Dear Associates:
The ALTA has adopted new forms for the Master Residential and Short Form policies.
The only significant difference is that the underlying loan policy is the 10-17-92
policy.
Both forms may be utilized in each of your states at the present time except
for Utah, in which only the Short Form Policy has been approved. Many of you
are aware that lenders have begun asking for a copy of Stewart's Fannie Mae
approval letter regarding both forms. A copy of the approval letter is available
from the National Legal Department in Houston.
While the utilization and coverages of both forms are very similar, there
are some differences between the Master Policy and Short Form Policy which
need explanation.
ALTA Master Residential Loan Policy
The name of this form describes the type of policy that will be issued. Only
one Master Policy will be issued to each lender. In order that the Company
may track each Master Policy and prevent duplication, all Master Policies will
be issued by the National Legal Department in Houston. If a lender requests
the issuance of a Master Policy, you need to contact Vicki Blake at 1-800-729-1902
to request the issuance of a policy. She will access the Master file that we
keep to determine whether or not a policy has previously been issued. If none
has been issued, then the Legal Department will send the Master Policy directly
to the lender and copy you or, at your request, send you the original policy
so that you may personally deliver it to your customer. The Master List of
Master Policyholders will be continuously updated and you are always welcome
to call to determine if any lender has received a policy.
ALTA Short Form Residential Loan
Policy
The Short Form Policy format is almost identical to the Master Policy Certificate.
(See forms referenced below) The Short Form Policy is, in itself, an actual
policy and as you will note from reading the language on the reverse of the
Short Form Policy, incorporates all the terms and conditions of the ALTA Loan
Policy. The issuance of the Short Form Policy in and of itself is the equivalent
of issuing an individual ALTA Loan Policy, complete with Schedules A and B.
General Comments Regarding the Two
Form
It is either the lender's prerogative to request the issuance of either the
Master Policy or the Short Form Policy, and you would expect to determine whether
or not a lender wishes to have either of these two formats issued by reference
to the closing instructions sent to you by the lender. As you can tell from
the certificate, the Short Form Residential Loan Policy, each require minimal
information, and the rates charged for each of these forms would be the same
as if you are issuing a regular ALTA Loan Policy. The issuance of either the
Master Policy Certificate or the Short Form policy is no short cut in the preparation
you have traditionally done in the issuance of an ALTA Loan Policy. All the
traditional skill and professional care in record searching, document examination,
study of exceptions, and title underwriting must still be applied.
Schedule A Information
Amount of Insurance: This should reflect the amount of the mortgage
or deed of trust being insured.
Premium: Premium will be the premium that you would normally charge for
the issuance of a regular ALTA Loan Policy, plus any premium-bearing
endorsements.
File Number: Your own file numbering system.
Mortgage Amount: The amount of the mortgage to be insured.
Policy Number (Short Form): Unnecessary to complete as the
policy number is reflected below.
Certificate Number (Master Certificate): Unnecessary to complete as the certificate
number is listed below.
Loan Number: The loan number, if any, given to you by the lender.
Mortgage Date: The date the mortgage was executed.
Date of Policy (Short Form); Date of Certificate (Master Policy): Normally
would be the date of settlement. You should note the actual date insofar
as coverage is concerned will be determined by the date of recording if it is
later than the date of the certificate or policy. You should consult lender's
closing instructions for variations.
Name of Insured: The lender or the assignee of the lender if the assignment
is filed contemporaneously with the mortgage document. It will be permissible
to add "its successors and/or assigns" if requested by the insured.
Name of Borrowers: Those parties which execute the mortgage instrument.
Property Address: This should be the actual address of the property which
is security for the mortgage or the deed of trust. It is important to recognize
that neither form contains a legal description; therefore, you must be
absolutely sure that the property address is correct.
County and State: County and state in which the property is located.
Schedule A - The "Boxes"
In order to reduce the amount of paper and multiplicity of forms, it was determined
that boxes would be provided which would be checked off in the event additional
coverage is requested through use of the common ALTA endorsements. By utilizing
the boxes, it is unnecessary to attach the endorsement forms. If any of the
endorsements requested by the lender are premium-bearing endorsements, the
amount of premium charged for the endorsement should be included in the premium
amount in the upper, right-hand corner of the Short Form Policy and the Master
Certificate.
Addendums: You would simply check the appropriate box, depending
on whether an addendum is necessary. To determine whether an addendum is
necessary,
please refer to the Schedule B discussion below, which will discuss items
that must be shown on any addendum.
ALTA Endorsements: You will check the appropriate box reflecting the ALTA
Endorsement(s) requested by the lender. It is unnecessary to attach any of
the printed endorsements
to either the Short Form Policy or the Residential Loan Certificate. The
new form adds a 4.1 and 5.1 endorsement. These are used only in jurisdictions
where
assessments or condominiums or planned unit developments, by statute, are
given priority over the lien insured. You should pay special attention to Endorsement
8.1, in that, in some jurisdictions there are state environmental protection
lien statutes that should be specifically referred to in the two blank
lines
immediately below the 8.1 box. Please refer to prior Bulletins for this
information.
Schedule B
The Schedule B language, which you will find on the reverse of both the Certificate
and the Short Form are virtually identical except for the use of the words "Policy" and "Certificate." You
should note that Schedule B includes both exceptions from coverage and affirmative
assurances. While it is certainly not the ideal to mix exceptions and affirmative
insurance in the same paragraphs, it is necessary in order that the amount
of paper is reduced to the smallest factor. You should note that there is no
provision for a separate Schedule B in which you would insert your normal exceptions
to coverage. The only method for including any special exceptions is by the
use of the Addendum which is available on both forms. The Addendum to either
form will be needed only if any of the following are true:
There are unpaid taxes and special assessments which were due and
payable before the effective date of the Certificate or Policy and which
are not to
be satisfied
at the closing.
There are present violations of covenants, conditions, or restrictions
over which you are not authorized and/or are not willing to insure, or there
exists
reverter language under which a future violation might result in forfeiture
of title or might cut off, subordinate, or impair the lien of the insured
mortgage, and you are not authorized and/or not willing to insure against the
existence
of reverter clauses.
The improvements encroach on easements or servitudes, or use of the easements
or servitudes for the purpose intended may interfere with or damage the
improvements, and you are not authorized and/or not willing to insure against
loss or damage
on that account.
There are mineral leases or mineral royalty reservations of such a nature
that you are not authorized and/or not willing to insure that the same will
not result in a loss to the insured because of damage to improvements including
lawn, shrubbery, or trees.
Both policies provide insurance over matters of survey, but the forms neither
require nor negate the requirement for a survey. If there is reason to
believe there may be survey problems that should not be insured against without
obtaining
a satisfactory survey, then obtain the survey and issue a regular ALTA
Loan Policy excepting to matters that a survey might disclose. If the survey
you
obtain discloses any problems, a suitable exception should be made on the
Addendum. The policies are not suitable for acreage tracts and subdivisions with
a history
of encroachment and survey problems; here, a regular ALTA Loan Policy should
be issued. If you have a starter file with an old survey, by all means
take a look at it to see if there are any survey problems which you wish to except
to in the Addendum. The issuance of either the Master Policy or the Short
Form
Policy is restricted to those 1-to-4 residential tracts that exist in well
established subdivisions which do not have a history of survey or encroachment
problems. Stewart has determined that the Company is unwilling to issue
these policies on leasehold estates. Both policies are ideally suited for condominiums.
Even though both forms simplify and reduce the clerical work in providing
the
lender with a quick delivery of the title insurance product, all the traditional
skill and professional care in record searching, document examination,
study of exceptions, title underwriting must still be applied. Be sure you are
familiar
with the terms of the Schedule B exceptions and affirmative assurances.
If the title is subject to any easements, restrictions, mineral rights, or other
matters you believe should not be insured over, then you must except them
on
the Addendum. If you have any questions, please discuss the matter with
your authorized Stewart representative.
As always, check to be sure that the conveyance to the
mortgagor, as well as the mortgage or lien instrument itself, are correctly
drawn and executed. Are the names correct? Is there any doubt as to
authenticity? Does the legal description of the land match in all documents?
Does the description in the insured mortgage include any land you don't intend
to insure? We believe that you will find both of these products a welcome
addition to the title insurance products that you are able to offer your
customers. Should you have any questions involving either of these forms, please
do not hesitate to call.