Endorsements: Form 2041-06 Instructions

NOTES:

Coverage: This endorsement insures against loss or damage from a final court order determining that the lien of the mortgage is unenforceable because the loan is usurious.

Procedure: The Usury Endorsement may only be issued on Loan Policies when the lender requests it. To issue this endorsement, examine the mortgage and note for the provisions relating to interest rates to determine if the rate is usurious. You will have to investigate the law concerning usury, and determine if it prohibits the interest clause in the mortgage to be insured. Here are some guidelines:

• If loan contains a variable interest rate, adjustments in the interest rate must correspond to an independent index, i.e., an index not under control of the lender;
• If the loan is a first lien on residential real property and insured under the National Housing Act, or made by a federally insured or federally regulated lending institution, then federal law will preempt state law as to the interest provisions. In such case, examine federal law to determine that the interest rate is not usurious;
• If Illinois law applies, then the interest on any loan secured by a mortgage on real estate is not subject to state regulation;
• If the loan is made by a national bank located outside of Illinois, the usury laws of the foreign state will apply.

Questions? Contact an Underwriter.