Articles from The Massachusetts Focus
by Margaret Fortuna and Mark V. Borst, Underwriting Counsels
Question: What is Schedule B II of the Loan Policy, and when do I use it?
Answer: Schedule B II is an additional schedule to be used with Loan Policies. It provides notice of matters subordinate to the lien of the insured mortgage. Frequently in the residential context it is used when the closing is a “double”; i.e. a first and second mortgage closing simultaneously, and the policy issued for the first mortgage would include a Schedule B II to take note of the second mortgage (without forgetting to take exception for the first mortgage in the policy of the second mortgage). If an existing mortgage (for example, an equity line) is subordinated to the insured mortgage, that would also be noted on Schedule B II. Another common use would be in a commercial transaction to note an Assignment of Leases and Rents as a matter subordinate to the lien of the mortgage.
Schedule B II is not used as an addition to the Schedule B I or as a continuation of the list of exception items.
Question: When I am preparing the policy for a condominium unit, do I need to include the whole Exhibit A from the mortgage or unit deed?
Answer: Absolutely not. The information in a condominium unit deed, and by extension, the mortgage Exhibit A, needs to comply with Section 9 of Chapter 183A. The title insurance policy Exhibit A need only (and should only) identify that property (the unit) being insured. The inclusion in the policy’s Exhibit A of mailing addresses, limitations on use (for example, Residential Use Only), and title references become additional matters that are then covered by the policy and may cause problems later. For example, a reassignment of street addresses or zip codes may later give rise to a claim or inquiry under the policy if the address as insured in the Exhibit A did not match the post office address at the issuance of the policy.
Question: I’m paying off a privately held mortgage and am uncomfortable sending the funds and then waiting for a discharge. Is there a better way?
Answer: A best practice in this situation is not to schedule a closing until you either have the discharge in your possession or know that it is in the possession of another attorney. It is appropriate if the private mortgagee is not represented by counsel to request that the discharge be executed and delivered to the closing attorney to hold in escrow until payoff funds are forwarded to the mortgagee. If the mortgagee is represented by counsel, a document from mortgagee’s counsel with a copy of the executed release and letter stating that he has the discharge in his possession and will forward it to the closing attorney upon receipt of the payoff check is also commonly accepted.
Question: One or both of the parties in my closing transaction are in the process of getting divorced. Does Probate Court Rule 411 (the Automatic Restraining Order) apply?
Answer: Yes. Rule 411 states, in part:
a) The following automatic restraining order shall apply to both parties to a complaint for divorce or separate support. This automatic restraining order shall be effective with regard to the plaintiff upon the filing of the complaint by the plaintiff or the plaintiff’s counsel and with regard to the defendant upon service of the summons and complaint or any other acceptance of service by the defendant…The following restraining order shall remain in effect during the pendency of the action, unless it is modified by agreement of the parties or by further order of the court.
- Neither party shall sell, transfer, encumber, conceal, assign, remove or in any way dispose of any property, real or personal belonging to or acquired by, either party, except: (a) as required for reasonable expense of living; (b) in the ordinary and usual course of business; (d) in the ordinary and usual course of investing; (d) for payment of reasonable attorney’s fees and costs in connection with the action; (e) written agreement of both parties; or (f) by Order of the Court.
If one or more of the parties to your transaction is currently involved in an on-going divorce action, the Rule 411 Automatic Restraining Order must be addressed in order for your closing to proceed. You may release this Restraining Order by obtaining an Order from the Probate and Family Court in question. You may also release this Restraining Order by obtaining a written agreement signed by both parties to the underlying divorce action. Given the usual nature of divorce proceedings, the divorce attorneys for both parties should be contacted when obtaining this written agreement.
Question: I am conducting a sales transaction and issuing a Homeowner’s Policy to the new owner. Is there an Endorsement that gets issued with this Policy?
Answer: Yes. The Homeowner’s Policy provides the Insured Owner with extended coverage as compared to the 1992 ALTA Owners Policies. There are 28 Covered Risks outlined in the Homeowner’s Policy Jacket. However, certain of these Covered Risks are subject to deductibles and maximum dollar limits which are set forth in the Endorsement. Therefore, each Homeowner’s Policy must include the Homeowner’s Endorsement. If your software system is not set up to print the Homeowner’s Endorsement, please contact Stewart Title Guaranty Company.The Homeowner’s Endorsement can be obtained in the Forms>Endorsements section of our website.
Question: I am conducting a refinance and there is only one owner of record and this owner has recorded a Declaration of Homestead pursuant to G.L.c. 188, §1. What initial inquiries should I be making relative to this Homestead filing?
Answer: The place to begin your review is with G.L.c. 188, §1, which states:
Section 1. An estate of homestead to the extent of $500,000 in the land and buildings may be acquired pursuant to this chapter by an owner or owners of a home or one or all who rightfully possess the premise by lease or otherwise and who occupy or intend to occupy said home as a principal residence. Said estate shall be exempt from the laws of conveyance, descent, devise, attachment, levy on execution and sale for payment of debts or legacies except in the following cases:
- sale for taxes;
- for a debt contracted prior to the acquisition of said estate of homestead;
- for a debt contracted for the purchase of said home;
- upon an execution issued from the probate court to enforce its judgment that a spouse pay a certain amount weekly or otherwise for the support of a spouse or minor children;
- where buildings on land not owned by the owner of a homestead estate are attached, levied upon or sold for the ground rent of the lot whereon they stand;
- upon an execution issued from a court of competent jurisdiction to enforce its judgment based upon fraud, mistake, duress, undue influence or lack of capacity.
For the purposes of this chapter, an owner of a home shall include a sole owner, joint tenant, tenant by the entirety or tenant in common; provided, that only one owner may acquire an estate of homestead in any such home for the benefit of his family; and provided further, that an estate of homestead may be acquired on only one principal residence for the benefit of a family. For the purposes of this chapter, the word “family” shall include either a parent and child or children, a husband and wife and their children, if any, or a sole owner.
Under the provisions of Section 1, the declarant of the homestead declares the same for the benefit of himself or herself and his or her family. The filing of the homestead provides the declarant and the declarant’s family rights of possession relative to the real estate regardless of whether or not the spouse of the declarant has an interest in the underlying fee. The homestead does not prevent a creditor from filing a claim against the property. However, the homestead filing would prevent the creditor from denying the declarant and the declarant’s family the right to possess or occupy the property.
In a refinance situation, such as the one described above, the Husband, who is the declarant of the Section 1 homestead, must sign the mortgage since he is the title holder of the real estate. The standard Fannie Mae mortgage for Massachusetts contains a waiver clause whereby a declaration of homestead that has been filed by the borrower prior to the recording of the mortgage in question is subordinated to that mortgage. Let’s assume for the moment that the spouse does not sign the mortgage and does not execute a separate subordination of homestead. If the lender in question forecloses on the property, the lender’s foreclosure would be subject to the spouse’s right to the possession of the property.
This right to possession as a result of a homestead filing is why it is crucial to make the inquiry as to whether or not your borrower is married. If the borrower is unmarried the borrower should be identified as “unmarried” on the Mortgage. If the borrower is married and has filed a homestead, then the borrower’s spouse should sign the mortgage as well. If the spouse fails to execute the mortgage in question, then a subordination of homestead should be executed by the wife and recorded.
For a more in-depth discussion of Homesteads, I would refer you to the article entitled “Understanding Homesteads,” written by Gary F. Casaly, Special Counsel, which can be found in the Stewart Title Guaranty Company Spring 2006 newsletter. This newsletter can be found on the stewartma.com website under Archived Newsletters.
Question: I’m reviewing a title that includes a deed in which the grantee is “X” to the use of “Y”, and the next deed is from “Y” without any mention of “X”’s rights. Is this correct?
Answer: This is correct. Under the Statute of Uses the use was executed, and the holder of the use possessed the title. A subsequent deed from the holder of the use is correct.
Question: I have a purchase transaction in which an individual is buying the property in her name alone, but the lender is requiring a co-signer on the note and will prepare the mortgage with the co-signer’s name on it and require his signature. How does this affect my title insurance policies?
Answer: When issuing any title insurance policy, it is important to remember not to insure more people than actually own the property. Therefore, in the facts above, only the sole purchaser should be listed as the insured in the owner’s policy and as the holder of the title in the lender’s policy. When describing the mortgage in line 4 of the lender’s policy Schedule A, you would include the name of the co-signer of the mortgage, but as they have no interest in the property, they should not be listed as having any vested interest.
Question: I have to issue a title commitment to my lender for a new condominium unit, but the condominium documents are not recorded yet. How do I handle this?
Answer: In this case, once you have completed your title examination and addressed any issues discovered in the title, you should review the proposed condominium documents, including the unit deed, and draft the commitment to ensure that you are limiting the title to the single new unit. To do that you will have to identify the unit in the Schedule A, draft the Exhibit A so that it defines only the new unit and not the land on which the condominium sits, and in the Requirements section of the commitment, include a requirement that the condominium documents be recorded and conform to those that you have reviewed and relied upon in drafting the commitment and Exhibit A.
Question: One of the joint tenants of property in my chain of title died in 1985. There is no death certificate on record for this joint owner. Must I record a death certificate?
Answer: Not necessarily. REBA Title Standard No. 71 addresses what documentation is sufficient evidence of death of deceased Joint Owners and Life Tenants. Title Standard 71 provides:
A title derived from surviving joint owner(s), or from remainderpersons after the death of life tenant(s) or from an executor, administrator, guardian, conservator, heir(s) or devisee(s) of such survivor(s) or remainderperson(s) (collectively, “Survivors”) is not defective by reason of any uncertainty as to the death of the deceased joint owner or life tenant if evidence of the death is established by:
a) a death certificate recorded at the Registry of Deeds in the district where the property is located or a death certificate filed with or noted in the docket of a probate or other proceeding in the Probate Court in the county where the real property is located; or
b) the recording at the Registry of Deeds in the district where the property is located of
- a certified copy of an allowed petition for a domestic or foreign probate or administration of the decedent’s estate, or a certificate of appointment in such matter, which in either case recites the decedent’s date of death, provided that recording of such petition in the Registry of Deeds shall not be necessary if such petition is filed in the same county where the property is located; or
- a Massachusetts Inheritance Tax Lien Release (“L-8”) relative to the decedent’s interest in the property; or
- a Massachusetts Certificate of Release of Estate Tax Lien (“M-792 ”) relative to the decedent’s interest in the property, provided, however, that the M-792 has been recorded for more than 20 years; or
- a deed for the real property from such Survivors that contains a recital that the decedent has died, even if no date or place of death is recited, provided, however, that such deed has been recorded for more than 20 years.