Guideline: ALTA Expanded Coverage Residential Loan Policy - Assessments Priority (04-02-15)

Explanation:

The ALTA Expanded Coverage Residential Loan Policy - Assessments Priority (04-02-15) provides more coverage to lenders than the 2006 ALTA Loan Policy. This Policy is similar to the Homeowner's Policy of Title Insurance. You should use the most recent version of the ALTA Expanded Coverage Residential Loan Policy that is available in your jurisdiction.

The ALTA Expanded Coverage Residential Loan Policy - Assessments Priority (04-02-15) includes the following standard coverages (Covered Risks):

1. Automatic incorporation of the following ALTA Endorsements:    

  • ALTA Endorsement 4-06 (Condominium);
  • ALTA Endorsement 5-06 (Planned Unit Development);
  • ALTA Endorsement 6-06 (Variable Rate Mortgage);
  • ALTA Endorsement 6.2 (Variable Rate Mortgage - Negative Amortization);
  • ALTA Endorsement 8.1-06 (Environmental Protection Lien); and,
  • ALTA Endorsement 9-06 (Restrictions, Encroachments, Minerals – Loan Policy).

You do not need to mark boxes or attach these endorsements: these endorsements are automatically included.

2. Revolving credit coverage for future advances.

3. Modification coverage that automatically covers advances made or changes in the interest rate subsequent to a modification of the insured mortgage after Date of Policy.

4. Zoning coverage (similar to ALTA Endorsement 3.1-06).

5. Building permit coverage (without any separate cap or deductible).

6. Subdivision Map Act coverage.

7. Post-policy forgery coverage of the lender's signature on a subordination, assignment, release, or reconveyance of the Insured Mortgage, or of an instrument purporting to convey or encumber the Title.

8. Location coverage of street address and residence.

9. Tax parcel coverage insuring that the land is not taxed with other property.

10. Survey coverage that includes coverage with respect to post-policy encroachments.

11. Coverage against damage to improvements from use of surface for extraction of minerals, water or other substances (similar to coverage included in ALTA 9-06).

12. Coverage against supplemental real estate taxes.

13. Usury coverage if the Insured Mortgage is insured as a first mortgage.

14. Coverage of perimeter boundaries of map, if any map is attached.

15. Insurance of right of access.

16. 25% increase in insurance coverage, so that insurance is 125% of amount stated in Schedule A.

17. 10% increase in insurance coverage, if Company attempts pursuant to the policy to establish title and is unsuccessful.

18. Covered Risks as to Electronic Transactions, such as failure to comply with requirements to create documents electronically and failure to properly record a document electronically.

19. Coverage that real estate taxes and assessments are not due and payable, but unpaid.

20. Coverage against survey matters, because of: "any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term "encroachment" includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land."

21. Covered Risks insuring against notices of governmental enforcement, notices of legal violation and notices of eminent domain proceedings that are recorded in the Public Records.

22.  Creditors' rights coverage because of prior fraudulent transfers, preferential transfers, and ineffective or delayed recording.

23. Gap coverage between the date of settlement (Date of Policy) and date of recording.

24. Coverage against the lack of priority of the lien of the Insured Mortgage over the lien of any assessments for street improvements under construction or completed at Date of Policy. This is the same as ALTA Endorsement 1.

25. The definition of "Indebtedness" is broadened, and includes future advances (as to which there is separate insurance of priority).

26. There is no non-cumulative liability clause in the Policy.

27. There is no pro tanto reduction clause by payment of principal, and therefore no need for a Last Dollar Endorsement.

28. The Policy clarifies the arbitration clause. The Policy that is subject to mandatory arbitration upon request and compliance with applicable law has been raised from $1 million to $2 million. The rules for arbitration will be the ALTA Title Insurance Arbitration Rules (which incorporate the National Arbitration Forum rules except as modified). You may find the Title Insurance Arbitration Rules at www.alta.org/standards/arbitration1.1.06.cfm.

The ALTA Expanded Coverage Residential Loan Policy - Assessments Priority (04-02-15) generally will have a premium charge of 110% of the applicable cost of the Standard Loan Policy (unless a higher rate is filed in your state), plus any endorsement charges for the incorporated endorsements applicable to the transaction. The additional premium charge, other than endorsement charges, typically will not apply if the ALTA Expanded Coverage Loan Policy - Assessments Priority (04-02-15) is issued simultaneously with the ALTA Homeowner's Policy of Title Insurance.

Underwriting Requirements:

(1) Issue only on one-to-four family residence or residential condominium; Issue only if improved property; Verify by review of tax/assessment search; Add address for land in Schedule A.

(2) Issue on first liens only.

(3) Issue only if lender is institutional lender commonly making residential loans (do not issue if lender is an individual).

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

(5) Issue only on (i) platted lot or metes and bounds tract not exceeding 25 acres; or (ii) condominium unit. Do not issue on metes and bounds or other property without underwriter approval or unless you can determine that the metes and bounds description does not violate subdivision map requirements.

(6) Verify by tax/assessment search that separately assessed.

(7) Verify with homeowner's association that assessments 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);

(8) If a map of the land is attached (not required on policy), verify that description same as Schedule A description.

(9) Sellers must execute the STG Homeowner’s Affidavit. If no sale, require borrowers to execute STG Homeowner’s Affidavit.

(10) No inspection or survey is required.

(11) Separately except to easements, covenants, minerals, assessment liens and options or first refusals.

(12) You may show as your Date of Policy the date of disbursement and delivery of all documents. You do not need to await 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. Show the settlement date as the Date of Policy; you do not need to show recording information.

(13) You should be satisfied that taxes and assessments are not yet due and payable, or add the following at the end of your tax exception: "These taxes and assessments are due and payable." You may continue to note in Schedule B that excepted taxes are not yet due and payable, if requested by the Insured.

(14) You should except to a recorded notice of governmental violation (such as zoning, subdivision, environmental) or notice of eminent domain proceeding filed by any person. Do not remove as an exception because of a release unless you receive approval from underwriting personnel.

(15) You should verify street improvements are not under construction or recently completed, by your tax search, survey review, or affidavit of the owner.

(16) You should not issue the ALTA Expanded Coverage Residential Loan Policy - Assessments Priority (04-02-15) in your state, unless Stewart has filed the policy or unless forms are available without filing.

(17) Because this policy insures that condominium and homeowner’s association liens for future assessments are subordinate to the Insured Mortgage, 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 Expanded Coverage Residential Loan Policy - Assessments Priority (4-02-15) may be issued, if it is available in the state:

Illinois – the law subordinates the assessment lien

Indiana – the law subordinates the assessment lien

Louisiana - the law subordinates the assessment lien

Maine – the law subordinates the assessment lien

Nebraska – the law subordinates the assessment lien

North Carolina – the law subordinates the assessment lien

Ohio – the law subordinates the assessment lien

Oklahoma – the law subordinates the assessment lien

South Carolina – the law subordinates the assessment lien

Utah – the law subordinates the assessment lien

Virginia – the law subordinates the assessment lien

States in which the ALTA Expanded Coverage Residential Loan Policy - Assessments Priority (4-02-15) may be issued, if it is available in the state, 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; 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; 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; 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 Expanded Coverage Residential Loan Policy - Current Assessments (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.