Bulletin: SLS2009011

Dear Associates:

If you are insuring a purchaser at a foreclosure sale of a mortgage or deed of trust or a buyer from that purchaser, you must do the following:

1. Verify that all foreclosure requirements (including a final, non-appealable judgment in a judicial foreclosure) under state law and our guidelines have been met.
   
   
2. Verify that the mortgagor is not in possession of the property. If the mortgagor is in possession when you issue your commitment, the commitment and policies should contain the following exception:
   
   "Any rights, claims or interest of (the mortgagor) in the land or any claim that the foreclosure by (lender) is invalid."
   
   
3. Determine that no other parties, such as tenants under prior leases, are in possession, because their rights may not have been extinguished by the foreclosure. For example, the Protecting Tenants at Foreclosure Act (which expires December 31, 2012) applies to "any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title (May 20, 2009)" and allows a tenant to remain in possession under a prior lease under certain conditions.
   
   Click here to view Title VII-Protecting Tenants at Foreclosure Act.
   
   If other parties are in possession, the commitment and policies should except to rights of parties in possession or should except to the specific lease.
   
   
4. Except to any applicable right of redemption or right to purchase (e.g., State law; IRS; Agricultural Credit Act of 1987).
   
   
5. Comply with our guidelines in Bulletin SLS2008021, "Foreclosures and Mechanic's Liens."
   If you are asked to insure the grantee of a deed in lieu of foreclosure, please consult our Underwriting Manual or underwriting personnel.

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

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