TITLE POTPOURRI
Presented by:
Douglas G. Smith
V.P. and Associate Sr. Underwriter
April 23, 2013
SPLIT CLOSINGS
MARKING UP THE COMMITMENT/POLICY EXCEPTIONS

Seller’s Agent

Record deed or get indemnity from Underwriter of
disbursing agent if you turn over deed to seller’s title
company.

Do not mark-up commitment for buyer as you are not
disbursing the proceeds (being done by disbursing
agent/lender’s title company). A marked-up commitment
would act as an indemnity under the Mutual Indemnity
Agreement.

Do not remove gap exception (Definition of gap: time frame
between the date of the commitment and the date the
vesting instrument is recorded).
MARKING UP THE COMMITMENT/POLICY EXCEPTIONS


Seller’s Agent, cont.

Review title before issuing policy to determine whether the
deed and discharges of mortgages/liens have been recorded.

Wait for either the mortgages/monetary liens to be discharged
before issuing owner’s policy or issue policy with exceptions for
all open matters.

Take exception to all gap matters, if any on policy.
Note: If the disbursing agent/lender’s title company is
issuing a Stewart commitment, get a copy of the title
company’s HUD showing the items paid for, or marked-up
commitment showing the items deleted and you may then
provide gap coverage for the buyer and issue the policy free
of the monetary liens.
HOMEOWNER’S POLICY
HOMEOWNER’S POLICY OF TITLE INSURANCE
FOR 1-4 FAMILY RESIDENCE (REVISED 2/3/10)


Covers land upon which is located a one-to-four
family residence. Neither vacant nor commercial
property is eligible to receive this product. The
product can be used for recreational or
investment property if owned by a “Natural
Person”.
The insured must be a “Natural Person” (a
human being and not a commercial or legal
organization or entity). Natural person includes a
trustee of a trust.
HOMEOWNER’S POLICY OF TITLE INSURANCE
FOR 1-4 FAMILY RESIDENCE (REVISED 2/3/10)


Don’t provide product for recent construction
(sale from the builder).
[See affirmative coverage provision #18.]
Policy date is shown as the date of closing,
though this product provides gap coverage. You
must therefore close the transaction before you
can provide the product, or you take exception to
gap matters when you issue the policy.
HOMEOWNER’S POLICY OF TITLE INSURANCE
FOR 1-4 FAMILY RESIDENCE (REVISED 2/3/10)

There are 32 some coverage provisions included
in the jacket.
This is a more expensive product than the ALTA
Owner’s Policy. Purchase Agreement should
probably contemplate that this product is to be
utilized specifically before issuance.
[Was notice provided to the customers that a less
expensive product was available…class action law
suits are made of such issues.]

HOMEOWNER’S POLICY OF TITLE INSURANCE
FOR 1-4 FAMILY RESIDENCE (REVISED 2/3/10)

There are various differences between the ALTA
Owner’s Policy and the Homeowner’s Policy:

Insures actual vehicular and pedestrian access. ALTA
Owner’s insures “record” access.

Provides maximum dollar limit of liability and deductibles
(like casualty insurance) over certain matters of coverage
such as:




#16 – violation of subdivision laws or regulations;
#18 – forced to remove or remedy your existing structure
because structure was built without obtaining a building
permit from the proper government office (new construction
problem);
#19 – forced to remove or remedy your existing structure
because they violate an existing zoning law or regulation;
#21 – forced to remove or remedy your existing structure
because the structures encroach onto your neighbor’s land
[casualty coverages].
HOMEOWNER’S POLICY OF TITLE INSURANCE
FOR 1-4 FAMILY RESIDENCE (REVISED 2/3/10)

Differences between the Owner’s and Homeowner’s Policy,
continued:

Coverage for your neighbors’ structures encroaching onto your
land.

Coverage for your existing structures which encroach into
easements or setbacks.

Coverage for damage to the land as a result of future exercise
of a right of others to extract or develop mineral interests.

Retroactive reassessment of taxes because of construction or a
change in ownership unless excepted in Schedule B. Be sure to
use the Stewart Title tax exception. See bulletin MI2009006.

The residence with the address shown on Schedule A is not
located upon the land [Location endorsement].
HOMEOWNER’S POLICY OF TITLE INSURANCE
FOR 1-4 FAMILY RESIDENCE (REVISED 2/3/10)



Schedule A provides that Covered Risk 16, 18, 19 and
21 have deductible amounts and varying maximum
coverage up to $25,000.00.
Schedule B is set up the same for specific exceptions
though it is preferable to get an Owner’s Affidavit or
Estoppel and remove the pre-printed exceptions in
Schedule B. Showing them creates an ambiguity in
the coverage which is inconsistent with the design of
the Homeowner’s Policy of Insurance to cover the
matters addressed in the pre-printed standard
exceptions.
A survey is not required to provide survey coverage
on the Homeowner’s policy.
GAP COVERAGE ON OWNER’S
POLICIES AND INSTANT OWNER’S
POLICIES
GAP COVERAGE ON OWNER’S POLICIES
AND INSTANT OWNER’S POLICIES

ALTA Owner’s policy (6-17-06), ALTA Loan Policy (617-06) and Short Form Loan Policy (rev. 12-03-12) all
have equivalent of the following affirmative coverage
language:

Any defect in or lien or encumbrance on the Title or other
matter included in Covered Risks 1 through __ 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 Insured Mortgage (or deed or other
instrument of transfer) in the Public Records. [Corollary of
the gap exception].

This constitutes automatic “gap” coverage to the insured.

However, we have also automatically included a “gap”
exception in Schedule B of the Commitment.
GAP COVERAGE ON OWNER’S POLICIES
AND INSTANT OWNER’S POLICIES

Continued…

To engage the jacket coverage provision, we have to close
the transaction and mark-up the commitment by crossing
out or marking “deleted” next to the gap exception at
closing.

If we do not close the transaction (also see “Split Closings”)
you do not mark-up the commitment; you perform a review
of title prior to the issuance of the policy and you take
exception to all matters coming on in the gap period.

On Short Form Loan Policies, you don’t have to use the
historic “formula” for the policy date: “Date of closing or the
date in which the mortgage is recorded, whichever is later.”
Just put in the date of closing because the gap coverage is
already provided in the jacket.
[YOU MUST CLOSE THE TRANSACTION]
GAP COVERAGE ON OWNER’S POLICIES
AND INSTANT OWNER’S POLICIES

Continued…

On instant owner’s policies (policies issued at
closing), you don’t have to use the formula anymore:
“Date of closing or the date in which the deed vesting
title in the insured is recorded, whichever is later.”
Just put in the date of closing because the gap
coverage is already provided in the jacket.
[YOU MUST CLOSE THE TRANSACTION]

Interestingly this automatic gap coverage provision is neither
present in the Homeowner’s Policy of Title Insurance nor the
Expanded Coverage Residential Loan Policy.
NEW ALTA FORMS
NEW ALTA FORMS

U.S. Policy Form 9-28-91, Revised 12-03-12


Merely adds creditor’s rights protection for prior
conveyances equivalent to the ALTA Owner’s Policy
paragraph #9.
Short Form Residential Loan Policy One-to-Four
Family, Revised 12-03-12.
Adds another “check the box” endorsement 30-06
Shared Appreciation.
 Adds additional coverage language in exception #4 of
Schedule B for “other subsurface substances.”

NEW ALTA FORMS

ALTA Endorsement 32.2-06 (Construction Loan – Loss of
Priority – Insured’s Direct Payment) Adopted 8-1-12
Requires direct disbursement from the lender to the trades:
does not cover 2nd or 3rd tier claimants.
 Stewart doesn’t use the ALTA 32-06 series of construction
endorsements but rather its own pending disbursement clause
and the Construction Loan Disbursement Endorsement E3583.


Endorsement 37-06 (Assignment of Rents or Leases)
Adopted 12-03-12

Endorsement 38-06 (Mortgage Tax) Adopted 12-03-12

NOTE: Stewart Title will be sending out a Bulletin
instructing its Agents to begin using the new forms shortly.
THANK YOU FOR ATTENDING!
Questions??
Please contact:
Doug Smith
doug.smith@stewart.com
734-469-9461
800-221-8710 ext. 9461