STG Non-Partnership Endorsement Guideline 1

Explanation:

This endorsement is applicable only in connection with the issuance of loan policies and is designed to insure the lender against loss by reason of invalidity of the lien or by reason of lost priority based upon determination that the documents create a relationship between the borrower and the lender that is in the nature of a partnership.

Underwriting Requirements:

(1) A Senior Underwriter must review all of the documents and the proposed endorsement.
(2) The endorsement must be limited to loss by reason of lost priority or invalidity or unenforceability of the lien of the insured mortgage based on specific documents.
(3) We will consider the amount of control by the lender (passive control versus active control); extent of review of leases and management budgets; equity of the borrower in the property; the amount of equity participation by the lender - not exceeding 50%; and right of the borrower to extinguish any equity participation interest upon full payment of the loan.
(4) We will require certification or recitation in existing documents that the relationship of the parties is not that of a joint venture or partnership.
(5) Is the borrower a new entity? A single-asset entity? If so, the risk of other creditors is lower.