Bulletin: SLS2007002

Experience has shown that in times of economic downturn when the housing industry slows, we will experience an increase in Mechanics and Materialmens Liens (M&M Liens) claims and losses. This will impact your profitability and the profitability of Stewart Title Guaranty Company (STG). Heightened awareness of this increased loss potential can minimize or eliminate M&M lien losses.

Occurrence of any of the following does not necessarily indicate that a M&M lien claim exists or is eminent, however, when one appears, the issuing agent should closely scrutinize the transaction so that a claim may be avoided. M&M lien ?red flags? are:

• Information and knowledge of community economic conditions and, in particular the building industry, indicates monetary problems exits;
• A building contractor on any prior occasion has executed a false affidavit purportedly verifying a payment of all mechanics and materialmen. A subsequent affidavit would be unacceptable without additional verification and underwriter approval;
• Affidavits of Mechanic's Liens are repeatedly filed against the builder signifying slow payment practices, disputes, or cash flow problems.
• The builder has a greater than usual inventory of unsold projects, or unfinished projects (usually residential homes);
• Known disputes exist between the builder and any subcontractor;
• Substantial cost overruns have occurred in the project to be insured;
• The general business reputation of the builder is unfavorable

In addition, now would be an appropriate time to review the bulletins available in Virtual Underwriter on the topic. As always, STG underwriters are available to assist you.

For on-line viewing of this and other bulletins, log onto http://vuwriter.com