Explanation:
The ALTA Residential Limited Coverage Junior Loan Policy includes the Insuring Provisions, Exclusions From Coverage, Conditions and Stipulations, and Insert (or Schedule). This form does not insure the validity of the insured's mortgage and it does not insure that the Grantee (who will generally be the mortgagor) owns the land. It does provide defense costs as stated and does insure a later owner of the debt secured by the insured's mortgage. This form is issued before the Junior Mortgage is executed; it is similar to a commitment to insure.
It insures these matters:
(1) the Grantee named in the policy is named as the vestee or grantee in the last recorded deed purporting to convey the fee simple;
(2) the land described in the policy is the same as the land described in the deed to the Grantee;
(3) there are no outstanding recorded monetary liens (such as judgment liens, tax liens, deeds of trust and mortgages on the title, even if they attached before the Grantee's deed); and
(4) there are no ad valorem taxes or assessments owed to the government and secured by liens according to the local tax records.
Underwriting Requirements:
(1) Search: You must search from the date of the execution of the last deed involving a sale for recorded "monetary liens" against the land and for the period of local custom (but not less than 10 years) for general liens (such as tax liens and judgment liens) against the "Grantor" named in the policy (person named as the grantee in the last recorded deed). You also must search for the last deed purporting to convey the land to determine the "Grantee." You must secure a tax and assessment search to reflect the current tax information.
(2) Amount of Insurance: This is the amount requested by the lender; it should be the proposed loan amount. Do not issue this Junior Loan Policy without underwriter approval if the Amount of Insurance will exceed $200,000.
(3) Name of Insured: This is the proposed lender which will receive a junior mortgage. Do not issue this Junior Loan Policy without underwriter approval unless the Insured is an institutional lender. Do not issue to an individual without underwriter approval. Do not add "its successors and assigns" without underwriter approval.
(4) Date of Policy: This is the date through which you examine title before issuing the Junior Loan Policy. This date generally precedes the date of issuance of the insured's mortgage.
(5) Grantee: This person is the owner according to the last conveyance (generally deed) in your local real property records. You need to search only for the last recorded deed. The Junior Loan Policy does not insure that the Grantee owns the land. If the last deed purports to convey only an undivided interests, you must show the other "Grantees" of the remaining undivided interests. Some insureds may require that the Junior Loan Policy refer to the deed; if so you may add after the name of the "Grantee" words such as "pursuant to deed dated [here insert deed date] from [name of grantor] recorded [here insert date of recording and recording information]." You may attach the deed if requested; however, the Junior Policy does not require that you attach the deed or monetary liens.
(6) The land referred to in this policy is described as follows. This is the legal description of the land. You must verify that this description also is the same description appearing in the deed to the "Grantor." If your insured requires a reference to the Property Address on the Junior Loan Policy, you may add after the description words such as "Property address of the land is:_______." You must review the tax search or certificate to insure the address.
(7) Exceptions: You must show all outstanding recorded monetary liens under the "Exceptions." Monetary liens include judgment liens, child support liens, federal tax liens, state and local tax liens, other governmental liens, mortgages, deeds to secure debt, deeds of trust, and notices of overdue subdivision or condominium maintenance assessments. Monetary liens do not include covenants, conditions and restrictions, condominium declarations or easements; monetary liens do include specific recorded notices of overdue assessments. You need only to search for outstanding recorded monetary liens (1) recorded on or after the date of the execution of the last deed involving a sale (generally this is the deed to the Grantor), or (2) against the Grantor according to your general name search (for judgments, tax liens, etc.) for the period of local custom (but no less than 10 years). If you do not have enough room on the form, you may refer to and attach an Addendum or Exhibit. You may attach copies of the recorded Monetary Liens if your insured requests, but this Policy does not require that copies be attached. As a courtesy to the insured, you may show as an Exception or in a separate letter to the insured a lis pendens or notice of bankruptcy recorded after the deed to the Grantee; however, the Policy does not insure as to these matters.
(8) Tax Information: You must secure a tax and assessment search. You must show all taxes and governmental assessments that are a lien on the title according to the search. If the current year's taxes are not known but are a lien, you may except to "taxes for the year ____, not yet due and payable," in order to accommodate the insured. You may show additional tax information if requested by your insured, such as Tax Parcel Number, Assessed Value of Land/Improvements, Exemptions (including Type and Amount), and Amount of Taxes for prior years. If you do not have enough room on the form, you may refer to and attach an Addendum or Exhibit.