NM Variable Rate Mortgage Endorsement (Negative Amortization) Guideline 15


Like the New Mexico Form 14 this endorsement insures against invalidity, unenforceability or loss of priority of the lien of the insured mortgage by reason of provisions for changes in the rate of interest. In addition, this form insures against invalidity, loss of priority or unenforceability of the lien of the insured mortgage by reason of interest on interest or the addition of unpaid interest to the principal balance (negative amortization of interest). Negative amortization is the name commonly given to the process which adds interest which is due and unpaid to the principal balance of the loan. Amortization is the process which reduces the principal balance as payments are made on a loan.

This endorsements does not increase the face amount of the Policy. This endorsement excludes usury or consumer credit protection, or Truth-in-Lending laws.

Rate: See Regulation 13 NMAC 14.10.12.

Underwriting Requirements:

(1) The endorsement may be issued so long as the mortgage or deed of trust or rider refers to the variable rate features of the interest rate and, to the negative amortization provisions.

(2) The mortgage or deed of trust must contain a clear representation that it secures interest at a variable rate, and that it secures a loan providing for negative amortization or adding unpaid interest to principal.

(3) The interest rate should be determined by an objective formula not within the control of the lender (e.g., its own "prime rate").

(4) The mortgage should state the maximum amount of amortization possible.

(5) Do not issue New Mexico 15 without underwriter consent if the lender receives appreciation, contingent interest or a portion of cash flow.

The underwriting guidelines contained herein have been provided for general reference. The facts, circumstances, and location of the subject property should be considered when determining the issuance of the requested form or endorsement. Please note that all of the forms and endorsements included in this system may not be available in all states. Accordingly, please contact the appropriate Stewart Title Guaranty Company underwriting personnel in order to determine availability.

Compliance with the underwriting guidelines contained herein in no way obligates Stewart Title Guaranty Company to issue any form or endorsement.