Title Insurance for Mortgage Lenders: Zoning, Usury, Easement, Future Advances, Comprehensive, Other Endorsements

Description

Title insurance can figure heavily in the closing of a commercial mortgage loan. Lender's counsel must have a thorough understanding of the endorsements that are available to cover various title issues at the property level. Certain features or modifications of a loan can also affect title insurance coverage, so counsel must ensure that appropriate endorsements or title policy modifications are obtained to address those contingencies.

The ALTA 9 or "Comprehensive" endorsement insures against loss or damage resulting from violations of the deed restrictions, encroachments, and set back lines. Certain endorsements address other property-specific title issues, such as the ALTA 3.3 endorsement for improved property where there is known nonconforming use, the ALTA 8.1-06 endorsement relating to environmental protection liens, and the ALTA 28 endorsement which provides coverage against forced removal or alteration of improvements under existing easements.

Endorsements relating to the financing structure must also be considered. There are future advances endorsements for credit line loans and for obligatory and nonobligatory advances. Construction loan endorsements are available in most states, but title updates may be necessary prior to each disbursement. A balloon mortgage endorsement protects the lender against the unenforceability of the lien due to the exercise of a conditional right to refinance, an extension of the loan term, or a change in the rate of interest.

Listen as our authoritative panel discusses the foregoing title endorsements and the legal due diligence which must be conducted to determine the need for each. The panel will also discuss when title endorsements are needed in connection with assignment or amendment of an existing loan.