- October 02, 2008
- All California Issuing Offices
- S.T.A.R. - Stewart Title Absolute Rate and Issuing the ALTA Short Form Residential Loan Policy
The Stewart Title Absolute Rate (S.T.A.R.) is new. It is found in section 3.21 of the June 9, 2008 pricing manual. It offers special pricing for refinance transactions on one-to-four family residential properties. One of the requirements for this special pricing program is that the lender accept an ALTA Short Form Residential Loan Policy.
Getting to know the ALTA Short Form Residential Loan Policy
This policy is not a limited coverage policy, like a STEP or SFLP. It provides the full coverage of the familiar ALTA loan policy. But it is different in some important ways.
1. It is short.
Ordinarily this policy will be two pages long.
2. No recording information.
The loan is identified by loan number.
Exceptions are broad and generic.
3. No Legal Description.
The policy refers to the insured Deed of Trust for this information.
4. No endorsements.
They’re built-in. Some endorsements are automatic. Others are incorporated in the appropriate case by checking a box.
5. No map.
Schedule A consists of spots to fill in the name of the insured, policy date, property address, loan number, borrower, and the date and amount of the insured Deed of Trust.
Schedule A contains a check-box for indicating that an addendum for extraordinary matters is attached and made a part of the policy.
Schedule A sets out incorporated endorsements. It is not necessary to attach additional forms.
The policy automatically includes the following endorsements as applicable:
4.1-06 (115.3-06 Condo)
5.1-06 (115.4-06 PUD)
6-06 (111.5-06 Variable Rate)
6.2-06 (111.8-06 Neg. Am.)
The following additional endorsements may be issued upon request in the appropriate circumstances by checking the appropriate box:
4-06 (115.1-06 Condo)
14-06 (111.14-06 Future Advance-Priority)
5-06 (115.2-06 PUD)
14.1-06 (111.14.1-06 Future Advance-Knowledge)
7-06 (116.5-06 Manufactured Housing)
14.3-06 (111.14.3-06 Reverse Mortgage)
7.1-06 (116.5.1-06 Man. Housing Conversion)
22-06 (116.1-06 Location)
Additional endorsements (such as the 103.5-06) may be attached as required. Remember to use forms with the -06 suffix, as this policy incorporates the terms of the familiar long form ‘06 ALTA Loan Policy.
Unlike the full length ALTA form, Schedule B contains both exceptions to coverage and affirmative assurances.
There are four generic paragraphs for taxes, CC&R’s, easements, and minerals.
Except for taxes, each contains affirmative coverage, protecting the lender against loss from violation, impairment or reversion by CC& R’s, encroachments over easement areas, and surface entry rights. Here they are:
1. Those taxes and special assessments that become due or payable subsequent to Date of Policy. (This does not modify or limit the coverage provided in COVERED RISKS 11(b).)
2. Covenants, conditions, or restrictions, if any, appearing in the Public Records; however, this policy insures against loss or damage arising from:(a) the violation of those covenants, conditions, or restrictions on or prior to Date of Policy;(b) a forfeiture or reversion of Title from a future violation of those covenants, conditions, or restrictions, including those relating to environmental protection; and(c) provisions in those covenants, conditions, or restrictions, including those relating to environmental protection, under which the lien of the Insured Mortgage can be extinguished, subordinated, or impaired.As used in paragraph 2(a), the words "covenants, conditions, or restrictions" do not refer to or include any covenant, condition, or restriction (a) relating to obligations of any type to perform maintenance, repair or remediation on the Land, or (b) pertaining to environmental protection of any kind or nature, including hazardous or toxic matters, conditions, or substances, except to the extent that a notice of a violation or alleged violation affecting the Land has been recorded or filed in the Public Records at Date of Policy and is not referenced in an addendum attached to this policy.
3. Any easements or servitudes appearing in the Public Records; however, this policy insures against loss or damage arising from (a) the encroachment, at Date of Policy, of the improvements on any easement, and (b) any interference with or damage to existing improvements, including lawns, shrubbery, and trees, resulting from the use of the easements for the purposes granted or reserved.
4. Any lease, grant, exception, or reservation of minerals or mineral rights appearing in the Public Records; however, this policy insures against loss or damage arising from (a) any affect on or impairment of the use of the Land for residential one-to-four family dwelling purposes by reason of such lease, grant, exception or reservation of minerals or mineral rights, and (b) any damage to existing improvements, including lawns, shrubbery, and trees, resulting from the future exercise of any right to use the surface of the Land for the extraction or development of the minerals or mineral rights so leased, granted, excepted, or reserved. Nothing herein shall insure against loss or damage resulting from subsidence.
You may note some familiar language here. The affirmative coverages track assurances given in popularly requested endorsements.
Unlike the familiar form, Schedule B is not divided into parts I and II. There is no Schedule B, Part II in which to show subordinate matters. For this reason, if you have two Deeds of Trust recording concurrently it is not necessary to show the subordinate Deed of Trust in the policy for the first. In order to show the superior deed of trust in the junior loan’s policy, use the addendum. An otherwise superior matter which gets subordinated is simply not shown: only superior matters are shown in the policy. Consult your ATO/CTO or underwriter with questions about the sufficiency of subordination language.
The addendum may be a part of the policy or it may be omitted. A checkbox on Schedule A tells you whether it’s incorporated.
Items that should be shown in a policy that are not adequately covered by the generic exceptions and affirmative coverages go in the addendum. Some of these might include:
- Unpaid taxes that are both due and payable as of policy date (Note: All real property taxes are payable when the first half is due on Nov. 1 although the 2nd halfis not payable until the 1st is paid).
- Mechanic’s liens
- Lis Pendens
- Governmental Notices such as – Redevelopment/Low Income Agreements, Subdivider Contracts, Redevelopment Agency Documents
- Abstracts of Judgment , Federal or State tax liens and other GI matters
- Options to Purchase or Rights of First Refusal
- And, of course, superior Deeds of Trust!
Since exceptions 1-4 appear in Schedule B, exceptions in the addendum will be numbered 5, 6, 7…. etc.
Issuing the prelim
The Preliminary Report to be issued under the S.T.A.R. is also different to be consistent with the policy form to be issued, and the goals of the S.T.A.R.
1. Select the following policy type when selecting the contemplated policy to be issued: ALTA Short Form Res Ln Policy 07
2. Add the new NT40 to the notes selection of the preliminary report and select the following variable: STAR Pricing
3. Use the 3 following generic exceptions – AL191, AL192 and AL193
AL191 CC&R’s Blanket Exception (Expedited Searching)
Covenants, conditions and restrictions, if any, appearing in the Public Records, but omitting, except to the extent permitted by any applicable federal or state law, covenants or restrictions, if any, based on race, color, religion, sex, familial status, national origin, handicap, sexual orientation, marital status, ancestry, source of income, disability, medical condition, or other unlawful basis.
AL192 Easements Blanket Exception (Expedited Searching)
Any easements or servitudes appearing in Public Records.
AL193 Mineral Rights Exception (Expedited Searching)
Any lease, grant, exception or reservation of minerals or mineral rights appearing in the Public Records.
Otherwise, the preliminary report will set out the vesting and description as usual.
Because the exceptions are generic, a truncated search is appropriate.
Search back to the last recorded, insured, full value deed with a concurrent deed of trust in favor of an institutional lender for 80% or more of the sale price as disclosed by transfer tax.
Run the owner vested by that deed and any subsequent owners for General Index matters. Show any such matters identified in the ordinary way.
Run current parties on the Special Alerts site or perform the equivalent validation function in AFW.
Examine taxes carefully, and show any that are unpaid and both due and payable. Note: 1sthalfdue Nov. 1; 2ndhalfdue Feb. 1. All real property taxes are payable Nov. 1,but2ndhalfis not payable until the 1st halfis paid. Watch for any special assessments that may need to be separately excepted.
Show a water rights exception in any case in which you would ordinarily shown one.
Make an office note stating that the report produced cannot be used as a starter (unless for another policy meeting the same requirements).
Questions or concerns?
Consult your ATO/CTO or call an underwriter. There is no substitute for experience and good judgment. If you know of or suspect that a matter prior to the prescribed period or any other matter may cause a problem, consult your ATO/CTO.
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