Guideline: ALTA Expanded Coverage Residential Loan Policy (2-3-10)

Explanation:

The ALTA Expanded Coverage Residential Loan Policy provides more coverage to lenders than the 2006 ALTA Loan Policy. This Policy is similar to the Homeowner's Policy of Title Insurance. You should use the most recent version of the ALTA Expanded Coverage Residential Loan Policy that is available in your jurisdiction.

The ALTA Expanded Coverage Residential Loan Policy includes the following standard coverages (Covered Risks):

1.  Automatic incorporation of the following ALTA Endorsements:

• ALTA Endorsement 4-06 (or 4.1-06) (Condominium);
• ALTA Endorsement 5-06 (or 5.1-06) (Planned Unit Development);
• ALTA Endorsement 6-06 (Variable Rate Mortgage);
• ALTA Endorsement 6.2 (Variable Rate Mortgage - Negative Amortization);
• ALTA Endorsement 8.1-06 (Environmental Protection Lien); and,
• ALTA Endorsement 9.3-06 (Restrictions, Encroachments, Minerals) [on the 01/01/08 form and the 02/03/10 form] or ALTA Endorsement 9-06 (Restrictions, Encroachments, Minerals) [on the 07-26-10 (Revised 12-02-13) form].

You do not need to mark boxes or attach these endorsements: these endorsements are automatically included.

2.  Revolving credit coverage for future advances.

3.  Modification coverage that automatically covers advances made or changes in the interest rate subsequent to a modification of the insured mortgage after Date of Policy.

4.  Zoning coverage (similar to ALTA Endorsement 3.1-06).

5.  Building permit coverage (without any separate cap or deductible).  

6.  Subdivision Map Act coverage.

7.  Post-policy forgery coverage of the lender's signature on enumerated documents.  

8.  Location coverage of street address and residence.

9.  Tax parcel coverage insuring that the land is not taxed with other property.

10.  Survey coverage that includes coverage with respect to post-policy encroachments.  

11.  Coverage against damage to improvements from use of surface for extraction of minerals, water or other substances (similar to coverage included in ALTA 9.3-06).

12.  Coverage against supplemental real estate taxes.

13.  Usury coverage if the Insured Mortgage is insured as a first mortgage.

14.  Coverage of perimeter boundaries of map, if any map is attached.

15.  Insurance of actual pedestrian and vehicular access.

16.  25% increase in insurance coverage, so that insurance is 125% of amount stated in Schedule A.

17.   10% increase in insurance coverage, if Company attempts pursuant to the policy to establish title and is unsuccessful.

18.  Covered Risks as to Electronic Transactions, such as failure to comply with requirements to create documents electronically and failure to properly record a document electronically.

19.  Coverage that real estate taxes and assessments are not due and payable, but unpaid.

20.  Coverage against survey matters, because of: "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."

21.  Covered Risks insuring against notices of governmental enforcement, notices of legal violation and notices of eminent domain proceedings that are recorded in the Public Records.

22.  Creditors' rights coverage because of prior fraudulent transfers, preferential transfers, and ineffective or delayed recording.

23.  Gap coverage between the date of settlement (Date of Policy) and date of recording.

24.  Coverage against the lack of priority of the lien of the Insured Mortgage over the lien of any assessments for street improvements under construction or completed at Date of Policy.  This is the same as ALTA Endorsement 1.

25.  The definition of "Indebtedness" is broadened, and includes future advances (as to which there is separate insurance of priority).

26.  There is no non-cumulative liability clause in the Policy.27.  There is no pro tanto reduction clause by payment of principal, and therefore no need for a Last Dollar Endorsement.

28.  The Policy clarify the arbitration clause. The Policy that is subject to mandatory arbitration upon request and compliance with applicable law has been raised from $1 million to $2 million. The rules for arbitration will be the ALTA Title Insurance Arbitration Rules (which incorporate the National Arbitration Forum rules except as modified). You may find the Title Insurance Arbitration Rules at www.alta.org/standards/arbitration1.1.06.cfm.

The ALTA Expanded Coverage Residential Loan Policy generally will have a premium charge of 110% of the applicable cost of the Standard Loan Policy (unless a higher rate is filed in your state), plus any endorsement charges for the incorporated endorsements applicable to the transaction. The additional premium charge, other than endorsement charges, typically will not apply if the ALTA Expanded Coverage Loan Policy is issued simultaneously with the ALTA Homeowner's Policy of Title Insurance.

Underwriting Requirements:

(1) Issue only on one-to-four family residence or residential condominium; Issue only if improved property; Verify by review of tax/assessment search; Add address for land in Schedule A.

(2) Issue on first liens only.

(3) Issue only if lender is institutional lender commonly making residential loans (do not issue if lender is an individual).

(4) Do not issue if loan is for construction or repair of improvements (must verify that all bills paid on any prior construction within lien period).

(5) Issue only on (i) platted lot or metes and bounds tract not exceeding 25 acres; or (ii) condominium unit. Do not issue on metes and bounds or other property without underwriter approval or unless you can determine that the metes and bounds description does not violate subdivision map requirements.

(6) Verify by tax/assessment search that separately assessed.

(6) Verify with homeowner's association that assessments paid current and that any right of first refusal will not be exercised in the current transaction (if there is a right of first refusal);

(7) If a map of the land is attached (not required on policy), verify that description same as Schedule A description.

(8) Sellers must execute the ALTA Homeowner's Policy of Title Insurance/Expanded Coverage Loan Policy Affidavit. If no sale, require borrowers to execute ALTA Homeowner's Policy of Title Insurance/Expanded Coverage Loan Policy Affidavit.

(9) No inspection or survey is required.

(10) Verify homeowner's assessment liens subordinated to insured mortgage (e.g. as purchase money or first lien). If condominium or uniform act provides that the Insured Mortgage is subordinate to some assessments, a specific exception in Schedule B is required. If the assessment lien of a covenant is not subordinate, specifically state in Schedule B. The specific exception may state “Notwithstanding the Covered Risks and Endorsements incorporated in this policy, the policy does not insure against lack of priority of the lien of the Insured Mortgage over any lien for assessments and charges set forth in  (describe assessment lien provision).” 

(11) Separately and specifically except to easements, assessment liens and options or first refusals set forth in covenants.

(12) Absent the lender's instructions to the contrary, the policy may be dated and issued on date of settlement/closing if your requirements have been met, the funds have been disbursed and you are in a position to record. Show the settlement date as the Date of Policy; you do not need to show recording information.

(13)  You should be satisfied that taxes and assessments are not yet due and payable, or add the following at the end of your tax exception:"These taxes and assessments are due and payable."You may continue to note in Schedule B that excepted taxes are not yet due and payable, if requested by the Insured.(14)  You should except to a recorded notice of governmental violation (such as zoning, subdivision, environmental) or notice of eminent domain proceeding filed by any person. Do not remove as an exception because of a release unless you receive approval from underwriting personnel.

(15)  You may show as your Date of Policy the date of disbursement and delivery of all documents. You do not need to await recording information unless the closing instructions require that information on the Policy.

(16)  You should verify street improvements are not under construction or recently completed, by your tax search, survey review, or affidavit of the owner.

In Oklahoma you must include the following exception in Schedule B, Part II of each Commitment in which ALTA Expanded Coverage Residential Loan Policy 07/26/10 policy will be issued:

Covered Risk 18 of the Policy and paragraph 3.b. of any incorporated ALTA 9-06 will be deleted.

You must add the following in Schedule B of each such policy to be issued:

Covered Risk 18 of the Policy and paragraph 3.b. of any incorporated ALTA 9-06 are hereby deleted.