- November 15, 2010
- All Issuing Offices
- Insuring at or after Mortgage or Deed of Trust Foreclosure
We have previously issued Bulletin SLS2010021 concerning Insurance at or after a Foreclosure. Serious questions had been raised concerning foreclosures by institutional lenders/servicers (lender). For example, GMAC, One West, Bank of America, and JP Morgan Chase have recently encountered possible errors in foreclosures and had suspended certain foreclosures.
We will not require an affidavit by any lender to Stewart Title Guaranty Company in order to insure based on a foreclosure, other than any customary affidavits historically required in your state.
We do not require an indemnity from the lender because of alleged improprieties in the foreclosure, except as provided below.
If you are insuring title to a purchaser or lender after a foreclosure sale of a mortgage or deed of trust, you must do the following:
1. Verify that all foreclosure requirements (including a final, non-appealable judgment in a judicial foreclosure) under state law and our guidelines have been met.
2. Verify that the mortgagor subject to the foreclosure is not in possession of the property. You may rely on any credible evidence such as a lender or broker confirmation, without inspecting the land. If the mortgagor is in possession when you issue your commitment, the commitment and policies should contain the following exception:
"Any rights, claims or interest of (the mortgagor) in the land or any claim that the foreclosure by (lender) is invalid."
3. Determine that no other parties, such as tenants under prior leases, are in possession, because their rights may not have been extinguished by the foreclosure. For example, the Protecting Tenants at Foreclosure Act (which expires December 31, 2012) applies to "any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title (May 20, 2009)" and allows a tenant to remain in possession under a prior lease under certain conditions.
Click here to view Title VII-Protecting Tenants at Foreclosure Act.
If other parties are in possession, the commitment and policies should except to rights of parties in possession or should except to the specific lease.
4. Except to any applicable right of redemption or right to purchase (e.g., State law; IRS; Agricultural Credit Act of 1987).
5. Comply with our guidelines in Bulletin SLS2008021, "Foreclosures and Mechanic's Liens." If you are asked to insure the grantee of a deed in lieu of foreclosure, please consult our Underwriting Manual or underwriting personnel.
6. Do not issue without Stewart Underwriter approval if you know that a governmental authority (e.g. State Attorney General) in the state in which the property is located has commenced litigation (such as the suit by the Ohio Attorney General against Ally Financial and GMAC) to halt foreclosures or REO sales by the lender. If you are aware that such litigation has commenced, please contact a Stewart Underwriter before proceeding.
7. Do not issue without Stewart Underwriter approval if you know that a suit seeks to overturn/enjoin the foreclosure or REO sale of the property, or seeks damages because of alleged improprieties in the mortgage foreclosure action. If such a suit has been commenced please contact a Stewart Underwriter before proceeding.
8. Do not issue without Stewart Underwriter approval if you know that the lender is currently pursuing a separate deficiency judgment against the mortgagors and such judgment is not yet final.
9. If you are asked to insure on the first sale after foreclosure, you should determine that the amount owed on the foreclosed mortgage or deed of trust exceeds the current resale price. Otherwise secure Stewart Underwriter approval.
10. If you prepare a Commitment, you may use Standard Exception DTSR05 STGC (Foreclosure of Deed of Trust) or Standard Exception MTGRO2 STGC (Proof of Valid Foreclosure of Mortgage), unless you customarily use another exception/requirement in connection with mortgage or deed of trust foreclosures.
Do not insure a purchaser or lender at the foreclosure, unless you secure Stewart Underwriter approval.
If you have questions related to this bulletin, please contact Stewart Legal Services or your local underwriting personnel.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
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.