Guideline: ALTA Endorsement 45-06 (Pari Passu Mortgage - Loan Policy) (12-01-14)

Explanation:

This endorsement is designed for situations where two or more lenders make different loans secured by the same Land (which may be one or more properties) and where the mortgages or deeds of trust securing the loans are of equal lien priority.  The loans may differ in amounts, terms, etc.  The transaction often involves a credit facility.

The lenders usually also execute an Intercreditor Agreement which describes the equal priority of the loans and other aspects, e.g. payments, foreclosure, etc.

This endorsement insures against loss or damage sustained by the Insured Lender by reason of: (a) the invalidity or unenforceability of the lien of the Insured Mortgage resulting solely from the provisions of a Pari Passu Mortgage or Intercreditor Agreement establishing lien priority; or (b) the lack of equal lien priority of the Insured Mortgage to the other Pari Passu Mortgages.

Underwriting Requirements:

1.  Require review of the Insured Mortgage and all other Pari Passu Mortgages or deeds of trust and the Intercreditor Agreement.  Review provisions in the Intercreditor Agreement and all mortgages or deeds of trust to confirm the equal lien priority of the Insured Mortgage and all other Pari Passu Mortgages, notwithstanding the order of recording of the Insured Mortgage and the Pari Passu Mortgages.  If the equal lien priority provisions are contained only in the Intercreditor Agreement, it must be recorded.

2.  On Schedule A of the Policy: show the Insured Mortgage.

3.  On Schedule B of the Policy: insert exceptions for the each of the other Pari Passu Mortgages.

4.  On Schedule B of the Policy: insert an exception for the Intercreditor Agreement, whether it is recorded or not.

5.  On the Pari Passu Endorsement: in Section 2(a) of the endorsement, insert the exception number of the Intercreditor Agreement.

6.  On the Pari Passu Endorsement: in Section 2(c) of the endorsement, insert the exception number(s) of all of the other Pari Passu mortgages / deeds of trust.

7.  Issue a separate Loan Policy for each Insured Mortgage, unless otherwise approved by an underwriter.

8.  Contact an underwriter if you will not be insuring all Pari Passu Mortgages.

9.  Contact an underwriter if all Pari Passu Mortgages are not recorded at the same time.

 

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.

This guideline applies to the following form(s):

ALTA Endorsement 45-06 (Pari Passu Mortgage - Loan Policy)