STG Construction Loan Endorsement Guideline

Explanation:

During construction, upon satisfaction of the requirements stated in the applicable pending disbursement clause, you may issue an endorsement to the Loan Policy only which may extend the Date of Policy and/or increase the Amount of Insurance. You should use STG Construction Loan Endorsement, where permitted.

Underwriting Requirements:

You should not issue a Down Date Endorsement unless it is modified to be substantially similar to the Construction Loan Endorsement or provides more limited coverage than the Construction Loan Endorsement. Any other form of Down Date Endorsement must be approved by an underwriter. You may not issue CLTA Endorsement 122 unless paragraph 6 is deleted (as discussed elsewhere).

Unless otherwise directed by your underwriter, you should not issue a Construction Loan Endorsement or Down Date Endorsement on a loan policy during construction if any mechanic's liens have been filed and remain unresolved, or if any requirement of the pending disbursement clause has not been satisfied. You must be satisfied that the general contractor is paid from the current draw, and that subcontractors were actually paid for waivers from the prior draw.

1. Schedule A

Date of Policy: If the policy contains Pending Disbursement Clause PDCX06 STGC or PDCX07 STGC, the date to be filled in may be the date for the prior disbursement for which waivers of original contractors and subcontractors are furnished and you are satisfied payment has been made. If the policy contains Pending Disbursement Clause PDCX06 STGC, the date to be filled in may be the date of the current disbursement for which waivers of original contractors and subcontractors are furnished and if you are satisfied payment has been made for the current draw to original contractors and for the previous draws to the subcontractors. If the policy contains Pending Disbursement Clause PDCX02 ALTA (Modified), the date to be filled in may be the date of the current disbursement.

If you do not extend the Date of Policy coverage, you should add the following, or similar language, to the Endorsement: "The effective Date of Policy remains the date stated in Schedule A, or as otherwise previously changed by prior endorsement."
Amount of Insurance: If the policy contains Pending Disbursement Clause PDCX02 ALTA (Modified) or PDCX06 STGC, the amounts inserted in the Amount of Insurance section may be based upon the loan advances made to date. If the policy contains Pending Disbursement Clause PDCX07 STGC , the amounts inserted generally will be based upon the amount of lien waivers/proofs of payment received to date. If the policy contains Pending Disbursement Clause PDCX06 STGC or PDCX07 STGC, as a condition to issuing the Endorsement, the owner/contractor must provide you with lien waivers, proof of payment, etc. through the date of the prior disbursement, and you must keep a running total of all such proofs of payment. If you are not changing the Amount of Insurance, you should add the following, or similar language, to the Endorsement: "The Amount of Insurance remains the amount stated in the pending disbursement clause (endorsement) in the policy, or as otherwise changed by prior endorsement."

2. Schedule B

Survey matters and related endorsements and affirmative coverages: The ongoing construction may affect survey matters (e.g., encroachments, setback lines, etc), and/or coverages (endorsements or affirmative insurance, e.g., ALTA 9, etc.) that may have been covered by the policy as of the original Date of Policy. Unless specifically underwritten and addressed, the down dates exclude such matters and coverages subsequent to the original Date of Policy. If you do not secure an updated survey, you should add the following, or similar language, to the Endorsement: "Matters which would be shown by a correct current survey and inspection of the Land subsequent to the Date of Policy stated in Schedule A and any endorsements or affirmative coverages that would be affected by such matters."

Deleting Exceptions: Except for the tax exception, you should not delete any existing exceptions without approval of an underwriter.

Adding Exceptions: You should add an exception for taxes and any new matters that are disclosed by your search.

Mechanic's liens: Unless otherwise directed by your underwriter, you should not issue a Construction Loan Endorsement or Down Date Endorsement if any mechanic's liens or claims of lien have been filed and remain unresolved.