12.27 Mortgagee Title Policy Binder On Interim Construction Loan (Interim Construction Binder)


In General

The Mortgagee Title Policy Binder on Interim Construction Loan, hereinafter referred to as interim construction binder, may be used only on interim construction loans in which it is contemplated that the Company issuing the interim construction binder will be asked to issue a mortgagee policy on a permanent loan or loans covering the identical property when the improvements are completed. The construction loans may include sums advanced for acquisition of land and/or renew, extend or satisfy prior existing liens on land upon which construction is to occur.The interim construction binder may not be issued on vacant lots except in connection with the immediate construction of improvements. Additionally, it may not be issued if the construction to which it relates has already been completed (Procedural Rule P-16).Under Procedural Rule P-16, Interim Construction Binders are not allowed unless the obligor on the indebtedness to be insured is an original contractor who is also the record owner of the property and the security investment is not a Mechanic’s Lien Contract.


Premium to be Charged

In accordance with Rate Rule R-13, a premium charge of an amount equal to the minimum Basic Rate shall be charged for the issuance of each interim construction binder. The initial binder has a term of one (l) year. Thereafter, the binder may be extended for six (6) additional consecutive periods of six (6) months each, not to exceed thirty-six (36) months. Binder extensions should be drawn in accordance with Endorsement Instruction I. A premium of $25.00 must be charged for each binder extension.

Upon subsequent issuance of:

  • a mortgagee policy on a loan to fully take up, renew, extend or satisfy a lien already covered by an interim construction binder; or
  • an owner policy on the sale of a property which is encumbered by a lien covered by an interim construction loan, the premium for the new policy shall be at the basic rate but a credit for the interim construction binder shall be allowed to the purchaser of the owner policy as follows:

    Fifty percent (50%) of the premium paid for the interim construction binder as long as the subsequent policy is issued within one (1) year from the date of the original interim construction binder.

    If more than one policy is to be issued on a portion of the property covered by the interim construction binder, only one credit may be given.

    This rate rule may be combined with Rate Rule R-5 (simultaneous issue) for calculation of the premium; however, the premium may never be less than the minimum basic rate for a mortgagee policy. Additionally, the credit shall not apply if the interim construction binder covers property other than one to four residential property.


Amendment of the Tax Exception

Item No. 3 on Schedule B of the interim construction binder is the tax exception. This exception may be amended by deleting the words "and subsequent assessments for prior years due to change in land usage or ownership "by either deleting these words within the exception or by attachment of endorsement form T-30 or a T-3 endorsement form providing for deletion of the above-referenced words (Procedural Rule P-20). A premium charge of $20.00 must be made for this amendment (Rate Rule R-19).

Additionally, if the title agent is satisfied that all taxes, standby fees and assessments for the year are not yet due and payable, the following sentence may be inserted:

"Company insures that standby fees, taxes and assessments by any taxing authority for the year ____ are not yet due and payable."

(Procedural Rule P-29) The premium charge for this insertion is $5.00 (Rate Rule R-24).


Down Date Endorsements

When construction advances are being made subsequent to the issuance of an interim construction binder, the Company may extend the effective date of the interim construction binder by issuing the endorsement provided for in Form T-3, Instruction VII (Procedural Rule P-9(b)4). The premium charge for this endorsement is $50.00 (Rate Rule R-llc).