Bulletin: IN2007001

Dear Associates:

The purpose of this bulletin is to set forth underwriting guidelines for insuring Indiana property upon which a manufactured home is located and the guidelines for issuing an ALTA 7 series endorsement. Under Indiana law, a manufactured home is considered personal property until all requirements to permanently affix the home to land have been satisfied.  If not permanently affixed, the home does not fall within the definition of land under the policy.  The ALTA 7 series endorsements provide, among other things, that the term "land" in the policy includes the manufactured home located on the land. 

New Indiana legislation, effective July 1, 2007, concerning the retirement of manufactured housing titles (Senate Enrolled Act 0434) was signed by the Governor on May 2, 2007.  The intent of the new legislation is to clarify Indiana 's law concerning the titling of manufactured homes and when a manufactured home becomes part of the land.   Under the former law, many lenders, investors and guarantors had interpreted Indiana 's law as requiring the mandatory surrender of title and recordation of an affidavit of transfer of real estate in order to convert the manufactured home to real property.   The former law was also troublesome because it required an owner to submit a certificate of origin or a certificate of title along with the Indiana Bureau of Motor Vehicle ("BMV") application to obtain an affidavit of transfer of title for recording.  Missing or lost certificate of titles created problems and closing delays when owners of existing manufactured housing had to take additional steps to apply for a new certificate of title.

The new legislation requires a person who owns a manufactured home that is personal property not held for resale or not attached to real estate by a permanent foundation to obtain a certificate of title for the manufactured home.  I.C. 9-17-6-1.  Prior law required issuance of a certificate of title for manufactured homes whether owned as personal property or real property. The new law provides that the BMV may issue an affidavit of transfer without a certificate of title or origin, if unavailable.  I.C. 9-17-6-15.1.  Additionally, the BMV may issue a certificate of title even if certain identification numbers are not available.  I.C. 9-17-6-2.  If a manufacturer's serial number or a HUD certification label number for the manufactured home is unavailable, the BMV is authorized to issue a special identification number for the manufactured home. I.C. 9-17-6-2 (5). New information required by statute on the application for an affidavit of transfer to real estate includes the property's tax parcel number and the special identification number issued by the BMV, if the other numbers are unavailable.  I.C. 9-17-6-15.1.  Because changes have been made regarding the affirmations required to be made by the applicant on the affidavit of transfer of title to real estate and the new authority for the BMV to issue a special identification number under certain circumstances, the affidavit of transfer to real estate and certificate of title form to be may be revised by the BMV at some point.

Most significantly, the new law provides that an application for an affidavit of transfer to real estate and the filing of an affidavit is not required to convert a manufactured home to real estate.  I.C. 9-17-6-15.1  and  I.C. 9-17-6-15.5. Pursuant to I.C. 9-17-6-15.1, a person who holds a certificate of title or certificate of origin or who otherwise owns the manufactured home as an improvement, may apply for a affidavit of transfer to real estate with the BMV. However, as stated previously, an application is not required if the manufactured housing is attached to the real estate by a permanent foundation.

The revised statute requires the BMV to adopt rules for the issuance of the affidavit of transfer to real estate and rules to require additional information in an application for certificate of title.  Once rules have been adopted, further guidelines, if necessary, will be issued.

What constitutes a manufactured home for purposes of I.C. 9-17 remains the same. A manufactured  home falling within the provisions of I.C. 9-17 is any manufactured home that is certified to comply with the federal Manufactured Housing Construction and Safety Standards Law of 1974 and more specifically defined  as "a structure, transportable in one or more sections, which , in the traveling mode, is eight body feet or more in width or forty body feet or more in length, or when erected on site, is three hundred twenty or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained therein; except that such term shall include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the manufacturer voluntarily files a certification required by the Secretary and complies with the standards established under this chapter; and except that such term shall not include any self-propelled recreational vehicle." See 42. U.S.C. 5402(b).

Underwriting Guidelines

If you are aware that a manufactured home is located or to be located on the land to be insured, our primary concern is whether the unit qualifies as part of the land to be insured.  As stated above, lenders, in particular, want assurance that the unit is part of the real estate.  The ALTA 7-06 endorsement provides that the term "land" in the policy includes a manufactured housing unit located on the land. The ALTA 7.1-06 endorsement for lenders provides the same coverage as the ALTA 7-06 and also insures against loss or damage if 1) the manufactured housing unit is not located on the land at date of policy; 2)  the manufactured housing unit is not real property under state law; 3) the owner is not the owner of the manufactured housing unit; 4) there are any liens attaching to the manufactured housing unit as personal property;  5) the lien of the mortgage is not enforceable against the land and 6) the lien is not enforceable in a single foreclosure proceeding.  The ALTA 7.2-06 for owners provides the same coverage as the ALTA 7.1-06 except for coverage relating to the enforceability of the lien in a single foreclosure proceeding.

It is advisable to include the following requirement in Schedule B-I in order to determine if improvements located on the land to be insured are a manufactured home or mobile home:

You must tell us if the improvements located on the land to be insured are a mobile or manufactured home. We reserve the right to make additional requirements and/or exceptions if the improvements located on the land are a mobile or manufactured home.

When you become aware of the existence of a manufactured home or mobile home on the property to be insured, you should set forth the following exception in Schedule B absent further evidence that the manufactured home is permanently affixed to the land:

The land described in Schedule A hereof shall not be deemed to include any manufactured home or mobile home located on the property.

In order to issue the ALTA 7 endorsement insuring that the manufactured home is part of the land, the following guidelines are applicable for an existing home on a residential refinance or purchase:

1)      Verify that ownership of the land and unit is or will be in the same party

2)      Verify unit is assessed or will be assessed as a real property improvement

3)      Verify Unit is permanently affixed to land by:

a.       Certificate of surveyor that axles and wheels removed and set on permanent foundation; or

b.      Certificate of appraiser certifying the same as in a. above.

4)      Conduct U.C.C. search.  Except any security interest revealed by the U.C.C. search in Schedule B or require a release.

5)      Obtain a copy of certificate of title. Require release of any lien that is shown on the certificate of title or except the same in Schedule B. Remember, perfection of a security interest in a mobile home or similar unit is by notation on the certificate of title. I.C. 9-17-6-7. Recording of financing statement is not required.  I.C. 26-1-9.1-311. Therefore, a prior security interest in a mobile home or similar may obtain priority over a mortgage we insure.

6)      For issuance of the ALTA 7.1-06 and 7.2-06, verify by certificate of surveyor that manufactured home is located on the land at date of closing.

With respect to issuing an ALTA 7 series endorsements for transactions involving the initial placement of a manufactured home, it is recommended that you require an application for affidavit of transfer to real estate as county assessors may continue to rely only on the filing of the affidavit to designate the manufactured housing as real property on the tax rolls.

The effect of recording an affidavit of transfer to real property remains the same. Pursuant to I.C. 9-17-6-15.5, the recording of an affidavit of transfer will be deemed a conversion of the manufactured home that is attached to real estate by a permanent foundation to an improvement upon the real estate. Again, if you can determine that the manufactured home is permanently affixed by way of a survey or appraisal that indicates that home is on a permanent foundation, the wheels and axles have been removed, the home is hooked up to permanent utilities and the property is taxed as real estate, an affidavit of transfer to real property is not necessary. 

Although the new legislation clarifies the former law and specifically provides that the filing of an affidavit of transfer of real estate is not required to convert a manufactured home attached to a permanent foundation to real estate, some lenders and investors may still interpret the law as requiring the surrender of title and require that title be surrendered for existing or newly placed homes.  If your closing instructions require surrender of title or if you insuring a transaction involving the initial placement of a manufactured home on the property, you will need to make the following or similar requirement in Schedule B-I:

An application for Affidavit of Transfer to real estate must be filed with the BMV and the Affidavit of Transfer to Real Estate along with the retired certificate of title, if available, must be recorded, after endorsement by the auditor, in the office of the recorder of the county in which the manufactured home is located.

A modified requirement for existing manufactured homes including language that "If the lender's closing instructions require surrender of title, an application for Affidavit of Transfer to real estate must be filed" is also acceptable.

A copy of the application for the Affidavit to Transfer to Real Estate and Certificate of Title and instructions may be found at http://www.in.gov/bmv/platesandtitles/TransfertoRealEstate.html

A copy of SB 434 is available at http://www.in.gov/legislative/bills/2007/SE/SE0434.1.html

Please contact a Stewart Indiana underwriter if you have any questions concerning this or any other topic for which you need assistance.