Bulletin: MU000011

Date:
August 31, 1993
To:
All Issuing Offices in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming
RE:
Master Residential Loan Policy and Short Form Residential Policy

Dear Associates:

The ALTA has adopted new forms for the Master Residential and Short Form policies. The only significant difference is that the underlying loan policy is the 10-17-92 policy.

Both forms may be utilized in each of your states at the present time except for Utah, in which only the Short Form Policy has been approved. Many of you are aware that lenders have begun asking for a copy of Stewart's Fannie Mae approval letter regarding both forms. A copy of the approval letter is available from the National Legal Department in Houston.

While the utilization and coverages of both forms are very similar, there are some differences between the Master Policy and Short Form Policy which need explanation.

ALTA Master Residential Loan Policy

The name of this form describes the type of policy that will be issued. Only one Master Policy will be issued to each lender. In order that the Company may track each Master Policy and prevent duplication, all Master Policies will be issued by the National Legal Department in Houston. If a lender requests the issuance of a Master Policy, you need to contact Vicki Blake at 1-800-729-1902 to request the issuance of a policy. She will access the Master file that we keep to determine whether or not a policy has previously been issued. If none has been issued, then the Legal Department will send the Master Policy directly to the lender and copy you or, at your request, send you the original policy so that you may personally deliver it to your customer. The Master List of Master Policyholders will be continuously updated and you are always welcome to call to determine if any lender has received a policy.

ALTA Short Form Residential Loan Policy

The Short Form Policy format is almost identical to the Master Policy Certificate. (See forms referenced below) The Short Form Policy is, in itself, an actual policy and as you will note from reading the language on the reverse of the Short Form Policy, incorporates all the terms and conditions of the ALTA Loan Policy. The issuance of the Short Form Policy in and of itself is the equivalent of issuing an individual ALTA Loan Policy, complete with Schedules A and B.

General Comments Regarding the Two Form

It is either the lender's prerogative to request the issuance of either the Master Policy or the Short Form Policy, and you would expect to determine whether or not a lender wishes to have either of these two formats issued by reference to the closing instructions sent to you by the lender. As you can tell from the certificate, the Short Form Residential Loan Policy, each require minimal information, and the rates charged for each of these forms would be the same as if you are issuing a regular ALTA Loan Policy. The issuance of either the Master Policy Certificate or the Short Form policy is no short cut in the preparation you have traditionally done in the issuance of an ALTA Loan Policy. All the traditional skill and professional care in record searching, document examination, study of exceptions, and title underwriting must still be applied.

Schedule A Information

Amount of Insurance: This should reflect the amount of the mortgage or deed of trust being insured.

Premium: Premium will be the premium that you would normally charge for the issuance of a regular ALTA Loan Policy, plus any premium-bearing endorsements.

File Number: Your own file numbering system.

Mortgage Amount: The amount of the mortgage to be insured.

Policy Number (Short Form): Unnecessary to complete as the policy number is reflected below.

Certificate Number (Master Certificate): Unnecessary to complete as the certificate number is listed below.

Loan Number: The loan number, if any, given to you by the lender.

Mortgage Date: The date the mortgage was executed.

Date of Policy (Short Form); Date of Certificate (Master Policy): Normally would be the date of settlement. You should note the actual date insofar as coverage is concerned will be determined by the date of recording if it is later than the date of the certificate or policy. You should consult lender's closing instructions for variations.

Name of Insured: The lender or the assignee of the lender if the assignment is filed contemporaneously with the mortgage document. It will be permissible to add "its successors and/or assigns" if requested by the insured.

Name of Borrowers: Those parties which execute the mortgage instrument.

Property Address: This should be the actual address of the property which is security for the mortgage or the deed of trust. It is important to recognize that neither form contains a legal description; therefore, you must be absolutely sure that the property address is correct.

County and State: County and state in which the property is located.

Schedule A - The "Boxes"

In order to reduce the amount of paper and multiplicity of forms, it was determined that boxes would be provided which would be checked off in the event additional coverage is requested through use of the common ALTA endorsements. By utilizing the boxes, it is unnecessary to attach the endorsement forms. If any of the endorsements requested by the lender are premium-bearing endorsements, the amount of premium charged for the endorsement should be included in the premium amount in the upper, right-hand corner of the Short Form Policy and the Master Certificate.

Addendums: You would simply check the appropriate box, depending on whether an addendum is necessary. To determine whether an addendum is necessary, please refer to the Schedule B discussion below, which will discuss items that must be shown on any addendum.


ALTA Endorsements: You will check the appropriate box reflecting the ALTA Endorsement(s) requested by the lender. It is unnecessary to attach any of the printed endorsements to either the Short Form Policy or the Residential Loan Certificate. The new form adds a 4.1 and 5.1 endorsement. These are used only in jurisdictions where assessments or condominiums or planned unit developments, by statute, are given priority over the lien insured. You should pay special attention to Endorsement 8.1, in that, in some jurisdictions there are state environmental protection lien statutes that should be specifically referred to in the two blank lines immediately below the 8.1 box. Please refer to prior Bulletins for this information.

Schedule B

The Schedule B language, which you will find on the reverse of both the Certificate and the Short Form are virtually identical except for the use of the words "Policy" and "Certificate." You should note that Schedule B includes both exceptions from coverage and affirmative assurances. While it is certainly not the ideal to mix exceptions and affirmative insurance in the same paragraphs, it is necessary in order that the amount of paper is reduced to the smallest factor. You should note that there is no provision for a separate Schedule B in which you would insert your normal exceptions to coverage. The only method for including any special exceptions is by the use of the Addendum which is available on both forms. The Addendum to either form will be needed only if any of the following are true:

There are unpaid taxes and special assessments which were due and payable before the effective date of the Certificate or Policy and which are not to be satisfied at the closing.

There are present violations of covenants, conditions, or restrictions over which you are not authorized and/or are not willing to insure, or there exists reverter language under which a future violation might result in forfeiture of title or might cut off, subordinate, or impair the lien of the insured mortgage, and you are not authorized and/or not willing to insure against the existence of reverter clauses.

The improvements encroach on easements or servitudes, or use of the easements or servitudes for the purpose intended may interfere with or damage the improvements, and you are not authorized and/or not willing to insure against loss or damage on that account.

There are mineral leases or mineral royalty reservations of such a nature that you are not authorized and/or not willing to insure that the same will not result in a loss to the insured because of damage to improvements including lawn, shrubbery, or trees.

Both policies provide insurance over matters of survey, but the forms neither require nor negate the requirement for a survey. If there is reason to believe there may be survey problems that should not be insured against without obtaining a satisfactory survey, then obtain the survey and issue a regular ALTA Loan Policy excepting to matters that a survey might disclose. If the survey you obtain discloses any problems, a suitable exception should be made on the Addendum. The policies are not suitable for acreage tracts and subdivisions with a history of encroachment and survey problems; here, a regular ALTA Loan Policy should be issued. If you have a starter file with an old survey, by all means take a look at it to see if there are any survey problems which you wish to except to in the Addendum. The issuance of either the Master Policy or the Short Form Policy is restricted to those 1-to-4 residential tracts that exist in well established subdivisions which do not have a history of survey or encroachment problems. Stewart has determined that the Company is unwilling to issue these policies on leasehold estates. Both policies are ideally suited for condominiums. Even though both forms simplify and reduce the clerical work in providing the lender with a quick delivery of the title insurance product, all the traditional skill and professional care in record searching, document examination, study of exceptions, title underwriting must still be applied. Be sure you are familiar with the terms of the Schedule B exceptions and affirmative assurances. If the title is subject to any easements, restrictions, mineral rights, or other matters you believe should not be insured over, then you must except them on the Addendum. If you have any questions, please discuss the matter with your authorized Stewart representative.

As always, check to be sure that the conveyance to the mortgagor, as well as the mortgage or lien instrument itself, are correctly drawn and executed. Are the names correct? Is there any doubt as to authenticity? Does the legal description of the land match in all documents? Does the description in the insured mortgage include any land you don't intend to insure? We believe that you will find both of these products a welcome addition to the title insurance products that you are able to offer your customers. Should you have any questions involving either of these forms, please do not hesitate to call.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.