THE 2006 ALTA FORMS

ByJames L. Gosdin

Stewart Title Guaranty Companyjgosdin@stewart.com

New ALTA Forms

• ALTA Loan Policy (6/17/06)

• ALTA Owner’s Policy (6/17/06)

• New Commitments – Standard/Plain

• Short Form Loan Policy (6/17/06)

• Totally New New Endorsements

• 2006 Policy Endorsements (XX-06)

• Revisions to Existing Endorsements

Format of the 2006 ALTA Policy

• Terms of Art

• Covered Risks, Schedules, Exclusions, and Conditions

• The Idea: Improve Coverage

Laundry List of Coverage

• Defect in Title

• Invalidity and unenforceability of lien of Insured Mortgage

Coverage for Electronic Transactions

• Failure to Perform acts necessary to create an electronic document legally.

• Failure to file, record, or index including electronic means

• Indebtedness evidenced by electronic means

• Insured includes person who has control

Survey Coverage: Covered Risk 2(c) • 2 (c) “Any encroachment, encumbrance, violation,

variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term “encroachment” includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land.” 

Taxes, Taxes, Taxes• The lien of real estate taxes or assessments

imposed on the Title by a governmental authority due or payable, but unpaid.

• The lien of any assessment for street improvements under construction or completed at Date of Policy (Loan) (ALTA Endorsement 1)

Gap Coverage

• Any defect in or lien or encumbrance on the Title or other matter included in Covered Risk that has been created or attached or has been filed or recorded in the Public Records subsequent to Date of Policy and prior to the recording (of the deed or Insured Mortgage).

• Tax Exclusion for liens after Date of Policy• Post-Policy Creditors’ Rights Coverage

Governmental Exclusions from Exclusions Become Covered Risks

• Covered Risk 5: Specific Police Powers and Notice of Violation or Intent to Enforce by Anyone

• Covered Risk 6: Catch-all Notice of Enforcement of Police Powers

• Covered Risk 7: Eminent Domain Notice of Exercise

• Covered Risk 8: Eminent Domain Binding BFP• Compare Exclusions 1 and 2

Covered Risk 13 Creditors’ Rights in Loan Policy

• Covers Invalidity, Unenforceability, Lack of Priority and Avoidance

• Because of Avoidance or Court Order (e.g. Money)• Fraudulent transfer or voidable preference prior to current

transaction• Preferential transfer of Insured Mortgage because of

– failure to timely record Insured Mortgage– failure of Insured Mortgage to be constructive notice

• Compare Exclusion 6: Creditors’ Rights Exclusion

Covered Risk 9 - Creditors’ Rights in Owner’s Policy

• Title Being vested other than as stated or being defective • Because of Avoidance or Court Order (e.g. Money)• Fraudulent transfer or voidable preference prior to current

transaction• Preferential transfer of Deed because of

– failure to timely record – failure of Deed to be constructive notice

• Compare Exclusion 4: Creditors’ Rights Exclusion

Lien and Lien Position

• Covered Risk 9: Invalidity or Unenforceability• Covered Risk 10: Lack of Priority – Contrast 1970

and 1992• Covered Risk 11(a): Lack of Priority over MMLs

– Same Underwriting• Covered Risk 11(b): (New) Lien for Assessments

for Street Improvements Under Construction or Completed – ALTA Endorsement 1

Schedule A Changes

• Title Insurer name and address

• Loan No.

• Address Reference

• Optional 6: box selection of endorsements – Can issue with, without, with others or with some

Exciting Changes in Conditions

• (Section 1) Indebtedness includes post-policy advances, but not ALTA 14 coverage

• (Section 1) Insured in Loan Policy includes person who has control of transferable record and more transferees

• (Section 1) Insured In Owner’s Policy• (Section 2) Warrantor’s Coverage • (Section 4) Proof of Loss not an absolute• (Old Section 7(b)) OTP Co-insurance bye bye• (Old Section 8) Apportionment bye bye

How Much Will We Owe?

• (Section 8 (b)) 10% Hike

• (Old Section 9(b) of Loan Policy) -Last Dollar Swan Song

• (Old Section 10 of Loan Policy) Liability Noncumulative Disappears

• (Section 13/14) Arbitration-Higher Limits, New Rules

Endorsements

• New ALTA 7.1 , 7.2 Manufactured Housing Endorsements

• New ALTA 9.3, 9.4, 9.5 (future improvements)• New ALTA 14.3 Future Advance – Reverse • New ALTA 22, 22.1 Location• Revised 9, 9.1, 9.2 • New Endorsements for 2006 Policies: ALTA 1-06

to 22.1-06 (all with xx-06 designation)

New Reinsurance Agreements

• Facultative Reinsurance Agreement

• Tertiary Agreement

• Quaternary Agreement

Other New Forms

• Revised 1966 Commitment – Designed for 2006 Policies

• Revised Plain Language 1982 Commitment – Designed for 2006 Policies

• Short Form Loan Policy

THE END

James L. Gosdin

800-729-1902

Jgosdin@stewart.com