Bulletin: NM000003

Dear Associates:

The Superintendent of Insurance has ordered the following changes in New Mexico effective June 1, 1997.

Mining Claims Exception

Standard Exception Number 7 is "Unpatented mining claims, reservations or exceptions in patents or in acts authorizing the issuance thereof, water rights, claims or title to water."

You may modify this exception by deleting "Unpatented mining claims, reservations or exceptions in patents or in acts authorizing the issuance thereof." To delete this language, you must review the patent of the land and you must except in Schedule B to any exceptions or reservations in the patent. Do not delete "Water rights, claims or title to water." [13 NMAC 14.6.23]

The charge to delete "Unpatented mining claims, reservations or exceptions in patents or in acts authorizing the issuance thereof" is $25.

Truth in Lending Endorsement

You may issue the Truth in Lending Endorsement (NM Form 48) on a Loan Policy, Construction Loan Policy or Leasehold Loan Policy, if:

1. You charge 9% of the full basic (original owner's) premium rate for the Endorsement; and,

2. You determine that the mortgagor (and borrower if different) is not an individual (natural person) or trust mortgaging one-to-four family residential improved or unimproved property.

If the land is one-to-four family property and the borrower or mortgagor is an individual or trust, call our underwriting personnel.

Commitment Premium

The premium for any Commitment to Insure is $40. Each extension of the Commitment for an additional six months is $40. [13 NMAC 14.9.1]

Standard Loan Policy with Pending Disbursement Clause

You may issue the Standard Loan Policy with a Pending Disbursement Clause at the simultaneous rate or subsequent issue rate, when those rates are applicable. [13 NMAC 14.9.13.6] If you delete the mechanic's lien exception, you must verify priority by an inspection at time of recording, or you must secure approval from underwriting personnel.

ALTA Residential Limited Coverage Junior Loan Policy (NM Form 45)

When you may issue

You may issue this Policy if all of the following conditions are met:

the land is one-to-four family residential;

the land is in a county recorded subdivision;

you receive a copy of any title company's owner's policy issued to the person shown as Grantee in the Policy (grantee in last recorded deed);

the loan to be made is no greater than $75,000; and,

the loan is a junior equity line of credit or junior mortgage. [13 NMAC 14.7.23]

Premium

The premium for the Residential Limited Coverage Junior Loan Policy is 40% of the full Basic Premium Rate (original owner's rate). In no event may the premium be less than $65.

Endorsements: Cannot be Issued

The Insurance Department has stated that the Supplemental Coverage Endorsement (JR1) (NM Form 46) and the Revolving Credit/Variable Rate Endorsement (JR2) (NM Form 47) will not be available until after the 1997 hearing. Because of this fact, we do not expect many requests for the Junior Loan Policy.

Explanation of Form

The ALTA Residential Limited Coverage Junior Loan Policy does not insure the validity of the insured's mortgage and it does not insure that the Grantee (who will generally be the mortgagor) owns the land. It does provide defense costs as stated therein and does insure a later owner of the debt secured by the insured's mortgage. This form is issued before the Junior Mortgage is executed; it is similar to a commitment to insure.

It insures these matters:

the Grantee named in the policy is named as the vestee or grantee in the last recorded deed purporting to convey the fee simple;

the land described in the policy is the same as the land described in the deed to the Grantee;

there are no outstanding recorded monetary liens (such as judgment liens, tax liens, deeds of trust and mortgages on the title, even if they attached before the Grantee's deed); and,

there are no ad valorem taxes or assessments owed to the government and secured by liens according to the local tax records.

Endorsement Form JR 1 (NM Form 46) (not yet available)
(ALTA Residential Limited Coverage Junior Loan Policy Supplemental Coverage)
This form is a continuation endorsement to the Junior Loan Policy. It is generally requested at the time the insured's mortgage is executed. It will show intervening liens or deeds recorded after the Policy and it will show the insured's mortgage.

Endorsement Form JR 2 (NM Form 47) (not yet available)
(Revolving Credit/Variable Rate to Residential Limited Coverage Junior Loan Policy)
This form endorses the Junior Loan Policy to provide insurance as to revolving credit and variable rate provisions in the insured's mortgage.

Underwriting Requirements

ALTA Residential Limited Coverage Junior Loan Policy (NM Form 45)

Search: You must search from the date of the execution of the last deed involving a sale for recorded "monetary liens" against the land and for the period of not less than 14 years for general liens (such as tax liens and judgment liens) against the "Grantor" named in the policy (person named as the grantee in the last recorded deed). You also must search for the last deed purporting to convey the land to determine the "Grantee." You must secure a tax and assessment search to reflect the current tax information.

"Amount of Insurance:" This is the amount requested by the lender; it should be the proposed loan amount. Do not issue this Junior Loan Policy if the Amount of Insurance will exceed $75,000.

"Name of Insured:" This is the proposed lender which will receive a junior mortgage. Do not issue this Junior Loan Policy without underwriter approval unless the Insured is an institutional lender. Do not issue to a individual without underwriter approval. Do not add "its successors and assigns" without underwriter approval.

"Date of Policy:" This is the date through which you examine title before issuing the Junior Loan Policy. This date generally precedes the date of issuance of the insured's mortgage.

"Grantee:" This person is the owner according to the last conveyance (generally deed) in your local real property records. You need to search only for the last recorded deed. The Junior Loan Policy does not insure that the Grantee owns the land. If the last deed purports to convey only an undivided interest, you must show the other "Grantees" of the remaining undivided interest. Some insureds may require that the Junior Loan Policy refer to the deed; if so you may add after the name of the "Grantee" words such as "pursuant to deed dated [here insert deed date] from [name of grantor] recorded [here insert date of recording and recording information]." You may attach the deed if requested; however, the Junior Policy does not require that you attach the deed or monetary liens.

"The land referred to in this policy is described as follows:" This is the legal description of the land. You must verify that this description also is the same description appearing in the deed to the "Grantor." If your insured requires a reference to the Property Address on the Junior Loan Policy, you may add after the description words such as "Property address of the land is:_______." You must review the tax search or certificate to insure the address.

"Exceptions:" You must show all outstanding recorded monetary liens under the "Exceptions." Monetary liens include judgment liens, child support liens, federal tax liens, state and local tax liens, other governmental liens, mortgages, deeds to secure debt, deeds of trust, and notices of overdue subdivision or condominium maintenance assessments. Monetary liens do not include covenants, conditions and restrictions, condominium declarations or easements; monetary liens do include specific recorded notices of overdue assessments. You need only to search for outstanding recorded monetary liens (1) recorded on or after the date of the execution of the last deed involving a sale (generally this is the deed to the Grantor), and (2) against the Grantor according to your general name search (for judgments, tax liens, etc.) for the period of not less than 14 years. If you do not have enough room on the form, you may refer to and attach an Addendum or Exhibit. You may attach copies of the recorded Monetary Liens if your insured requests, but this Policy does not require that copies be attached. As a courtesy to the insured, you should show as an Exception or in a separate letter to the insured a lis pendens or notice of bankruptcy recorded after the deed to the Grantee; however, the Policy does not insure as to these matters.

Tax Information: You must secure a tax and assessment search. You must show all taxes and governmental assessments that are a lien on the title according to the search. If the current year's taxes are not known but are a lien, you may except to "Taxes for the year ____, not yet due and payable," in order to accommodate the insured. You may show additional tax information if requested by your insured, such as Tax Parcel Number, Assessed Value of Land/Improvements, Exemptions (including Type and Amount), and Amount of Taxes for prior years. If you do not have enough room on the form, you may refer to and attach an Addendum or Exhibit.

(After approval at 1997 hearing.) Endorsement Form JR 1 (ALTA Residential Limited Coverage Junior Loan Policy Supplemental Coverage) (NM Form 46). You may issue this Endorsement after you issue the Junior Loan Policy.

Paragraph A(1): Under this paragraph you show deeds and other conveyances of the title recorded subsequent to the Date of Policy of the Junior Loan Policy. You examine title from the Date of Policy to provide this coverage.

Paragraph A(2): Under this paragraph you show monetary liens found in the search of the title and in the general name search against the "Grantor" after the Date of the Junior Loan Policy. You also do your 14-year general name search for liens against the name of any subsequent grantee shown in a document excepted in Paragraph A(1).

Paragraph B: Under this paragraph you show the insured's mortgage which has been recorded or which is furnished to you for recording. You do not need to show recording information if the insured furnishes the original mortgage to you for recording and if the insured requires immediate issuance of the Endorsement. If you receive the original mortgage for recording, you may issue Endorsement JR 2 immediately after doing your search to the most recent date possible and prior to receipt of the recording information of the insured's mortgage if the insured requires such immediate issuance.

If you are requested to issue this Endorsement before the execution of the insured's mortgage, you should delete Paragraph B. If you then issue a second or later Endorsement JR 1, you should include all exceptions appearing in paragraph A of the prior Endorsement(s) JR 1.

Paragraph C: If the insured request issuance of the Endorsement JR 2 (Revolving Credit/Variable Rate), you may mark this box. You do not need to attach a copy of Endorsement JR 2, unless the insured requires a copy. The mortgage must state the maximum amount of debt for future advances.

Date of Endorsement: This is the date through which your examination is made. You may date the Endorsement as of the date of the insured's mortgage and subsequent to the most recent date of examination possible, if (1) the insured requires that the Endorsement be issued before the recording information is possible and before an examination through that date is possible and (2) you receive the original mortgage for immediate recording. If you are requested to issue this endorsement before the execution and delivery of the insured's mortgage for recording, delete the phrase "Date of Endorsement is the date shown above or the date of recording of the insured's mortgage." Do not issue JR 1 (NM Form 46) until approved pursuant to 1997 hearing.

(After approval at 1997 hearing.) Endorsement Form JR 2 (Revolving Credit/Variable Rate Endorsement to Residential Limited Coverage Junior Loan Policy). (NM Form 47). You may issue this Endorsement when you issue the Endorsement JR 1, if you describe the insured's mortgage in the JR 1. The mortgage must state the maximum amount of debt for future advance. You do not need to attach this Endorsement to the Junior Loan Policy or to Endorsement JR 1 unless the insured requires that this Endorsement be attached; you may simply mark the Box C of Endorsement JR 1. Do not issue JR2 (NM Form 47) until approved pursuant to the 1997 hearing.