Guideline: NM 80 – Mortgage Modification Endorsement (ALTA 11-06, 6/17/06)

Explanation:

This endorsement insures the lender that (1) the modification of mortgage does not result in invalidity or unenforceability of the insured mortgage; and (2) the mortgage, as modified, has priority over defects, liens, and encumbrances, except those in the policy and prior endorsements and except those set forth in this endorsement. The endorsement does not insure against creditors' rights issues arising out of the modification.

Underwriting Requirements:

1. You must search the public records from the Date of Policy of the mortgage and you must secure a name search of the mortgagors and successors in ownership.

2. Require joinder in the modification by the current owners of the estate or interest in the land and require proof of authority by those signing on behalf of the current owners.

3. If the mortgage covers a lease, require a current estoppel and consent by the lessor.

4. If the policy reflects a mortgage or other lien in Schedule B, Part II (as subordinate), require new subordination by the lienholder or except under paragraph 2 of the Endorsement.

5. If your search reflects intervening matters such as mortgages, liens, covenants or easements, require subordinations or except under paragraph 2 of the Endorsement.  If you obtain subordinations, use NM form 80.1 Mortgage Modification with Subordination Endorsement.

6. If your search reflects a notice of bankruptcy by the owner, contact your underwriter.

7. If your search reflects a partial release, reconveyance or discharge of the mortgage, except under paragraph 2 of the Endorsement. If your search reflects a full release, reconveyance or discharge, do not issue this Endorsement.

8. If your search reflects that the record mortgage holder is not the current lender on the modification, require an assignment from that holder to the current lender.

9. Secure a current tax and assessment search. Except under paragraph 2 of the Endorsement to unpaid taxes and assessments.

10. Verify that the mortgage as modified does not secure advances for construction and that there has been no recent lienable work of improvement.

11. Verify the parties in possession. If the Policy has not deleted standard exception 1 (parties in possession), add an exception to those rights in paragraph 2 of the Endorsement.  If the Policy has deleted standard exception 1, you do not need to include an additional exception. 

12. If the Policy has provided survey coverage, require a current survey and add as exceptions any new matters revealed by the new survey or except to survey matters arising subsequent to Date of Policy.  If there was no survey coverage, there is no need for a new survey exception.

13. Record the modification.  The date of endorsement in paragraph 1.b generally will be the date of recording the modification.

14. Mortgage modifications can take many forms, including without limitation:  Partial Release, Release of Additional Collateral, Modification Agreement, Reinstatement Agreement and/or Release from Personal Liability.  Modification instruments create the possibility of a novation which would preclude the issuance of a modification endorsement.  If you encounter a Modification instrument that does any of the following, do not issue this endorsement without Stewart Title Guaranty Company underwriter approval:

• add or remove obligors or change the obligee; and/or
• release a part of the land described in Schedule A of said Policy; and/or
• release additional collateral securing indebtedness described in said Schedule A; and/or
• modify only one or more of the following items described in Schedule A of said policy: the mortgage, deed of trust, security instrument, guaranty or promissory note by entering into a Modification Agreement; and/or
• reinstate said mortgage or deed of trust by entering into a Reinstatement Agreement; and/or
• release the mortgagor(s) or other obligors from personal liability; and/or.
• expressly creates or grants a lien or power of sale; and/or
• the indebtedness secured by the lien of the insured mortgage or deed of trust is evidenced by a new promissory note; and/or
• the insured mortgage or deed of trust is modified to secure additional principal indebtedness other than accrued or deferred interest on the specific indebtedness described on Schedule A of the policy or advances made pursuant to the terms of the original mortgage or deed of trust (and in which case the NM form 80.2 will be more appropriate); and/or
• the insured mortgage or deed of trust is cross-collateralized or otherwise modified to cover property not described on Schedule A of the policy.

16.  The cost of this endorsement is $65.