- March 31, 2008
- All Issuing Offices
- Builder Transactions and Mechanic's Liens
Downturns in the housing market give rise to an increase in mechanic's lien claims involving builders. In order to minimize our mechanic's lien losses, please adhere to the following procedures when insuring on a builder sale or builder construction financing:
- If you are insuring on a sale of a home or other property by a builder, please be satisfied that subcontractors of the builder have been paid or are being paid out of closing proceeds, but do not rely solely on an affidavit of payment of bills by the builder unless you secure approval of Stewart Underwriting Personnel. If your state law adequately protects innocent purchasers against unfiled mechanic's liens (as some states do), you may rely on the state procedure for such protection. You may contact Stewart Underwriting Personnel for further guidance.
- If you are insuring on a construction loan mortgage by a builder in a state which may provide for priority of the mortgage over unfiled mechanic's liens, please be satisfied that you follow state procedure and our guidelines for determining and insuring priority of the insured mortgage if state law provides for priority of the mortgage. You should contact Stewart Underwriting Personnel for further guidance if priority of the mortgage cannot be obtained, unless you add an exception for unrecorded mechanic's liens in the policy (Schedule B Part 1). In Texas, you may comply when insuring construction loan mortgages by adding in Schedule B the promulgated exceptions in Procedural Rule P-8.
- If you insure on builder transactions, you should also secure an indemnity against mechanic's liens from the builder and its principals. This may be accomplished by a Master Indemnity. If you secure a builder indemnity it is best practice to maintain a record or log of policies issued pursuant to the indemnity, so that you can know the total exposure under the indemnity. You should contact Stewart Underwriting Personnel for further guidance and approval of the indemnity.
- You should secure overlimits approval of large transactions as required by your Underwriting Agreement.
If you have any questions, or seek guidance with respect to a particular builder, please contact Stewart Underwriting Personnel.
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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.
- Bulletins Replaced:
- Related Bulletins:
- Underwriting Manual:
- Exceptions Manual:
- STG Indemnity Agreement 2