Bulletin: SLS2020009

Date:
April 23, 2020
To:
All Issuing Offices
RE:
UNDERWRITING - COVID19 and Non-Institutional/ Hard Money/ Private Lender Transactions [Revised 7-27-20]

Dear Associates:

Due to the current COVID-19 crisis, the ongoing challenges and limitations of many County Recorder’s offices, and the increased opportunity for fraud, the Company is making additional general requirements for hard money loans.

Hard money transactions involve non-institutional lenders. For example, non-institutional loans do not include loans by banks, savings associations, credit unions, governmental or other pension or retirement funds, real estate investment trusts, governmental agencies, insurance companies, or bona fide seller loans.

Hard money loans may have the following characteristics: high interest rates, high loan fees, short term payment, borrowers without strong credit, apparent strong loan-to-value ratio since the loan is based on the strength of the collateral and not the credit of the borrower, use of flips and short-term ownership (e.g. purchase of house, fix, and sell), and higher rate of fraud and title losses.

Effective immediately, all hard money loan transactions, including loans on single-family residences, are required to have Underwriter approval, as follows. 

Transactions up to $150,000 require Underwriter approval;
Transactions up to $350,000 require Associate Senior Underwriter approval;
Transactions $350,000 and up require Senior Underwriter approval.

In addition, Stewart will generally require a mechanic’s lien exception on the hard money lender’s loan policy and will generally not insure the priority of a construction loan mortgage over mechanic’s liens. The Stewart Underwriter, Associate Senior Underwriter, or Senior Underwriter must receive a copy of the closing instructions, any borrower/lender agreements, and loan documents for review.

Offices must continue to follow the recommended due diligence steps provided in bulletin SLS2018002, prior to your submission to underwriting.

Please submit an Overlimits Request for Approval as you would for any high liability and/or extrahazardous risk. A Stewart Underwriter will review it and forward it to a Stewart Senior Underwriter for additional approval, if necessary. In Question 6 (description of transaction and financing) and Question 11 (“Other unusual risks”), please input “Hard money loan” and any additional relevant information. In Question 10, Please also check the box for “Other extrahazardous risks”.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
SLS2018002 UNDERWRITING - Non-Institutional / Hard Money / Private Lenders Transactions [Revised 7-11-19]
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None