Take note that the recommended additional exception stating “Content Area Not Insured” is not removed or addressed by either endorsement.

Bear in mind that when an out of state lender or purchaser requests a so-called “survey endorsement”, they may not be expecting or anticipating any form of 300 series endorsement coverage. Instead, they may have in mind and be expecting a “Land Same as Survey” [CLTA Form 116.1] endorsement form. Before you may issue this endorsement it should first be filed as a deviation with the Department of Insurance. Once that is approved, the examiner must compare the description of the land being insured with the referenced survey. If necessary, the description must be redrawn in accordance with the referenced survey. As a Practice Suggestion we recommend the redrawn description follow the record description, preceded by the words “. . .the above land being more particularly described in accordance with a survey prepared by ____________ , PE & LS, dated ____________ , as follows”. Thereafter enter the redrawn description.

Issuance of the CLTA Form 116.1 endorsement requires underwriter approval. The charge for this form of coverage will most likely vary from one underwriter to another.

NB A brief word here about TIRBOP PA ENDORSEMENT 1030. While that is addressed elsewhere in this chapter supplement, that endorsement form provides multiple forms of coverage to a lender, including matters included within the Pennsylvania survey exception. Endorsement 1030 coverage requires the production and review of a current ALTA/ACSM survey.

THE TIRBOP 400 RELATING TO MANUFACTURED HOUSING

This endorsement protects mobile homes or moveable housing units by modifying the policy definition of land so that the manufactured housing may be included and insured as real property under the terms of the policy. In determining whether the endorsement coverage may be given the following requirement should be satisfied:

·         The ownership of both the trailer and the land must be in the same party;

·         The trailer must be affixed to the land in the following manner:

·         The axles and wheels must be removed;

·         The trailer must be fixed upon a permanent foundation;

·         There must be a permanent connection to a septic tank or sewer

system and to power facilities.

Production of affidavit(s), photographs, information from reliable sources or a physical inspection of the premises may satisfy these requirements. You should also obtain a copy of the Bill of Sale and Certificate of Title or Certificate of registration if the mobile home was ever subject to registration under the motor vehicle laws. Any security interest, lien or encumbrance noted thereon should be shown as an exception in the policy to issue unless proof is produced that it has been satisfied. Additionally, a UCC filing search should be made and any financing statements revealed by the search are to be shown as exceptions in the policy to issue unless satisfactory proof is furnished that same have been released or expired by time.

The charge for the coverage is $50.00.

THE TIRBOP 800 SERIES RELATING TO CONDOMINIUMS AND PUDS

·         The TIRBOP PA Endorsement 810 [ALTA Form 4.1] contains 7 affirmative statements and affords multiple forms of coverage with respect to the condominium regime and documentation. A detailed analysis and underwriting guidelines may be found in the endorsement text located on this CD-Rom. However, because of the Pennsylvania Rate Rules mentioned herein, the endorsement may not be modified or amended in the manner suggested in the endorsement text. Furthermore, the reader should note that these underwriting guidelines are frequently overlooked. It is incumbent upon the examiner and agent to follow these guidelines. Failure to do so may result in partial or total failure of title and the loss incurred thereunder. Particularly where it may later be determined that coverage in the aggregate (i.e., insurance of the construction loan followed by insurance of most of the out sales) exceeds a particular title insurers self-imposed single risk limitation or treaty reinsurance agreement. The charge for this endorsement is $50.00.

·         The TIRBOP PA Endorsement 820 [ALTA Form 5.1] affords multiple forms of coverage with respect to the PUD Regime and Documentation, when affixed to a policy in which the insured land is a PUD. The same suggestions and references as apply to the TIRBOP 810 above should be followed here. The charge for the endorsement is $50.00.

THE TIRBOP ENDORSEMENTS RELATING TO LOAN POLICIES AND LOAN DOCUMENTATION

·         The TIRBOP PA ENDORSEMENT 500 [based on ALTA Form 11] is designed for use where the issuing office or agent is asked to insure a Modification Agreement to a previously insured mortgage. In many cases insurance of mortgage modifications represents an extra-hazardous risk [see Brodkey/Colavito, Title Insurance Considerations in Dealing with the Troubled Loan, NYLJ; Giesen, “Routine” Mortgage Modification: Lenders Beware, Real Estate Law Journal, Winter, 1989; Hart, Debt Restructuring Problems in the Workout of Troubled Real Estate Assets, The Land Title Institute of Virginia CLE Seminar, 1991; Hart, The Law of Titles in Pennsylvania, Chapter 33, Mortgages and Mortgage Modifications, December 1994 Supplement.; Panzer, The Effect of Mortgage Modifications and Consolidations on Lien Priority, PLTA Annual Convention Address 1977; Western Pa. National Bank v Peoples, 439 Pa. 304;

The Title Risk, in a nutshell, may be summarized as follows. Matters occurring after the original effective date of the policy may impact upon the Title Company’s ability to insure the continued priority of the lien of the mortgage after the modification. While it is proper for a borrower and a lender to later agree upon an extension of maturity or the alteration of the terms of the original mortgage, such changes are not binding upon non-consenting third party junior creditors who may be prejudiced thereby. There may be “impairment of priority” problems that must be addressed under state law. Changes that may present priority problems would include new provisions that:

·         unpaid interest may be capitalized;

·         new money may be advanced;

·         the interest rate may change;

·         contingent interest may be added; or

·         additional collateral may be added as security.

      Thus, any action which the lender takes to change its relationship with the borrower which imposes additional obligations upon, or impair the borrowers ability to perform, under its obligations to junior creditors, may result in a judicial determination that, the junior creditors rights have been prejudiced to such an extent that, the lien of the mortgage should be partially or totally equitably subordinated to the liens of junior creditors.

      This is a high-risk endorsement. In addition to requiring a search of the public records from the date of the mortgage, in order to determine if there are any intervening matters or creditors, it shall also be necessary to determine whether the modification so changes the terms of the original mortgage, as to constitute a novation. Because of the extra-hazardous risk nature of the coverage, the charges vary and are set forth more fully in the Rate Manual.

See also ATIC Underwriting Bulletin 88-16 Mortgage Modification Agreements.

·         The TIRBOP PA ENDORSEMENT 600 modifies certain policy terms to conform to the requirements of the Federal Home Loan Bank. The only requirement is that the lender or assignee be the Federal Home Loan Bank.

·         The TIRBOP PA Endorsement 700 series. Both these endorsements provide the lender with additional assurances as to the priority of mortgage documents that provide for changes in the rate of interest. These are the Pennsylvania equivalents of the ALTA Variable Rate Mortgage Endorsement Forms [ALTA Forms 6 and 6.2]. These endorsements protect lenders whose loan interest rates are based on something other than that of a fixed-rate, level payment, self-liquidating loan and provide further assurance of the continued priority of the lien of the mortgage whose interest rate may, by its terms, from time to time be renegotiated. The endorsements provide coverage otherwise precluded under a loan policy (by reason of difficulties arising due to loan provisions such as negative amortization, compound interest, accruals and fluctuating interest), in that they insure the lender against loss or damage sustained by reason (of a subsequent determination) of the invalidity or unenforceability of the lien of the mortgage resulting from:

·         Changes in the interest rate provided for;

·         Charging interest upon interest; or

·         The addition of unpaid interest from the principal balance.

This may prove to be a high-risk endorsement if requested together with other commercial endorsements common to equity participation loans. The mortgage document must be examined to determine that it includes and provides notice to the borrower of the changing or renegotiable interest rate. A more detailed review of the underwriting concerns regarding this issue as it relates to equity participation loan issues may be found in Hart, Instructions as to the Use of Title Insurance Endorsements, a copy of which is included with this CD-Rom.

·         Endorsement 710 [ALTA Form 6] applies to variable rate loans;

·         Endorsement 710(6.2) [ALTA Form 6.2] applies to variable rate loan interest rate changes that include provisions for negative amortization.

      The charge for each endorsement is $50.00.

·         The TIRBOP PA Endorsement 900 [ALTA Form 8.1] insures the lien priority of the insured mortgage over environmental protection liens except those designated by the Pennsylvania Statute(s) as specifically set forth in the endorsement itself. In Pennsylvania the statutory reference to be included as exceptions on the form include The Land Water Conservation and Reclamation Act, 32 P.S.§5101 et seq.; and The PA Environmental Legislation Hazardous Clean Up Act, Act 108 of 1988.

The endorsement amends both the 1970 ALTA loan policy exclusions from coverage [Ex cl. 1(b) and 1(d)] and the 1992 ALTA loan policy exclusions from coverage [Ex. Cl. 1(a)(iv)]. NB that where the 1992 loan policy form is to be issued the endorsement should not be issued in the event the search and examination of the property discloses an environmental protection lien filed of record in either the county or relevant U.S. District Court jurisdiction. Because of a change in the policy language between the two forms, if an environmental protection lien is filed of record in either location, it must be shown as an exception to title notwithstanding the fact that environmental matters are specifically excluded from coverage under the standard policy.

Title Rule: where the 1992-policy form is to be issued, if an environmental protection lien is filed of record in either location, it must be shown as an exception to title.

NB the endorsement should only be issued to a lender making a loan on residential property. However, the term “residential” is not limited or defined in this context as being applicable only to dwellings for one to four family use, as it is elsewhere in the ALTA forms. Therefore, it may be issued in commercial transactions where an apartment building qualifies as residential property.

The charge for the coverage is a flat rate of $25.00.

See also ATIC Underwriting Bulletin 88-20.

·         The TIRBOP PA Endorsement 1000 [Mandatory Advance Endorsement] provides the lender with assurances as to the lien priority of advances made subsequent to the date of policy, if the entire amount is not funded or disbursed at the time of settlement or closing. The Mortgage, Note and Security Loan Agreement documents must be examined to determine that such future advances are in fact mandatory; i.e., that the lender has no choice or discretion about making such advances. The charge for the coverage is a flat rate of $25.00.

See also ATIC Underwriting Bulletin 89-15 Revolving Credit Mortgage Considerations in Pennsylvania; and 91-25 Pennsylvania Future Advance Loans; citing In Re Curtis Johnson: Provident National Bank v First Pennsylvania Bank, Bankruptcy No. 90-11008S, (E.D. Pa., March 11, 1991) citing 138 ALR 566, Optional Advances under Mortgage as subject to Lien Intervening Between Giving of the Mortgage and Making the Advance

·         The TIRBOP PA Endorsement 1010 provides assurances as to the lien priority of future advances made pursuant to a Revolving Line of Credit or Open End Mortgage. As with the 1000 Endorsement, the Mortgage, Note and Security Loan Agreement documents must be examined to determine that such future advances are in fact obligatory. Further, the Mortgage document must by its own terms identify itself as being an “Open End Mortgage” pursuant to “Act 126 of 1990, 42 Pa C.S.A., §8143”. If the document does not so identify itself prominently on the top of the form it may be denied statutory priority protection.

The charge for this coverage is different for residential and commercial property. On a 1 to 4 family residential property the charge is a flat fee of $50.00. The charge for this coverage on property other than a 1 t0 4 family residential structure is 10% of the applicable basic or reissue rate.

See also ATIC Underwriting Bulletin 90-24, Act No. 126; Bernstein, Pennsylvania’s New Priority of Lien Law, Blank Rome Comisky & McCauley Financial Services Update, Fall, 1990; Montgomery, McCracken, Walker & Rhoads Banking Advisory, November 1990.

·         The TIRBOP PA Endorsement 1015 is a variation of the Open End Mortgage Endorsement 1010 tailored to a mortgage securing periodic advances for new construction. This endorsement provides limited insurance for construction loan advances made pursuant to a mortgage that qualifies as an “Open End Mortgage” by statute. By statute, the advances paid to the borrower must be applied toward all of part of the costs of completing any erection, construction, alteration or repair of the mortgaged premises. The endorsement insures the lien priority of such advances. The charge for the coverage is 10% of the applicable basic or reissue rate with a minimum charge of $50.00.

·         The TIRBOP PA Endorsement 1020 [FNMA Balloon Mortgage Endorsement] was designed in response to the FNMA Balloon Mortgage Purchase program first introduced in March of 1990. Mortgages originated under the program give the borrower a conditional right to refinance at the end of the 7-year term of the loan. Thereafter, if certain specified conditions were met, the borrower had the option to both modify the existing mortgage and execute and new note or, pay off the old loan and execute a new note and mortgage. The endorsement insures a lender against the invalidity, unenforceability or loss of priority of the insured mortgage resulting from provisions which provide for a conditional right to refinance at a later date at a changed interest rate. Detailed underwriting instructions may be found in the endorsement text.

·         The 1030 Endorsement series (Revised 1999) [ALTA Form 9, Special Risks R.E.M. Endorsement (a/k/a/ the PA Lender Comprehensive)] provide the lender with multiple forms of affirmative coverage including, inter alia, those provided under the Pa 100 and 300 series Endorsements, and the underwriting considerations are similar. The endorsements also provide coverage against damage to the surface from mineral extraction and so should satisfy and make less burdensome the concern of lenders when the statutory coal clause and title exception appears in the policy.

NB As a title practice suggestion, Endorsements 100 and 300 should not be issued when either 1030 form is attached to the policy unless they are specifically requested by the insured and then only with underwriter approval. We make this suggestion in order to avoid a subsequent determination by a court, in the litigation or policy coverage claim phase, that there exists a latent ambiguity between the 100 and 300 forms of coverage and those provided for under the 1030 Endorsement form. You may recall we mentioned these phases at the very beginning of this supplement. Since title insurance policies are subject to and governed by the same general rules and principles of construction which apply to other insurance contracts, ambiguities in policy terms will be construed against the insurer and in favor of the insured in the policy claim or litigation phase.

It may be significant to mention here that critics of the title insurance industry’s effort to raise premium rates contend the rise in claims over the past two decades stems more from poor underwriting and badly written policies rather than changing circumstances within society. They further contend that much of the litigation arises from ambiguously worded policies; that a lot of title agents don’t understand the policies they’re writing; and that a lot of sophisticated companies offer broad coverage at unrealistically low prices.

·         TIRBOP PA ENDORSEMENT 1031 (1999) [(ALTA Endorsement 9.1); (Restrictions, etc. Unimproved land)]

·         TIRBOP PA ENDORSEMENT 1032 (1999) [(ALTA Endorsement 9.2); (Restrictions, etc., Improved Land)];

Detailed Underwriting Guidelines prerequisite to the issuance of the TIRBOP PA ENDORSEMENT 1030 Forms [ALTA Forms 9.1 and 9.2 REM Endorsement] may be found in the original Chapter 54 beginning at page 15 and the endorsement text. An ALTA/ASCM survey is required before these multiple forms of coverage may be provided.

The charge for this coverage is 10% of the applicable rate with a minimum charge of $75.00.

·         The TIRBOP PA Endorsement 1080 [Abbreviated Form a/k/a the PA Residential Mortgagee Endorsement] incorporates by reference 9 of the most common loan policy endorsements used in Pennsylvania, and contained in the Rate Manual, onto one page. Each of the referenced endorsements, as requested by the lender, can be checked off in the appropriate block. The charge for each endorsement so checked must be made in accordance with the Rate Manual.

·         THE TIRBOP PA ENDORSEMENT 1100 [WAIVER OF ARBITRATION]

This endorsement amends the 1992 ALTA Loan Policy by deleting Paragraph 13 of the Conditions and Stipulations relating to arbitration. The coverage is only issued to a lender. The charge for the endorsement is a flat fee of $100.00.

·         THE TIRBOP PA ENDORSEMENT 1110 [“FIRST LOSS” ENDORSEMENT]

This endorsement requires underwriter approval and provides, under certain conditions, that the amount, which the insurer shall be liable to pay under the policy, shall be determined without first requiring maturity of the indebtedness by acceleration or otherwise. A more detailed explanation of the coverage and the underwriting guidelines prerequisite thereto may be found on either the Stewart Title Guaranty Company website located at www.stewart.com or the First American website located at www.firstam.com . The charge for this endorsement shall be 10% of the basic or reissue rate with a minimum of $500.00

·         THE TIRBOP PA ENDORSEMENT 1120 [“APPLICATION OF MORTGAGE PAYMENTS” or “LAST DOLLAR” ENDORSEMENT]

In many instances a loan made by a lender will have as security both real and personal property. The mortgage will likely be for an amount equal to the full amount of the loan and perhaps be subject to or include the conditions of a security agreement. The ALTA loan policy will be written for the value of the real property used as security and the amount of the insurance may be less than the amount shown on the face of the mortgage. The last dollar endorsement provides that if the insured lender applies all payments made by the mortgagees to the release of security other than the land insured under the policy [as described on Sch. A], such as, e.g., the personalty, until such time as the aggregate principal indebtedness is reduced to the amount of the policy, coverage under the policy will not be reduced by such application of payments. This coverage provides the insured with coverage that the portion of the loan secured by the real property would be the last to be paid off and permit the title insurance to remain in effect until the full loan has been paid off. The charge for this endorsement shall be 10% of the basic or reissue rate with a minimum of $500.00.

THE TIRBOP ENDORSEMENTS RELATING TO MATTERS OF AN EXCLUSIONARY OR INTERPRETIVE NATURE FOR WHICH ENDORSEMENTS MAY BE OBTAINED

A.            Environmental laws are specifically excluded from coverage under the policy. Counsel for the lender may not wish to be exposed to the “super lien” statutes, resulting in a request for the TIRBOP PA Endorsement 900 [ALTA Form 8.1].

B.        The continuation of business entities following a substitution of interests and the impact of that change upon continued policy coverage is frequently the concern of counsel. Under the Uniform Partnership Act and most state LLC statutes, the partnership or the LLC will dissolve when only one member remains or when any member dies, withdraws or becomes bankrupt, insolvent or incompetent. However, the Revised Uniform Partnership Act, and most state LLC statutes, provide that the partnership agreement or the LLC operating agreement may nonetheless specifically provided within it’s terms for continuation of the business of the partnership or the LLC and permit all or a majority of the remaining partners or members to authorize continuation of the business. Under the “Fairway” rule, if less than the statutorily or contractually required number of partners or members decides to reconstitute or continue the business of the partnership or the LLC, coverage under the owner’s policy may be terminated [see Fairway Development Co. v Title Ins. Co. of Minn., 621 F. Supp. 120 (N.D. Ohio 1985). To avoid the conclusions reached in the Fairway case special commercial endorsements were designed for Partnerships and Limited Liability Companies regarding the questions of substitution of interests. These special endorsements are referred to as Fairway Endorsements.

·         The TIRBOP PA ENDORSEMENT 1040 was designed for use in the case of a substitution of partnership interests. The endorsement does not increase or expand coverage but does extend it beyond an event that may otherwise terminate the coverage. To utilize the endorsement you must first thoroughly examine the partnership agreement to determine that it contains adequate provisions for the continuation of the partnership in the event of death or withdrawal of a partner. The charge for this endorsement is a flat $500.00.

·         The TIRBOP PA ENDORSEMENT 1041 was designed for use in the case of a LLC. The same underwriting guidelines apply.

The charge for the endorsement is a flat $500.00.

C.        Another exclusion from coverage involves matters known to the insured but not disclosed to the insurer. This would include “imputed knowledge” which may become an issue where a title insurer is asked to insure the interest of the interest of an incoming partner or shareholder. The “Non-Imputation” Endorsement was designed to address this issue.

Business entities such as corporations and general and limited partnerships often transfer property indirectly by transferring partial or total ownership interests in the business. NB that under this type of transaction there is also the risk that the transaction may later be determined to be a LBO. Because of this risk beware if you are asked or required to issue a 1970 (rev. 10/17/84) ALTA policy form rather than a 1992 form. The 1970 form does not contain a “creditors’ rights” exclusion.

Thus, a new partner may be admitted to a partnership by acquiring the interests of an existing partner, or stock of a corporation may be transferred from an existing stockholder to a new stockholder. The business entity may own real estate, and as part of the transfer of interests in the business entity, the incoming party may wish to be assured that any existing title insurance will not be forfeited or may require title insurance as a condition to acquisition. How such a transfer is underwritten is more particularly addressed in Title Insurance Underwriting, Principles and Exception Language.

Under the ALTA Owner’s and Loan Policy, defects, liens, encumbrances, adverse claims or other matters not known to the title insurer and not recorded in the public records as of the date of the policy, but known to the insured and not disclosed in writing to the title insurer prior to the date the insured (the incoming party) became an insured under the policy, is excluded from coverage [Ex. 3(d) & C&S 1(c)]. Any new or reissue insurance written to cover the business entity or the incoming party would subject the incoming partner or stockholder to any undisclosed matters known by the existing partners, stockholders, officers or directors under the legal theory of imputation of knowledge. Failure to disclose such matters could void coverage under the standard coverage policy. To avoid this issue, the incoming party may require the title insurance policy to issue include a “Non-Imputation Endorsement” which, in effect, provides that the insurer will not deny coverage to the extent the incoming party has theoretical (not actual) knowledge of events known by other parties associated with the business entity.

·         The TIRBOP PA 1050 was designed to provide such coverage in partnership situations, while

·         the TIRBOP PA 1060 was designed for use for corporate entities.

Underwriting Guidelines are set forth in Chapter 54 of the original text beginning at page 22. Also see ATIC Underwriting Bulletin 90-11 for a detailed review of the risk analysis.

The filed rate for coverage is 20% of the applicable premium.

D.        Another concern of many lawyers is the policy’s definition of insured as found in the Conditions and Stipulations of the owner’s policy:

·         the definition of the “insured” under the terms of the owner’s policy [see C&S cl. 1]; and

·         the provisions for the continuation of coverage under the policy [see C&S cl. 2]

The “Standard” [as opposed to “Extended”] coverage provided by the ALTA title insurance policy is further limited by the preprinted section entitled Conditions and Stipulations [C&S]. Continuation of coverage after conveyance of title is addressed under C&S clause 2. It is the intention of this clause to limit coverage to the named insured. However, as Bob Ellis comments in The Title Insurance Law Handbook, the concept embodied in C&S clause 2 of limiting coverage to the named insured, and thus excluding unnamed grantees, assignees, etc., has been upheld by the courts in relatively few cases [see Ellis, supra., page 404, Comment ¶ 2]. Nonetheless, there are policy construction concerns relating to the “definition of insured” voiced by some counsel. Some lawyers feel the definition of “insured” is too limited in the case of: yle: normal">see also, letter appearing in PLI Course Handbook N4-4581, November 1993, at page 622). The matter again received attention in the December, 1996 issue of the Title Insurance Newsletter citing the case of Covalt v First American Title Insurance Co., 1997 WL 4273 (10^th Cir.) – unpublished opinion [see also ALTA Title Counsel Meeting Agenda, May, 1997, exhibit 14]. The most noteworthy legal articles on this issue may be found listed on the TLA website located at www.titlelawannotated®.com/endors.html .ALTA has not adopted an endorsement coverage addressing this issue, although many of its corporate underwriting members have adopted their own individual endorsements forms recognizing such transfers provided the coverage is requested and the premium paid.

·         The TIRBO PA Endorsement 1090 was designed to provide for the continuation of coverage in those cases where an existing insured transfers the insured property to the trustees of an inter vivos trust, subject to the further provisions and conditions as therein set forth. This endorsement expands the definition of “insured” in the policy to include trustees of an inter vivos trust. The charge for this endorsement is a flat rate of $125.00. NB The endorsement does not change the effective date of the policy. If that coverage is also sought an additional “Date Down” endorsement must be requested, issued and paid for after a continuation search and further examination of the title is performed.

            not otherwise covered by the other endorsements set forth in the manual [emphasis