ALTA Limited Pre-Foreclosure Policy (12-03-12)

LIMITED PRE-FORECLOSURE POLICY

Issued By

STEWART TITLE GUARANTY COMPANY

Any notice of claim and any other notice or statement in writing required to be given to the Company under this policy must be given to the Company at the address shown in Section 15 of the Conditions.

This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured and is not an abstract of title or a report of a condition of title. 

COVERED RISKS 

SUBJECT TO THE EXCLUSIONS FROM COVERAGE AND THE CONDITIONS, STEWART TITLE GUARANTY COMPANY (the “Company”), insures as of Date of Policy, against loss or damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by reason of  any of the following matters, if not identified in Schedule B:   

1.   An instrument purporting to change or evidencing a change in the ownership of the Title and recorded in the Public Records subsequent to the recording of the Insured’s Mortgage.

2.   An instrument purporting to create a right or interest affecting the Title and recorded in the Public Records subsequent to the recording of the Insured’s Mortgage. 

3.   A Mortgage, notice of Mechanic’s Lien, Judgment Lien, federal tax lien, or other lien affecting the Title and recorded in the Public Records subsequent to the recording of the Insured’s Mortgage.

4.   A Judgment Lien or federal tax lien affecting the Title and recorded in the Public Records against the names of the mortgagors of the Insured’s Mortgage prior to the recording of the Insured’s Mortgage. 

5.   A Notice of a Judicial Proceeding affecting the Title and recorded in the Public Records subsequent to the recording of the Insured’s Mortgage.

6.   A Notice of Bankruptcy specified in 11 U.S.C. Section 549 (c), affecting the Title and recorded in the Public Records subsequent to the recording of the Insured’s Mortgage. 

7.   The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records subsequent to the recording of the Insured’s Mortgage.

8.   Ad valorem real estate taxes and assessments imposed by a governmental authority due and payable at Date of Policy.

STEWART TITLE GUARANTY COMPANY

 

EXCLUSIONS FROM COVERAGE

The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of: 

1.   (a)  Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to:

(i)   the occupancy, use, or enjoyment of the Land; 

(ii)   the character, dimensions, or location of any improvement erected on the Land; 

(iii)  the subdivision of land; or 

(iv)  environmental protection;  

or the effect of any violation of these laws, ordinances, or governmental regulations. 

(b)  Any governmental police power. 

2.   Rights of eminent domain.  This Exclusion does not modify or limit the coverage provided under Covered Risk 7. 

3.   Defects, liens, encumbrances, adverse claims, transfers of the Title, or other matters:

      (a)  created, suffered, assumed, or agreed to by the Insured; 

      (b)  Known to the Insured whether or not disclosed in the Public Records;

      (c)  resulting in no loss or damage to the Insured; 

      (d)  attaching or created subsequent to Date of Policy; 

      (e)  not recorded in the Public Records at Date of Policy; or

      (f)   resulting in loss or damage that would not have been sustained if the Insured had paid value for the Insured’s Mortgage. 

4.   Invalidity, unenforceability, or lack of priority of the Insured's Mortgage, or any assignment of it.   

5.   Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors’ rights laws.  This Exclusion does not modify or limit the coverage provided under Covered Risk 6.

6.   Any claim that Title to the Land is an Unmarketable Title.

  

CONDITIONS 

1.   DEFINITION OF TERMS  

      The following terms when used in this policy mean:

(a)   "Amount of Insurance":  The amount stated in Schedule A as it may be decreased by Section 9 of these Conditions.

(b)   “Curative Action”:  An act, payment or proceeding to eliminate a matter included within the Covered Risks but not excluded by the Exclusions from Coverage or identified in Schedule B.

      (c)  "Date of Policy":  The date designated as “Date of Policy” in Schedule A. 

      (d)  "Indebtedness":  The obligation secured by the Insured’s Mortgage including one evidenced by electronic means authorized by law and, if that obligation is the payment of a debt, the Indebtedness is the sum of:

            (i)   the amount of the principal disbursed as of Date of Policy; 

            (ii)   interest on the loan; 

            (iii)  the expenses of foreclosure and any other costs of enforcement; 

            (iv)  the amounts to pay taxes and insurance; and

            (v)  the reasonable amounts expended to prevent deterioration of improvements; 

but the Indebtedness is reduced by the total of all payments and by any amount forgiven by an Insured.

      (e) "Insured’s Mortgage":  The Mortgage described in paragraph 3 of Schedule A. 

      (f)   "Insured":  The Insured named in Schedule A.

      (g)  “Judgment Lien”:  A judgment, abstract of judgment, tax lien (other than a lien for ad valorem real estate taxes or assessments), or support lien recorded in the Public Records, and having the effect of a judgment for the payment of money.

      (h)  "Knowledge" or "Known":  Actual knowledge, not constructive knowledge or notice that may be imputed to an Insured by reason of the Public Records or any other records that impart constructive notice of matters affecting the Title. 

      (i)   "Land":  The land described in Schedule A, and affixed improvements that by law constitute real property.  The term "Land” does not include any property beyond the lines of the area described in Schedule A, nor any right, title, interest, estate, or easement in abutting streets, roads, avenues, alleys, lanes, ways, or waterways. 

(j)     “Mechanic’s Lien”:  A private, statutory lien or claim of lien, affecting the Title that arises from services provided, labor performed, or materials or equipment furnished for the construction of an improvement or work on the Land.

      (k)   "Mortgage":  Mortgage, deed of trust, trust deed, or other security instrument, including one evidenced by electronic means authorized by law. 

      (l)   “Notice of Bankruptcy":  A document specified in 11 U.S.C. Section 549 (c) setting forth the nature and venue of and debtor in a bankruptcy proceeding.

      (m) "Notice of a Judicial Proceeding":  A notice of lis pendens or other document required or permitted under state statutes to provide constructive notice of a judicial proceeding affecting the Title and setting forth the nature and venue of and parties to the proceeding and describing any part of the Land.

(n)  "Public Records":  Records established under state statutes at Date of Policy for the purpose of imparting constructive notice of matters relating to real property to purchasers for value and without Knowledge. 

(o)  "Title”:  The estate or interest described in Schedule A. 

      (p)  "Unmarketable Title”:  Title affected by an alleged or apparent matter that would permit a prospective purchaser or lessee of the Title or lender on the Title or a prospective purchaser of the Insured’s Mortgage to be released from the obligation to purchase, lease, or lend if there is a contractual condition requiring the delivery of marketable title. 

 2.   Notice of Claim to be Given by Insured

      The Insured shall notify the Company promptly in writing in case Knowledge shall come to the Insured of a matter that might cause loss or damage for which the Company may be liable by virtue of this policy. If the Company is prejudiced by the failure of the Insured to provide prompt notice, the Company's liability to the Insured under the policy shall be reduced to the extent of the prejudice.

 3.   No Duty to Defend or Prosecute

       The Company shall have no duty to defend or prosecute any action or proceeding to which the Insured is a party, notwithstanding the nature of any allegation in such action or proceeding.  However, the Company has the rights listed in Section 4 of these Conditions.

 4.   Company's Option to Defend or Prosecute Actions; Duty of Insured to Cooperate

 (a)  In addition to the options contained in Section 6 of these Conditions and whether or not the Company shall be liable to the Insured, the Company shall have the right, but not the obligation, at its own cost, to undertake any Curative Action that in its opinion may prevent or reduce loss or damage to the Insured.   The exercise of these rights shall not be an admission of liability or waiver of any provision of this policy.  If the Company exercises its rights under this subsection, it must do so diligently.

 (b)  If the Company brings an action or asserts a defense permitted by this policy, the Company may pursue the litigation to a final determination by a court of competent jurisdiction, and it expressly reserves the right, in its sole discretion, to appeal any adverse judgment or order.   

 (c)   In all cases where this policy permits the Company to prosecute or provide for the defense of any action or proceeding and any appeals, the Insured shall secure to the Company the right to so prosecute or provide defense in the action or proceeding, including the right to use, at  the Company’s option, the name of the Insured for this purpose.

 (d)   If requested by the Company, the Insured, at the Company's expense, shall give the Company all reasonable aid (i) in securing evidence, obtaining witnesses, prosecuting or defending the action or proceeding, or effecting settlement, and (ii) in any other lawful act that, in the opinion of the Company, may be necessary or desirable to avoid or mitigate a loss under this policy.  If the Company is prejudiced by the failure of the Insured to furnish the required cooperation, the Company's obligations to the Insured under the policy shall terminate, with regard to the matter or matters requiring such cooperation.

 5.   Proof of Loss or Damage 

 (a)   In the event the Company is unable to determine the amount of loss or damage, the Company may, at its option, require as a condition of payment that the Insured furnish a signed proof of loss.  The proof of loss must describe the matter insured against by this policy that constitutes the basis of loss or damage and shall state, to the extent possible, the basis of calculating the amount of the loss or damage. 

 (b)   The Company may reasonably require the Insured to submit to examination under oath by any authorized representative of the Company and to produce for examination, inspection, and copying, at such reasonable times and places as may be designated by the authorized representative of the Company, all records, in whatever medium maintained, including books, ledgers, checks, memoranda, correspondence, reports, e-mails, disks, tapes, and videos, whether bearing a date before or after Date of Policy, that reasonably pertain to the loss or damage.  Further, if requested by any authorized representative of the Company, the Insured shall grant its permission, in writing, for any authorized representative of the Company to examine, inspect, and copy all of these records in the custody or control of a third party that reasonably pertain to the loss or damage.  All information designated as confidential by the Insured provided to the Company pursuant to this Section shall not be disclosed to others unless, in the reasonable judgment of the Company, it is necessary in the administration of the claim.  Failure of the Insured to submit for examination under oath, produce any reasonably requested information, or grant permission to secure reasonably necessary information from third parties as required in this subsection, unless prohibited by law or governmental regulation, shall terminate any liability of the Company under this policy as to that claim.

 6.   Options to Pay or Otherwise Settle Claims: Termination of Liability 

 In case of a claim under this policy, the Company shall have the following additional options: 

(a)  To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness. 

(i)   To pay or tender payment of the Amount of Insurance under this policy.  In addition, if the Company exercises its rights under Section 4 of these Conditions it will pay any costs, attorneys' fees, and expenses authorized by the Company and incurred by the Insured; or

(ii)   To purchase the Indebtedness for the amount of the Indebtedness on the date of purchase.  When the Company purchases the Indebtedness, the Insured shall transfer, assign, and convey to the Company the Indebtedness and the Insured’s Mortgage, together with any collateral security. 

Upon the exercise by the Company of either of the options provided for in subsections (a)(i) or (ii), all liability and obligations of the Company to the Insured under this policy for the claimed loss or damage, other than to make the payments required in those subsections, shall terminate. 

(b)  To Pay or Otherwise Settle With Parties Other Than the Insured or With the Insured. 

(i)   To pay or otherwise settle with other parties for or in the name of an Insured any claim insured against under this policy.  In addition, if the Company exercises its rights under Section 4 of these Conditions it will pay any costs, attorneys' fees, and expenses authorized by the Company and incurred by the Insured; or

(ii)   To pay or otherwise settle with the Insured the loss or damage provided for under this policy.  In addition, if the Company exercises its rights under Section 4 of these Conditions it will pay any costs, attorneys' fees, and expenses authorized by the Company and incurred by the Insured.

      Upon the exercise by the Company of either of the options provided for in subsections (b)(i) or (ii), all liability and obligations of the Company to the Insured under this policy for the claimed loss or damage, other than the payments required in those subsections, shall terminate.

 7.   Determination and Extent of Liability

      This policy is a contract of indemnity against actual monetary loss or damage sustained or incurred by the Insured who has suffered loss or damage by reason of matters insured against by this policy. 

      The extent of liability of the Company for loss or damage under this policy shall not exceed the least of: 

(a)   the Amount of Insurance;

(b)   the Indebtedness;

(c)   costs, attorneys' fees, and expenses incurred or authorized in writing by the Company in completing any Curative Action; or

(d)   the difference between the value of the Title without the matter insured against and the value of the Title subject to the matter insured against by this policy.

 8.   Limitation Of Liability

 (a)   If the Company cures any matter insured against by this policy in a reasonably diligent manner by any method, including litigation and the completion of any appeals, it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused to the Insured.

 (b)   In the event of any litigation, including litigation by the Company or with the Company's consent, the Company shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals. 

(c)   The Company shall have no liability for loss or damage to the Insured, resulting from any delay in the enforcement of the Insured Mortgage, including lost interest, reduction in the value of the security or collateral, taxes, assessments, insurance or maintenance.    

(d)  The Company shall not be liable for loss or damage to, or attorneys’ fees, expenses or liability incurred by, the Insured in conducting a Curative Action or settling any claim or suit without the prior written consent of the Company.

 9.   Reduction Of Insurance; Reduction Or Termination Of Liability

 (a)  All payments under this policy, except payments made for costs, attorneys’ fees, and expenses under Section 4 of these Conditions, shall reduce the Amount of Insurance by the amount of the payments. 

 (b) The voluntary satisfaction or release of the Insured’s Mortgage, other than foreclosure of the Insured’s Mortgage or the acceptance of delivery of a deed of lieu of foreclosure of the Insured’s Mortgage, shall terminate all liability of the Company. 

 10.  Payment Of Loss

 When liability and the extent of loss or damage have been definitely fixed in accordance with these Conditions, the payment shall be made within 30 days.

 11. Rights Of Recovery Upon Payment Or Settlement

(a)  The Company's Right to Recover.

            Whenever the Company shall have settled and paid a claim under this policy, it shall be subrogated and entitled to the rights of the Insured in the Title or Insured’s Mortgage and to all other rights and remedies in respect to the claim that the Insured has against any person or property, to the extent of the amount of any loss, costs, attorneys' fees, and expenses paid by the Company.  If requested by the Company, the Insured shall execute documents to evidence the transfer to the Company of these rights and remedies.  The Insured shall permit the Company to sue, compromise, or settle in the name of the Insured and to use the name of the Insured in any transaction or litigation involving these rights and remedies. 

If a payment on account of a claim does not fully cover the loss of the Insured, the Company shall defer the exercise of its right to recover until after the Insured shall have recovered its loss. 

(b)  The Company's Rights Against Noninsured Obligors.

The Company’s right of subrogation includes the Insured’s rights against non-insured obligors including the rights of the Insured to indemnities, guaranties, other policies of insurance, or bonds, notwithstanding any terms or conditions contained in those instruments that address subrogation rights. 

The Company's right of subrogation shall not be avoided by acquisition of the Insured’s Mortgage by an obligor who acquires the Insured’s Mortgage as a result of an indemnity, guarantee, other policy of insurance, or bond, and the obligor will not be an Insured under this policy. 

 12.  Liability Limited To This Policy; Policy Entire Contract

(a)  This policy together with all endorsements, if any, attached to it by the Company is the entire policy and contract between the Insured and the Company.  In interpreting any provision of this policy, this policy shall be construed as a whole. 

(b)  Any claim of loss or damage that arises out of a matter insured against by this policy or by any action asserting such matter shall be restricted to this policy. 

(c)  Any amendment of or endorsement to this policy must be in writing and authenticated by an authorized person. 

(d)  Each endorsement to this policy issued at any time is made a part of this policy and is subject to all of its terms and provisions.  Except as the endorsement expressly states, it shall not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsement, (iii) extend the Date of Policy, or (iv) increase the Amount of Insurance. 

 13.  Severability  

In the event any provision of this policy, in whole or in part, is held invalid or unenforceable under applicable law, the policy shall be deemed not to include that provision or such part held to be invalid, but all other provisions shall remain in full force and effect.   

 14.  Choice of Law; Forum

(a)  Choice of Law:  The Insured acknowledges the Company has underwritten the risks covered by this policy and determined the premium charged in reliance upon the law affecting interests in real property and applicable to the interpretation, rights, remedies, or enforcement of policies of title insurance of the jurisdiction where the Land is located. 

The law of the jurisdiction where the Land is located shall apply to determine the validity of matters insured against under this policy and to interpret and enforce the terms of this policy.  In neither case shall the court or arbitrator apply its conflicts of law principles to determine the applicable law. 

(b)  Choice of Forum:  Any litigation or other proceeding brought by the Insured against the Company must be filed only in a state or federal court within the United States of America or its territories having appropriate jurisdiction. 

 15.  Notices, Where Sent  

Any notice of claim and any other notice or statement in writing required to be given to the Company under this policy must be given to the Company at [fill in]. 

 [16. Arbitration

Either the Company or the Insured may demand that the claim or controversy shall be submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land Title Association (“Rules”).  Except as provided in the Rules, there shall be no joinder or consolidation with claims or controversies of other persons.  Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the Insured arising out of or relating to this policy, any service in connection with its issuance or the breach of a policy provision, or to any other controversy or claim arising out of the transaction giving rise to this policy.  All arbitrable matters, when the Amount of Insurance is $____________ or less, shall be arbitrated at the option of either the Company or the Insured.  All arbitrable matters, when the Amount of Insurance is in excess of $__________________, shall be arbitrated only when agreed to by both the Company and the Insured.  Arbitration pursuant to this policy and under the Rules shall be binding upon the parties.  Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent jurisdiction.] 

 

NOTE:  Bracketed [ ] material optional

Schedule A

 

Name and Address of Title Insurance Company:

 [File No.:      ]        Policy No.: 

[Address Reference:                              ]

Amount of Insurance: $   [Premium: $             ] 

Date of Policy:                     [at a.m./p.m.]

 

 1. Name of Insured: 

 

2. The estate or interest in the Land that is the subject of coverage in this policy is: 

 

3. The Insured’s Mortgage is described as follows:  

 

4. The Land referred to in this policy is described as follows:

Schedule B

This policy does not insure against loss or damage by reason of:

 

(List matters identified in accordance with the Covered Risks.)