Bulletin: SLS00307

Dear Associates:

NEW FORMS

The American Land Title Association (ALTA) has adopted the new 2006 Owner's Policy and Loan Policy, new and revised Endorsements, revised Reinsurance Agreements, revised Commitments, and a revised Short Form Residential Loan Policy.

We are in the process of preparing and filing these forms where filing is required. It is our company policy to issue these new forms where available unless directed otherwise by the customer.

DE-CERTIFICATION OF 1992 POLICIES AND APPLICABLE ENDORSEMENTS

We understand that the existing ALTA Loan Policy (10/17/92), ALTA Owner's Policy (10/17/92), Short Form Loan Policy (10/21/00), and endorsements applicable only to the 1992 Policies will be de-certified as ALTA Forms on June 17, 2007. Thereafter they may be issued if available in the state and if specifically requested by the customer.

The ALTA did not amend the Homeowner's Policy of Title Insurance, the Expanded Coverage Residential Loan Policy, the Short Form Expanded Coverage Residential Loan Policy, the Residential Title Insurance Policy, the Recorded Document Guarantee, the Master Residential Loan Policy, the Limited Coverage Junior Loan Policy, the Short Form Limited Coverage Junior Loan Policy, or the U.S. Policy. These forms will not be de-certified and the endorsements applicable to those Policies will not be de-certified.

2006 POLICIES

The new ALTA Owner's Policy (6/17/06) (see references at the end of this bulletin) and ALTA Loan Policy (6/17/06) (See references section at the end of this Bulletin) extensively revise and improve coverage.

Those changes include:

• The 2006 Policies contain defined terms that also are used in new endorsements: Amount of Insurance, Date of Policy, Entity, Indebtedness, Insured, Insured Claimant, Insured Mortgage, Knowledge, Land, Mortgage, Public Records, Title, and Unmarketable Title.
  
  
• Schedule A of the 2006 Owner's and Loan Policies contains the phrase "Address Reference." You may fill this in, delete it, or say N/A.
  
  
• Schedule A of the 2006 Loan Policy includes "Loan No." You should complete if you know the number.
  
  
• Schedule B of the 2006 Loan Policy contains an optional phrase to refer to Schedule B II ("Except as provided in Schedule B - Part II….") if you show subordinate liens or leases.
  
  
• The Exclusions no longer have what were considered to be insuring or carve out provisions that could be construed as providing insurance. Those carve outs appear in "Covered Risks."
  
  
• The insuring provisions are now "Covered Risks."
  
  
• Schedule A of the 2006 Loan Policy incorporates, by selection, endorsements in optional paragraph 6. These endorsements do not have to be attached to the policy. You may select these endorsements by marking the appropriate boxes: Endorsements 4-06 (Condominium), 4.1-06 (Condominium), 5-06 (Planned Unit Development), 5.1-06 (Planned Unit Development), 6-06 (Variable Rate), 6.2-06 (Variable Rate - Negative Amortization), 8.1-06 (Environmental Protection Lien), 9-06 (Restrictions, Encroachments, Minerals), 13.1-06 (Leasehold Loan), 14-06 (Future Advance - Priority), 14.1-06 (Future Advance - Knowledge), 14.3-06 (Future Advance - Reverse Mortgage), and 22-06 (Location). The Insured may continue to request other endorsements.
  
  
• Covered Risks in the 2006 Owner's and Loan Policies cover Electronic Transactions, such as failure to comply with requirements to create documents electronically and failure to properly record a document electronically.
  
  
• Covered Risk 2(b) in the 2006 Owner's and Loan Policies insures against loss because of:

  "The lien of real estate taxes or assessments imposed on the Title by a governmental authority due and payable, but unpaid."

  You should be satisfied that taxes and assessments are not yet due and payable, or add the following at the end of your tax exception:

  "These taxes and assessments are due and payable."

  You may continue to note in Schedule B that excepted taxes are not yet due and payable, if requested by the insured.

• Covered Risk 2(c) in the 2006 Owner's and Loan Policies insures survey matters, by insuring against loss because of:

  "Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term "encroachment" includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land."

  Our survey requirements do not change. If we are not willing to provide survey coverage, we should include a survey exception, such as the following:

  "Any encroachment, encumbrance, violation, variation, or adverse circumstance that would be disclosed by an accurate and complete land survey of the Land."

• Covered Risks 5, 6, and 7 of the 2006 Owner's and Loan Policies insure against notices of governmental enforcement, notices of legal violation and notices of eminent domain proceedings that are recorded in the Public Records. You should except to a recorded notice of governmental violation (such as zoning, subdivision, environmental) or notice of eminent domain proceeding filed by any person. Do not remove as an exception because of a release unless you receive approval from underwriting personnel.
  
  
• Covered Risk 9 of the 2006 Owner's Policy and Covered Risk 13 of the 2006 Loan Policy provide creditors' rights coverage because of prior fraudulent transfers and ineffective or delayed recording. The Policies remain subject to creditors' rights exclusions relating to the current transaction. Contact your underwriting personnel if you are asked to delete the creditors' rights exclusion or issue an ALTA 21 (Creditors' Rights) Endorsement.
  
  
• Covered Risk 10 of the 2006 Owner's Policy and Covered Risk 14 of the 2006 Loan Policy provide Gap Coverage. You may show as your Date of Policy the date of disbursement and delivery of all documents. You do not need to await recording information unless the closing instructions require that information on the Policy.
  
  
• Covered Risk 11(b) of the 2006 Loan Policy insures against lack of priority of the lien of the Insured Mortgage

  "over the lien of any assessments for street improvements under construction or completed at Date of Policy."

  This is the same as the ALTA Endorsement 1. You should verify street improvements are not under construction or recently completed, by your tax search, survey review, or affidavit of the owner.

• The definition of "Insured" in the 2006 Owner's Policy is expanded. It includes a successor by conversion, certain affiliated grantees, and certain trustee grantees.
  
  
• The definition of "Indebtedness" is broadened in the 2006 Loan Policy, and includes future advances, but does not insure validity or priority of the Insured Mortgage for those advances. The Insured should still secure a Future Advance Endorsement (such as the ALTA Endorsement 14 or 14.1).
  
  
• There is no co-insurance clause in the 2006 Owner's Policy.
  
  
• There is no apportionment clause in the 2006 Owner's Policy.
  
  
• There is no non-cumulative liability clause in the 2006 Loan Policy.
  
  
• There is no pro tanto reduction clause by payment of principal in the 2006 Loan Policy, and therefore no need for a Last Dollar Endorsement. You may continue to issue the endorsement if requested.
  
  
• The 2006 Policies clarify the arbitration clause. The Policy that is subject to mandatory arbitration upon request and compliance with applicable law has been raised from $1 million to $2 million. The rules for arbitration will be the ALTA Title Insurance Arbitration Rules (which incorporate the National Arbitration Forum rules except as modified). You may find the Title Insurance Arbitration Rules at www.alta.org/standards/arbitration1.1.06.cfm.

REVISED COMMITMENTS

Both the 1966 and 1982 (Plain Language) Commitment Forms were revised and now have a date of 6/17/06. The new ALTA Commitments are the ALTA Commitment Form (6/17/06) and the ALTA Plain Language Commitment Form (6/17/06).  See references section at the end of this Bulletin.

It is our Company Policy to issue the regular Commitment Form (6/17/06) if you will issue the 2006 Policy. Do not issue the ALTA Plain Language Commitment Form (6/17/06) unless requested.

You should use these Commitments when you issue the 2006 Policies, but not when you issue the 1992 Policies. These commitments disclose that the 2006 ALTA Policy includes an arbitration provision.

The ALTA did not amend the Short Form Commitment (1/17/04). You may use this Commitment if you issue a Short Form Policy (including the 2006 Short Form Loan Policy). It avoids the need to refer to specific Schedule B exceptions, so long as you are not also issuing a regular "long form" policy (such as a Homeowner's Policy).

ADOPTION OF NEW AND REVISED ENDORSEMENTS FOR 1992 POLICY (6/17/06)

The ALTA now has two sets of endorsements: one set for the 1992 Policies and one set for the 2006 Policies. The new or revised endorsements that were adopted for issuance with the 1992 Policies are:

ALTA Endorsement 7.1

The new ALTA Endorsement 7.1 is issued with a Loan Policy and insures (1) that the owner of the land owns the manufactured housing unit, (2) that the manufactured housing unit is on the land, (3) that the manufactured housing unit is real property, (4) that there are no personal property liens against the manufactured housing unit (unless excepted in Schedule B), (5) that the lien of the insured mortgage attaches to the manufactured housing unit, and (6) that the lien of the Insured Mortgage can be foreclosed in a single foreclosure procedure against the manufactured housing unit and (remaining) land. Fannie Mae and Freddie Mac wanted this endorsement because of concern that several states do not establish a procedure for surrender of title to a manufactured home, and because separate foreclosures would have to be conducted for the land and the unit.  See references section at the end of this Bulletin.

ALTA Endorsement 7.2

The new ALTA Endorsement 7.2 is issued with an Owner's Policy and provides the same insurance as the ALTA Endorsement 7.1, except that it does not insure that the lien of the Insured Mortgage attaches to the manufactured housing unit or that the lien can be foreclosed in a single foreclosure procedure. See references section at the end of this Bulletin.

ALTA Endorsements 9, 9.1, 9.2

The existing (revised) ALTA Endorsements 9, 9.1 and 9.2 were amended to modify the exception to environmental matters.

ALTA Endorsements 9.3, 9.4, and 9.5

The ALTA also adopted new Endorsements 9.3, 9.4, and 9.5. The ALTA Endorsement 9.3 is similar to the existing ALTA Endorsement 9, the ALTA Endorsement 9.4 is similar to the existing ALTA Endorsement 9.1, and the ALTA Endorsement 9.5 is similar to the existing ALTA Endorsement 9.2. These endorsements provide new coverage against damage to existing or future improvements because of development of minerals. See references section at the end of this Bulletin.

ALTA Endorsement 14.3

The new ALTA Endorsement 14.3 (Future Advance - Reverse Mortgage) insures the validity, enforceability and priority of the lien of the insured mortgage for future Advances pursuant to a Reverse Mortgage. It also includes insurance as to variable interest and negative amortization. Unlike most Reverse Mortgage Endorsements, this Endorsement also insures against loss because of (1) failure of the Insured Mortgage to state the term for Advances, (2) failure of the Insured Mortgage to state the maximum amount secured by the Insured Mortgage, and (3) failure of the mortgagors to be at least 62 years of age (a HUD requirement). See references section at the end of this Bulletin.

ALTA Endorsements 22 and 22.1

The new ALTA Endorsements 22 and 22.1 are similar to the CLTA Location Endorsement (116). ALTA Endorsement 22 (Location) insures that a specified improvement, known as a stated street address, is located on the Land at Date of Policy. ALTA Endorsement 22.1 (Location and Map) also insures that the map, if any, attached to the policy correctly shows the location and dimensions of the Land according to the Public Records. The ALTA 22.1 can be issued without attaching a map. See references section at the end of this Bulletin.

CONFORMING CHANGES TO EXISTING AND NEW ENDORSEMENTS TO ISSUE WITH 2006 POLICIES (-06 ENDORSEMENTS)

The ALTA has adopted modified versions of each of the existing and new endorsements that are designed for issuance with the new ALTA Owner's Policy (6/17/06) and new ALTA Loan Policy (6/17/06). Endorsements include in the assigned numbering "-06" and incorporate the terms used in the new policies, such as "Land," "Amount of Insurance," "Title," "Insured," and "Indebtedness." These endorsements adopted for issuance with the 2006 Policies are listed on the right-hand column of Table 2 below. Endorsements that may be issued with the 1992 Policies are listed on the left-hand column of Table 2 below.

SHORT FORM LOAN POLICY REVISIONS

The new Short Form Residential Loan Policy One to Four Family (6/17/06) incorporates the ALTA Loan Policy (6/17/06) (see references section at the end of this Bulletin). The new Short Form Residential Loan Policy automatically incorporates several endorsements, and certain endorsements may also be incorporated by marking a box on the Policy (see Table 3).

Schedule A

Schedule A no longer states that the Date of Policy is the later of the stated Settlement Date or Date of Recording of the Insured Mortgage. You should place the date of settlement by Date of Policy. You should always promptly file for record the Insured Mortgage.

Schedule B

The Schedule B exceptions to taxes not yet due and payable and to survey matters were removed because they were viewed as no longer necessary; the new ALTA Loan Policy (6/17/06) Covered Risks, which are incorporated in the Short Form, insure these matters.

See Table 1, Table 2 & Table 3 above for list of endorsements.