Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Spring 2005, Volume 4, Number 2
by Donald A. Brown, Boston Office Paralegal
Questions and Answers Section
Question: I have an upcoming closing and have reviewed the loan closing instructions from a lender. They are looking to be insured up to 110 percent of the loan amount. Have you ever heard of this before?
Answer: The lender is doing a negative amortization loan. A brief description of a negative amortization loan is as follows: “It is a condition created in a loan when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases.” The way you would calculate the title insurance premium for this type of transaction is as follows: You would multiply the loan amount by the 110 percent to get your total amount of insurance. Then you would calculate the premium at the standard rate of $2.50 per thousand by the total amount of insurance to get the title insurance premium. You will also have to attach the ALTA 6.2 Variable Rate/Negative Amortization Endorsement. This endorsement can be found on our company software Stewart Docs. It is also available on our local company website www.stewartma.com. Click on Agent Support, go to the second set of tabs, click on Endorsements. For your reference the endorsements are listed in alphabetical order. Scroll down until you find this endorsement.
Question: I have a construction loan that I am handling and will be issuing an owner’s policy in connection with this transaction. I see that there is a Stewart Title Guaranty Company Disbursement Endorsement for a loan policy to reflect a rundown of title and a post-policy disbursement by the lender in conjunction with their loan policy. What do we use to reflect the same in an owner’s policy?
Answer: We would use a Pending Improvements Endorsement and attach it to the subject Owners Policy. This endorsement is used on an owners policy when a substantial (more than 20%) improvement is anticipated, so that the value of the improvements will be included under the coverage of the policy (up to the face amount), if they are erected without knowledge of defects in the title. We recently added this endorsement to our local company website, which can be found by clicking on Agent Support, going to the second set of tabs, and clicking on Endorsements.
Question: A lender has recently contacted me to advise that they had recently received their final loan policy insuring their mortgage. However by inadvertence or mistake I incorrectly incorporated the book and page of the insured mortgage. How can this be fixed?
Answer: This can be rectified by using a change endorsement. One of the uses of a change endorsement is to correct something in a policy that has already issued. The endorsement is a blank form and can be found on our company software Stewart Docs, or on our local company website www.stewartma.com (click on Agent Support, go to the second set of tabs, and click on Endorsements).