On July 30, 2021, the American Land Title Association (ALTA) Board approved the revised 2021 ALTA Owner’s and Loan Policies – updating their 2006 versions in segments over the intervening years.
The revisions encompass several portions of the policy jacket: aligning the updated language of the 2016 Commitment to the Policy Forms; moving some exceptions that became conventional to the jacket as Exclusions; punctuation and grammatical refinements; amendments based on how courts have treated the prior policy language; and some amended coverages and exclusions.
For instance, a newly defined term is introduced: “Enforcement Notice.” This document affecting the Title, recorded in the Public Records at Date of Policy, describes any part of the Land and identifies a violation or enforcement of a law, ordinance, permit, or governmental regulation, the exercise of a power, or enforcement of a PACA-PSA Trust. This terminology appears throughout the new Policies.
Remote Notary and E-Signature
The loan policy update now references electronic signatures and electronic notary, or “Remote Online Notarization.” Coverage now extends to documents signed electronically or notarized remotely, where permissible. (See Covered Risks #2(a)(iii) &(viii), and 9(c)&(h), for example).
Covered Risk #9: Frauds, Forgeries, and Failures
Coverage has expanded concerning issues relating to the invalidity or unenforceability of the security instrument. Covered Risk #9 previously included conflicting language offering coverage that “includes but is not limited to” a list of causes with the heading “any of the following. “The language has been altered to remove “from any of the following impairing the lien of the Insured Mortgage” and replaced with “caused by:” phrase, which makes it clear that the list of causes of impairment is non-exhaustive and will now embrace a larger universe of causes, the majority of which are related to fraud, forgery, or the failure of proper signing authority or notarization.
Covered Risk #10: Priority
The updates to Covered Risk 10 are about clarification – refining the language to specify the components of the indebtedness that benefit from priority coverage. For example, the revision states that coverage only extends to the amount of loan principal disbursed as of the date of policy, accrued interest, reasonable expenses of foreclosure, and protective advances for insurance and real estate taxes made before obtaining title to the property.
As a result of this clarification, the new Covered Risk 10 has alerted lenders to the benefits of having the ALTA 14 included in their policies, even when the loans do not involve a line of credit. ALTA 14 adds coverage for future disbursements of principal as well as additional portions of the Indebtedness, such as advances to protect the secured property itself.
New Endorsement: ALTA 34.1
There is now an ALTA 34.1 Endorsement which is very similar to the ALTA 34, which remains a coverage option. However, in this new endorsement, the formatting of the endorsement’s verbiage allows for the insertion of an open-ended description of the “Identified Risk.” Essentially, the insurance provided by this endorsement changes such that the covered loss may occur by an adverse party’s exercise or enforcement of the Identified Risk– as opposed to the coverage in ALTA 34, which requires a final court order to enforce the Identified Risk. In addition, coverage is reduced because the title insurer is no longer obligated to pay the costs, attorneys’ fees, or expenses incurred in defense of the title.
To learn more about the revised forms and endorsements, join us for our CLE webinar series – ALTA Forms & Endorsements, on April 26.