NM Construction Loan Policy Endorsement A Guideline 18

Explanation:

This endorsement was available for construction loan policies only, which were decertified effective 8/14/2014. NM Series 83 endorsements are now used for mechanic’s lien coverage in broken priority situations.

Please refer to the guidelines for such endorsements if you are requested to provide this coverage. Underwriter approval is always required to provide such coverage.

A Construction Loan Policy is issued to a lender making a construction loan secured by a mortgage on the parcel of land to be improved. The policy insures against the invalidity or unenforceability of the lien of the mortgage and against loss or damage should the priority of the mortgage be other than as shown in the policy. It is similar to the Loan Policy except that no mechanics' lien coverage is provided by the Construction Loan Policy, but instead by Endorsement "A" or Endorsement "D", depending on the facts of the situation.
Endorsement "A" insures against lack of priority of the insured mortgage over any mechanics' liens for labor and materials which were provided before a specified date and for which the insured has advanced funds. This endorsement is designed to be used when the insurer has decided to offer insurance of priority even though the insured mortgage does not have priority over mechanics' liens.
This form excludes liability for loss or damage by reason of the failure of the mortgagor to comply with or enforce the terms of any loan agreement which concerns the advancing of loan proceeds.
Rate: See Regulation 13 NMAC 14.9.13.4.
Procedure: See Regulations 13 NMAC 14.7.14.3 and 13 NMAC 14.7.17.

Underwriting Requirements:

(1) Compliance with relevant and current Stewart Title Guaranty Company bulletins.
(a) As of February 1, 1997, the current Bulletin is NL000046, dated October 21, 1994, entitled "Mechanics' Lien Coverage - Construction Loans".
(b) An indemnificaton form, which is discussed in Bulletin NL000046, is available in the Stewart Title Guaranty Forms entitled "Indemnity Agreement 1" and from the National Legal Department.
(2) As an alternative to the indemnity required by Bulletin NL000046, the risk may be assumed if Stewart Title Guaranty Company is named as Obligee in a surety company mechanic's lien bond written by an approved surety company in the amount of the contemplated policy.