ALTA 2-06 Truth in Lending Endorsement

The premium for this endorsement is ten percent (10%) of the premium for the loan policy at the promulgated risk rate with a minimum charge of $25.00 and a maximum charge of $100.00.

This endorsement contains the following affirmative coverage:

Insures against a final judgment or court order that either the lien of the insured mortgage has been terminated or title of the insured acquired through foreclosure or deed in lieu of foreclosure has been defeated as a result of a valid exercise of the right of rescission under the Federal Truth in Lending Act.

This endorsement may only be used with respect to “commercial purpose loans” as defined under the Federal Truth in Lending Act thus exempting the loan from the right of rescission requirements under said Federal Truth in Lending Act. This is a factor which is totally “out of the arena” of issues normally determined by an examination of title and its insurability but rather goes directly to the nature of the loan.

Requests for this endorsement are very rare; however, when received, they generally involve the case in which a borrower is giving a mortgage on the individual’s primary residence to secure a loan for “commercial purposes” (e.g. loan on an individual’s primary residence, the proceeds of which will be used to finance the purchase of inventory for the individual’s business) and the lender wants affirmative coverage that the right of rescission under the Federal Truth in Lending Act does not apply.

If this endorsement is requested, underwriting approval should be obtained, since the issues to be determined in the providing of such coverage are, as indicated, beyond the normal scope of title examination and insurability issues.

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