More Changes in the 2006 Policies
by Sarah Holdener, Esq.

We've previously discussed how the 2006 Policies differ from the 1992 Policies, but it will likely take many title tips to address the major changes.  Today's point of interest is something new I learned this week because of a question I received following last week's Title Tip of the Week Newsletter.

The question, from a commercial lender, was basically this - frequenty we have various mortgages with numerous properties, and sometimes actually have mortgages totaling more than the value of the property because of cross collateralization.  Can we obtain title insurance coverage equal to the amount of the mortgage.  I'm assuming that you can not obtain more insurance than the value of the property, no different than getting excess property insurance.  

The short answer is that the lender is correct, a title company will in most instances only insure up to the value of the property.  However, depending on whether a 1992 Loan Policy or a 2006 Loan Policy was issued the end result of a title claim could be dramatically different.

With the 1992 Loan Policy a lender would need to obtain a "last dollar" endorsement in order to maintain coverage until their loan is paid off for certain loan transactions where the amount of the loan exceeds the amount of insurance shown in Schedule A of the policy.  This occurs when the value of the real property collateral is less than the total loan amount and the remaining portion of the loan is either "unsecured" or secured by personal property collateral.  The lender would purchase a policy with an amount of insurance equal to the value of the real estate only, rather than the full loan amount.  As the loan is paid down, subsection 9(b) of the Conditions and Stipulations of the 1992 Loan Policy causes the amount of policy liability to be reduced dollar for dollar, with the liability eventually decreasing to zero although the lender may still be owed a considerable sum of money!  

With the 2006 Loan Policy this situation is eliminated because Section 9 (b) has been removed completely, and the additional coverage granted by the old "last dollar" endorsement has now become standard.     

Thank you for the excellent question and please keep them coming.

Any questions can be directed to Benchmark Title at 618-239-3750. Please feel free to call or email: 

John Howe President Doreen Miller, Esq. Commercial Division Manager

Sarah Holdener, Esq. General Counsel, VP Production Michelle Null VP Escrow Operations

Serving you from three convenient locations:

Main Office: 1124 Hartman Lane Shiloh, IL 62221 Ph: 618-239-3750 Escrow Fax: 618-239-3707 Title Fax: 618-239-3757 Fax Orders: 618-310-1589 President: John Howe www.benchmarktitle.net

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Amy Habrock joined Benchmark Title Company in July of 2005 as a recording clerk and has since been promoted to commercial assistant in the Commercial Division where she is learning to process, prepare documents, and closing statements for commercial closings.  Before joining Benchmark Amy earned a bachelors degree in business administration with a minor in music and vocal performance from Monmouth College in Monmouth Illinois.  Amy resides in Swansea.  She can be reached at 618-239-3750 or by email at ahabrock@benchmarktitle.net.

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