...Since the early 1960's

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Step 3

1. Write the Commitment

  • See the sample Commitment form.

  • See sample Schedule A, Schedule B, Section 1 and B, Section 2 for hints (in italics) on where to obtain information to be inserted into the Commitment.

  • The following is an overview of the contents of a basic ALTA Commitment form.

  • The ALTA Standard Commitment Form is comprised of:
    • Introductory Page
    • Conditions and Stipulations
    • Schedule A
    • Schedule B, Section 1, Schedule B, Section 2

  • Introductory Page

    The introductory page determines the extent of the insurer's commitment to the insured. The introductory page is comprised of four paragraphs.
    • 1st Paragraph

      The 1st paragraph is a statement of promise to issue a Policy or Policies of Title Insurance if payment is made and if requirements are met. ATGF commits to issue a Policy, which is described in Schedule A.

    • 2nd Paragraph

      The 2nd paragraph identifies the insured and the amount of coverage.

    • 3rd Paragraph

      The 3rd paragraph says that the Commitment is good for six months or until a policy is written (whichever comes first.)

    • 4th Paragraph

      The 4th paragraph says that the Commitment is not binding until it is signed by a validating officer.

  • Conditions and Stipulations

    The Conditions and Stipulations in a Commitment are different from those in a Policy, but those in the Policy relate back to those in the Commitment. There are four paragraphs.
    • 1st Paragraph

      The 1st paragraph is the definition of the security instrument - Mortgage and Deed of Trust are used interchangeably here.

      Traditionally Mortgage means debt pledge and is a two party instrument between a borrower and lender. A Deed of Trust is a three party instrument between a borrower, and lender and trustee. Currently, a Mortgage is hardly ever the method of choice because it is more difficult to take through the foreclosure process. One benefit of a Deed of Trust, therefore, is that it is faster and cheaper to foreclose on.

    • 2nd Paragraph

      The 2nd paragraph speaks of the knowledge of the insured.

      This says that the insured will not be protected against defects, liens and encumbrances, not shown on Schedule B that the insured has knowledge of until the insured discloses it in writing to the insurance company. The Policy is rendered invalid if the proposed insured hides information that would affect the Policy.

    • 3rd Paragraph and 4th Paragraph

      The 3rd and 4th paragraphs speak to limitation of liability.
      These two paragraphs identify things of which the insurance company will not be liable.
      • 1. Only the named insured is covered.
        2. Only actual loss will be paid.
        3. The proposed insured must have relied on the Commitment.
        4. Reliance of the Commitment must have been in good faith.
        5. Loss (prior to the Policy being issued) must have been incurred while the insured was attempting to comply with the requirements
        6.All other limitations set forth in the Policy committed for.

  • Schedule A

    Schedule A is a summary of the transaction and a statement of the facts. There are four numbered paragraphs.

    Note: Unlike the Title Policy Jackets, the Commitment Jackets do not have pre-printed numbers for immediate identification. ATGF requests that you use its file number (when ATGF conducts the search) as your Commitment number so that the Accounting and Title Departments may reference your file quickly to serve you efficiently. That number should be inserted in the space provided at the top of Schedule A of the Commitment. If you have a separate file number for your files, you may insert your file number in the space named "File No.".

     
    • 1st Paragraph - Effective date

      The 1st paragraph tells how recently the records were searched by the title company. This date will always be backdated. Because there is a lag time in posting, there will always be a "gap" between the effective date and the date of closing.

    • 2nd Paragraph - Noted as "A", "B" and "C".

      This paragraph indicates the types of Policies to be issued and itemizes the total charges.

      If an Owner's Policy is to be issued, the liability based on the sales price is entered here. It should not be less than the fair market value of the property.

      The premium is taken from the rate schedule supplied by ATGF. (See the "Rates" section of this manual for more information.)

      Certificate of Taxes Due in this paragraph is self-explanatory. The appropriate charge should be listed in the "Premium" column.

      Additional Charges is where all endorsements should be listed. The most common endorsements requested by lenders are the 100 and 8. As the transaction progresses very often additional endorsements are requested. At that time look under Tab 10 for the appropriate endorsement(s) and charge(s). You would then need to do an amended Schedule A to reflect these changes.

    • 3rd Paragraph - Estate or Interest

      The 3rd paragraph tells what kind of estate or interest is being insured (i.e. fee simple).

    • 4th Paragraph - Legal description of the property

      The 4th paragraph contains the legal description of the property. The legal description on the Commitment should be the same as on the contract and the survey.

    • Countersigned

      Is the city and state where the signing agent is located. This information is not necessary but should be filled in if it exists on the forms you are using.

    • Authorized Officer or Agent

      The title agent's name should be inserted in the space provided.

    • Member Number

      The title agent's member number should be inserted in the space provided.

  • Schedule B, Section 1 (Title Clearance Page) - Requirements

    • This section is saying that if (and only if) the requirements of this section are fulfilled, then title insurance as described in the Commitment will be issued. There are general requirements and there are specific requirements. (See the "Requirement" section of this manual for more information on requirements.)

    • General Requirements
      • Payment must be completed (or promissory note issued, etc.).
      • Pertinent documents must be executed and filed for record.
        List the documents that must be recorded before the Policy can be issued.
      • All taxes must be paid

    • Specific Requirements

      Are specific to the transaction.

    • Notes

      Notes of information may be added to this section to give additional information and disclosures.

  • Schedule B, Section 2 - Exceptions

    There are matters that are or may be a cloud against the title. Unless the exceptions are disposed of in some manner, they will appear on the Policy. When exceptions of title are indicated on Schedule B, Section 2 of the Commitment, that means there will be no insurance against those items unless they are subsequently deleted or an affirmative endorsement is obtained which specifically refers to the exception item and states the extent to which the title insurance company will protect against its appearance or enforcement. There are standard exceptions and there are specific exceptions.
    • Standard Exceptions

      The first four pre-printed exceptions will appear on all Commitments and will appear on all Policies unless a change occurs between the date of the Commitment and the date of the Policy issued. The normal Loan Policy will have exceptions 1, 2, 3, and 4 omitted if an endorsement Form 100 along with a lien affidavit and agreement are obtained. The four standard exceptions are:

      (1) Rights of parties in possession

      Protects the title insurance company against claims of a party in possession, such as a tenant with no recorded lease.

      (2) Easements

      Relates to possessory and non-possessory rights. The exception may be deleted if a survey is obtained and/or an inspection is made.

      (3) Discrepancies, conflicts in boundary lines, encroachments, etc.

      A shortage of area, encroachment, disputed boundary or similar defects makes the property unmarketable. The exception may be deleted if a survey is obtained.

      (4) Mechanics Liens

      A person entitled to a Mechanic's Lien has a 4-month period after completing his work on the premises within which to file his lien. In the interim, such person has an un-filed Secret Lien whose priority dates from the commencement of the work on the project. The exception may be deleted if an affidavit by the seller and buyer is obtained saying that no work has been done on the property within the last four months.

      (5) Subsequently attaching defects - The "Gap"

      Gap - A period of time in which a document could win the "race" to the courthouse and defeat or encumber the title to be insured. This exception provides that the insurance company will not insure against any defects created or recorded after the effective date of the Commitment. However, the Colorado Commissioner of Insurance says that when the title entity conducts the closing, it shall be held responsible.
      • Note: This exception shows the importance of obtaining an update prior to closing, so that any adverse matters can be resolved before the closing. If the title entity or its agent performs the closing, this exception automatically drops off. If someone other than a member or its agent conducts the closing, a GE-1, or "Gap" endorsement may be purchased.

    • Non-Standard Exceptions

      Along with the pre-printed exceptions, list as exceptions all encumbrances of record against which the Policy will not insure.

    • Statutory and Regulatory Notes (Disclosure Notes)

      Add appropriate notes as regulated by statute and insurance regulations.

    2. When the Commitment has been written, fax a copy to ATGF for review (1st 10 or so written).


    3. Once the Commitment is approved, send the original to the client (identified in 2(A) of Schedule A for a sale and 2(B) of Schedule A if it is a refinance transaction. Also, send a copy to the Realtor (if applicable) and to the Lender (if applicable).

    4. Remit to ATGF payment for the TSR.

  • If payment is made within 30 days of receiving the TSR invoice, a 10% discount will be credited. If payment is made after 120 days of receiving the TSR invoice a penalty of 1.5% will be assessed. (This refers to the invoice attached to the TSR cover sheet and documents.)

Copyright (c) 1999 - 2010 Attorneys Title Guaranty Fund, Inc. All rights reserved.