PDC

Pending Disbursement Clauses

Pending disbursement clauses are inserted in Loan Policies when future disbursements of loan proceeds are contemplated. These proceeds may be advanced for construction or other purposes. The Company generally uses special pending disbursement clauses on construction loans that require downdates. Where the future advances do not relate to construction, the pending disbursement clause does not require a downdate, although such downdate is sometimes done.

Exception

PDCX01 ALTA

Loan Policy - No Downdate Required

Pending disbursement of the full proceeds of the loan secured by the Insured Mortgage, this Policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without Knowledge of any defects, liens or encumbrances on the Title, up to the face amount of the Policy. Nothing contained in this paragraph limits any exception or any printed provision of this Policy.

Comment: This pending disbursement clause requires underwriter approval. This clause may be used if the loan is not a construction loan or if the construction mortgage has and will retain priority for future good faith disbursements.

PDCX02 ALTA

Loan Policy - Construction - Downdate Required

Pending disbursement of the full proceeds of the loan secured by the Insured Mortgage, this Policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without Knowledge of any defects, liens or encumbrances on the Title, up to the face amount of the Policy. At the time of each disbursement of the proceeds of the loan, the title must be continued down to that time for defects, liens or encumbrances on the Title intervening or recorded between Date of Policy and the date of the disbursement.

Comment: This pending disbursement clause requires underwriter approval. This clause may be used if the construction loan mortgage has initial priority, but priority may be lost because of knowledge, recorded claims, or optional disbursements. See PDCX08 STGC.

PDCX03 ALTA

Owner's Policy - No Downdate Required

Liability hereunder at the date hereof limited to $____________. Liability shall increase as contemplated improvements are made so that liability hereunder shall be limited to that sum plus the amount actually expended by the Insured in improvements in good faith and without Knowledge of any defects, liens or encumbrances on the Title at the time the expenditure occurs. In no event shall the liability of the Company hereunder exceed the face amount of this Policy. Nothing contained in this paragraph shall limit any exception or any printed provision of this Policy.

Comment: You should use this exception in the Owner's Policy if the amount of insurance includes contemplated improvements. You may not delete the standard mechanics' lien exception from that Policy without underwriter approval.

 

PDCX04 STG

Reserved

PDCX05 STG

Reserved

PDCX06 STG

Loan Policy - Construction; Downdate Required

Pending disbursement of the full proceeds of the loan secured by the Mortgage or Deed of Trust described in Schedule A, this Policy insures only to the extent of the amount actually disbursed for improvements by the Insured in good faith and without Knowledge of any defects, liens, or encumbrances on the Title. This Policy insures against loss or damage which results from claims of mechanic's or materialmen's liens arising from non-payment of bills for labor performed or material furnished prior to ____________________, except any such liens or notices thereof as may be recited under Schedule B hereof and except as otherwise provided herein. At the time of each such disbursement of proceeds of the loan, an endorsement to this Policy must be secured increasing the amount insured hereunder up to the face amount of the Policy, subject to the following requirements being met before issuance of such endorsement: (a) a title search is made by the Company that reveals no liens, objections or any adverse changes in the title, (b) the contractor and owner furnish the Company satisfactory paid bills, lien waivers, estoppel certificates and other evidence that all items, from which a lien might arise, have been paid or otherwise satisfied, and (c) the Owner and Contractor furnish the Company satisfactory Affidavit and Indemnity Agreement(s) as to the matters referred to in (b) above. This Policy does not insure against mechanic's and materialmen's liens for labor performed and materials furnished subsequent to the last date to which mechanic's liens coverage has been extended or against mechanic's or materialmen's liens for any improvement or work that is not financed in whole or in part by proceeds of the indebtedness secured by the Insured mortgage, nor does this Policy insure completion of the improvements in progress, or their compliance with plans and specifications. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements, or against loss because of the failure of the Insured to disburse the entire amount of proceeds of the loan secured by the lien of the Insured Mortgage. Notwithstanding any other language contained in the insuring provisions of this Policy, the above provisions are the sole provision applicable to coverage for loss or damage resulting from mechanic's or materialmen's liens or claims not of record.

Comment: This pending disbursement clause requires underwriter approval. This clause is designed for issuance if the construction mortgage does not have priority over mechanic's liens (e.g., recordation after commencement in some states; unfavorable law in states such as Colorado, Missouri, and other states). This clause provides limited coverage for mechanic's liens arising from non-payment of bills for labor performed or material furnished prior to a specific date, which date may be the date of the current disbursement. The Company generally requires waivers from and confirms payment to those persons. This clause does not insure against claims for subsequent work or material.

Revised 07/31/14

PDCX07 STG

Loan Policy - Construction; Ltd Coverage Only for Prior Wk

Loan Policy - Construction; Limited Coverage Only for Prior Work - Downdate Required

Pending disbursement of the full proceeds of the loan secured by the mortgage described in Schedule A, this policy insures only to the extent of the amount actually disbursed for improvements by the Insured in good faith and without Knowledge of any defects, liens, or encumbrances on the Title. This policy insures against loss or damage which results from claims of mechanic's or materialmen's liens arising from nonpayment of bills for labor performed or material furnished prior to ________________, 20____, but said coverage is limited to mechanic's and materialmen's liens for services or labor performed or materials or equipment furnished by those persons or entities receiving payments for such services, labor, materials or equipment directly from the Insured pursuant to written disbursement authorization approved by the Insured herein; except any such liens or notices thereof as may be recited under Schedule B hereof and except as otherwise provided herein. At the time of each such disbursement of proceeds of the loan, an endorsement to this policy must be secured increasing the amount insured hereunder up to the face amount of the Policy, subject to the following requirements being met before issuance of such endorsement:
(a) a title search is made by the Company that reveals no liens, objections or any adverse changes in the title,
(b) the contractor and owner furnish the Company satisfactory paid bills, liens waivers, estoppel certificates and other evidence that all items from which a lien might arise, have been paid or otherwise satisfied, and
(c) the Owner and Contractor furnish the Company satisfactory updated Affidavit and Indemnity Agreement(s) as to the matters referred to in (b) above.
This Policy does not insure against mechanic's and materialmen's liens for labor performed and materials furnished subsequent to the last date to which mechanic's lien coverage has been extended or against mechanic's or materialmen's liens for any improvement or work that is not financed in whole or in part by proceeds of the indebtedness secured by the Insured mortgage, or against mechanic's or materialmen's liens for services or labor performed or materials or equipment furnished by any persons or entities to the extent such persons or entities do not receive payments for such labor or material directly from the Insured pursuant to written disbursement authorization approved by the Insured herein, nor does this Policy insure completion of any improvements contemplated by the Owner, Contractor or Insured, or their compliance with plans and specifications. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements, or against loss because of the failure of the Insured to disburse the entire amount of proceeds of the loan secured by the lien of the Insured Mortgage. Notwithstanding any other language contained in the insured provisions of this Policy, the above provisions are the sole provisions applicable to coverage for loss or damage resulting from mechanic's or materialmen's liens or claims therefore not of record.

Comment: This pending disbursement clause requires underwriter approval. This clause is designed for issuance if the construction mortgage does not have priority over mechanic's liens (e.g., recordation after commencement in some states; unfavorable law in states such as Colorado, Missouri, Virginia, and other states) and where the Company is unwilling to provide coverage for claims by all claimants because of prior work or materials (e.g., the Company is not satisfied with adequacy of loan funds, financial strength of indemnitors, or disbursement procedure). This clause provides limited coverage for mechanic's liens claims by those persons or entities receiving payments directly from the Insured pursuant to written disbursement authorization approved by the Insured. The Company generally requires waivers from and confirms payment to those persons. It does not insure against claims by other contractors or subcontractors, or claims for subsequent work or material.

Note: You may add additional local exceptions here. Please consult with our underwriting personnel in preparing appropriate provisions.

Revised 07/31/14

PDCX08 STG

Loan Policy - Construction - Downdate Required

Pending disbursement of the full proceeds of the loan secured by the Insured Mortgage, this Policy insures only to the extent of the amount actually disbursed for improvements, but increases as each such disbursement is made in good faith and without Knowledge of any defects, liens or encumbrances on the Title, up to the face amount of the Policy. At the time of each such disbursement of the proceeds of the loan, the Title must be continued in writing by the Company for defects, liens or encumbrances on the Title intervening or recorded between Date of Policy and the date of the disbursement.

Comment: This pending disbursement clause requires underwriter approval. This clause may be used if the construction loan mortgage has initial priority, but priority may be lost because of knowledge, recorded claims, or optional disbursements. This clause is similar to PDCX02 ALTA. This clause does not require ongoing receipt and review of lien waivers, or documentation of payments, etc., as a condition of issuing a down date endorsement; however, as a condition of each disbursement, title must be continued.

Revised 07/31/14

PDCX09 DE STG

Loan Policy - First Mortgage for Construction - Delaware

Pending disbursement of the full proceeds of the construction loan secured by the construction mortgage described in Schedule A, this Policy insures only to the extent of the amount actually disbursed in good faith and without knowledge of any defects, liens or encumbrances on the title, up to the face amount of the Policy. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements , or against loss because of the failure of the Insured to disburse the entire amount of proceeds of the loan secured by the lien of the Insured Mortgage. This Policy does not insure against the lack of priority of the lien of the Insured Mortgage over any statutory lien for services, labor or material arising from construction of any improvement or work related to the Land unless at least fifty per cent of the initial loan and future advances secured by the Insured Mortgage are used for payment of labor or materials, or both, for structures on the Land. At the time of each disbursement of the proceeds of the loan, the Title must be continued in writing by the Company for defects, liens or encumbrances on the Title intervening or recorded between Date of Policy and the date of the disbursement. Nothing contained in this paragraph limits any exception or any printed provision of this Policy. Notwithstanding any other language contained in the Covered Risks or any other insuring provisions of this Policy, the above provisions are the sole provisions applicable to coverage for loss or damage resulting from construction liens or claims not of record.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Delaware. In lieu of securing Visible Commencement Documentation, you may use the Delaware Pending Disbursement Clause on a Loan Policy insuring a first lien mortgage for construction of improvements. The Delaware Pending Disbursement Clause is consistent with 25 Del. C. Section 2718.

PDCX10 FL STG

Loan Policy - Construction - Florida

Liability under this policy is limited to the amount of the proceeds of the mortgage identified in Schedule A hereof actually disbursed in good faith without knowledge of any objection to the title.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Florida. If the insured mortgage has priority over any construction liens, you should use this pending disbursements clause.

 

PDCX11 IL STG

Loan Policy - Construction - Illinois

Any lien, or right to a lien, for services, labor or material furnished after ________ (date shown on Sworn Contractor's Statement).

Rights of mechanics or materialmen who are named on the contractor's statement dated ________ (date shown on Sworn Contractor's Statement) and of mechanics or materialmen claiming by, through or under them to the extent, if any, that the amount shown in said statement as being unpaid relate to work, labor and material actually in place on said land on the date covered by said statement.

Anything in this Policy and any endorsement thereto notwithstanding, the liability of the Company under said Policy shall not exceed the sum for $ ________ (being the amount actually disbursed of the proceeds of the loan secured by the mortgage described in Schedule A at the date of said Policy) and costs which the company is obligated under the Conditions to pay.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Illinois. It includes a mechanic's lien exception for services, labor or material furnished after the date shown on a Sworn Contractor's Statement and an exception for rights of mechanics and materialmen shown on the Statement and their applicable subcontractors.

PDCX12 MA STG

Loan Policy - Construction - Massachusetts

Pending disbursements of the full proceeds of the loan secured by the mortgage covered by the policy, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without any actual knowledge of any defects in, or objections to the title, up to the face amount of these policy. At the time of each disbursement of the proceeds of the loan, the title must be continued down to such time for possible liens, or objections intervening between the date of this policy and the date of such disbursement. Each title continuation must be evidenced by an endorsement to the policy, which endorsement will set forth all matters of record since the date of the preceding endorsement, but said endorsement will exclude coverage for matters of survey. This policy does not guarantee the completion of the improvements nor the sufficiency of funds for the completion thereof.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Massachusetts. This clause does not require ongoing receipt and review of lien waivers, or documentation of payments, etc., as a condition of issuing a down date endorsement; however, as a condition of each disbursement, title must be continued and an endorsement issued, and no liens must be of record.

PDCX12.1 MA STG

Loan Policy - Construction - Massachusetts

Pending disbursement of the full proceeds of the loan secured by the Insured Mortgage, this policy insures only to the extent of the amount actually disbursed but increases, as each disbursement is made within the time frame set forth in M.G.L. c. 254, § 7(b), in good faith and without knowledge of any defects in, or objections to, the Title up to the face amount of the policy. At the time of each disbursement of the proceeds of the loan, the title must be continued down to such time for possible liens or objections intervening between the date hereof and the date of such disbursement and a valid and accurately completed partial waiver and subordination of lien must be executed by any party who has recorded a notice of contract pursuant to M.G.L. c. 254, § 2. This policy does not insure the priority of disbursements made by the Insured over any statutory lien securing the right to retainage held by any party who has recorded a notice of contract pursuant to M.G.L. c.254, § 2.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Massachusetts. This clause does not require ongoing receipt and review of lien waivers, or documentation of payments, etc., as a condition of issuing a down date endorsement; however, as a condition of each disbursement, title must be continued and an endorsement issued, and no liens must be of record.

PDCX13 MI STG

Loan Policy - Construction - Michigan

Pending disbursement of the full proceeds of the loan secured by the Mortgage in Schedule A, this Policy insures only to the extent of $0.00 being the aggregate of the amount actually disbursed at the date hereof under the terms of the mortgage set forth in Schedule A. Any disbursement made subsequent to the date hereof shall be insured only with the written approval of the Company. Such approval shall, as of the extended Date of Policy, have the effect of insuring such disbursements as a valid lien prior to any liens or other matters evidenced of record, except such as may be included in Schedule B, Part I, and prior to any unrecorded construction liens arising from non-payment of bills covered in the improvements set forth in the sworn statements and documents evidencing work progress submitted to the Company in connection with such disbursements, and for which funds were actually advanced.

This policy does not insure against construction liens for labor or material furnished subsequent to the last extended Date of Policy, or construction liens for labor and material for which funds were not actually advanced for payment, nor does this policy guarantee completion of the improvements in progress, or their compliance with plans and specifications. The Company does not insure against liens for labor performed and materials furnished after Date of Policy.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Michigan. This clause provides limited coverage for mechanic's liens arising from non-payment of bills for labor performed or material furnished prior to a specific date and in accordance with state requirements for priority of disbursements

PDCX14 NJ STG

Loan Policy - Construction - New Jersey

I. Pending disbursement of the full proceeds of the loan secured by the mortgage insured, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith for the payment of construction costs, up to the face amount of the policy. At the time of each disbursement of the proceeds of the loan, the title examination must be continued down to such time for possible liens, including Notices of Unpaid Balance and Construction Lien Claims, and other matters, intervening between the date hereof and the date of such disbursement.

II. Notices of Unpaid Balance and Construction Lien Claims must be discharged or released of record, or subordinated to the lien of the mortgage insured prior to each advance of the loan proceeds.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in New Jersey.

PDCX16 ND STG

Loan Policy - Construction - North Dakota

Pending disbursement of the full proceeds of the construction loan secured by the construction mortgage described in Schedule A, this Policy insures only to the extent of the amount actually disbursed in good faith for the payment of materials or labor for improvements, but increases in the amount of each disbursement made in good faith for the payment of materials or labor for improvements, and without knowledge of any defects, liens or encumbrances on the title, up to the face amount of the Policy. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements , or against loss because of the failure of the Insured to disburse the entire amount of proceeds of the loan secured by the lien of the Insured Mortgage. This Policy does not insure against the lack of priority of the lien of the Insured Mortgage as it secures Indebtedness other than amounts disbursed by the Insured in good faith for payment of materials or labor for improvements on the Land over any statutory lien for services, labor or material arising from construction of any improvement or work related to the Land. At the time of each disbursement of the proceeds of the loan, the title must be continued down to that time for defects, liens or encumbrances on the title intervening or recorded between Date of Policy and the date of the disbursement. Nothing contained in this paragraph limits any exception or any printed provision of this Policy.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in North Dakota. You also should determine that the mortgage complies with state law for future advances. If there is a construction lien filed against the subject land, then generally an exception for the construction lien must be included in the loan policy.

PDCX17 TX STG

Loan Policy - Construction - Texas

Pending disbursement of the full proceeds of the loan secured by the lien instrument set forth under Schedule A hereof, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects in, or objections to, the title up to the face amount of the policy. Nothing contained in this paragraph shall be construed as limiting any exception under Schedule B, or any printed provision of this policy.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Texas. Before or during construction, you may not delete the promulgated general mechanic's liens exception from a Loan Policy. When a Mortgagee Policy is issued prior to completion of improvements made under a mortgage given in whole, or in part, for the cost of improvements, the policy must also contain the following exception under Schedule B, prior to the above-referenced pending disbursement clause:

Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, or to be placed, upon the subject land. However, the Company does insure the Insured against loss, if any, sustained by the Insured under this Policy if such liens have been filed with the County Clerk of __________County, Texas, prior to the date hereof.

PDCX18 VA STG

Loan Policy - Construction - Virginia, High Risk Projects ("Restpend")

Pending disbursement of the full proceeds of the loan secured by the Mortgage or Deed of Trust described in Schedule "A" hereof, this policy insures only to the extent of the amount actually disbursed. This policy insures against any loss or damage which might result from claims of mechanic's liens arising from nonpayment of bills for labor performed or material furnished prior to __________________, but said coverage is limited to mechanic's liens relating to those amounts actually paid and only to mechanic's liens by those persons or entities receiving said payments directly pursuant to written disbursement authorization by Insured to Company and approved by the Insured herein; except any such liens or notices thereof as may be recited under Schedule B hereof. At the time of each disbursement of proceeds of the loan, an endorsement to this policy must be secured increasing the amount insured hereunder up to the face amount of the policy, subject to the following requirements being met before issuance of such endorsement that: (a) the Company is furnished evidence from the insured certifying that the disbursement has been made in good faith and without knowledge of any defect in, or objection to the title, (b) a title search by the Company reveals no liens, objections or any other adverse changes in the title, (c) the contractor and owner furnish this company satisfactory paid bills, lien waiver, or other evidence that all items from which a lien might arise, have been paid or otherwise satisfied, and (d) the owner and Contractor furnish the Company satisfactory Affidavit and Indemnity Agreement(s) as to the matters referred to in (c) above.

This policy does not insure against mechanic's liens for labor performed and materials furnished subsequent to the last date to which mechanic's lien coverage has been extended, nor does this policy guarantee completion of the improvements in progress, or their compliance with plans and specifications. The company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete said improvements.

Notwithstanding any other language contained in the insuring provisions of this policy, the above provisions are the sole provision applicable to the extension of coverage for loss or damage resulting from mechanic's liens or claims of such hens not of record.

This endorsement is made a part of the commitment or policy. It is subject to all the terms of the commitment or policy and prior endorsements. Except as expressly stated on this endorsement, the terms, date, and amount of the commitment or policy and prior endorsements are not changed.

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Virginia. This clause (also known in Virginia as "Restpend" Pending Disbursement Clause) provides limited coverage for mechanic's liens by those persons or entities receiving payments directly as provided in the clause pursuant to written disbursement authorization approved by the Insured.

 

 

PDCX19 VA STG

Loan Policy - Construction - Virginia ("Stewpend")

Pending disbursement of the full proceeds of the loan secured by the Mortgage or Deed of Trust described in Schedule "A" hereof, this policy insures only to the extent of the amount actually disbursed. This policy insures against any loss or damage which might result from claims of mechanic's liens arising from non-payment of bills for labor performed or material furnished prior to _________________ except any such liens or notices thereof as may be recited under Schedule B hereof. At the time of each disbursement of proceeds of the loan, an endorsement to this policy must be secured increasing the amount insured hereunder up to the face amount of the policy, subject to the following requirements being met before issuance of such endorsement that: (a) the Company is furnished evidence from the insured certifying that the disbursement has been made in good faith and without knowledge of any defect in, or objection to the title, (b) a title search by the Company reveals no liens, objections or any other adverse changes in the title; (c) the contractor and owner furnish this company satisfactory paid bills, lien waiver, or other evidence that all items from which a lien might arise, have been paid or otherwise satisfied, and (d) the Owner and Contractor furnish the Company satisfactory Affidavit and Indemnity Agreement(s) as to the matters referred to in (c) above.

This policy does not insure against mechanic's liens for labor performed and materials furnished subsequent to the last date to which mechanic's lien coverage has been extended, nor does this policy guarantee completion of the improvements in progress, or their compliance with plans and specifications. The company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete said improvements.

Notwithstanding any other language contained in the insuring provisions of this policy, the above provisions are the sole provision applicable to the extension of coverage for loss or damage resulting from mechanic's liens or claims of such liens not of record."

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Virginia. This clause (also known in Virginia as "Stewpend" Pending Disbursement Clause) provides limited coverage for mechanic's liens arising from non-payment of bills for labor performed or material furnished prior to a specific date and in accordance our requirements.

 

 

PDCX20 OH STG

Loan Policy - Ohio - Visible Commencement Rule

Pending disbursement of the full proceeds of the loan secured by the mortgage set forth under Schedule A hereof, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made up to the face amount of the policy. However, if disbursements are made which the holder of such mortgage was not obligated to make after holder’s receipt of a written notice of a lien or encumbrance or of work or labor performed or to be performed or of machinery, material or fuel furnished or to be furnished as provided in Section 5301.232 of the Ohio Revised Code, said mortgage, to the extent of said disbursements, shall be subordinate to the lien or encumbrance specified in such notice or to a valid mechanic’s lien for the work or labor actually performed or machinery, material or fuel actually furnished as specified in such notice. At the time of each such disbursement of the proceeds of the loan, the title may be continued in writing by the Company for defects, liens or encumbrances on the Title intervening or recorded between Date of Policy and the date of the disbursement.

Comment:  In Ohio only (a jurisdiction that follows the visible commencement rule) an Associate Senior Underwriter (for policies up to $20,000,000) or a Senior Underwriter (for policies up to $30,000,000) may approve Mechanic’s Lien Coverage by use of PDCX08 STGC or ALTA 32 Series endorsement, or by use of an Ohio-approved pending disbursement clause, provided that:

(a)    A Notice of Commencement has not been recorded prior to the proposed insured mortgage;

(b)   Acceptable Mechanic’s Lien Documentation as determined by that Underwriter has been received;

(c)    Those potential lien claimants that have actually done work or supplied materials sign a sufficient unconditional lien waiver to date of closing and subordinate their lien rights to the insured lender;

(d)   Acceptable Indemnity is obtained from the owner, general contractor, and/or any other party deemed sufficiently solvent based on review of financial information;

(e)    A Notice of Commencement is recorded immediately after the insured mortgage.

PDCX21 PA STG

Loan Policy - Construction - Pennsylvania

Pending disbursement of the full proceeds of the construction loan secured by the construction mortgage described in Schedule A, this Policy insures only to the extent of the amount actually disbursed in good faith and without knowledge of any defects, liens, or encumbrances on the title, up to the face amount of the Policy. The Company in no way guarantees the sufficiency of the mortgage proceeds as adequate to complete improvements, or against loss because of the failure of the Insured to disburse the entire amount of proceeds of the loan secured by the lien of the Insured Mortgage. This Policy does not insure against the lack of priority of the lien of the Insured Mortgage over any statutory lien for services, labor or material arising from erection, construction, alteration or repair of any improvement or work related to the Land unless at least sixty percent (60%) of the initial loan and future advances secured by the Insured Mortgage are intended to pay or are used to pay all or part of the costs of construction [as “costs of construction” are defined in 49 P.S. § 1201 (15)]. At the time of each disbursement of the proceeds of the loan, the Title must be continued in writing by the Company for defects, liens, or encumbrances on the Title intervening or recorded between Date of Policy and the date of the disbursement. Nothing contained in this paragraph limits any exception or any printed provision of this Policy. Notwithstanding any other language contained in the Covered Risks or any other insuring provisions of this Policy, the above provisions are the sole provisions applicable to coverage for loss or damage resulting from Mechanic’s liens or claims not of record.”

Comment: This pending disbursement clause requires underwriter approval. This clause is authorized for use solely in Pennsylvania.