ALTA Releases Discussion Drafts of Revised ALTA Owner’s and Loan Policies

November 2, 2017

The ALTA Board of Governors approved a recommendation to release Discussion Drafts of revised ALTA Owner’s and Loan Policies of Title Insurance during a meeting on Oct. 11. The deadline for comments is May 1, 2018.

The Forms Committee endeavors to maintain a quality standard title insurance product that is responsive to the needs of proposed insured owners and lenders. The current versions of the standard ALTA Owner’s and Loan Policies of Title Insurance were published in 2006. Legislation, regulation, judicial proceedings and business practices have changed the title insurance landscape over time. These Discussion Drafts also present an opportunity to enhance benefits to consumers. 

The ALTA Forms Committee has discussed and tracked possible revisions to the 2006 policies for several years.  The Discussion Drafts address issues the Committee has identified as worthy of discussion with interested parties.

The Discussion Drafts are made available for review and comment only.  They have not been adopted as ALTA standard Forms. Clean and redline versions may be downloaded for review from www.alta.org/policy-forms in the "Discussion Drafts - For Comment by May 1, 2018" section of the Policy Forms Online.

Comments on the Discussion Drafts are welcome and should be submitted to forms@alta.org no later than May 1, 2018.

Discussion Drafts of Revised ALTA Owner’s and Loan Policies - Highlights

ALTA Owner’s & Loan Policy Revision (Covered Risks)

  • The Discussion Drafts acknowledge that the title insurer will not deny liability because the policy is issued electronically or lacks wet signatures.
  • Covered Risks 2(a)(iii) and 2(a)(iv) address electronic notarization of any sort and include insurance against invalidity of a document affecting Title as a result of repudiation of the electronic signature because the electronic signature was not valid
  • The Discussion Drafts add a Covered Risk relating to any PACA-PSA Trust
  • The Loan Policy expands the coverage of insurance against lack of priority of the Insured Mortgage to refer to particular obligations and expenses
  • The Discussion Drafts add coverage for certain court orders providing an alternative remedy in a claim of a voidable or fraudulent transfer or voidable preference

ALTA Owner’s & Loan Policy Revision (Exclusions)

  • Exclusion 1(b) includes forfeitures.
  • Exclusion 6(b) of the Loan Policy and Exclusion 4(b) of the Owner’s Policy (Creditors’ Rights) exclude “a voidable transfer under the Uniform Voidable Transactions Act,” which Act refers to a “voidable transfer” instead of “fraudulent transfer.”  This Act has been adopted in 10 states (per NCCUSL), including California. The Exclusions also excludes a claim that the transaction was not made as a contemporaneous exchange for new value.
  • Exclusion 7 of the Loan Policy and Exclusion 5 of the Owner’s Policy exclude claims arising out of a statutory trust under PACA and P&SA.
  • Exclusion 8 of the Loan Policy and Exclusion 6 of the Owner’s Policy exclude governmental taxes or assessments (such as PACE assessments) due and payable after Date of Policy.
  • Exclusion 9 of the Loan Policy and Exclusion 7 of the Owner’s Policy exclude liability for the quantity of area, square footage, or acreage.

ALTA Owner’s & Loan Policy Revision (Conditions)

  • The definition of Public Records is modified, consistent with the prevalent understanding, to exclude environmental protection, planning, permitting, zoning, licensing, building, health, or public safety matters unless a Record Title Notice is filed in the Public Records.
  • A new definition of Consumer Protection Laws is included in the Loan Policy.
  • The definition of Insured is expanded in both the Owner’s Policy and the Loan Policy with respect to a grantee of the Insured that is an Affiliate, and foreclosure or deed in lieu of foreclosure by an Affiliate
  • Condition 8 states that the policy is not an abstract of the Title, report of the condition of the Title, legal opinion, opinion of the Title, or other representation of the status of Title, and that the Company shall not be liable for any claim alleging negligence or negligent misrepresentation.
  • Condition 8(b) establishes an explicit date for determination of the amount of loss or damage (either date of notice of claim or date of foreclosure as chosen by the Insured if Loan Policy, or date of notice of claim or date liability is finally established if Owner’s Policy.
  • Condition 17 of the Loan Policy and Condition 18 of the Owner’s Policy disclaim class action in arbitration.

ALTA Owner’s & Loan Policy Revision (Exclusions)

  • Exclusion 1(b) includes forfeitures.
  • Exclusion 6(b) (Creditors’ Rights) excludes “a voidable transfer under the Uniform Voidable Transactions Act,” which Act refers to a “voidable transfer” instead of “fraudulent transfer.”  This Act has been adopted in 10 states (per NCCUSL), including California.
  • Exclusion 7 of the Loan Policy excludes claims arising out of a statutory trust under PACA and P&SA.
  • Exclusion 8 of the Loan Policy excludes governmental taxes or assessments (such as PACE assessments) due and payable after Date of Policy.
  • Exclusion 9 of the Loan Policy excludes liability for the quantity of area, square footage, or acreage.

ALTA Owner’s & Loan Policy Revision (Schedules) 

  • Schedule A includes optional “Transaction Identification Data” and in the Conditions disclaims liability for errors.
  • Schedule B Part II insures priority of the Insured Mortgage over listed matters, “subject to the terms and provisions of any subordination agreement identified below.”

As noted above, coverage for the Insured is enhanced by changes, such as the definition of the Insured, new Covered Risk for Perishable Agricultural Commodities Act (PACA) and Packers and Stockyards Act (PSA) claims if a notice of violation or enforcement is in the Public Records, clarification of the creditors’ rights coverage for an alternative remedy (in lieu of avoidance of insured interest), incorporation of the Policy Authentication Endorsement at the beginning of the Covered Risks (no denial because policy issued electronically), and choice of explicit dates for determination of the amount of loss or damage.

Questions?

If you have questions or need more information, email Kelly Romeo, the staff liaison for the Forms Committee.


Contact ALTA at 202-296-3671 or communications@alta.org.

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