Vested Land Services Title Topics the Deed in Lieu of Foreclosure

From the Vested Land Services LLC newsletter Title Topics - Deeds in Lieu of Foreclosure

How is the deed in lieu transaction approached by a title agent?  This is from a recent edition of our client newsletter:

 We’ve been asked to insure a title that was obtained by deed in lieu of foreclosure.  Are there any special requirements when insuring a title which was obtained by deed in lieu of foreclosure?

Well, yes, there are. And there are some underlying legal issues, too.

       First, is the creditors’ rights problem.  If we are insuring the grantee under the deed in lieu of foreclosure’s title and we are issuing the ALTA 2006 Owner Policy, the pre-printed Creditors Rights Exclusion will cover this concern and no additional exception need be added; but, if we are using the ALTA 1987 Residential “Plain Language” Policy, we must include the following exception on Schedule B: 

 Consequences of an attack on the estate or interest insured herein under the Federal Bankruptcy Law or any creditors' rights law or state insolvency law. 

        If we are insuring a conveyance by the grantee under the deed in lieu of foreclosure we must run the deed in lieu of foreclosure grantor in upper courts through the date of the insured transaction; if that grantor has filed for bankruptcy protection after the date of the deed in lieu, the stop sign is illuminated and the bankruptcy proceedings have to be reviewed.

      Second, the mortgage for which the deed in lieu of foreclosure was given may remain open until the grantee in the deed in lieu of foreclosure conveys title.  In that subsequent transaction, the mortgage must be cancelled of record.

      Third, we cannot insure a title being conveyed by a deed in lieu of foreclosure which had been previously executed and held in escrow in case of a future default.  Only deeds in lieu of foreclosure which have been currently executed may form the basis for owners’ title coverage in favor of the grantee in the deed in lieu.

      Fourth, the realty transfer fee must be paid upon recording of deed in lieu if the underlying mortgage is not discharged.

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We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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