Guideline: ALTA Endorsement 29.2-06 (Interest Rate Swap Endorsement - Direct Obligation - Defined Amount) (08-01-11) and ALTA Endorsement 29.3-06 (Interest Rate Swap Endorsement - Additional Interest - Defined Amount) (08-01-11).
This endorsement insures against (1) invalidity or unenforceability of the Insured Mortgage as security for the repayment of the Swap Obligation; (2) lack of priority of the lien of the Insured Mortgage as security for the repayment of the Swap Obligation, not to exceed the Additional Amount of Insurance.
This endorsement contains exclusions from coverage, including rights or obligations created after the Date of Endorsement under a master interest rate exchange agreement, creditors' rights, calculations of the swap obligation by a court, unpaid recording, or similar taxes. There are several Swap Obligation endorsements. ALTA Endorsement 29.2-06 (Interest Rate Swap Endorsement - Direct Obligation - Defined Amount) is designed for use where the swap obligation amount is treated as principal. ALTA Endorsement 29.3-06 (Interest Rate Swap Endorsement - Additional Interest - Defined Amount) is designed for use where the swap obligation amount is treated as additional interest. Both forms require that an Additional Amount of Insurance be stated in the endorsement.
ALTA Endorsements 29.2-06 and 29.3-06 are issued with a 2006 ALTA Loan Policy. They can be issued simultaneously with the Loan policy or subsequently.
We require the following:
1. Verify that the mortgage expressly secures the Swap Obligation and complies with applicable state requirements for disclosure of Swap Obligations, if applicable.
2. Verify that the Swap Obligation is evidenced by an existing master swap agreement or interest exchange agreement and confirm that such agreement is in effect at the time of the execution of the Insured Mortgage.
3. Verify that the Insured Mortgage states the additional amount to be secured under the Swap Agreement or Interest Exchange Agreement, in addition to the loan amount. Insert this value in the Additional Amount of Insurance section of the endorsement. Title insurance premium must be collected on this additional amount.
4. If the Date of Endorsement is subsequent to the Date of Policy, add applicable datedown exceptions in section 3.e of the endorsement.
5. Secure approval of a Senior Underwriter.
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.
This guideline applies to the following form(s):