- September 28, 2007
- All Florida Issuing Offices
- Substitution Rates
In light of the recent litigation regarding the application of Reissue Rates, Stewart would like to ensure that all Florida agents reacquaint themselves with Substitution Loan Rates and apply them in transactions which qualify.
Substitution Loan Rates are applicable in the following instances:
(a) When the same borrower and the same lender make a substitution loan on the same property, the title to which was insured by an insurer in connection with the previous loan.
(b) In the case of a substitution loan of $250,000 or more, when the same borrower and any lender make a substitution loan on the same property, the title to which was insured by an insurer in connection with the previous loan.
There may be instances when no reissue rate is available but Substitution Loan Rates can be charged provided the transaction falls into one of the above categories and the existing mortgagee policy is obtained. Consequently, please be advised that it is Stewart’s policy in Florida, that in transactions in which Substitution Loan Rates is applicable, the agent should:
(i) Request the prior mortgagee policy from the existing lender, and
(ii) Inform the borrower on refinance transactions where Substitution Rates apply that the existing mortgagee policy must be provided to the title agent, and
(iii) In transactions where reissue rates do apply, determine whether the Substitution Loan Rate is more advantageous to the customer.
The following premium rates for substitution loans shall apply:
|Age of Previous Loan||Premium Rates||Premium Split|
|3 years or under||30% of the original rates||70/30|
|From 3 years to 4 years||40% of the original rates||70/30|
|From 4 years to 5 years||50% of the original rates||70/30|
|From 5 years to 10 years||60% of the original rates||70/30|
|Over 10 years||100% of the original rates||70/30|
THE MINIMUM PREMIUM IS $100.00
Please also be advised that it is Stewart’s policy in Florida that, for each transaction where a Substitution Loan Rate might apply, if the agent is unable to obtain the prior mortgagee policy from the lender, the agent should search Stewart’s computerized database of Stewart policies, if available to the agent, for any prior Stewart mortgagee policies. Stewart recommends that agents also search any other title insurance database available to the agent that might reveal the existence of a prior mortgagee policy on the property being insured.
It is Stewart’s position that the charging of Substitution Loan Rates is mandatory where the transaction qualifies under the Florida regulations and statutes. In many instances, it may apply when reissue rates are unavailable. However, if the borrower qualifies for both the reissue and substitution rate, then the lower rate should be charged. The borrower is not entitled to both the reissue and substitution rate.
If you have questions, please contact any of our Florida Underwriting Counsel.
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