Bulletin: UT2009002

Dear Associates:

Claims are currently being generated under the following scenario. An examination of the title reveals two deeds of trust (DT) recorded concurrently. The first recorded DT is to an institutional lender. The second recorded DT is a vendor's lien. This lien is sometimes called a seller carry-back loan because the seller secures a loan for part of the purchase price with a DT. Subsequently, the first recorded DT goes into default and the lender forecloses. This results in a trustee's deed back to the lender and then a conveyance from the lender to a bona fide purchaser. The vendor's lien is then assigned to an entity formed by Bruce Shapiro who is in the business of researching titles to spot this situation and then making contact with the vendor to purchase an assignment of the vendor's DT. One such entity is called Persimmon Investments, Inc. That entity then records a notice of default or otherwise notifies the current title holder and their lender of its intent to foreclose the vendor's lien.

The Shapiro entity's argument is that the vendor's lien enjoyed a special priority position to the first recorded DT that foreclosed because it is senior to the other loan regardless of recording order. The Shapiro entity argues, therefore, that the vendor's lien was not extinguished in the foreclosure and that the current title holders took subject to their still valid lien.

When you identify this situation in your examination of title, regardless of whether Shapiro or Persimmon is involved, you must except to the vendor's lien in any commitment and policy you write. In order to delete such an exception you must have underwriting approval from your local underwriting personnel or Stewart Legal Services.

Please refer to Bulletin MU000040 for information regarding insuring a loan when there is a concurrently filed vendor's lien.

If you have questions relating to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

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