Short Form Policies
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Summer 2003, Volume 2, Number 3
Short Form Policies
by Richard Urban, Vice President and Massachusetts State Counsel
Many agents have found it difficult to keep pace with policy production during the refinance boom that presently continues. With increasing frequency, agents are being besieged by ongoing requests from lenders for final policies of title insurance. Already facing the daily pressures and demands of preparing current loan closings, an agent's worse nightmare can arise when confronted with the unenviable task of retrieving closed loan files and preparing policies for closings from the immediate past.
The ALTA Short Form Residential Loan Policy (the "Policy") might provide the solution to this dilemma. It saves time, money and improves efficiency since it:
- Reduces the need for specific Schedule B exceptions. In most cases, you do not need to add specific exceptions. The Policy has standard, preprinted exceptions and affirmative insurance for easements, covenants, conditions or restrictions. It consists of one page (including the reverse side) unless an addendum is indicated and attached. If there are exceptions disclosed by your title examination (other than easements, covenants, conditions or restrictions) you need to mark the "Addendum attached" box and include the exceptions in the addendum. Otherwise, you simply mark the "No addendum attached" box.
- Avoids the need to make common corrections of the Policy due to typographical errors since most of the provisions are pre-printed and specific, detailed references are usually not required.
- Can be issued immediately after closing; there is no need to include recording information unless the lender requires it. You simply insert the date of settlement in Schedule A for the Date of Policy. The Policy then states that the effective date of the policy is the date of settlement or "the date of recording of the insured mortgage, whichever is later." You no longer need to obtain the recording information of the mortgage in order to complete Schedule A of the Policy.
- Allows incorporation of endorsements without attaching the actual forms. You simply select and mark a designated box on the Policy which is located next to the defined endorsement.
- Reduces the "paper shuffle." You simply issue the Policy which is produced on one piece of paper (unless there is an Addendum) that has two sides, Schedule A and Schedule B, and do not need to attach a "jacket." The terms and provisions of the ALTA Loan Policy (10-17-92) are incorporated by reference.
- Does not require an "Exhibit A" legal description. The Policy incorporates the description contained in the mortgage. It does, however, require an address which must be added to the Policy.
Both Fannie Mae and Freddie Mac have approved the Policy and it is acceptable to HUD and VA. Of course, you need to review your lender's instructions relative to the policy of title insurance it requires since the lender ultimately chooses the form it wants. However, the following lenders have accepted use of the Policy:
Regular premium rates apply as well.
Lenders are accepting Short Form Policies with increasing regularity. The biggest hindrance to their use is unfamiliarity. Conventional practice has always lead an agent to believe that the only means by which a policy can issue is by including Schedule B exceptions, a legal property description, and specific recording information for the insured mortgage. To learn more about the Short Form Policy contact your sales representative or the legal department.