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B7-2-06, Attorney Title Opinion Letter Requirements (12/13/2023)

Introduction
This topic contains information on the following:

Attorney Title Opinion Letter Requirements

Lenders are authorized to use an attorney title opinion letter in lieu of a title insurance policy if all of the conditions in the following table are satisfied.

✓ The attorney title opinion letter must...
  be addressed to the lender and all successors in interest of the lender.
  provide the following statement: We [I] agree to indemnify you and your successors in interest in the [mortgage] [deed of trust] opined hereto, to the full extent of all losses attributable to a breach of our [my] duty to exercise reasonable care and skill in the examination of the title and giving of this opinion.
  provide the gap coverage for the period of time between the loan closing and the recordation of the mortgage.
  state that the title condition of the property is acceptable and the mortgage constitutes a lien of the required priority on a fee simple estate in the property.
  list other liens and state that they are subordinate.
  be given by an attorney licensed to practice law in the jurisdiction where the subject property is located. The attorney must also be insured against malpractice in rendering opinions of title in an amount commonly prevailing in the jurisdiction, taking into account the volume of opinions rendered by the attorney.
  be commonly acceptable in lieu of title insurance by private institutional mortgage investors in the area where the subject property is located.
  include language relating to the coverage normally provided by ALTA Endorsement 8.1 (Environment Protection Lien). Section (a) of the endorsement insures that there are no environmental protection liens filed in the public records that have priority over the lien of the insured mortgage; Section (b) insures that there are no state statutes that provide that liens filed after the date of the policy would have priority over the lien of the insured mortgage. An attorney may include an exception for possible subsequent super liens that could take priority over the mortgage only if the subject property is located in a state whose state statutes provide for such a super lien.
 

include the following if the loan is an ARM:

The law of the state in which the property securing the mortgage is located provides that (i) the lien of the mortgage will not become invalid or unenforceable resulting from provisions in the mortgage that provide for changes in the interest rate calculated pursuant to the formula provided in the mortgage, and (ii) priority of the lien of the mortgage for the UPB of the loan, together with interest as changed and other sums advanced by the noteholder in accordance with the provisions of the mortgage, will not be lost as a result of changes in the rate of interest calculated pursuant to the formula provided in the mortgage.
 

include the following if the loan is secured by a unit in a PUD:

  • there is no present violation of any restrictive covenants that are in the PUD constituent documents and restrict the use of the land or the forfeiture or reversion of title,
  • all dues applicable to the subject property are current and not delinquent, and
  • no recorded right of first refusal to purchase the land was exercised or could have been exercised on or before the closing date of the loan and the undersigned is unaware of the existence or the exercise of any right of first refusal on or before the closing date of the loan.
  not take exception to survey matters. In addition, the opinion must not be subject to any title exceptions other than those set forth in  B7-2-05, Title Exceptions and ImpedimentsB7-2-05, Title Exceptions and Impediments.

 

Ineligible Transactions

The following transactions are not eligible for an attorney title opinion letter:

  • co-op share loans;
  • loans secured by a dwelling on a leasehold estate, including leasehold estates on property owned by a community land trust;
  • loans secured by a manufactured home;
  • HomeStyle Energy and HomeStyle Renovation loans;
  • Texas Section 50(a)(6) loans; and
  • loans executed using a power of attorney.

 

Special Feature Code

The lender must report Special Feature Code 155 when delivering a loan that uses an attorney title opinion letter in lieu of a title insurance policy. This code is in addition to any other SFCs that may apply (see Special Feature Codes for additional information).

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcement  Issue Date
Announcement SEL-2023-11 December 13, 2023
Announcement SEL-2022-03 April 06, 2022

 

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