Bulletin: NY000051

Dear Associates:

Recent days have seen a flurry of activity from the insurance department, with the approval of several new and modified endorsements, some rate changes, and amendments to the TIRSA Rate Manual.

This Bulletin is limited in scope to the changes related to Reverse Mortgages.

Rate Manual Part 1, Section 6 (Minimum Insurance: Mortgage Policy) has been amended by the addition of new subsection (C) as follows:

(C) A mortgage policy of title insurance insuring a Reverse Mortgage (as defined in §§280 and 280-a of the Real Property Law) may not be issued in an amount less than the greater of (1) the fair market value of the insured premises at the time the mortgage is made, or (2) the maximum amount of principal as stated in the mortgage.

This new provision eliminates the possibility of the application of the provisions of subsection (B) (which deals with minimum insurance where there is negative amortization toinsurance of reverse mortgages. Reverse mortgages generally have no cap on negative amortization, and would have been impossible to insure if subsection (B) applied. (Our underwriting position was that it could not apply, but we welcome the explicit clarification.)

Also approved was the form of the Reverse Mortgage Endorsement, which is to be issued when insuring a reverse mortgage, at a charge of $25.00. The insurance afforded by the endorsement relates to the validity of the loan documentation, but does not provide the lender with coverage against a violation by the lender of other requirements of the statutes.

With the exception of reverse mortgages made on standard forms under the federal HECM program (which qualify under the New York Reverse Mortgage statute), the lender's forms of loan documentation (all loan documents, and not just the mortgage) must be reviewed by counsel for compliance with §§280 and 280-a of the Real Property Law before insuring a reverse mortgage.

A copy of the endorsement for interim use is available through the reference section at the end of this bulletin.

If lender requires policy to be issued at closing, a recording endorsement must be issued promptly upon obtaining recording information.

ALTA '92 Loan Policy Schedule A - Amount of Insurance - Effective August 15, 1994, the amount of insurance must be in compliance with new Section 6 (C) added to Part 1 of the TIRSA Rate Manual, which reads as follows:

• (C) A mortgage policy of title insurance insuring a Reverse Mortgage (as defined in §§ 280 and 280-a of the Real Property Law) may not be issued in an amount less than the greater of (1) the fair market value of the insured premises at the time the mortgage is made, or (2) the maximum amount of principal as stated in the mortgage.
  
  In order to establish the fair market value, a copy of the lender's appraisal should be obtained, or some other evidence of the present fair market value.

ALTA '92 Loan Policy, Schedule A Item 4, describing the insured mortgage can read as follows:

• Mortgage dated __/__/__, made by ______________________ to the Insured and to be recorded in _________________________________________________,
  
  The face amount of the mortgage is not stated in this section of the policy.

The following endorsements are to be issued in all cases. If any of the endorsements cannot be issued, that must be noted on the initial issuance of the title report:

• Standard New York Endorsement (Loan Policy) (For ALTA 10/17/92)
  at no extra charge
  
  TIRSA Reverse Mortgage Endorsement (8/15/94)
  premium $25.00

Some lenders may require:

• TIRSA Environmental Lien Endorsement 8.1 (9/1/93) or
  TIRSA Environmental Lien Endorsement 8.1 (New York City ) (8/15/94)
  premium $25.00
  
  
• ALTA Endorsement 9 (Restrictions, Encroachments, Minerals (10/27/92) NY (9/1/93)
  premium 10% of regular loan policy.
  Readers Must Note on reader sheet if there is a problem issuing an ALTA-9
  
  
• TIRSA Survey Endorsement (Loan Policy) (9/1/93)
  premium 10% of regular loan policy.
  Affidavit must be signed by borrower
  
  
• In appropriate cases (condominiums, PUDs, etc.), the appropriate endorsement should be pointed out to the lender, and the appropriate charge shown on the bill.

Closer Instructions

Reverse Mortgages - Transamerica HomeFirst, Inc.

Most proofs should have been obtained prior to closing, and the report should be pre-marked to so indicate. Your main concerns should be:

• obtaining photo I.D. and an attendance sheet;
  
  
• taking acknowledgments;
  
  
• obtaining any proofs not previously obtained;
  
  
• counting pages on the mortgage and completing the title bill; make sure that any taxes to be paid, escrows, and mortgage payoffs are appropriately noted;
  
  
• making sure you obtain two (2) original executed §252-a affidavits (exemption from mortgage tax for reverse mortgages), as well as the original mortgage; and
  
  
• delivering the original policy and marked up report.

If there is a mortgage payoff, pickup charges are limited to the amount set forth on the title bill.

The marked-up report and closing papers must be returned to us promptly, and arrangements for the second continuation must be made.