Bulletin: VT2017002

Date:
November 22, 2017
To:
All Vermont Issuing Offices
RE:
UNDERWRITING - Deeds in Lieu of Foreclosure

Dear Associates:

In addition to the underwriting requirements set forth in SLS2012011, dated July 3, 2012, and the Deed in Lieu Guidelines listed in Second 4.12 of the Underwriting Manual, Vermont also requires that you obtain satisfactory evidence that there is no substantial value in the Insured property in excess of what is owed under the Note/Mortgage.

Accordingly, the following requirement shall be added to any Commitment insuring a Deed in Lieu property:

In the event that this property is acquired via a Deed in Lieu of Foreclosure, the Company requires satisfactory evidence, via a recent appraisal of the property, evidencing that there is no substantial value in the Subject Property in excess of what is owed under the Note/Mortgage by Borrower to Lender and recorded in Volume ____ at Page _____ of the City/Town of _______ Land Records; See In Re: Chase, a 2005 Bankruptcy decision in which a Vermont court ruled that transfers of title via strict foreclosure can be voided as a fraudulent transfer if the debtor in the foreclosure later files for bankruptcy protection.

If a recent appraisal of the property is not available or is unattainable, approval from a Stewart Title Guaranty Underwriter is required before insuring the proposed transaction.

Guidance on what is considered “substantial value” is set forth in the In Re: Chase decision. However, for underwriting purposes, the appraised value cannot exceed the outstanding indebtedness by more than five percent (5%).

For example, if the appraised value of the insured property is $100,000 and the outstanding debt is $90,000, the transaction cannot be insured as the appraised value exceeds the indebtedness by ten percent (10%).

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:
SLS2012011 Deeds in Lieu of Foreclosure
Underwriting Manual:
4.12 Deeds In Lieu Of Foreclosure
Exceptions Manual:
None
Forms:
STG Deed In Lieu of Foreclosure Affidavit and Estoppel Certificate