May 2009 Vol. 2, No. 5
 

Procedural Updates

Mortgages

Refinance and Mortgage Modification Basics

With the boom in refinances and mortgage modifications, here are some tips and reminders to help ATG members write commitments and policies for these transactions.

  1. Rates:
  2. For all counties in Illinois outside of Cook and the collar counties, the premium to remit to ATG for all refinances and mortgage modifications, is $0.50 per thousand, with a minimum premium of $25. Whether you issue a new policy, new Schedules A & B, or a Date Down Endorsement on a mortgage modification, the premium is the same.

    3.  

  3. Prior Title Evidence:
  4. If you have an existing Owner or Mortgagee Policy written by an ATG member or a commercial title insurance company authorized to conduct business in the state where the property is located, then the search may be conducted from the date of that policy forward. You may use an abstract as long as you or another ATG member wrote the most recent attorney opinion letter. Verify that the prior policy covers the same legal description as the property to be insured. If any parcels to be insured are not included in the prior policy's coverage, then those parcels must be searched using the guidelines for full searches. You may not rely upon the following:
  5.  
    1. Commitments that you know have not gone to policy;

      2.  

    2. Short Form Residential Mortgagee Policies; and

      3.  

    3. Mid-America Title Insurance Company policies.

  6. Search Requirements:
  7. If you have prior title evidence, you may search back to the date of the prior title evidence. If not, then the guidelines are as follows for Illinois:
  8.  
    1. Subdivided Residential Property: Search the chain of title back 20 years, review any plat, declaration, and first deed for restrictions, search 20 years back for judgments and liens on titleholders in the last 20 years, and five years for real estate taxes.

      2.  

    2. All Other Land: Search the chain of title back to 1900, review any plat, declaration, and first deed, search 20 years back for judgments and liens on titleholders in the last 20 years, and five years for real estate taxes.

  9. ALTA Statement and Survey Requirements:
  10. To waive the five Standard Exceptions for the Mortgagee Policy, collect a new ALTA Statement at the time the mortgage is closed, and either a new Affidavit of No New Improvements (in Cook and the collar counties) together with the survey from the purchase, or an Affidavit in Lieu of Survey (only for use outside Cook and the collar counties). Be sure that the Lender's Disbursement Statement is signed on the ALTA Statement, showing the loan proceeds have been disbursed.

    11.  

  11. Revolving Credit Mortgage Payoffs:
  12. If there is a home equity line of credit mortgage to be paid off (also known as a revolving credit mortgage), then be sure to get the borrower to either freeze or close the account first. Otherwise, the payoff letter could be incorrect and the lender may reject the payoff.

    13.  

  13. Subordination Agreements:
  14. If there are liens or mortgages of record that will stay on record, then the lender must provide subordination agreements from those creditors or lenders. Without a valid subordination agreement that clearly identifies the lien or mortgage to be subordinated, those liens or mortgages must remain as Schedule B exceptions on the final Mortgagee Policy. Be sure any subordination agreement you review is signed by the actual owner of the interest to be subordinated, and not a loan servicer or other third party.

    15.  

  15. Schedule B, Part II:
  16. Once you have a valid subordination agreement for a lien or mortgage on title, you can show the exception for that matter on a Schedule B, Part II on the final Mortgagee Policy. After including all the exceptions you need on Schedule B, then add the Schedule B, Part II language from the Standard Exception Language Library in REsource. Below that language, add special exceptions first for the subordinated lien or mortgage and then for the subordination agreement.

    17.  

  17. Mortgage Review:
  18. Review the mortgage to be insured. Be sure that it has all titleholders as mortgagors on the front page and signing as mortgagors at the end. Be sure that no titleholder signs only to waive homestead, as that will not create a valid lien on that owner's fractional interest in the title. Be sure the legal description attached is correct. Check to see that the acknowledgement is done correctly. If not, it can be corrected after closing, but record the mortgage first and correct the acknowledgement later, to be sure that the mortgage has priority over later interests on title.

    19.  

  19. Recording:
  20. If you conduct the closing, record the mortgage as soon after closing as possible. Remember that, in addition to possibly losing priority to other recorded interests, if the mortgage is recorded more than 30 days after it is signed, it can be later avoided by a trustee in bankruptcy, which is a covered risk under the 2006 Mortgagee Policy. If a lender asks you to delay in recording, please notify them of the risks and raise an additional exception on Schedule B. If you do not conduct the closing, then special exception language on the commitment will allow you to raise an exception for the final policy for any recording delay.

If you have any questions, please contact the ATG Underwriting Department,legal@atgf.com, 217.403.0020, or 312.752.1990.

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[Last update: 5-12-09]

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