TITLE INSURANCE POLICIES

STANDARD COVERAGE V. EXTENDED COVERAGE:

ALTA policies can be issued as standard coverage policies or as extended coverage policies. An extended coverage policy insures the owner or the priority of the lien of the insured mortgage against:

a) unrecorded matters, and
b) documents recorded in the public records and not shown as exceptions to the policy, which could constitute a lien, defect or encumbrance on the title.

A policy is considered an extended coverage policy when it is issued without the "standard exceptions" in Schedule B. By deleting the standard exceptions an extended coverage policy is created. The policy provides coverage against possessory claims by adverse users or squatters, encroachments and other off-record matters that a survey could disclose. It also protects against easements or even mechanic's liens which may exist.

When an ALTA policy includes the standard exceptions, the policy becomes a standard coverage policy. The standard policy excludes coverage for off-record matters. Off-record matters include, among others, encroachments, unrecorded easements, discrepancies or conflicts in boundary lines and interests of parties in possession of the land.

ALTA OWNER'S POLICY
Insures an owner with respect to the title to the subject property. The policy can be used for residential or commercial properties, or various other interests in real estate. The coverage remains in effect as long as the insured, or heirs or devisees of the insured, retain an interest in the subject property or remain liable under warranties given in the sale of that property. The minimum amount of coverage is generally the full purchase price of the real estate, including any improvements to the property that constitute real property.

ALTA LOAN POLICY
Insures a lender making a loan secured by a mortgage on land with respect to the title of the subject property, and with respect tot the validity and priority of the mortgage lien.

NEW! EXPANDED COVERAGE ALTA LOAN POLICY
Includes the same insuring provisions as the ALTA Loan Policy with automatic coverage for endorsements typically issued separately for ALTA Form 9 (restrictions); ALTA Form 6 and 6.2 (variable rate); ALTA Form 8.1 (environmental protection liens; and CLTA Form 116 (address); plus expanded or additional coverage for certain off record or post-policy matters not previously available on residential properties or available only by special endorsement including automatic coverage for revolving credit loans and mortgage modifications; usury law coverage; post-policy mechanic's lien coverage; building permit violations; subdivision map act coverage; violation of restrictive covenants; post-policy forgery; post-policy encroachment; structure damage from mineral extraction; map inconsistencies; increasing policy coverage; enhanced access; expanded survey coverage; and zoning. Some of these expanded coverages contain limitations and provisions for deductibles.

ALTA LEASEHOLD LOAN POLICY
Insures a lender making a loan secured by a mortgage on a "leasehold estate" with respect to the title to the subject property, and with respect to the validity and priority of the mortgage lien. The policy includes a definition of the "leasehold estate" and provides a basis for valuation of the leasehold estate for claims purposes. The policy specifies various miscellaneous items of loss in the event of eviction that are peculiar to a "leasehold estate" -- including the reasonable cost of removing and relocating personal property up to 25 miles, rent or damages that may be due to someone with superior title, the fair market value of any sublease under the insured leasehold, or damage that the insured's borrower may be obligated to pay any sublessee because of any breach of the sublease caused by eviction.

ALTA LEASEHOLD OWNER'S POLICY
Insures the owner of the leasehold estate. Coverage is very similar to the ALTA Owner's Policy but this policy provides a definition of a "leasehold estate" and a method of valuation of the "leasehold estate" for claims purposes. Also, in the event of eviction, it provides for miscellaneous items of loss as set forth in the ALTA Leasehold Loan Policy.

ALTA CONSTRUCTION LOAN POLICY
Insures a lender making a loan secured by a mortgage on land for the purpose of financing construction on the land with respect to the title to the subject property and with respect to the validity and priority of the mortgage lien. This policy is similar to the ALTA Loan Policy except that no mechanic's lien coverage is furnished by the base policy, but rather by one of four endorsement forms designed to be used.

ALTA RESIDENTIAL ("PLAIN LANGUAGE") TITLE INSURANCE POLICY
Insures the owner of a one-to-four family residential dwelling, residential lot, or condominium unit. This is a "plain language" policy designed for consumers and is often used, where appropriate, instead of the ALTA Owner's Policy. The policy specifies 14 covered title risks and, unlike the ALTA Owner's Policy, provides limited survey coverage and limited zoning coverage, if no exception is taken to these matters.

NEW! EXPANDED COVERAGE ALTA RESIDENTIAL ("PLAIN LANGUAGE" TITLE INSURANCE POLICY:
Includes the same insuring provisions as the ALTA Residential Policy with automatic expanded or additional coverage for certain off record or post-policy matters not previously available on residential properties or available only by special endorsement. These coverages include building permit violations; subdivision map act coverage; violations of restrictive covenants; post-policy forgery; post-policy encroachment; structure damage from mineral extraction; map inconsistencies; increasing policy coverage; and continuation of insurance to the trustee of a trust who receives a deed from the homeowner. Some of these expanded coverages contain limitations and provisions for deductibles.

ALTA SHORT FORM RESIDENTIAL LOAN POLICY
Insures the lender making a mortgage loan on a one-to-four family residence or condominium unit. The policy is an abbreviated short form version of the current ALTA Loan Policy, which is designed to be delivered to the lender at closing. The policy contains blanket exceptions to taxes, covenants and restrictions, easements, reservations of minerals or mineral rights, and offers certain affirmative assurances with respect to survey matters. The policy also includes an Addendum, which can be used to set forth additional exceptions or to limit the affirmative assurances. The policy is designed so that certain ALTA endorsement forms may be specified, and thus incorporated, by checking appropriate boxes.

ALTA MASTER RESIDENTIAL LOAN POLICY
This form offers a lender, in one-to-four family residential and condominium transactions, the protection of the current ALTA Loan Policy through the Master Policy, which is supplemented by an ALTA Residential Loan Certificate for each particular mortgage loan insured. The Residential Loan Certificate is similar to the ALTA Short Form Policy and sets forth blanket exceptions to taxes, covenants and restrictions, easements, reservation of minerals or mineral rights, which are followed by certain affirmative assurances desired by lenders in connection with these exceptions, including specified affirmative assurance with respect to survey matters. As with the Short Form Policy, The Master Policy also includes an Addendum. The Residential Loan Certificate is also designed so that it may incorporate by reference certain ALTA endorsement forms.

ALTA US POLICY
An owner's policy, very similar to the regular ALTA Owner's Policy, designed to insure title in the United States of America or a US Agency. This policy has an additional insuring provision insuring against loss or damage by reason of the failure of the title report or commitment to name any party who has an interest in the land, which was disclosed by the public records immediately prior to the filing of the lis pendens or Declaration of Taking by the USA The policy does not insure the validity or sufficiency of the condemnation proceeding, and it contains a provision by which the Attorney General of the United States may undertake the defense of any claim, provided that certain notices and opportunities to suggest defenses are given to the company.

FREQUENTLY REQUESTED ENDORSEMENTS
(ALTA and CLTA Forms):

ALTA FORM 1 (STREET ASSESSMENTS)

This endorsement assures the insured mortgagee under a loan policy that there are no street improvements under construction or completed which at the date of the issuance are prior or at a later date may be prior to the lien of the insured mortgage. It may be given upon request by endorsement or by additional coverage within the body of a loan policy if the issuing company is provided with satisfactory evidence to justify such coverage.

ALTA FORM 2 (TRUTH IN LENDING)
(same as CLTA Form 125)

This endorsement may be issued in connection with a loan policy to protect the insured lender against rescission under the Federal Truth in Lending Act.

ALTA FORM 3 (ZONING)
(same as CLTA Form 123.1)

This endorsement to the owner's or loan policy is designed for issuance on unimproved property and provides assurance on the applicable zoning classification and authorized use of the land described in the policy.

ALTA FORM 3.1 (ZONING--COMPLETED STRUCTURE)
(same as CLTA Form 123.2)

This endorsement to the owner's or loan policy is designed for issuance on improved property and provides assurance on the applicable zoning classification and authorized use of the land described in the policy. In addition, this endorsement insures against loss or damage arising from a final decree of a court of competent jurisdiction which either (1) prohibits a specific use set forth in the policy or (2) requires the removal or alteration of a structure located on the property on the date the policy is issued because of violations of area, floor space or setback requirements in the law.

ALTA FORM 4 (CONDOMINIUM)
(same as CLTA Form 115.1)

The condominium endorsement may be issued in connection with the issuance of a loan policy on a unit of a condominium. It insures a) that the condominium being insured qualifies as a condominium under state statue; b) that there are no violations of restrictive covenants which will cause a forfeiture of title; c) the lien of homeowner's association assessments will not have priority over the insured mortgage; d) no loss or damage arising by reason of the insured's interest not being separately assessed; e) that there no encroachments that will cause loss or damage to the insured owner or lender; and f) that there

ALTA FORM 5 (PLANNED UNIT DEVELOPMENT (PUD))
(same as CLTA Form 115.2)

The PUD endorsement may be issued in connection with the issuance of a loan policy on a lot of a PUD. This provides basically the same coverage as the ALTA Form 4 for PUD's rather than condominiums.

ALTA FORMS 6, 6.1 and 6.2 (VARIABLE RATE MORTGAGE)
(same as CLTA Forms 111.5, 111.6 and 111.7)

The variable rate mortgage endorsement may be issued in connection with a loan policy for variable rate mortgages. These endorsements insure lenders against loss or damage arising from the invalidity or unenforceability of the lien of the insured mortgage caused by changes in rates of interest in variable or renegotiable rate mortgages.

ALTA FORM 7 (MANUFACTURED HOUSING UNIT)

The manufactured housing unit endorsement may be issued in connection with a loan policy when the insured premises are improved with one single family residence. This endorsement changes the definition of the word "land" in the policy and insures that the manufactured housing unit is real property and part of the land.

ALTA FORM 8.1 (ENVIRONMENTAL PROTECTION LIEN)
(same as CLTA Form 110.9)

The environmental protection lien endorsement is issued in conjunction only with a loan policy and only on one-to-four family residential property. It provides assurances that there are no environmental protection liens filed in the local records or in the federal district court clerk's office that could have priority over the lien of the insured mortgage (unless any such lien is excepted); it also provides assurance that there are no state statutes that could create liens later filed which would have priority over the lien of the insured mortgage except those statutes specifically excepted. (Even though this endorsement is limited to residential property, we do have an equivalent form available for commercial properties)

ALTA FORM 9 (RESTRICTIONS, ENCROACHMENTS, MINERALS)
(same as CLTA Form 100)

This "comprehensive" or "all-inclusive" endorsement is issued in conjunction with a loan policy and provides coverage that there are no violations of covenants, conditions, and restrictions, but if there are violations, they will not impair the lien of the mortgage or cause loss or all or part of the title to the property. In addition, there are assurances that there are no violations of building codes relating to set back lines, nor other encroachments. Lastly, the endorsement assures against damage arising out of the right to surface entry resulting from mineral exceptions shown in Schedule B.

CLTA FORM 101 (MECHANIC LIEN GAINING PRIORITY OVER INSURED MORTGAGE)

This endorsement provides specific assurances against any mechanic or materialmen lien gaining priority over the insured mortgage. These endorsements are not necessary when ALTA extended coverage policies are issued.

CLTA FORM 102.4 (FOUNDATIONS WITHIN LAND DESCRIBED DO NOT VIOLATE COVENANTS)

This endorsement provides assurances that the foundations that have been constructed following the issuance of the policy lie within the exterior bounds of the land and that such foundations do not violate the provisions of the covenants, conditions and restrictions shown in the policy.

CLTA FORM 102.5 (FOUNDATIONS WITHIN LAND DESCRIBED, DO NOT VIOLATE COVENANTS AND DO NOT ENCROACH ON EASEMENTS)

This endorsement provides assurances that the foundations that have been constructed following issuance of the policy lie within the exterior bounds of the land and that such foundations do not violate the provisions of the covenants, conditions and restrictions and do not encroach upon easements excepted from coverage.

CLTA FORM 103.1 (EXERCISE OF RIGHT OF USE OF EASEMENT)

This endorsement provides assurances against loss sustained by reason of the exercise of the use or maintenance of an easement which cannot be specifically located from the document and is excepted from coverage.

CLTA FORM 103.2 (NONE OF IMPROVEMENTS ENCROACH UPON EASEMENT)

This endorsment provides that the existing improvements upon the land do not encroach upon the easement identified.

CLTA FORM 103.3 (EXERCISE OF RIGHT OF USE OF SPECIFIC EASEMENT)

This endorsement provides assurances against loss sustained by reason of the exercise of the use or maintenance of an easement which can be specifically located from the document and is excepted from coverage.

CLTA FORM 103.4 (A NAMED EASEMENT PROVIDES ACCESS TO LAND)

This endorsement provides assurances that a named easement provides ingress and egress to the land from a public street.

CLTA FORM 103.7 (LAND ABUTS PHYSCIALLY OPEN STREET)

This endorsement provides assurances that the land abuts a physcically open and identified street.

CLTA FORM 104 (ASSIGNMENT ENDORSEMENT FOR INSTITUTIONAL LENDER WITH PARTIAL DATEDOWN)

This endorsement is used for institutional lenders who assign the insured mortgage. It insures that the assignment of the beneficial interest in an insured mortgage is valid, that no reconveyance, either full or partial, nor any modification or subordination appears of record.

CLTA FORM 108.8 (ADDITIONAL ADVANCE)

This endorsement is used when a lender makes an optional advance under an insured mortgage. When attached to the ALTA loan policy this endorsement provides the lender with insurance that the priority of the advance is the same as that of the insured mortgage.

CLTA FORM 110.5 (MODIFICATION OF INSURED MORTGAGE)

This endorsement is used when an insured lender modifies their mortgage and provides specific assurances relating to title at a date later than the date of policy.

CLTA FORM 116 (ADDRESS - IMPROVEMENTS UPON LAND)

This endorsement discloses that a specified type of improvement exists upon the land, if any, and that the land is commonly known as the named address.

CLTA FORM 116.1 (LAND SAME AS SHOWN BY SURVEY)

This endorsement is used when an ALTA/ACSM Survey is submitted to the Company and the insured desires assurances that the land shown in the survey is the same as described in the policy.

CLTA FORM 116.2 (CONDOMINIM MAP CORRECTLY SHOWS IMPROVEMENTS UPON LAND )

This endorsement provides assurances that the map of survey of the condominium correctly shows the unit and identifies the correct street address of the land.

CLTA FORM 116.3 (CHANGE OF DESCRIPTION OF LAND)

This endorsement provides assurances that land is now known by a different legal description.

CLTA FORM 116.4 (CONTIGUITY OF PARCELS)

This endorsement provides that the various parcels that consitute the land physically touch each other as identified and are contiguous.

CLTA FORM 122 (CONSTRUCTION DATEDOWN)

This endorsement is used when a construction lender desires that title be extended to find specific changes appearing in the public records.

CLTA FORM 126 and 126.1 (COMPREHENSIVE ENDORSEMENT FOR HOMEOWNER)

This endorsement provides the same assurances as those found in the ALTA Residential (Plain Language) Title Insurance Policy.

SPECIAL ENDORSEMENTS

The policy and endorsement from previously listed are designed to be used in the standard or usual types of transactions involving a simple sale, lease or mortgage. These endorsements help tailor the policy to fit specific situations but as transactions become more complicated or do not fall within the normal category, there are more non-standard or special endorsements which are needed. Different companies will refer to these endorsements by different names or designations and not all of these will be available on any transaction. Following is an explanation for some of these special endorsements along with general underwriting guidelines for their issuance.

LAST DOLLAR ENDORSEMENT

The 1992 Loan Policy provides under Section 9(b) of the Conditions and Stipulations that payment in part of the principal of the indebtedness shall reduce the amount of insurance pro tanto. This endorsement may be requested where the lien of the insured mortgage secures an amount in excess of the amount of insurance stated in the specific policy.

Underwriting Requirements:
(1) Issuance of the endorsement will only be authorized if there is a reasonable explanation for issuance of the Policy for an amount less than the amount of the debt (such as where the value of the land is equal to the amount of insurance and there is other collateral). In the alternative, consideration could be given to a provision for pro rata liability equal to the ratio of the value of the land to the total collateral.

NON-IMPUTATION ENDORSEMENT

This endorsement may be issued in conjunction with either an Owner's Policy or a Loan Policy. It limits Exclusion 3(b) concerning matters "known" by the Insured, not appearing in the public records, not known by the title company and not disclosed to the title company. For example, the endorsement may be requested when a partner is buying the interest of another partner and does not want the exclusion to be applicable as to matters known by the former partner or partners but not known by the new partner. It may also be requested by a new investor as to matters known by the former owner where property is conveyed by the former owner to a new partnership composed of the former owner and a new investor.

Underwriting Requirements:
(1) We require an indemnification by the party whose knowledge is in question and an affidavit or certification by that party that it knows of no outstanding claims or interests.
(2) We require financial disclosures by the proposed indemnitor evidencing the financial strength of that party.
(3) We require an explanation of the transaction and of the reason for the endorsement; for example, the nature of the transaction may evidence that a leveraged buyout is occurring and, thus, that an additional exception should appear.
(4) We require that the party whose knowledge is in question be specified by name and not generically (such as "shareholders", "officers", "other parties by operation of law" or similar general terms).

FAIRWAY ENDORSEMENT

The Fairway case suggests that the ALTA Owner's Policy does not continue "by operation of law" to cover a partnership after dissolution even if the business continues. As a result, the insured requests a Fairway Endorsement on many commercial transactions where the insured owner is a partnership (and often anticipates changes in partners), or similar entity.

Underwriting Requirements:
(1) Although the requested language of the endorsement will vary widely, we will generally be willing to issue the Fairway Endorsement provided that the Policy continues notwithstanding a dissolution of the partnership so long as the business continues. This endorsement avoids the necessity of a new policy.
(2) To the extent that the endorsement expressly provides for continuation of coverage in the event of a sale to related entities, we are less likely to issue the endorsement.

USURY ENDORSEMENT

The Usury Endorsement is issued only in conjunction with the Loan Policy. There is no "standard" usury endorsement although at least three types of forms are evident:
(1) A Usury Endorsement which simply deletes the exclusion regarding usury;
(2) A Usury Endorsement which insures against loss by reason of invalidity or unenforceability of the lien of the insured mortgage resulting from violation of the usury laws of a specific state in effect at date of Policy; and
(3) A Usury Endorsement which provides more generous coverage regarding invalidity or unenforceability of the lien as to principal and interest (and which generally refers to a particular state and may, in addition, delete the exclusion).

Underwriting Requirements:
(1) We may require an attorney's opinion (with copy of applicable statutes) to issue the Usury Endorsement. Reliance upon a state statute affording an apparent absolute exemption may be ill-advised since there may be conflicting criminal usury laws or subsequent laws modifying the effectiveness of the exemption.
(2) We will issue the endorsement only if the state statute provides an absolute exemption since we are not in a position to calculate the effective rate of interest due to possible prepaid interest or equity participation.
(3) We generally prefer to issue a usury endorsement limited to loss by reason of invalidity or unenforceability of the lien of the insured mortgage (without reference to principal and interest as such) under the laws of a specific state.
(4) We generally do not rely upon choice of law provisions in the loan documents in order to issue the endorsement where the state in which the land is located does not have an absolute exemption.

DOING BUSINESS ENDORSEMENT

This endorsement is only applicable in connection with the issuance of a Loan Policy. The ALTA Loan Policy excludes unenforceability of the lien of the insured mortgage by reason of failure or inability of the insured to qualify to do business. The endorsement provides insurance against loss by reason of unenforceability of the lien due to failure to qualify to do business. We generally prefer to issue a modified endorsement excepting to the effect of other business transactions or offices. This limit is implicit in most endorsements.

Underwriting Requirements:
(1) We may issue an endorsement insuring against loss by reason of violation at Date of Policy of doing business laws if we verify that the insured is qualified in the relevant state.
(2) We may issue the endorsement to a specific named insured if we are furnished with the following:
(a) Confirmation that (i) the loan to the mortgagor will not take place in the state where the land is located (including negotiation, issuance of the lender's loan Commitment, execution of documents, closing of the transaction, disbursement of loan proceeds and repayment of loan), (ii) no prior loans have been made in the state by the lender, (iii) no real estate in the state is or has been owned by the lender, (iv) no prior business by the lender has occurred in the state, and (v) no office of the lender exists in this state, or;
(b) An attorney's opinion addressed to the Company stating that the making of the loan does not violate the doing business laws of the state where the land is located and reciting the specific statutory exemption of the loan transaction.
(3) The first endorsement should always name a specific party and not use the generic phrase "the insured" and should not cover violations subsequent to date of Policy.
(4) We may issue a modified endorsement which refers to the specific statutory exemption (where applicable) and which excepts to the effect of other transactions. (5) We may issue an endorsement which is based on specific exemption of loan transactions.

TIE-IN ENDORSEMENT (SPREADER OR CLUSTER ENDORSEMENT)

This endorsement is requested on Loan Policies where the lender is making loans secured by mortgages on various tracts covered by more than one Policy and where the mortgages secure one aggregate loan. The lender wishes to aggregate the liability so that loss on each tract will not be limited to the face amount of the Policy on each tract. By issuance of the Tie-In Endorsement, the Company has effectively issued one Policy and pooled liability since there is no apportionment clause under the Loan Policy. The Tie-In Endorsement may result in the necessity of reinsurance.