In this article, we are going to talk about the variable rate mortgage endorsements and when they can be properly utilized in title insurance.
Variable Rate Mortgage Endorsements
The variable rate mortgage endorsements insure the insured lender against invalidity, unenforceability or loss of priority of the lien of the Insured Mortgage by reason of provisions of the mortgage which allow for changes in the rate of interest. The Mortgage, itself, must contain a provision which indicates that the interest rate is subject to change, but does not need to spell out the specifics of either the interest rate or the formula by which the interest rate is calculated. The ALTA 6.2 Endorsement also insures the insured lender against invalidity, unenforceability or loss of priority of the lien of the insured mortgage by reason of interest on interest or the addition of unpaid interest to the principal balance. It does not increase the face amount of the Policy and it specifically excludes usury, consumer credit protection and Truth-in-Lending laws.
This endorsement is available in a lender’s policy but not an owner’s policy.
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