Bulletin: SLS2024009

Dear Associates:

Recently, a review of a lender’s closing instructions revealed a parenthetical statement requiring the deletion of creditors’ rights from the policy jacket (see example below). It is possible that other lenders are making similar requirements or will try and do so in the future. Under no circumstances is the creditors’ rights exclusion to be deleted from any policy. This does not, however, affect the limited creditors’ rights coverage provided for under the Covered Risks.

The deletion of the creditors’ rights exclusion or the addition of affirmative creditors’ rights coverage has not been available since the decertification and withdrawal of the ALTA 21-06 Endorsement in 2010. Additionally, in some jurisdictions, providing this coverage is prohibited.

This requirement to delete the creditors’ rights exclusion highlights the importance of thoroughly reading all closing instructions – even those you believe you are familiar with or have previously reviewed. Pay close attention to all of the requests being made by the lender even if receipt of the instructions is at the eleventh hour. Lender’s often update closing instructions and include new requirements that may not be noticeable upon quick glance.

If you have identified this type of language in lenders’ instructions in your state, please add the following to your issued title products:

Creditors’ rights coverage as set forth in the policy jacket is the only available coverage, if any. Deletion of the Creditors’ Rights Exclusion or issuance of any affirmative Creditors’ Rights Endorsement is not available.

EXAMPLE:

          1.    Title Policy: An ALTA 2021, or the most recent ALTA Standards/ALTA equivalent available, extended coverage lender's policy of title insurance (deleting arbitration and creditors' rights) that shall be: (i) issued by the Title Company in the total amount of ONE MILLION THREE HUNDRED EIGHTY-THREE THOUSAND SEVEN HUNDRED FIFTY AND 00/100 DOLLARS (US $1,383,750.00), (ii) dated as of the date and time of the recording of the Security Instrument (the "Policy Date"), (iii) which satisfies the title and closing requirements attached hereto as Exhibit A.

IF YOU ARE UNABLE TO COMPLY WITH ANY PROVISIONS IN CLOSING INSTRUCTIONS, FOR EXAMPLE, LIKE DISCUSSED HEREIN, A REQUEST TO DELETE THE CREDITORS’ RIGHTS EXCLUSION, YOU MUST OBTAIN REVISED CLOSING INSTRUCTIONS, WHICH MAY BE BY EMAIL, BEFORE PROCEEDING WITH THE CLOSING.

If you have questions about a transaction involving a closed bank or a bridge bank, or other issues not addressed by this bulletin, please contact a Stewart Title Guaranty Company underwriter.

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