Introduction
This topic provides specific requirements for title insurance coverage related to certain types of mortgage products or types of security properties, including:
- Condo and PUD Unit Mortgages
- Co-op Share Loans
- Mortgages Subject to Leasehold Estates
- Other Mortgages
Condo and PUD Unit Mortgages
The title insurance policy for a condo or PUD unit mortgage must describe all components of the unit estate.
For condo unit mortgages, an ALTA 4-06 or 4.1-06 endorsement or its equivalent is required. For PUD unit mortgages, an ALTA 5-06 or 5.1-06 endorsement or its equivalent is required. These endorsements must be attached to each policy or incorporated in the text of the policy.
If the unit owners own the common areas of the project as tenants in common, the policy for each unit mortgage must reflect that ownership.
If the homeowners' association owns the common elements, areas, or facilities of the project separately (or holds them in a leasehold estate), the title insurance on those areas must insure that ownership.
This title policy must show that title to the common elements, areas, or facilities is free and clear of any objectionable liens and encumbrances, including any statutory or mechanics' liens for labor or materials related to improvements on the common areas that began before the title policy was issued.
The title policy must protect Fannie Mae by insuring the following:
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that the mortgage is superior to any lien for unpaid common expense assessments. (In jurisdictions that give these assessments a limited priority over a first mortgage lien, the policy must provide assurance that those assessments have been paid through the effective date of the policy.)
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against any impairment or loss of title of Fannie Mae's first lien caused by any past, present, or future violations of any covenants, conditions, or restrictions of the master deed for the project. (It must specifically insure against any loss that results from a violation that existed as of the date of the policy.)
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that the unit does not encroach on another unit or on any of the common elements, areas, or facilities. (The policy also must insure that there is no encroachment on the unit by another unit or by any of the common elements, areas, or facilities.)
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that the mortgage loan is secured by a unit in a condo project that has been created in compliance with the applicable enabling statutes;
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that real estate taxes are assessable and lienable only against the individual condo unit and its undivided interest in the common elements, rather than against the project as a whole; and
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that the owner of a PUD unit is a member of the homeowners' association and that the membership is transferable if the unit is sold.
Mortgages Subject to Leasehold Estates
A mortgage that is subject to a leasehold estate must have an ALTA Endorsement 13.1-06. When a mortgage loan is secured by a property held by a community land trust, the lender's title insurance policy (or an endorsement to the policy) must expressly confirm the following:
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the recording of the complete community land trust ground lease or ground lease memorandum;
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the recording of the Community Land Trust Ground Lease Rider (Form 2100);
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that the community land trust mortgage is a first lien on the leasehold estate and the improvements;
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that there are no existing mortgage loans or other liens on the fee estate, except as may be permitted under Form 2100;
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that the ground lessor's reversionary interest is subordinate to the community land trust mortgage; and
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that there are no related community land trust ground lease occupancy and resale restrictions, covenants, or agreements that "run with the land," and have been recorded apart from the ground lease, except as may be permitted under Form 2100.
Other Mortgages
The table below provides the title insurance coverage requirements or endorsements for other types of loans.
| Transaction Type | Title Insurance Requirements |
|---|---|
| Conventional HomeStyle mortgage or FHA Section 203(k) home improvement mortgage | The policy must cover the full amount of the recorded mortgage, must be dated concurrently with the recordation of the mortgage, and must be updated to the date on which renovation work is completed. |
| Adjustable-rate mortgage | The policy must include ALTA Endorsement 6-06. |
| Manufactured home mortgage | The policy must include ALTA Endorsement 7, 7.1, or 7.2. |
| Native American Housing Initiative mortgage |
For a HUD-guaranteed Section 184 mortgage, when title to the security property is held as a fee simple estate, Fannie Mae requires a title insurance policy that satisfies its general requirements. For all other HUD-guaranteed Section 184 mortgages, Fannie Mae relies on the title status report issued by the Land Titles and Records Office of the Bureau of Indian Affairs. |
| Texas Section 50(a)(6) loan | Fannie Mae requires a Mortgagee Policy of Title Insurance (Form T-2), supplemented by an Equity Loan Mortgage Endorsement (Form T-42) including the optional coverage provided by Paragraph 2(f) and a Supplemental Coverage Equity Loan Mortgage Endorsement (Form T-42.1). Refer to B5-4.1-03, Texas Section 50(a)(6) Loan Underwriting, Collateral, and Closing Considerations for more information. |
| Conventional construction-to-permanent mortgage |
When closed as a single transaction for both the construction loan and the permanent financing, the policy must be dated concurrently with the date of the mortgage and must include (1) a "pending disbursements" clause and (2) a final endorsement to the title policy that extends the effective date of the coverage to the later of the final construction advance date or the endorsement date. When closed as two separate transactions (one for the construction phase and one for the permanent financing), the policy must satisfy Fannie Mae's standard title insurance requirements for permanent mortgages. |
| Mortgages with remotely notarized loan documents | If the notarized document is a security instrument or an amendment to a security instrument, the remote notarization must be disclosed to the title company providing title insurance coverage and either:
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