Guideline: ALTA Short Form Residential Loan Policy and Addendum (12-03-12)

Explanation:

The ALTA Short Form Residential Loan Policy (12-03-12) is issued to a lender making a loan secured by a one-to-four family residential property or condominium.

This policy incorporates the terms of the 2006 ALTA Loan Policy (06-17-06). This Policy incorporates by reference the Exclusions and Conditions contained in a standard 2006 ALTA Loan Policy form. It contains a printed Schedule B which excepts to certain taxes and assessments, recorded restrictions, easements and servitudes, and minerals. However, affirmative insurance is given with regard to these matters as provided in Schedule B. Coverage may include loss or damage from violation of restrictions, damage from the use of easements, and damage to improvements from the exercise of mineral rights. Title risks that are unacceptable to the insurer are shown in an Addendum to the policy.

Schedule A of the ALTA Short Form Residential Loan Policy (12-03-12) provides for optional selection to incorporate the following ALTA Endorsements, if requested and applicable:

  • ALTA Endorsement 4-06 (Condominium);
  • ALTA Endorsement 4.1-06 (Condominium);
  • ALTA Endorsement 5-06 (Planned Unit Development);
  • ALTA Endorsement 5.1-06 (Planned Unit Development);
  • ALTA Endorsement 6-06 (Variable Rate Mortgage), if the Insured Mortgage contains provisions which provide for an adjustable interest rate;
  • ALTA Endorsement 6.2-06 (Variable Rate Mortgage - Negative Amortization), if the Insured Mortgage contains provisions which provide for both an adjustable interest rate and negative amortization;
  • ALTA Endorsement 7-06 (Manufactured Housing), if a manufactured housing unit is located on the Land at Date of Policy;
  • ALTA Endorsement 7.1-06 (Manufactured Housing - Conversion; Loan)
  • ALTA Endorsement 8.1-06 (Environmental Protection Lien) subject to the statutes, if any, shown in Schedule B specifically for this endorsement; and,
  • ALTA Endorsement 9-06 (Restrictions, Encroachments, Minerals);
  • ALTA Endorsement 14-06 (Future Advance-Priority)
  • ALTA Endorsement 14.1-06 (Future Advance - Knowledge)
  • ALTA Endorsement 14.3-06 (Future Advance – Reverse Mortgage)
  • ALTA Endorsement 22-06 (Location) the type of improvement is a one-to-four family residential structure and the street address is as shown in Schedule A.
  • ALTA Endorsement 30-06 (Shared Appreciation Mortgage).

These endorsements may be added merely by checking appropriate boxes in the policy form.

A desirable feature of the ALTA Short Form Residential Loan Policy is that it may be easily reviewed by the lender and requires reduced file space.

The ALTA Short Form Residential Loan Policy reduces the opportunity for errors, the time for delivery (since there is no need to wait for recording information), and the necessary time for review, since special exceptions do not appear unless an Addendum is included.

Fannie Mae, Freddie Mac, VA, HUD and many institutional lenders accept the ALTA Short Form Residential Loan Policy.

There are two current versions of the ALTA Short Form Residential Loan Policy.  ALTA Short Form Residential Loan Policy – Current Violations (04-02-15) and ALTA Short Form Residential Loan Policy and Addendum (12-03-12) provide many of the same coverages. However, these two policy forms differ with respect to the coverage that they provide regarding the priority of the lien of the Insured Mortgage in relation to the priority of a condominium association's or homeowners association's lien for future unpaid charges and assessments.

ALTA Short Form Residential Loan Policy – Current Violations (04-02-15) has optional ALTA Endorsements 4.1-06, 5.1-06 and 9.10-06. These endorsements insure only insure against loss or damage if any charges or assessments of the association are due and unpaid at Date of Policy.

ALTA Short Form Residential Loan Policy and Addendum (12-03-12) has optional ALTA Endorsements 4-06, 5-06 and 9-06. These endorsements insure against loss or damage if the association's lien for future charges and assessments is superior to the lien of the Insured Mortgage.

Underwriting Requirements:

1.    This Policy incorporates the 2006 ALTA Loan Policy, which includes gap coverage to the date of recording. You do not need to wait for the recording information unless the closing instructions require that information on the Policy. Absent the lender's instructions to the contrary, the policy may be dated and issued on date of settlement/closing if your requirements have been met, the funds have been disbursed and you are in a position to record. Insert the settlement date as the Date of Policy in Schedule A; you do not need to show recording information unless requested.

2.    Record the mortgage on the same day that you issue the policy or at the latest, first thing the next morning or business day. We advise that you establish a procedure for recording twice a day, if practical in your area.

3.    Charge the normal rates on Loan Policies for issuance of this Policy, plus the applicable rate for the endorsements that are checked.

4.    Perform a general index search for the time period of the statute of limitations on judgments in your jurisdiction, and for the time period of the limitations on Federal judgments and Federal tax liens. Check taxes, assessments of all types, and other governmental charges. Be satisfied that there are no recent unpaid bills for improvements.

5.    Search: (1) one bona fide deed back if the grantee in that deed gave a purchase money mortgage to an institutional lender (e.g. not an individual seller); or (2) two bona fide deeds back if the grantee in the most recent deed did not give a purchase money mortgage to an institutional lender. A bona fide deed is a deed that appears to involve an arm's length sale (not a gift) between unrelated people.

6.    If you have a copy of a more recent title insurance policy from any underwriter (Owner's, Loan or Short Form Loan), you may rely on that policy and search forward from that prior policy.

7.    This Policy may insure a first lien or a subordinate lien. If insuring a subordinate lien, check the box for an Addendum and include any superior lien in the Addendum.  If you are receive a request to issue the ALTA Short Form Residential Loan Policy (12-03-12) on a subordinate lien with ALTA Endorsements 4-06, 5-06 and/or 9-06, you must confirm that the condominium or homeowners association assessment lien is subordinate to the lien of the subordinate mortgage and you must obtain underwriter approval. See requirement 17 below.

8.    You may issue this Policy on Fee Simple. If you are asked to issue the Short Form Residential Loan Policy on a leasehold, please call our underwriting personnel.

9.    Issue this Policy only on one-to-four family residential property or condominium unit. The Land should be a platted lot or a metes and bounds tract not exceeding 25 acres. Otherwise, please call our underwriting personnel.

10.  Schedule A should show the Street Address of the Land. You may use the address shown on the mortgage or other reasonable evidence, such as tax information.

11.  Schedule A should show the Loan Number.

12.  You do not need to specify any of the exceptions covered by the pre-printed exceptions in Schedule B. You do not need to add an Addendum unless you have special exceptions for matters not otherwise excepted by the pre-printed form. Examples of Addendum items include options, rights of first refusal, recorded notice of government violation or recorded notice of eminent domain proceeding, etc. Do not remove such exceptions without Underwriter approval.

13.  Verify with the homeowner's association or condominium, if applicable, that assessments are paid current and that any right of first refusal will not be exercised in the current transaction (if there is a right of first refusal).

14.  Issue only if the lender is an institutional lender commonly making residential loans (do not issue if lender is an individual unless you obtain Underwriter approval).

15.  Do not issue if the loan is for construction or repair of improvements. You must verify that all bills paid on any prior construction within lien period.

16.  No inspection or survey is required.

17.  If ALTA Endorsements 4-06, 5-06 and/or 9-06 are checked, this policy insures that condominium and homeowner’s association liens for future assessments are subordinate to the Insured Mortgage, If you provide any of those endorsements, you must: (a) review the condominium declaration or restrictive covenants to verify that the condominium declaration or restrictive covenants do not state that the property owner’s or homeowner's assessment liens for future assessments are superior to the Insured Mortgage, and (b) issue only in the states below where the law provides that the lien for future assessments is subordinate to a mortgage or where the declaration or restrictions subordinate the assessment lien to the mortgage.

States in which the ALTA Short Form Residential Loan Policy (12-03-12) may be issued, with ALTA Endorsements 4-06, 5-06 and/or 9-06, for first mortgage liens only:

Illinois – the law subordinates the assessment lien to a first mortgage lien

Indiana – the law subordinates the assessment lien to a first mortgage lien

Louisiana - the law subordinates the assessment lien

Maine – the law subordinates the assessment lien to a first mortgage lien on condominium or townhouse with common elements

Nebraska – the law subordinates the assessment lien to a first mortgage lien

North Carolina – the law subordinates the assessment lien to a first mortgage lien

Ohio – the law subordinates the assessment lien to a first mortgage lien

Oklahoma – the law subordinates the assessment lien

South Carolina – the law subordinates the assessment lien

Utah – the law subordinates the assessment lien to a first mortgage lien

Virginia –the law subordinates the assessment lien to a first mortgage lien

States in which the ALTA Short Form Residential Loan Policy (12-03-12) with ALTA Endorsements 4-06, 5-06 and/or 9-06, may be issued, if the condominium declaration or restrictive covenants subordinate the assessment lien to the lien of the mortgage. If you are requested to issue this policy in any of the following states, the condominium declaration or restrictive covenants, as applicable, must be reviewed to confirm that the assessment lien is subordinate to the mortgage, and you must obtain approval from a Stewart Title Guaranty underwriter:

Arizona – if condominium declaration or restrictive covenants subordinate the assessment lien

California – if condominium declaration or restrictive covenants subordinate the assessment lien

Georgia – if condominium declaration or restrictive covenants subordinate the assessment lien

Idaho – if condominium declaration or restrictive covenants subordinate the assessment lien

Iowa – if condominium declaration or restrictive covenants subordinate the assessment lien

Kansas – the law subordinates the condominium assessment lien to a first mortgage lien; or if restrictive covenants subordinate the HOA assessment lien

Kentucky – the law subordinates the condominium assessment lien; or if restrictive covenants subordinate the HOA assessment lien

Michigan – the law subordinates the condominium assessment lien to a first mortgage lien; or if restrictive covenants subordinate the HOA assessment lien

Mississippi – the law subordinates the condominium assessment lien; or if restrictive covenants subordinate the HOA assessment lien

Montana – if condominium declaration or restrictive covenants subordinate the assessment lien

North Dakota – if condominium declaration or restrictive covenants subordinate the assessment lien

South Dakota – if condominium declaration or restrictive covenants subordinate the assessment lien

Wisconsin – the law subordinates the condominium assessment lien to a first mortgage lien; or if restrictive covenants subordinate the HOA assessment lien

Wyoming – if condominium declaration or restrictive covenants subordinate the assessment lien

If the Declaration or Restrictions provide that the assessment lien is superior to any mortgage, issue the ALTA Short Form Residential Loan Policy - Current Violations (04-02-15).

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.