STG Foreclosure Insurance Policy 1996

This form should not be used if a comparable ALTA version is available. If a comparable ALTA version is available, the most current version of the ALTA form available in each state should be used, unless approved by a Stewart underwriter.

STEWART TITLE GUARANTY COMPANY

FORECLOSURE INSURANCE POLICY

SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, STEWART TITLE GUARANTY COMPANY, a Texas Corporation, herein called the Company, insures, as of Date of Policy shown in Schedule A, against loss or damage, not exceeding the Amount of Insurance stated in Schedule A, sustained or incurred by the insured by reason of any of the following matters recorded in the public records.

EXCLUSIONS FROM COVERAGE

The Company assumes no liability for loss or damage by reason of the following:

1. Taxes or assessments shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or shown as existing liens by the public records.
2. Defects, liens, encumbrances or adverse claims against the title insured against by another title insurance policy.
3. Defects, liens, encumbrances, adverse claims or other matters shown by the public records:

4. This policy does not insure that the matters listed in Schedule B are stated in order of priority.



CONDITIONS AND STIPULATIONS

1. Definition of Terms - The following terms when used in the policy mean:
(a) "the insured": the party or parties named as the insured in this policy, or in an endorsement by the Company.
(b) "Date of Mortgage": the earlier of the date of filing for record of the Mortgage or the stated date of execution of the Mortgage.
(c) "land": the land described or referred to in Schedule A, and improvements affixed thereto which by law constitute real property. The term "land "does not include any property beyond the lines of the area described or referred to in Schedule A, nor any right, title, interest, estate or easement in abutting streets, roads, avenues, alleys, lanes, ways or waterways.
(d) "Knowledge": actual knowledge or notice, not constructive notice imparted by the public records.
(e) "lien": a deed of trust, trust deed, mortgage, judgment lien, tax lien (other than real estate tax or assessment lien), or other monetary lien on the title. The term lien does not include easements, covenants, conditions, and restrictions (or any assessments by an association or pursuant to such covenants, conditions, and restrictions), or real estate taxes or assessments.
(f) "Mortgage": the mortgage, trust deed, or deed of trust described in Schedule A.
(g) "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.

2. Notice of Claim to be Given by Insured - The insured shall notify the Company promptly in writing of any claim which might cause loss or damage for which the Company may be liable by virtue of this policy. If prompt notice shall not be given to the Company, then all liability of the Company shall terminate with regard to the matter or matters for which prompt notice is required; provided, however, that failure to notify the Company shall in no case prejudice the rights of the insured under this policy unless the Company shall be prejudiced by the failure and then only to the extent to the prejudice.

3. No Duty to Defend or Prosecute - The Company shall have no duty to defend or prosecute (or to pay the cost to defend or prosecute) any action or proceeding to which the insured is a party, notwithstanding the nature of any allegation in such actions or proceeding.

4. Company's Option to Defend or Prosecute Actions; Duty of Insured to Cooperate - Even though the Company has no duty to defend or prosecute as set forth in Section 3 above:

5. Proof of Loss or Damage - In addition to and after the notices required under Section 2 of these Conditions and Stipulations have been provided to the Company, a proof of loss or damage signed and sworn to by the insured shall be furnished to the Company within ninety (90) days after the insured shall ascertain the facts giving rise to the loss or damage. The proof of loss or damage shall describe the matters covered by this policy which constitute the basis of loss or damage and shall state, to the extent possible, the basis of calculating the amount of the loss or damage. If the Company is prejudiced by the failure of the insured to provide the required proof of loss or damage, the Company's obligation to such insured under the policy shall terminate. In addition, the insured may reasonably be required to submit to examination under oath by any authorized representative of the Company and shall produce for examination, inspection and copying, at such reasonable times and places as may be designated by any authorized representative of the Company, all records, books, ledgers, checks, correspondence and memoranda, whether bearing a date before or after Date of Policy which 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 records, books, ledgers, checks, correspondence and memoranda in the custody or control of a third party, which 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 other reasonably requested information or grant permission to secure reasonably necessary information from third parties as required in the above paragraph, unless prohibited by law or governmental regulation, shall terminate any liability of the Company under this policy to the insured for 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 Liability or to Purchase the Indebtedness.

The Company shall have the option to pay or settle or compromise for or in the name of the insured any claim which could result in loss to the insured within the coverage of this policy, or to pay the full amount of this policy or, if this policy is issued for the benefit of a holder of a mortgage or a lienholder, the Company shall have the option to purchase the indebtedness secured by said mortgage or said lien for the amount owing thereon, together with any costs, reasonable attorney's fees and expenses incurred by the insured which were authorized by the Company up to the time of purchase.

Such purchase, payment or tender of payment of the full amount of the policy shall terminate all liability of the Company hereunder. In the event after notice of claim has been given to the Company by the insured the Company offers to purchase said indebtedness, the owner of such indebtedness shall transfer and assign said indebtedness, together with any collateral security, to the Company upon payment of the purchase price.

Upon the exercise by the Company of the option provided for in Paragraph (a) the Company's obligation to the insured under this policy for the claimed loss or damage, other than to make the payment required in that paragraph, shall terminate, and the Company may terminate the defense or prosecution of any litigation for which the Company has exercised its options under Section 4 and the policy shall be surrendered to the Company for cancellation.

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

To pay or otherwise settle with other parties for or in the name of an insured any claim assured against under this policy together any costs, attorney's fees and expenses incurred by the insured which were authorized by the Company up to the time of payment and which the Company is obligated to pay.

Upon the exercise by the Company of the option provided for in Paragraph (b) the Company's obligation to the insured under this policy for the claimed loss or damage, other than to make the payment required in that paragraph, shall terminate, and the Company may terminate the defense or prosecution of any litigation for which the Company has exercised its options under Section 4.

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 reliance upon the insurance set forth in the policy and only to the extent herein described, and subject to the Exclusions From Coverage.

The liability of the Company under this policy to the insured shall not exceed the lease of:

(a) the amount of insurance stated in Schedule A;

(b) the amount of the unpaid principal indebtedness secured by the Mortgage as limited or provided under Section 6 of these Conditions and Stipulations or as reduced under Section 9 of these Conditions and Stipulations, at the time the loss or damage insured against by this policy occurs, together with interest thereon;

(c) the difference between the value of the estate or interest covered hereby as stated herein and the value of the estate or interest subject to any defect, lien or encumbrance insured against by the policy; or

(d) the costs of reforeclosure and accrued interest due to matters insured against by this policy, or the amount of a final judgment establishing liability to third parties for wrongful foreclosure because of matters insured against by this policy.

8. Limitation of Liability

9. Reduction of Liability or Termination of Liability - All payments under this policy, except payment made for costs, attorneys' fees and expenses pursuant to Section 4 shall reduce the amount of liability pro tanto.

10. Payment of Loss

11. Subrogation Upon Payment of Settlement - Whenever the Company shall have settled and paid a claim under this policy, all right of subrogation shall vest in the Company unaffected by any act of the insured.

The Company shall be subrogated to and be entitled to all rights and remedies which the insured would have had against any person or property in respect to the claim had this policy not been issued. If requested by the Company, the insured shall transfer to the Company all rights and remedies against any person or property necessary in order to perfect this right of subrogation. 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 or remedies.

If a payment on account of a claim does not fully cover the loss of the insured the Company shall be subrogated to all rights and remedies of the insured after the insured shall have recovered its principal, interest, and costs of collection.

12 Arbitration - Unless prohibited by applicable law, either the Company or the insured may demand arbitration pursuant to the Title Insurance Arbitration Rules of the American Arbitration Association. 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 of the Company in connection with its issuance or the breach of a policy provision or other obligation. All arbitrable matters when the Amount of Liability is $1,000,000 or less shall be arbitrated at the option of either the Company or of the insured. All arbitrable matters when the amount of liability is in excess of $1,000,000 shall be arbitrated only when agreed to by both the Company and the insured. The Rules in effect at Date of Policy shall be binding upon the parties. The award may include attorneys' fees only if the laws of the state in which the land is located permits a court to award attorneys' fees to a prevailing party. Judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof.

13. Liability Limited to This Policy and Policy Entire Contract

14. Notices, Where Sent - All notices required to be given the Company and any statement in writing required to be furnished the Company shall include the number of this policy and shall be addressed to the Company at P.O. Box 2029, Houston, Texas 77252-2029.


SCHEDULE A

Foreclosure Policy No.

Date of Policy

Amount of Insurance $

Premium $


1. Name of Insured:



2. The estate or interest in the land is:



3. The land referred to in this Policy:



4. The Mortgage:




5. Vesting of the title subsequent to Date of Mortgage:






SCHEDULE B



Policy No.