MD2016005 updates and amends part 1.) of this bulletin.
This Bulletin is being disseminated to remind all Maryland title insurance issuing agents about relevant Maryland underwriting and claim issues.
1.) Front foot benefit assessments (FFBA):
Improvement liens and assessments can create many title issues and complications. Practitioners must be vigilant in reviewing all matters appearing of record and in carefully reading the title documents. Unfortunately, there is no master index or registry where these FFBA are recorded. Instead they appear as original declarations or covenants in the back chain of title. Additionally, proper exceptions must be included in title insurance binders and policies to avoid potential for future assessments. Utility liens and assessments are not often easily found in title searches. Therefore, it is absolutely critical that you make certain that the insured land is not subject to FFBA. Moreover, you should reference ALL declarations, covenants and restrictions as exceptions in your insurance commitments and policies. A standard form of exception for future front foot benefits should look like:
Schedule: B-II exceptions:
2. Taxes or special assessments which are not shown as existing liens by the public records, or which are not due and payable as of the date of the policy anticipated by this Commitment. Possible future tax levies and/or front foot benefit charges, liens, assessments or encumbrances, public charges, and/or the balance thereof for existing or proposed improvements which may have been levied or assessed, or which may be levied or assessed, but which are not yet due and payable to the State, County, Municipality, Metropolitan District, Commission, individual or corporate assessor.
Schedule: B exceptions:
9. Taxes (State, County and Municipal) and other charges (including but not limited to assessments by any State, County, Municipality, Metropolitan District or Commission) subsequent to June 30, ______. In addition this policy of title insurance does not insure against presently assessed and payable but unpaid front foot benefit charges, and possible future tax levies and/or front benefit assessments, nor against such public charges and assessments, or the balance thereof for existing or proposed improvements, which may have been levied or assessed, or to be levied or assessed, but which are not yet due and payable to the State, County, Municipality, Metropolitan District, Commission, individual or corporate assessor.
2.) Ground rents:
Note that the legislation relating to the mandatory registration of ground rents in Maryland has been struck down by the Maryland Courts. As such, all issuing agents are reminded when insuring property subject to a ground rent (i.e. "leasehold"), that all ground rent amounts have been paid current or if the ground rent owner is unknown to collect three (3) years of ground rent plus $500.00 and hold in escrow for three (3) years. Please be certain to reference the title on Sched. A of the commitments and polices as "Leasehold, subject to an annual ground rent of $_____ payable semi-annually on the ___ days of ____ and ____, each and every year." Additionally, you must take exception to the lease creating the ground rent in schedule B. Many ground rents have been registered with the State and can be found on the SDAT website: http://www.dat.state.md.us/
Also note that you are not authorized to rely on a Certificate of Extinguishment as to ground rent leases as recorded among the land records. Many of these extinguishments were recorded pursuant to the unconstitutional legislation when in fact the ground rent had not been properly extinguished.
Finally, remember that Maryland law requires that a settlement agent notify a borrower (purchase or refinance) as to ground rent against the property (see attached NOTICE REGARDING GROUND RENT BY SETTLEMENT AGENT). This law does not apply to transactions involving commercial property, indemnity deeds of trust or home equity lines of credit.
3.) Judgment lien searches:
Recently there have been claims resulting from the failure to identify properly indexed judgments. As such, we recommend that you utilize the services of an expert judgment service search provider AND conduct an independent judgment search through the below website:
Maryland Judiciary Case Search: http://casesearch.courts.state.md.us/inquiry/processDisclaimer.jis
4.) Deeds in lieu:
Recently we have seen a wave of deed in lieu (DIL) transactions in Maryland whereby the lender is looking for title insurance immediately after they acquire the property via a DIL from the mortgagor(s)/title holder(s). DIL’s are very tricky to underwrite. As such, we require all issuing offices contact a Stewart underwriter when presented with such a scenario to determine if title insurance is available or appropriate.
5.) Gap searches:
Please note that ALL Maryland counties have serious time gaps between recording and indexing of documents. As such, we require that all issuing agents conduct proper bring to dates immediately 1.) prior to closing, 2.) prior to disbursing and 3.) prior to recording. This includes a review of the land records, judgment searches, PACER and Special Alerts. This will help to minimize any exposure to claims as a result of issuing title insurance. Moreover, when issuing a commitment, please make sure you have brought the title and judgment searches current as close to the date of issuance as possible. Any overlimit request that does not include the most current date of examination will be returned for updating.
6.) HELOC’s and revolving mortgages:
HELOC’s and revolving mortgages have been a constant source of major claims in the industry. Stewart requires that all issuing agents follow bulletin number SLS2008015 when you are faced with a HELOC or revolving mortgage. Unless you will be obtaining a subordination (subject to scrutiny), you must contact the lender prior to closing to ensure that the account will be frozen by having the borrower(s) execute an authorization form to freeze the account. At the closing you should again contact the lender to verify the accuracy of the payoff, make certain the account has been frozen and determine that no new money has been withdrawn. Following up with a release is also critically important. Under Maryland law, lenders have 30 days from receipt of funds to record releases.
7.) Recording priority:
Recently we have received numerous claims involving unrecorded or late recorded deeds, deeds of trusts and mortgages. It is absolutely critical that all recordable documents are sent for recording immediately following the settlement. Our requirements state that you must record the same day, or no later than the next business day following settlement. Regardless of whether the proper amount of recordation or transfer taxes were collected, it is the issuing agent’s sole responsibility to ensure that the documents are properly and quickly recorded. If the documents have been rejected or there are impediments to delivery to the courthouse, you should not wait to instantly remedy these errors. We often rely on the Maryland "purchase money" exception for numerous incidents of priority.
Additionally, you are required to make certain that all "purchase money" deeds of trust or mortgages state on their face "PURCHASE MONEY DEED OF TRUST/MORTGAGE" in order to preserve priority.
Finally, you should implement a procedure following delivery of documents to the courthouse to ensure the documents were actually recorded and the originals returned by the county courthouse in a timely fashion.
8.) Estate conveyances:
Since 1970, all property held by a deceased individual in Maryland automatically vests in a personal representative. If you are conveying title from a party that has died or you see a conveyance in the chain from an estate or personal representative, you must apply the following requirements:
Our normal requirements (Sched. B):
-Certified copies of death certificate(s) – (may be more than one owner of record)-Proof of estate filing in the Register of Wills
-Current Letters of Administration
-Last Will and Testament (unless decedent died intestate)
-Proof of payment of claims, inheritance taxes and/or estate taxes, or escrow for same
(unless sale to bona fide purchaser or under applicable Unified Credit)
-List of interested persons
-Proper inventory reflecting property for sale.
Upon discovery of an estate conveyance, you must review the estate docket for any anomalies, exceptions/objections, removal of personal representative or court intervention:
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
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