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RATES 

A schedule of title insurance rates for the state in which you are located can be found inside the back cover pouch of this manual.  The premium is calculated on the basis of a set charge per thousand dollars of consideration stated.  In a typical simultaneous transaction where the purchase price exceeds the mortgage amount, the premium is calculated by determining the amount due on the owner's policy and then adding a nominal charge (typically, $100.00) for the simultaneous issuance of the loan policy. 

In the event that you are issuing an owner's policy together with two loan policies on a particular parcel of land, the premium should be calculated in the same fashion.  However, you should include a second simultaneous fee for the second mortgagee’s loan policy. 

In the event that the two mortgages in the aggregate exceed the amount of the owner's policy, the premium should be calculated in the exact same fashion.  However, you should also include an additional premium for the amount by which the combined loan exceeds the owner's policy.  An example is as follows. 

"A" purchases property for $500,000.00.  "A" gives a mortgage to bank "B" in the amount of $400,000.00.  "A" then gives a second mortgage to bank "C" in the amount of $200,000.00.  The premium would be calculated as follows.  The rate for a $500,000.00 owner's policy, combined with a simultaneous fee charge for the first mortgage, combined with a simultaneous fee for the second mortgage policy, combined with the premium for a $100,000.00 loan policy.  This $100,000.00 loan policy represents the amount by which the aggregate of the loans exceeds the owner's policy (i.e. $400,000.00 plus $200,000.00 minus $500,000.00). 

If you are only insuring one mortgage which actually exceeds the owner's policy amount, the same analysis should be applied to calculate the rate.  In other words, figure out the premium due on the owner's policy and combine it with the simultaneous charge and the premium due for the amount by which the loan amount exceeds the owner's coverage. 

There are occasions when special rates can be given based on a reissue or a refinance transaction.  Typically, if you are refinancing a mortgage with the same lender within a one-year period for the same amount or a lower amount, there will be a discount.  In the event the new mortgage exceeds the amount of the old mortgage, there will be a discount, plus an additional premium calculated on the amount by which the new mortgage exceeds the old.  If you have any questions concerning these transactions, you should contact the local office. 

In determining the amount of the policy, the following guidelines should be followed.  The face amount of a loan policy must be in an amount at least equal to the amount of the mortgage being insured.  The face amount of the policy can actually exceed the mortgage amount by up to 25%.  This is somewhat typical in a situation insuring a negative amortization mortgage. 

The owner's policy amount must be for the fair market value of the land.  This is typically calculated by the purchase price in an arm's length transaction.  In the event that there has been no arm's length transaction in the recent past, an appraisal must be obtained for the property to ascertain an accurate amount for an owner's policy.  This condition, however, can be waived in the event that the local office determines that the amount in question is not unusually high or low based upon the existing history of real estate transactions in that particular locale. 

In the event that a particular transaction involves multiple parcels located in different counties, it may become necessary to issue several policies all in the full face amount of the consideration or mortgage amount.  These policies would contain cross-liability language which would indicate that the aggregate liability of the company will not exceed the face amount of any one policy.  Under these circumstances, the premium charge should be calculated on the face amount of the mortgage.  It should not be calculated based on the aggregate amount of all of the policies.  Since the company's exposure is only the full face amount of the mortgage, that is the amount on which the premium should be calculated.  Please see the underwriting section for "Multiple Parcels" for further explanation and language. 

In several states in the Northeast, the rates are regulated by the various state insurance departments.  There are several kinds of regulation.  Some states set a maximum rate and allow title insurance companies to charge anything below that amount.  Other states set a minimum rate and preclude underwriters from charging less than the filed amount.  Still other states establish the exact rate for insurance and allow for no deviations either above or below that amount.  At present, Massachusetts is not regulated and affords a large degree of latitude to the underwriters in determining and establishing title insurance rates.  If you have a particular situation or transaction which you feel warrants special attention or consideration, please do not hesitate to contact the local office.

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