In large transactions, it may become necessary to issue title insurance policies insuring parcels of land located in different towns, counties, or even states. The format and the structure of the deal will impact directly on the
issuance of title insurance. There are typically a number of different ways in which the deal can be structured. The first example involves a situation where the Borrower signs a Note in the amount of $1 million to secure the purchase of three different properties. The Borrower then executes three mortgages, each in the face amount of $1 million (one mortgage for each property). These three mortgages are then recorded in the various Registries of Deeds.
In order to insure this transaction, we would most likely issue one owner's policy in the amount of $1 million (Exhibit A would describe all three parcels). Schedule B of the policy would contain all of the exceptions which apply to the various three parcels of land, including the three mortgages.
We would then issue three separate loan policies. Each loan policy would be in the amount of $1 million (i.e., the face amount of each insured mortgage). We would then issue Tie-In Endorsements for each of the three loan policies. A Tie-In Endorsement (i) notes that the policy at hand has been issued in conjunction with other loan policies and (ii) provides that the cumulative liability of the Company will not exceed the total amount of the Note, not the aggregate face amounts of the various mortgages (in our example, $1 million not $3 million). You may obtain a form Tie-In Endorsement from your local office.
In this instance, the title insurance premium would be based upon a $1 million figure, not $3 million. It is very important to include a Tie-In Endorsement to each of the loan policies. In the event this Endorsement is inadvertently omitted, we may have now incurred $3 million worth of liability, without receiving the premium required for $3 million.