DATE DOWN ENDORSEMENTS (NON-CONSTRUCTION)

Transcription

1 DATE DOWN ENDORSEMENTS (NON-CONSTRUCTION) extend the effective date of a previously-issued loan policy. They most frequently are requested when a mortgage is being assigned or modified. An underwriter should be consulted if a Date Down Endorsement to an owner s policy has been requested. The issuance of a Date Down Endorsement is typically a two-step process. 1. Issuance of a preliminary Date Down Endorsement (which extends the effective date, reflects the updated status of title and requests needed clearance); followed - as part of or after the closing - by: 2. Issuance of a final Date Down Endorsement (which extends the effective date to cover the recording of the mortgage assignment/modification, reflects the updated status of title and deletes references to clearance which has been received.) When preparing a date down endorsement, it is essential that new exceptions, waivers and modifications be reflected both in regular Schedule B on the office opinion and on the Date Down Endorsement. This is necessary so that the title examination remains complete and the file accurate for future reference as a prior. Billing issues should be considered and addressed with the customer, if necessary, as soon as practical. Payment of the title premium and recording charges, if at all possible, should occur prior to or simultaneously with the issuance of the final endorsement. 1

2 I. NOTE A copy of the policy to which the date down endorsement is to apply is required for this process. If not available internally, the customer should be asked to provide a copy of the policy. If no copy of the policy can be obtained you should contact an underwriter of the company. If a prior date down endorsement already has been issued, verify that a copy of the prior date down endorsement is in the file and that the appropriate changes have been noted. II. Order the updated searches. The tax records should be consulted in order to verify that the tax number(s) have not changed, or been discontinued since the date of the policy/prior endorsement. Searches, documents, etc., should be requested in the usual manner. Remember to search additional names, if any. III. Examine the searches, documents, etc., as if you were performing a standard later date examination. SCHEDULE A - Make any changes as may be appropriate for the particular file. All modifications should be properly documented so that those who subsequently deal with the file can determine what was done. Take particular care to determine if part of the land has been released from the lien of the insured mortgage or if part of the land has been taken by condemnation since the original date of the policy. Typically a date down endorsement is ordered for a mortgage policy to cover a modification of the mortgage. This modification should be shown on schedule A with the mortgage insured. SCHEDULE B - Beginning with the new tax exception, raise, waive and modify exceptions as appropriate. Document all changes by use of office notes. 2

3 Creditors Rights and the 1970 ALTA Loan Policy: The 1970 form of ALTA Loan Policy did not contain a creditors rights exclusion. As a result, when a date down endorsement is being issued to a 1970 ALTA Loan Policy and the mortgage modification presents a creditors rights risk, a creditors' rights exception should be raised both on Schedule B and on the endorsement. An assignment of mortgage or a mortgage modification which only extends the maturity date and makes no other change does not present a creditors rights risk. Mortgage modifications which do or may present a creditors' rights risk include modifications which: Increase the amount of the indebtedness; Increase the interest rate or add new forms of interest; Capitalize unpaid interest; Add real estate to the lien of the mortgage; Add previously-existing and unrelated obligations to the borrower's obligation under the mortgage; and Direct new or previously undisbursed funds to persons other than the borrower. In most instances, it will be helpful to consult with an underwriter before actually raising the creditors rights exception. In any event, an underwriter must be consulted if the customer requests that the exception, once raised, be waived or endorsed over. IV. ENDORSEMENT FORMS Select the appropriate date down endorsement. The endorsement forms and a description of their general uses are as follows: DATE DOWN 1L - Date Down Endorsement For Loan Policy/Modification of Mortgage (see page 10) DATE DOWN 1A - Date Down Endorsement For Loan Policy/Assignment Of Mortgage/Change Of Insured (see page 11) DATE DOWN 1B - Date Down Endorsement For Loan Policy/Modification Of Mortgage to Increase Amount Of Mortgage (see page 12) DATE DOWN 1 - Date Down Endorsement For Owner's Policy (see page 13) V. Complete the text of the endorsement, as appropriate for the file. 3

4 Schedule A Changes: PRIOR EFFECTIVE DATE OF POLICY Enter the policy effective date. If, however, a prior final date down endorsement was previously issued, enter the new effective date from the last such endorsement. NEW EFFECTIVE DATE OF POLICY Enter the date being covered by the updated searches. If a final Date Down Endorsement is being prepared, the extended effective date should be the date of the recording of the instrument(s) which the customer has requested be covered. PARTY IN TITLE Show the name of the PARTY IN TITLE, as applicable from: The policy The most recently issued date down endorsement The examination of the updated searches. AMENDMENT(S) TO MORTGAGE If issuing a preliminary Date Down Endorsement, TO COME normally should appear. When issuing the final Date Down Endorsement, amend the language to reflect the recording information and make any other appropriate changes (for example, to reflect the precise name of the instrument or to provide a brief description of how the mortgage has been amended). Schedule B Changes: 4

5 Add or delete any schedule B exceptions or notes as would be appropriate based on the examination of the updated searches. Don t forget to change the real estate tax exception. Additional Information: The following paragraphs are the requirements and clearance that are suggested to be included in the date down endorsement if appropriate: THE COVERAGE AFFORDED BY THIS ENDORSEMENT WILL NOT COMMENCE PRIOR TO THE DATE ON WHICH ALL CHARGES PROPERLY BILLED BY THE COMPANY HAVE BEEN PAID. THE PROPOSED MORTGAGE MODIFICATION/ASSIGNMENT SHOULD BE RECORDED AND A LATER DATE COVERING THE RECORDING SHOULD BE REQUESTED SO THAT WE MAY UPDATE OUR SEARCHES AND ISSUE A REVISED DATE DOWN ENDORSEMENT. THIS ENDORSEMENT IS SUBJECT TO SUCH FURTHER EXCEPTIONS AS THEN MAY BE DEEMED NECESSARY. WE SHOULD BE FURNISHED THE FOLLOWING AND THIS ENDORSEMENT IS SUBJECT TO SUCH FURTHER EXCEPTIONS AS MAY BE DISCLOSED THEREBY: (1) AN ALTA LOAN AND EXTENDED COVERAGE OWNER'S POLICY STATEMENT EXECUTED BY ALL PARTIES HOLDING TITLE TO THE LAND DURING THE SIX MONTHS PRECEDING THE DATE OF THE ENDORSEMENT. NOTE: IF THE ENDORSEMENT IS TO COVER ADDITIONAL DISBURSEMENTS MADE PURSUANT TO THE MORTGAGE BEING INSURED, WE ALSO SHOULD BE FURNISHED SATISFACTORY EVIDENCE THAT SAID DISBURSEMENTS HAVE BEEN MADE. (2) IF CONSTRUCTION HAS BEEN PERFORMED ON THE LAND WITHIN THE LAST SIX MONTHS, SATISFACTORY EVIDENCE OF THE PAYMENT IN FULL OF THE COST OF FURNISHING ALL LABOR AND MATERIAL IN CONNECTION THEREWITH. (3) [REQUEST ADDITIONAL CLEARANCE, AS APPROPRIATE. CONSIDER, FOR EXAMPLE, THE FOLLOWING:] A CURRENT ASSESSMENT LETTER WHICH COVERS THE DATE OF RECORDING OF THE MORTGAGE MODIFICATION/ASSIGNMENT. 5

6 CORPORATE RESOLUTIONS WHICH AUTHORIZE THE MORTGAGE MODIFICATION TO BE INSURED AND A CURRENT CERTIFICATE OF GOOD STANDING. COPIES OF ANY AMENDMENTS TO THE PARTNERSHIP AGREEMENT WHICH HAVE BEEN ADOPTED SINCE, OR A STATEMENT THAT THERE HAS BEEN NO SUCH AMENDMENT. A CURRENT RENT ROLL Assuming that all of the relevant clearance has been received, any such language used should be deleted when preparing the final date down endorsement and appropriate notes to the file should be made. PRIORITY/SUBORDINATION/SCHEDULE B PART II ISSUES MORTGAGE POLICY ONLY: Although there are exceptions the basic rule in Illinois is that a recorded mortgage has no priority until it is disbursed. (That is the reason for the disbursement statement on the ALTA statement.) Modification to existing loans which do not involve the advancement of new funds should not change the original priority position of the lender. If new funds are being advanced as a part of the modification of the loan contact an underwriter of the company. Re Matters Which Previously Appeared on Schedule B Part II: If an unreleased mortgage, lease or other such matter appeared on Schedule B Part II on the original policy or on a prior date down endorsement and a mortgage assignment is to be insured, such matter may remain on Schedule B Part II without comment. If, however, a mortgage modification is to be insured, the customer should be advised on the preliminary date down endorsement that such mortgage/lease/etc. will be moved to Schedule B Part I unless a subordination agreement is recorded which subordinates said matter to the lien of the insured mortgage as modified. To warn the customer of this fact, the following note should be raised in such a situation: UPON THE RECORDATION OF THE PROPOSED MORTGAGE MODIFICATION, THE EXCEPTION(S) NOTED AT EXCEPTION(S) NO. AND APPEARING ON SCHEDULE B PART II ON THE POLICY WILL (UNLESS PROPERLY RELEASED OR TERMINATED) BE MOVED TO SCHEDULE B PART I UNLESS A NEW SUBORDINATION AGREEMENT IS RECORDED WHICH SUBORDINATES SAID MATTER(S) TO THE LIEN OF THE MORTGAGE AS MODIFIED. 6

7 Re Matters Appearing of Record After the Mortgage Being Insured: Taxes and special assessments, mechanics lien claims, demolition liens, receiver s liens, special service area ordinances, easements, pending proceedings and similar matters normally should appear on Schedule B Part I, regardless of whether a mortgage assignment or modification is to be insured. If a mortgage modification is to be insured, however, mortgages, liens, leases and other matters recorded after the recording of the mortgage also should be added so that they appear on Schedule B Part I of the Date Down Endorsement. This is because in most instances the mortgage modification should be viewed as jeopardizing the lender s priority vis-àvis intervening liens. When preparing a final Date Down Endorsement, if a new subordination agreement is recorded by which another mortgage, lease or other lien has fully subordinated their interest to the lien of the insured mortgage as modified, such subordinated lien should appear on an added Schedule B Part II. The appropriate language reads as follows: SCHEDULE B PART II IN ADDITION TO THE MATTERS SET FORTH IN PART I OF THIS SCHEDULE, THE TITLE TO THE ESTATE OR INTEREST IN THE LAND DESCRIBED OR REFERRED TO IN SCHEDULE A IS SUBJECT TO THE FOLLOWING MATTERS, IF ANY BE SHOWN, BUT THE COMPANY INSURES THAT, SUBJECT TO THE TERMS OF ANY SUBORDINATION AGREEMENT, SUCH MATTERS ARE SUBORDINATE TO THE LIEN OR CHARGE OF THE INSURED MORTGAGE UPON SAID ESTATE OR INTEREST: The following qualifying language should be used when a lessee has recorded a subordination agreement which, while subordinating the lease to the mortgage as modified, also contains non-disturbance provisions: SCHEDULE B PART II (MODIFIED) 7

8 IN ADDITION TO THE MATTERS SET FORTH IN PART I OF THIS SCHEDULE, THE TITLE TO THE ESTATE OR INTEREST IN THE LAND DESCRIBED OR REFERRED TO IN SCHEDULE A IS SUBJECT TO THE FOLLOWING MATTERS, IF ANY BE SHOWN, BUT THE COMPANY INSURES THAT SUCH MATTERS ARE SUBORDINATE TO THE LIEN OR CHARGE OF THE INSURED MORTGAGE UPON SAID ESTATE OR INTEREST PURSUANT AND SUBJECT TO THE TERMS OF THE SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT RECORDED AS DOCUMENT : Similar qualifying language should be used whenever a subordination agreement places conditions or limitations on the effectiveness of the subordination (for example, a provision whereby a mortgage is subordinated but only if the lender provides a notice to the subordinating lender upon a default). A Subordination Agreement may contain provisions binding upon the Insured or provisions which, if not followed, could nullify the subordination. Therefore, the following should be shown on Schedule B Part I: TERMS AND PROVISIONS OF A CERTAIN SUBORDINATION AGREEMENT MADE BY AND BETWEEN AND DATED AND RECORDED AS DOCUMENT NUMBER. Requests to show matters on Schedule B Part II of a Loan Policy which arise after the recording of the mortgage should be referred to an underwriter of the company. EFFECT OF PREVIOUSLY-APPROVED ENDORSEMENTS: A date down endorsement extends the Schedule A effective date for all purposes, including for the coverages provided by endorsements (unless either they or the date down endorsement specifically provide otherwise). As a result, it must be ascertained which endorsements were approved on the original policy, with particular attention being paid to previously-approved zoning endorsements, survey endorsements and creditors rights endorsements. If the customer does not require that such endorsements be updated, the following language should be added: NOTWITHSTANDING THE EXTENSION OF THE EFFECTIVE DATE OF THE POLICY NOTED ABOVE, THIS DATE DOWN ENDORSEMENT 8

9 DOES NOT EXTEND THE COVERAGE OF ANY ENDORSEMENT ATTACHED TO THE ORIGINAL POLICY. If the customer does require that such endorsements be updated, an additional premium should be considered and the zoning status/an updated survey/etc. must be reviewed, as appropriate. Similarly, if a creditors rights endorsement was approved on the original policy and a mortgage modification is being insured on the date down endorsement, an analysis of whether the modification itself presents a creditors rights risk must be performed. Survey coverages can be updated on the basis of an Affidavit of No Change to Survey (see section on Extended Coverage), and the ALTA statement. If there have been substantive changes since the date of the last survey a new survey meeting minimum requirements for ALTA/ACSM land title surveys should be required. 9

10 ENDORSEMENT ATTACHED TO AND FORMING A PART OF POLICY NUMBER ISSUED BY DATE DOWN ENDORSEMENT 1L (FOR LOAN POLICY) SCHEDULE A OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE EFFECTIVE DATE OF THE ABOVE POLICY IS HEREBY EXTENDED FROM TO. 2. THE ESTATE OR INTEREST DESCRIBED IN SCHEDULE A AT THE EXTENDED EFFECTIVE DATE OF POLICY IS VESTED IN:. 3. THE DESCRIPTION OF THE MORTGAGE OR TRUST DEED IN SCHEDULE A IS HEREBY AMENDED AS FOLLOWS: SCHEDULE B OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY ADDED: 2. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY DELETED: 3. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY AMENDED TO READ AS FOLLOWS: [AMENDED TAX EXCEPTION] [OTHER AMENDED EXCEPTIONS] THIS ENDORSEMENT IS MADE A PART OF THE POLICY AND IS SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF AND OF ANY PRIOR ENDORSEMENTS THERETO. EXCEPT TO THE EXTENT EXPRESSLY STATED, IT NEITHER MODIFIES ANY OF THE TERMS AND PROVISIONS OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT EXTEND THE EFFECTIVE DATE OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT INCREASE THE FACE AMOUNT THEREOF. BY AUTHORIZED SIGNATORY NOTE: THIS ENDORSEMENT SHALL NOT BE VALID OR BINDING UNLESS COUNTERSIGNED BY AN AUTHORIZED SIGNATORY. ENDORSEMENT 10

11 ATTACHED TO AND FORMING A PART OF POLICY NUMBER ISSUED BY DATE DOWN ENDORSEMENT 1A (CHANGE OF INSURED) SCHEDULE A OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE EFFECTIVE DATE OF THE ABOVE POLICY IS HEREBY EXTENDED FROM TO. 2. THE ESTATE OR INTEREST IN SCHEDULE A AT THE EXTENDED EFFECTIVE DATE OF POLICY IS VESTED IN:. 3. THE DESCRIPTION OF THE MORTGAGE OR TRUST DEED IN SCHEDULE A IS HEREBY AMENDED BY ADDING THE FOLLOWING: 4. IS SUBSTITUTED AS THE NAMED INSURED IN PLACE OF. SCHEDULE B OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY ADDED: 2. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY DELETED: 3. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY AMENDED TO READ AS FOLLOWS: [AMENDED TAX EXCEPTION] [OTHER AMENDED EXCEPTIONS] THIS ENDORSEMENT IS MADE A PART OF THE POLICY AND IS SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF AND OF ANY PRIOR ENDORSEMENTS THERETO. EXCEPT TO THE EXTENT EXPRESSLY STATED, IT NEITHER MODIFIES ANY OF THE TERMS AND PROVISIONS OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT EXTEND THE EFFECTIVE DATE OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT INCREASE THE FACE AMOUNT THEREOF. BY AUTHORIZED SIGNATORY NOTE: THIS ENDORSEMENT SHALL NOT BE VALID OR BINDING UNLESS COUNTERSIGNED BY AN AUTHORIZED SIGNATORY. 11

12 ENDORSEMENT ATTACHED TO AND FORMING A PART OF POLICY NUMBER ISSUED BY DATE DOWN ENDORSEMENT 1B (INCREASED INSURANCE) SCHEDULE A OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE EFFECTIVE DATE OF THE ABOVE POLICY IS HEREBY EXTENDED FROM TO. 2. THE ESTATE OR INTEREST IN SCHEDULE A AT THE EXTENDED EFFECTIVE DATE OF POLICY IS VESTED IN:. 3. THE DESCRIPTION OF THE MORTGAGE OR TRUST DEED IN SCHEDULE A IS HEREBY AMENDED BY ADDING THE FOLLOWING: 4. THE AMOUNT OF THE POLICY IS HEREBY INCREASED FROM $ TO $. SCHEDULE B OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY ADDED: 2. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY DELETED: 3. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY AMENDED TO READ AS FOLLOWS: [AMENDED TAX EXCEPTION] [OTHER AMENDED EXCEPTIONS] THIS ENDORSEMENT IS MADE A PART OF THE POLICY AND IS SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF AND OF ANY PRIOR ENDORSEMENTS THERETO. EXCEPT TO THE EXTENT EXPRESSLY STATED, IT NEITHER MODIFIES ANY OF THE TERMS AND PROVISIONS OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT EXTEND THE EFFECTIVE DATE OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT INCREASE THE FACE AMOUNT THEREOF. BY AUTHORIZED SIGNATORY NOTE: THIS ENDORSEMENT SHALL NOT BE VALID OR BINDING UNLESS COUNTERSIGNED BY AN AUTHORIZED SIGNATORY. 12

13 ENDORSEMENT ATTACHED TO AND FORMING A PART OF POLICY NUMBER ISSUED BY DATE DOWN ENDORSEMENT 1 (FOR OWNER S POLICY) SCHEDULE A OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE EFFECTIVE DATE OF THE ABOVE POLICY IS HEREBY EXTENDED FROM TO. 2. THE ESTATE OR INTEREST IN SCHEDULE A AT THE EXTENDED EFFECTIVE DATE OF POLICY IS VESTED IN:. 3. THE DESCRIPTION OF THE MORTGAGE OR TRUST DEED IN SCHEDULE A IS HEREBY AMENDED BY ADDING THE FOLLOWING: SCHEDULE B OF THE ABOVE POLICY IS HEREBY AMENDED AS FOLLOWS: 1. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY ADDED: 2. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY DELETED: 3. THE FOLLOWING EXCEPTION LETTER(S) ARE HEREBY AMENDED TO READ AS FOLLOWS: [AMENDED TAX EXCEPTION] [OTHER AMENDED EXCEPTIONS] THIS ENDORSEMENT IS MADE A PART OF THE POLICY AND IS SUBJECT TO ALL OF THE TERMS AND PROVISIONS THEREOF AND OF ANY PRIOR ENDORSEMENTS THERETO. EXCEPT TO THE EXTENT EXPRESSLY STATED, IT NEITHER MODIFIES ANY OF THE TERMS AND PROVISIONS OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT EXTEND THE EFFECTIVE DATE OF THE POLICY AND ANY PRIOR ENDORSEMENTS, NOR DOES IT INCREASE THE FACE AMOUNT THEREOF. BY AUTHORIZED SIGNATORY NOTE: THIS ENDORSEMENT SHALL NOT BE VALID OR BINDING UNLESS COUNTERSIGNED BY AN AUTHORIZED SIGNATORY. 13