Guideline: ALTA Short Form Residential Loan Policy and Addendum 2007

Explanation:

The Short Form Residential Loan Policy (6/16/07) is issued to a lender making a loan secured by a one-to-four family residential lot or condominium.

The policy incorporates the terms of the 2006 ALTA Loan Policy.  The policy insures against the invalidity or unenforceability of the lien of the mortgage and against loss or damage should the priority of the mortgage be other than as shown in the policy. The insuring provisions of the policy are broad. Their coverage is limited by the Exceptions in Schedule B, the Exclusions from Coverage and the Conditions and Stipulations of the policy.

In other ALTA policy forms (except the Master Residential Loan Policy) all of the policy provisions are contained within the policy itself.

This Short Form Policy incorporates by reference the Exclusions and Conditions contained in a standard 2006 ALTA Loan Policy form. It contains a printed Schedule B which excepts to certain taxes and assessments, recorded restrictions, easements and servitudes, and minerals. However, affirmative insurance is given with regard to these matters as provided in Schedule B. Coverage may include violation of building restrictions, damage from the use of easements, encroachments and damage to the land from the exercise of mineral rights. Title risks that are unacceptable to the insurer are shown in an Addendum to the policy.

There are two versions of Schedule A of the Short Form Residential Loan Policy (6/16/07): (1) one version automatically incorporates ALTA Endorsements 4.1-06, 5.1-06, 6-06, 6.2-06, and 8.1-06, and provides for optional selection of ALTA Endorsements 4-06, 5-06, 7-06, 7.1-06, 9-06, 14-06, 14.1-06, 14.3-06, and 22-06; (2) the second version provides for optional selection of each of these ALTA Endorsements.  Additional coverage by optional selection of these endorsements may be added merely by checking appropriate boxes in the policy form.

A desirable feature of the Short Form Policy is that it may be easily reviewed by the lender and requires reduced file space.

The Short Form Policy reduces the opportunity for errors, the time for delivery (since there is no need to wait for recording information), and the necessary time for review, since special exceptions do not appear unless an Addendum is included. 

Fannie Mae, Freddie Mac, VA, and HUD accept the Short Form Policy.

Underwriting Requirements:

You simply put the date of settlement in the blank on Schedule A for the Date of Policy. The Policy then incorporates the 2006 ALTA Loan Policy, which includes gap coverage until the date of recording (subject to subsequent taxes and assessments as excluded). You do not need to await recording information, if this is acceptable to your insured.

You must still record the mortgage the same day you issue the policy or at the latest, first thing the next morning or business day. We advise that you establish a procedure for recording twice a day, if practical in your area.

You charge the normal rates on Loan Policies for issuance of this Policy and the endorsements that you mark.

You must perform a general index search for the time period of the statute of limitations on judgments in your jurisdiction, and for the time period of the limitations on Federal judgments and Federal tax liens. You must check taxes, assessments of all types, and other governmental charges. You should be satisfied that there are no recent unpaid bills for improvements.

You must search the title to the land for (1) one bona fide deed back if the grantee in that deed gave a purchase money mortgage to an institutional lender (e.g. not an individual seller); or (2) two bona fide deeds back if the grantee in the most recent deed did not give a purchase money mortgage to an institutional lender. A bona fide deed is a deed that appears to involve an arm's length sale (not gift) between unrelated people.

If you have or are given a copy of a more recent title insurance policy (owner's, loan or master/short form loan), you may search forward from that prior policy.

The Policy may insure a first lien or subordinate lien. If a subordinate lien, check the box for an Addendum and include any superior lien in the Addendum.

You may issue the Policy on Fee Simple. If you are asked to issue the Short Form Loan Policy on a Leasehold, please call our underwriting personnel.

Issue the Policy only on one-to-four family residential property. The land should be a platted lot or a metes and bounds tract not exceeding 25 acres. Otherwise, please call our underwriting personnel.