Basic Understanding of the ALTA 2006 Owner s Policy & Loan Policy

Transcription

1 Basic Understanding of the ALTA 2006 Owner s Policy & Loan Policy Montana Land Title Association 2013 Fall Education Seminar November 7, First American Title Insurance Company DISCLAIMER THIS PRESENTATION IS THE PROPERTY OF FIRST AMERICAN TITLE INSURANCE COMPANY AND IS INTENDED ONLY FOR REVIEW BY FIRST AMERICAN EMPLOYEES AND AGENTS. YOU ARE NOT AUTHORIZED TO SHARE THIS INFORMATION WITHOUT THE EXPRESS WRITTEN CONSENT OF AN OFFICER OF FIRST AMERICAN TITLE INSURANCE COMPANY. THE CONTENT HEREIN DOES NOT CONSTITUTE LEGAL ADVICE, AND IF YOU NEED SPECIFIC LEGAL ADVICE, PLEASE CONSULT AN ATTORNEY. 2 Today s Program What is a Title Commitment What is a Title Policy Elements of a Title Policy Covered Risks-Explanation of Coverage 3 1

2 What is a Title Commitment? A contract between the insurer and proposed insured Insurer will issue the policy (subject to terms, conditions, requirements and exceptions) in exchange for payment of the premium and satisfaction of the requirements 4 What is a Title Commitment? Any policy we issue will have the following exceptions unless they are taken care of to our satisfaction 1. Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records. 2. Any facts, rights, interest, or claims which are not shown by the public records but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof. 3. Easements, claims of easement or encumbrances which are not shown by the public records. 4. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the title including discrepancies, conflicts in boundary lines, shortage in area, or any other facts that would be disclosed by an accurate and complete land survey of the land, and that are not shown in the public records. 5. (a) Unpatented mining claims; (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a),(b), or (c) are shown by the public records. 6. Any liens, or rights to a lien, for services, labor or materials theretofore or hereafter furnished, imposed by law and not shown by the public records. 7. Any right, title or interest in any minerals, mineral rights, or related matters, including but not limited to oil, gas, coal, and other hydrocarbons, sand, gravel or other common variety materials, whether or not shown by the public record. 5 What is a Title Policy? Policy of indemnity for actual loss caused by defects in title For a one time premium, policy is issued free of items insurer is willing to remove subject to exceptions and exclusions Policy lasts for duration of insurable interest 6 2

3 What is a Title Policy NOT? It is NOT an abstract of title It is NOT a representation as to the condition of title MCA Common Policy Forms in Montana 2006 ALTA Owner s Policy (6/17/06) 2006 ALTA Loan Policy (6/17/06) ALTA Short Form Residential Loan Policy (06/16/07) ALTA Homeowner s Policy of Title Insurance (03/08/10) ALTA Expanded Coverage Residential Loan Policy (07/26/10) Fourth Generation ALTA Residential Limited Coverage Junior Loan Policy (10/19/96) Standard Mortgages Assurance of Record Title (SMART) policy (ALTA 2006 Policy form) 8 Elements of the Policy Jacket Covered Risks What is covered Exclusions Limitations to coverage (all exclusions apply to all covered risks) Conditions Explanations, limitations and definitions Schedule A Who, what, when, where, of the deal Schedule B General and specific exceptions from coverage Schedule B-II Subordinate matters (Loan Policy) Endorsements Enhancements to coverage Underwriting Considerations 9 3

4 Covered Risks 10 Covered Risks in ALTA Owner s Policy (06/17/06) 14 Covered Risks in ALTA Loan Policy (06/17/06) All Covered Risks are subject to Conditions, Exclusions and Exceptions from coverage 10 Covered Risks Company insures against loss or damage sustained or incurred by the Insured by reason of any of the listed Covered Risks As of Date of Policy Limited to the Amount of Insurance Measure of loss diminution in value All exclusions apply to all covered risks 11 Covered Risk 1: Vesting Title being vested other than as stated in Schedule A No specific exclusion 12 4

5 Any defect in or lien or encumbrance on the Title. This Covered Risk includes but is not limited to insurance against loss from 13 (a) A defect in the Title caused by (i) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation; Example: Forged deed Applies to both the current transaction as well as those deeds in the chain of title 14 (a) A defect in the Title caused by (ii) failure of any person or Entity to have authorized a transfer or conveyance; Examples: Corporate resolution; intent of members of LLC 15 5

6 (a) A defect in the Title caused by (iii) a document affecting Title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered; Examples: Defective acknowledgements 16 (a) A defect in the Title caused by (iv) failure to perform those acts necessary to create a document by electronic means authorized by law; Example: e-recording 17 (a) A defect in the Title caused by (v) a document executed under a falsified, expired, or otherwise invalid power of attorney; Statutory form-montana Code Acceptance and Reliance - Montana Code

7 (a) A defect in the Title caused by (vi) a document not properly filed, recorded, or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or Example: Posting errors 19 (a) A defect in the Title caused by (vii) a defective judicial or administrative proceeding. Examples: Tax Sales,Foreclosures,QTA 20 (b) The lien of real estate taxes or assessments imposed on the Title by a governmental authority due or payable, but unpaid. Examples:Missed taxes or SID assessment 21 7

8 (c) Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term encroachment includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land. Example: Survey coverage 22 Covered Risk 3: Unmarketable Title Can property be sold to an independent third party? Will a reputable title company insure again? Will a mortgage company lend money using this property as collateral? No specific exclusion maybe Exclusion 3 23 Covered Risk 4: Access No right of access to and from the Land. Legal access v. actual access Example: land on top of cliff with highway at bottom Endorsement ALTA or ALTA ; Eagle policy No specific exclusion 24 8

9 Covered Risk 5: Ordinances/Government Regulations The violation or enforcement of any law, ordinance, permit or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (a) the occupancy, use, or enjoyment of the Land; (b) the character, dimensions, or location of any improvement erected on the Land; (c) the subdivision of land; or (d) environmental protection If a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice. 25 Covered Risk 5: Ordinances/Government Regulations Key is that notice must be recorded Exclusion 1(a) reiterates that any of the violations listed in Covered Risk must be recorded as of the Date of Policy in order for coverage to apply Example: Notice of environmental violation or intent to enforce 26 Covered Risk 6: Government Police Power An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement action referred to in that notice. Exclusion 1(b) reiterates that notice of the enforcement action must be recorded Example: Drug forfeiture 27 9

10 Covered Risk 7: Eminent Domain The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records. Exclusion 2 reiterates any taking is covered only if notice was recorded Example: Government taking for street widening First American Title Insurance Company Covered Risk 8: Government Taking Any taking by a governmental body that has occurred and is binding on the rights of a purchaser for value without Knowledge. Condition 1(f) Owner s /1(h) Loan defines Knowledge Exclusion 2 reiterates that any taking is covered only if notice was recorded Example: Destroying a house in unsafe condition 29 Covered Risk 9: Creditors Rights Title being vested other than as stated in Schedule A or being defective (a) as a result of the avoidance in whole or in part, or from a court order providing an alternative remedy, of a transfer of all or any part of the title to or any interest in the Land occurring prior to the transaction vesting Title as shown in Schedule A because that prior transfer constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency, or other similar creditors rights laws; or 30 10

11 Covered Risk 9: Creditors Rights Title being vested other than as stated in Schedule A or being defective (b) because the instrument of transfer vesting Title as shown in Schedule A constitutes a preferential transfer under federal bankruptcy, state insolvency, or similar creditors rights laws by reason of the failure of its recording in the Public Records (i) to be timely, or (ii) to impart notice of its existence to a purchaser for value or to a judgment or lien creditor. Exclusion 4 Transaction we are insuring Covered Risk 13 in Loan Policy 31 Covered Risk 9: Creditors Rights Examples: Deed in lieu of foreclosure, short sale, flip transaction 32 Covered Risk 10: Gap Coverage Any defect in or lien or encumbrance on the Title or other matter included in Covered Risks 1 through 9 that has been created or attached or has been filed or recorded in the Public Records subsequent to Date of Policy and prior to the recording of the deed or other instrument of transfer in the Public Records that vests Title as shown in Schedule A. Covered Risk 14 in Loan Policy 33 11

12 Loan Policy of Title Insurance Loan Policy has 4 additional Covered Risks and 2 additional Exclusions Covered Risks 9, 10, 11 and 12 of the Loan Policy are not found in Owner s Policy 34 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title. This Covered Risk includes but is not limited to insurance against loss from any of the following impairing the lien of the Insured Mortgage 35 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (a) forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation; Example: Forged mortgage 36 12

13 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (b) failure of any person or Entity to have authorized a transfer or conveyance; Example: Failure of appropriate officer of corporate owner to sign mortgage document 37 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (c) the Insured Mortgage not being properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered; Example: Mortgage document not executed; defective acknowledgement 38 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (d) failure to perform those acts necessary to create a document by electronic means authorized by law; Example: e-recording 39 13

14 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (e) a document executed under a falsified, expired, or otherwise invalid power of attorney; Example: Statutory form 40 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (f) a document not properly filed, recorded, or indexed in the Public Records including failure to perform those acts by electronic means authorized by law; or Example: Failure to record 41 LP Covered Risk 9: Invalidity/Unenforceability of Mortgage (g) a defective judicial or administrative proceeding. Example: Lack of personal service on defendant 42 14

15 LP Covered Risk 10: Lack of Priority The lack of priority of the lien of the Insured Mortgage upon the Title over any other lien or encumbrance. Example: Senior mortgage files foreclosure action 43 LP Covered Risk 11: Lack of Priority The lack of priority of the lien of the Insured Mortgage upon the Title (a) as security for each and every advance of proceeds of the loan secured by the Insured Mortgage over any statutory lien for services, labor, or material arising from construction of an improvement or work related to the Land when the improvement or work is either (i) contracted for or commenced on or before Date of Policy; or (ii) contracted for, commenced, or continued after Date of Policy if the construction is financed, in whole or in part, by proceeds of the loan secured by the Insured Mortgage that the Insured has advanced or is obligated on Date of Policy to advance; and Example: Construction liens 44 LP Covered Risk 11: Lack of Priority The lack of priority of the lien of the Insured Mortgage upon the Title (b) over the lien of any assessments for street improvements under construction or completed at Date of Policy 45 15

16 LP Covered Risk 12: Lack of Priority The invalidity or unenforceability of any assignment of the Insured Mortgage, provided the assignment is shown in Schedule A, or the failure of the assignment shown in Schedule A to vest title to the Insured Mortgage in the named Insured assignee free and clear of all liens Example: Assignee s inability to foreclose on Insured Mortgage 46 Underwriting Support If any questions, do not hesitate to contact your First American underwriter for assistance. Operators are standing by