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Loan Policy in
Excess of Owner's Policy Rates
It is possible for a loan policy to exceed the
total amount of the owner's policy since the loan
can be written to cover additional costs, such as
negative amortization or foreclosure fees. Because
it is industry practice for the seller to pay for
the owner's policy and the buyer/borrower to pay
for the mortgagee's policy, calculation of the
appropriate division of the title premiums can be
confusing. The seller should be charged the base
rate calculated on the sales price. Where there is
just one loan policy to be issued, the
buyer/borrower should be charged the simultaneous
rate plus the amount of the additional premium
resulting from the loan policy having a higher
policy amount than the owner's policy. It should be
calculated according to the following formula:
[(base rate for the loan amount - base rate for
the sales price) + $125.00]
Example 1: (Denver Rates are used in
this example)
Loan amount is $122,000.00 $ 850.05
(base rate)
Sales price is $100,000.00 -$ 809.35
(base rate)
Difference
$40.70
Simultaneous policy $ 125.00 (simultaneous
rate)
Plus difference +$40.70
Total charged to buyer/borrower $ 165.70
Where more than one mortgagee policy is to be
issued, each of the mortgagee's policies shall be
charged to the buyer/borrow at the simultaneous
rate plus any excess exposure premium created by
the subsequent junior loan, charged at the base
rate in accordance with the formula above.
Example 2: (Denver Rates are used in this
example)
First loan amount is $85,000.00
$
125.00 (simultaneous rate - no excess
liability) Sales price is $100,000 $
809.35 (base rate)
Second loan amount is $ 37,000.00
$
165.70 (base rate on total loan
exposure [1st and 2nd of $122,000
[$850.05] minus base rate on
sales price [$809.35] plus
$125.00)
Third loan amount is $15,000.00
$
152.75 (base rate on total loan
exposure [1st , 2nd , and 3rd of
$137,000 [$877.80] minus base
rate on 1st and 2nd of $122,000
[$850.05] plus $125.00)
Fourth loan amount is $15,000.00
$
152.75 (base rate on total loan
exposure [1st , 2nd , 3rd , and 4th
of $152,000 [$905.55] minus
base rate on 1st , 2nd and 3rd of
$137,000 [$877.80] plus
$125.00)
Etc.
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