Guideline: NM 28.2 Endorsement – Non-Imputation – Partial Equity Transfer

Explanation:

This endorsement, while available for a Loan Policy, is designed for issuance with a new Owner's Policy. The endorsement contemplates acquisition of an ownership interest in the existing record owner (i.e. a partnership, limited liability company or corporation) and names the incoming investor member, partner or shareholder as the insured in Schedule A of its own policy. Like the NM 28 and 28.1 endorsements, this endorsement limits applicability of:

• Exclusion 3(a) - "created, suffered, assumed or agreed to by the insured claimant"
• Exclusion 3(b) - "not known to the Company, not recorded in the public records at Date of Policy, but known to the insured claimant and not disclosed in writing to the Company by the insured claimant prior to the date the insured claimant became an insured under this policy"
• Exclusion 3(e) - "resulting in loss or damage which would not have been sustained if the insured claimant had paid value for the estate or interest insured by this policy"

Those Exclusions will not apply with respect to a matter by reason of action, inaction, or knowledge, at Date of Policy, of other or former stockholders, officers, directors, managers, partners or members (of an LLC), provided and only to the extent that the "incoming" partner, member or stockholder (the insured) acquired its interest as a purchaser for value without knowledge of the matter otherwise insured against.

Underwriting Requirements:

We require the following:

1. We require execution of the ALTA Nonimputation Affidavit 1 by those persons (Affiants) whose knowledge, action or inaction is covered by the endorsement.

2. We require financial disclosures by the Affiants showing the financial strength of those parties.

3. We require an explanation of the transaction and reasons for the endorsement. The transaction may, for instance, suggest other issues, such as creditor's rights.

4. This endorsement should show in the first paragraph the names of specific persons (e.g. the names of the officers, directors, shareholders, members, partners) whose knowledge and participation in the titleholder entity is of concern. The names should be specific and should not be general (e.g. insert "Jane Doe" and do not insert "all officers (or shareholders) of XYZ, Inc."). The new investors should be named as insureds in the Owner's Policy.

5. The "Name of Insured" in Schedule A of the Owner's Policy should be the new investor, not the record owner.

6. A Stewart Title Guaranty Company underwriter must approve issuance of the Endorsement.

7. The issuing agent must retain the written authorization for two (2) years following the issuance of the endorsement.