Commonwealth Land Title Insurance Company, NCS

ALTA ENDORSEMENTS - 260 - SAMPLES AND DESCRIPTIONS MORTGAGE TAX – FORM 38-06 Many jurisdictions impose a mortgage transfer tax to record mortgages, and lenders face a risk that the mortgage may not be enforceable if the mortgage tax was not paid in full. The negotiations over the correct amount of mortgage tax may be complex. Imagine a $100,000,000 loan secured by mortgages on ten separate properties located in different states in 2010. Also imagine that the total value of the properties exceeds $200,000,000, so the loan to value ratio is about fifty percent of the value of each parcel. The borrower should be able to persuade the Recorder that the allocated value for a site is $10,000,000, even though the mortgage secures $100,000,000 on a site worth $20,000,000 by appraisal. Later, upon foreclosure, imagine that the site is valued at $30,000,000, but the economy has improved since 2010. The recorder is suspicious and demands additional mortgage tax. The mortgage tax is the responsibility of the Insured lender, so the title insurer cannot pay the additional tax, but it may insure that the mortgage is valid, enforceable and has priority as of its closing when the Insured pays the additional tax where state law supports this position. Section 2 of the ALTA 38-06 endorsement defines “Mortgage Tax” as a “recordation, registration or related tax or charge required to be paid when the Insured Mortgage is recorded in the Public Records.” Section 3 adds the insurance. It provides: 3. Upon payment of any deficiency in the Mortgage Tax, including interest and penalties, by the Insured, the Company insures against loss or damage sustained by the Insured by reason of: a. The invalidity or unenforceability of the lien of the Insured Mortgage as security for the Indebtedness resulting from the failure to pay, at the time of recording, any portion of the Mortgage Tax; or b. b. The lack of priority of the lien of the Insured Mortgage as security for c. The Indebtedness resulting from the failure to pay, at the time of recording, any portion of the Mortgage Tax. Section 4 excludes liability of the title insurer from a failure of the Insured to pay the Mortgage Tax. Section 5 excludes the title insurer from liability to pay the Mortgage Tax. ALTA Endorsement — Form 38-06 (Mortgage Tax – 12/3/12) Form 38-06 Mortgage Tax