Form 9 reverse mortgage endorsement

Reverse mortgages are of various types. A Home Equity Conversion Mortgage (HECM) is a reverse mortgage that is given to home owners of 62 years and above. HECM works by converting home equity into monthly income streams and is repaid when the owner moves out of the home or dies.

It is also necessary for the home owner to prove that they actually live in the home or have been living in it for a period of one consecutive month.

When you request a title loan Endorsement, you can get an American Land Title Association (ALTA) Form 9 Endorsement Protection that provides complete coverage against loss by reason of certain off-record risks and post-policy occurrences. The Comprehensive Form 9 endorsement replaced both the Comprehensive 1 and Comprehensive 2 endorsement in November of 1990.

Issuance of the form

This form is normally issued at no charge. The form protects the mortgage company against violations of private property limitations which could weaken the mortgage lien or the marketability of the title. These two, lien and marketability are the only forms of protection that the mortgagee may have.  It should be understood that reverse mortgages leave the lender with many disabilities and especially so as far as remedies are concerned.  He/she is always a non recourse lender.

The form also insures against harm or damage of the property which could be caused by improvements being done to it or damage from nearby properties that are still under construction or due to extraction or development of minerals. The ALTA endorsement – form 9 can be used for residential as well as for commercial transactions.

The ALTA 9 is a loan policy and covers the following 5 items according to the 2007 Attorneys Title:

1. Present violations on the land of any enforceable covenants, conditions or restrictions, and any existing improvements on the land which violate any building setback lines shown on a plat of subdivision recorded or filed in the public records.
   
   
2. Any instrument referred to in Schedule B as containing covenants, conditions or restrictions on the land which, in addition, (i) establishes an easement on the land; (ii) provides a lien for liquidated damages; (iii) provides for a private charge or assessment; (iv) provides for an option to purchase, a right of first refusal or the prior approval of a future purchaser or occupant.
   
   
3. Any encroachment of existing improvements located on the land onto adjoining land, or any encroachment onto the land of existing improvements located on adjoining land.
   
   
4. Any encroachment of existing improvements located on the land onto that portion of the land subject to any easement excepted in Schedule B.
   
   
5. Any notices of violation of covenants, conditions and restrictions relating to environmental protection recorded or filed in the public records.

From this section, the lender can rest assured that he may have recourse if any infringement is committed against the property even if title has not passed as is the case of conventional mortgages.  It will be critical for the lenders attorney to ensure his/her client is well covered in all reverse mortgage transactions to avoid the current situation that Fannie Mae and Freddie Mac are facing due to under securitization.

References

1. URL.http://www.attorneystitle.com/articles/legal/ALTA9CommercialTransactions.pdf
2. http://www.scribd.com/doc/1041479/06ALTA-Form-14-3Future-AdvanceReverse-Mortgage-End
3. http://www.alta.org/forms/