Bulletin: MI2011005

Dear Associates:

Please find attached a copy of the Michigan Mutual Indemnity Agreement (MIA).   This Bulletin is being sent as a reminder to review all the provisions of the Agreement and the one-page User Guide.  Specifically, please note that, in paragraph d. of the CONDITIONS ON THE OBLIGATION TO INDEMNIFY, the Indemnitor title company is only responsible up to the face amount of their policy of insurance, to wit: 

d. The liability of the Indemnitor is limited to the face amount and the terms of the Indemnitor’s policy or $250,000.00, whichever is less (emphasis added). 

The face amount of the underlying indemnifying policy should always be a concern when insuring the new transaction.  [You compare the potential loss for the defect to the face amount of the underlying policy and the amount of the new policy.  Are you increasing your liability?]    

As a result of the MERS decision [please see Stewart Bulleting MI2011003], this provision in the MIA impacts our ability to insure refinances or sales out from an REO purchaser who purchased property involving a MERS foreclosure.  As provided in MI2011003, we may rely on an owner’s policy to indemnify us in a resale or refinance under the MIA.  But, as described above, we must take note of the amount of the owner’s policy and compare that to the amount of the proposed transaction.  If the face amount of the owner’s policy is less than the proposed transaction, then the Company could sustain liability above the amount of the indemnity.  [Here, your defect is a void foreclosure.] 

In the event there is a difference between the face amount of the Indemnitor’s owner’s policy and the amount of the new transaction, you must get Legal Department approval to rely on the owner’s policy as an indemnification under the MIA.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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