Guideline: ALTA Endorsement 14.3 and 14.3-06 (Future Advance-Reverse Mortgage) W and WO/MML


This endorsement affords coverage to the insured lender for loss or damage caused by the loss of priority of future advances pursuant to the loan agreement secured note subject to certain exceptions.  This endorsement includes variable interest rate coverage.  Unlike, the ALTA 14-06, this endorsement is designed for issuance only for a reverse mortgage. Reverse mortgage loans are made to persons, generally one of whom is at least 62. Payments are not due until they die or leave the property. The most common reverse mortgage program is the HUD Home Equity Conversion Mortgage program (HECM) (which contemplates two mortgages; one for the lender and a subordinate mortgage for HUD). Fannie Mae does purchase some separate reverse mortgages under the Home Keeper® program.

This endorsement insures against the following:

(1) invalidity or unenforceability of the insured reverse mortgage as security for Advances;

(2) lack of priority of the lien of the insured reverse mortgage as security for Advances; and

(3) invalidity or unenforceability of the reverse mortgage because of Re-Advances and repayments, lack of outstanding debt before an Advance, and failure to comply with legal requirements for Advances;

(4) failure of the insured mortgage to state the term for Advances,

(5) failure of the insured reverse mortgage to state the maximum amount secured by the insured mortgage,

(6) failure of the mortgagors to be at least 62 years old at Date of Policy,

(7) invalidity or unenforceability of the insured mortgage because of adjustment of interest or addition of interest to principal, and

(8) loss of priority of the insured mortgage caused by adjustment of interest rates and addition of interest to principal. For purposes of the endorsement, interest includes lawful interest based on net appreciation.

This endorsement contains exclusions from coverage (similar to those in ALTA Endorsement 14 and 14.1): advances after a bankruptcy, real estate taxes and assessments, federal tax liens filed more than 45 days before the advance, federal or state environmental protection liens, and usury or consumer credit protection or truth in lending law.

We have two versions of the endorsement; one which contains mechanic's lien exception (Endorsement 14.3 W/MML at paragraph 4.f) and the other which does not contain the mechanic's lien exception (Endorsement 14 WO/MML).

Endorsement 14.3 is issued with a 1992 ALTA Loan Policy. Endorsement 14.3-06 is issued with a 2006 ALTA Loan Policy.

Underwriting Requirements:

The Underwriting Requirements for providing coverage for reverse mortgages by issuance of the ALTA 14.3-06 are as follows:

8. Verify the mortgage is a HUD HECM mortgage or a Fannie Mae Home Keeper® mortgage. Otherwise, please call our underwriting personnel before issuing this endorsement.

9. Issue for the Amount of Insurance requested by the lender.

10. Secure government issued photo ID for each mortgagor and verify that each mortgagor is at least 62 years of age. Otherwise, delete Subparagraph 2(d) of the endorsement.

11. Do not rely on a POA without Underwriter approval.  If the reverse mortgage transaction involves a Power of Attorney, please contact an Underwriter.

12. A non-titled spouse must be included in the granting clause of any reverse mortgage as well as sign the mortgage unless you receive Underwriter approval.  The best approach would be in insert the following language in the signature block or in the body of the instrument:

“[Name of non-titled spouse” joins in the execution of this instrument solely to release any claim she may have and hereby assumes no obligation under any covenants or warranties nor any obligations for payment of a secured note. “

If the property is, in fact, non-homestead, then a suitable non-homestead clause may be used instead.

13. Verify the mortgage discloses that it is a reverse mortgage that secures future Advances. Also verify that it complies with applicable state requirements for disclosure of future Advances in Virtual Underwriter under 17.46.12 "Future Advance Forms to Use for Each State."

14. If the reverse mortgage is a HUD HECM (Home Equity Conversion Mortgage), there will be two mortgages or deeds of trust: a first lien mortgage or deed of trust to a lender and a second lien mortgage or deed of trust to HUD. Generally, you will insure only the lender and the mortgage/deed of trust to the lender on Schedule A, and you will show the HUD mortgage/deed of trust as a subordinate matter on Schedule B.  However, at the request of the lender, you may issue one Loan Policy that describes both mortgages/deeds of trust on Schedule A and names both the lender and HUD as their interests may appear. At the request of the lender, you may also note their priority (e.g. First Mortgage/Deed of Trust and Second or Subordinate Mortgage/Deed of Trust) in the Schedule A description of each mortgage/deed of trust.

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):