mn title insurance a to z

COMMERCIAL PARTNERST I T L E, L L C

Market UpdateTitle Insurance


Market UpdateTitle Insurance

What’s happening at a national and local level that’s impacting the way we conduct business?

1. Numerous title insurance claims in a down market both in residential and commercial real estate.

a. title insurance premium rates are increasingb. title insurance coverage is declining

2. Title agent defalcation has increased. Agents have gone out of business and underwriters are cancelling agents.


Title Insurance Premiums are going up

•Title Insurance underwriters have filed new rates with Department of Commerce. Rates in general are up by 10%.

•The standard 40% reissue credit has been replaced by a refinance rate.

•Other states have filed and regulated rates. Texas and Florida are six times Minnesota’s rates.


Title Insurance Coverage’s are declining

•The Creditors Rights Endorsements has been withdrawn by two major title insurance underwriters.

•Early Start coverage has become a national focal point.

Creditor’s Rights Endorsement

• Purpose: Insures against loss if– Mortgagor or Predecessor in title files for

Bankruptcy Protection; AND– Bankruptcy Trustee challenges validity of

transfer as either a “Fraudulent Conveyance” or a “Preferential Transfer”



Early Start

•Statutory Priority

•What is Early Start


Statutory priority No priority

Project Concept

Idea to developproperty. Owner or purchaser considering action.

May be preliminaryConversation with lender or other investors. May be purchase agreement or option if land is not already owned.

Planning

Action is commenced. Either internal or outside resources are used in the process.

Architect and/or surveyor may be hired and begin work. These professionals have the right to file a lien if they are not paid. The effective date of their lien is the date that they begin working on the project.

At closing, these bills will need to be paid in full for all services provided to date.

ConstructionBegins

The bold line Represents the“first visible Improvement”

SOME EXAMPLES;Any use of heavy equipment. Delivery of materialsor equipment to the job site.Site Preparation.Excavation.

GREY AREA:Demolition

Ongoing Construction Process Any contractor, subcontractor, or supplier who complies with the statue’s requirement can file a lien against the property if they are not paid.

Mechanic’s Lien Statement must be filed within 120 days after the last day of work to the project by that provider. After a lien is filed, the lien claimant has additional time to begin the process of foreclosing their mechanic’s lien

If a lien is filed during the construction disbursing property, either the matter must be resolved or funds must be escrowed.

Construction Completed

The last work is performed by the last provider.

Finished carpentry, painting, carpet and other final items are being completed.

Beware of items on the punch list. If someone comes back, that becomes their last date of work.

Mechanic’s Liens and PriorityCOMMERCIAL PARTNERST I T L E, L L C

Early Start Approval

Loan Amount1. Loan Amount

Construction

Cost

2. Construction Cost

Soft Costs

3. Soft Costs

Land Cost

4. Land Costs General Contractor

5. General Contractor

Current Value

6. Current ValueImproved Value

7. Improved Value

Review ofBorrower’s Financials

8. Review of Borrower’s Financials


Early Start

Borrower

Lender

Title Company

Contractor

Early Start Approval•Terms for Coverage

•Pay Subs•Pay for completed work•Lien Waivers

Construction Contract•Work Start timing•Pay to GC/Subs•% Pay vs. Work completed

Loan Commitment•Financial Req’s•Loan Terms•Closing Time



Knowing Your Partners

Title Agent Title Insurance Company

Underwriter


Agent Benefits Title Company Benefits

•Ability to “shop” coverage and pricing

•Value of your business

•Closing Protection Letter

•Underwriting Authority

• still subject to limits and need to go up the chain

•Deep Pockets


Closing ProtectionLetter


Old Republic National Title Insurance Company

What is Title?

Ownership of real property consists of a variety of rights and interests which apply to different aspects of land.Collectively, these rights are called “fee simple title”

Fee simple title: The owner is entitled to the entire property, with unconditional power of disposition during his life, and descending to his heirs and legal representatives upon his death intestate.

- Black’s Law Dictionary


What is Title?

• Life Estates

• Possession

• Easements

• Licenses

• Leases (term of years)

• Rights to mine rocks or minerals

• Security Interest Liens (mortgages)

• Statutory Liens

• Vendee’s Interest under Contract for Deed


What is Title?

Marketable Title - Black’s Law Dictionary

Title which could be sold readily to a reasonably prudent purchaser or mortgagee

Title which would be acceptable to a reasonable purchaser who is informed as to the facts and their legal meaning, willing to perform his contract, in the exercise of that prudence which business men usually bring to bear on such transactions.

Title under which a purchaser may have quiet and peaceful enjoyment of the property, free of material defects or grave doubts, and reasonably free from litigation


What is Title Insurance?An Indemnity Contract between the Insurance Company and the owner of an Interest in Real Property, in which the Title Insurer agrees to insure the Insured against financial loss or damage that may arise from defects in the title as insured, including the assertion of liens and claims against the property that are not otherwise excepted from policy coverage.

- Rande Yeager, ALTA PresidentApril 26, 2006


What is Title Insurance?The Title Insurer will protect the insured against financial losses caused by title to the insured interest being other than as shown in the policy. Insurer may cure the problem OR

Pay the insured the value of the loss, up to the face value of the policy.


ALTA Policy Forms

ALTA 2006 Loan Policy

ALTA 2006 Owner’s Policy

ALTA 1992 Construction Loan Policy

ALTA 1992 Expanded Coverage ResidentialLoan Policy

ALTA 2008Homeowner’s

Policy

ALTA Master Residential

Loan Policy

ALTA 1996 Residential

Limited Coverage

Junior Loan Policy


Loan Certificate


Title Insurance

Policy

ALTA 2008 Short Form Expanded Coverage ResidentialLoan Policy

ALTA Short FormResidentialLoan Policy

ALTA Short Form Residential Loan Policy

Limited Coverage –

Junior Loan Policy

ALTA U.S. Policy






ALTA Policy Forms



Title Policy

• Schedule A: What is Insured– Effective Date– Amount of Coverage– Interest Insured– Fee ownership of Real Estate– Description of Real Estate

• Schedule B: What affects that land that burdens the insured interest– “Standard” Exceptions– Easements– Restrictions– Covenants– Senior security interests– Leases

• Schedule B – Part II: What affects the land, but is subordinate to the insured interest

– Subordinate Debt, Leases, etc.


O&E – Proceed with Caution


O&EOwner’s & Encumbrance Report

• Limited Report ONLY• Abstractor finds last

recorded deed• From that point forward

pulls in unsatisfied monetary encumbrances (mortgages, judgments)

• DOES NOT REFLECT– Whether last deed is good

vested title– Whether there are any

easements, etc. that have been filed during the search period

– Whether any matters (monetary liens or easements, etc.) from before the last deed continue to affect the property


Junior Lien PolicyCOMMERCIAL PARTNERST I T L E, L L C

• CANNOT be used for commercial property– Anything other than a 1-4 family residence

• DOES NOT insure against loss from easements, encroachments, covenants, conditions, restrictions

• DOES NOT insure that title is properly vested in the borrower

“Junior Lien” PolicyCOMMERCIAL PARTNERST I T L E, L L C

Modifies information on

all parts of the Title Policy

to make it current


Date Down Endorsements

Date Down Endorsement

• Provides coverage from the original policy date through the date and time the insured modification is recorded– Reflects what has occurred in the meantime– Reflects how these items relate to your

mortgage


• Extends coverage date to recording of modification– Reflects what has

occurred in the meantime

– Reflects how these items relate to your mortgage

• Critical When:– Additional Money– Interest Rate Changes– Ownership of property

changed in meantime– Assumption

Agreement (borrower changes)

• Appropriate at other times as well



Piggyback Date Down Endorsement

Endorsement issued by

a Title Insurer

to Policy issued by

a different Title Insurer



Modifies information on

all parts of the Title Policy

to make it current


Coverage start date is

effective date/time of original policy

(or last date down endorsement)



mn title insurance a to z

Documents

commercial partnerst

c title insurance premiums

title files

title insurance premium

fee simple title

title agent defalcation

commercial real estate

marketable title bl