effective August 1, 2014)

This amendment clarifies the rule with respect to the division of premiums between agents and underwriters to address the division of other fees and expenses. This rule aligns the division for such items in accordance with generally accepted customary practice in the New Mexico title insurance industry.

Amendment to NMAC §13.14.18.54 - Corrects a typographical error on Notice to Purchaser Insured (Effective August 1, 2014)

This technical amendment corrects a typographical error on the NM 35 Notice to Purchaser Insured and changes the reference to the Office of the Superintendent of Insurance.

Amendment to NMAC §13.14.1.25 - Amends definition of Superintendent of Insurance to match current statutory structure (Effective August 1, 2014)

This technical amendment changes the definition of “Superintendent” to Office of the Superintendent to coincide with the New Mexico statutory changes that went into effect in 2013 moving the Department of Insurance from the Public Regulation Commission and creating a new quasi-independent agency.  

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

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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.