Bulletin: WV000008

Dear Associates:

To recap: In West Virginia Bulletin No. 7, issued in January, 2001, we directed agents not to insure certain foreclosure transactions. Specifically, we addressed the common practice in West Virginia foreclosures that the Trustee would record the Deed of Substitution of Trustee immediately prior to the Trustee's deed, after the sale had already occurred. The bulletin was issued in response to the December 5, 2000, decision by the Supreme Court of Appeals of West Virginia in the case of Hafer v. Skinnner, et.al. (record no. 27767).

The troubling aspect of the per curiam decision of the Supreme Court was the conclusion that because the Trustee had no authority to act until the substitution of trustee had been recorded, the Trustee's deed was therefore a "nullity." Because of this "void" (as opposed to "voidable") declaration, you were advised not to insure any foreclosure transaction unless the Substitution of Trustee was recorded prior to the Trustee taking any action to foreclose the trust.

The direction not to insure if that sequence of events existed has caused confusion and hardship for our agents. We are now modifying our position to authorize our agents to insure West Virginia foreclosures that are factually similar to Hafer provided you follow the procedures in this bulletin.

If you are asked to insure a sale out of a foreclosure effected by a substitute Trustee, and you determine from the public records that the substitution of Trustee with certificate of mailing attached was not recorded prior to the Substitute Trustee taking any action toward the foreclosure of the lien, you must search the foreclosed borrower from the date of the foreclosed deed of trust. If you find no other recorded liens or judgments in the name of the foreclosed borrower, and the buyer is a bona fide purchaser for value, you may insure the transaction (lender and owner) without further exception to the rights of the foreclosed borrower.

If, however, your title examination does disclose intervening liens (after the date of the foreclosed deed of trust), do not insure the transaction without taking exception to the liens. Because of the "nullity" characterization by the Supreme Court, we are unwilling to insure without such an exception. If a policy containing the exception is unacceptable to the buyer or lender, you must require that the lien or judgment be paid and released, or the lien of the deed of trust be reforeclosed with proper notice to the lien creditor.

Contact your underwriting department with questions as to any specific requests to insure.