The minimum premium for this endorsement is $25.00.
This ALTA 14-06 Endorsement may be used to insure the validity and priority of the insured mortgage as security for future advances made pursuant to any mortgage which contains a future advance clause in accordance with Section 697.04, Florida Statutes, the requirements of which are set forth below. The endorsement also amends the standard provisions of the Loan Policy which provide that coverage is reduced as the principal indebtedness is repaid due to amortization by, instead, providing that coverage is based on the balance of the loan irrespective that it may increase or decrease from time to time; and, as a result, it can be used to insure future advances under a mortgage which secures a revolving line of credit. In addition to insuring such future advances, the endorsement further insures that the lien of the mortgage secures interest on said advances even if the rate of interest is subject to change and compounding of interest on interest. The following is a more detailed explanation of the FIVE (5) forms of affirmative coverage provided by the endorsement:
1) Subparagraph 2a. insures against the invalidity or unenforceability of the lien of the insured mortgage as security for advances of principal (including expenses of foreclosure and amounts advanced for taxes and insurance and to assure compliance with laws, protect the lien of the insured mortgage and prevent deterioration of the improvements) made subsequent to the date of the policy pursuant to the terms of the note or loan agreement the repayment of which is secured by the insured mortgage.
- Subparagraph insures against lack of priority of the lien of the insured mortgage as to advances of principal made subsequent to the date of the policy pursuant to the terms of the note or loan agreement the repayment of which is secured by the insured mortgage over any lien or encumbrance on title to the land.
- Subparagraph insures against the invalidity or unenforceability or lack of priority of the lien of the insured mortgage as security for the indebtedness, advances and unpaid interest secured by the insured mortgage resulting from (i) re-advances and repayments of indebtedness, (ii) earlier periods of no indebtedness owing during the term of the insured mortgage, or (iii) failure of the insured mortgage to comply with the requirements of state law to secure future advances.
- Subparagraph 3a. insures against the invalidity or unenforceability of the lien of the insured mortgage resulting from any provisions of the note or loan agreement for (i) interest on interest, (ii) changes in the rate of interest, or (iii) the addition of unpaid interest to the indebtedness.
- Subparagraph insures against lack of priority of the lien of the insured mortgage as security for the indebtedness, including any unpaid interest added to principal in accordance with the note or loan agreement, interest on interest, or interest as changed in accordance with the provisions of the insured mortgage, which lack of priority is caused by (i) changes in the rate of interest, (ii) interest on interest or, (iii) increases in the indebtedness resulting from the addition of unpaid interest.
The term “Changes in the rate of interest” as used in this Endorsement means only those changes in the rate of interest calculated pursuant to a formula provided in the note, loan agreement or insured mortgage at the date of the policy.
REQUIREMENTS: This endorsement may not be given unless the mortgage complies with the future advance requirements of Section 697.04, Florida Statutes, which in substance requires that the mortgage expressly provide that its lien secures not only existing indebtedness, but also future advances, whether such advances are obligatory or to be made at the option of the lender, or otherwise, as are made within 20 years from the date of the mortgage, to the same extent as if such future advances were made at the time of execution of the mortgage and although there may be no advance made at the time of the execution of such mortgage and no indebtedness outstanding at the time an advance is made. The statue further requires that the mortgage expressly specify the maximum amount of indebtedness that may be secured pursuant to the future advance clause and, although the amount of outstanding indebtedness may decrease or increase from time to time, the amount secured by the mortgage may not at any one time exceed the maximum principal amount specified, plus interest thereon.
EXCLUSIONS FROM COVERAGE: This endorsement does not insure against loss or damage (and the Company will not pay costs, attorneys’ fees or expenses) resulting from:
- The invalidity, unenforceability or lack of priority of the lien of the insured mortgage as security for any:
- Advance made after a Petition for Relief under the Bankruptcy Code (11 U.S.C.) has been filed by or on behalf of the mortgagor; or
- Advance made subsequent to 20 years after the date of the insured mortgage or after a notice has been recorded in the Public Records limiting the maximum principal amount that may be secured to the extent the advance causes the outstanding principal balance to exceed the amount stated in the notice.
- The lien of real estate taxes or assessments arising after the date of the policy;
- The lack of priority of the lien of the insured mortgage as security for any advance to a federal tax lien, which advance is made after the earlier of (i) actual knowledge of the insured that a federal tax lien was filed against the mortgagor, or (ii) the expiration, after notice of a federal tax lien filed against the mortgagor, of any grace period for making disbursements with priority over the federal tax lien provided in the Internal Revenue Code (26 U.S.C.);
- Any federal or state environmental protection lien; or
- Usury or any consumer credit protection or truth-in-lending law.