DLO

Deeds in Lieu of Foreclosure

If the deed to the seller or proposed insured is a deed in lieu of foreclosure, you must determine that the deed is absolute (not a mortgage or additional security), with no rights or possession retained by the grantor. The mortgage also must be released or excepted.

Requirement

DLOR01 STG

Adequacy of the Deed in Lieu of Foreclosure

As to the deed in lieu of foreclosure [recorded] _______ in connection with the mortgage or Deed of Trust recorded __________, the Company requires:
a) Satisfactory evidence that said Deed was an absolute conveyance given freely and under no duress or coercion;
b) Satisfactory evidence that the grantors are no longer in possession of the land;
c) Copy of any release or settlement agreement;
d) Satisfactory evidence that there are no other agreements between the grantor(s) and the grantee.
At that time, the Company may make additional requirements or exceptions.
The Policy when issued will contain the following exception:
 “Any claim by reason of the operation of federal bankruptcy, state insolvency, or similar creditors’ rights laws.”
Comment: If the deed to the seller or proposed insured is a deed in lieu of foreclosure, you must determine that the deed is absolute (not a mortgage or additional security), with no rights or possession retained by the grantor. The mortgage also must be released or excepted.

a) Satisfactory evidence that said Deed was an absolute conveyance given freely and under no duress or coercion;

b) Satisfactory evidence that the grantors are no longer in possession of the land;

c) Copy of any release or settlement agreement;

d) Satisfactory evidence that there are no other agreements between the grantor(s) and the grantee.

The policy will contain the following exception:

The deed insured in this policy is a deed in lieu of foreclosure. Policy excepts the terms, conditions and provisions of any underlying agreement in connection with same, including any possible right of the grantor to redeem, and any mechanic’s liens filed within eight months after recording of the deed.

Note: You may add additional local requirements here. Please consult with our underwriting personnel in preparing appropriate provisions.

Exception

DLOX01 STG

Recharacterization of Deed in Lieu as Equitable

Any claim that the Deed from _______________ to ________________ recorded _______________ is part of a loan transaction or that the Deed constitutes a mortgage or other security device.
Comment: A deed in lieu of foreclosure may be recharacterized as an equitable mortgage in appropriate cases. Issues we consider include any right or option of the mortgagor to repurchase, retention of possession by the mortgagor, and right of the mortgagor to share in sale proceeds.