Endorsements: Form 2055 Instructions

NOTES:

Coverage: This endorsement insures that mortgage provisions allowing for changes in the interest rate and the borrower’s right to convert to a fixed rate mortgage will not affect the validity, enforceability or priority of the lien of the insured mortgage. It excludes coverage for loss due to usury or any consumer credit protection or truth-in-lending law.

Generally, Illinois' Interest Act prohibits changes in the rate of interest on loans secured by a mortgage on residential property. 815 ILCS 205/4(2)(b). Adjustments to the interest rate are allowed if a federal statute or regulation allows any class of lender to make such loans. See, e.g., 12 USC § 1715z-16.

Procedure: This endorsement may be issued on Loan Policies only for mortgages in which the lender is of the class authorized under federal law and regulations to make adjustable rate loans. To issue this endorsement, you must review the mortgage to be insured to ascertain that, among other matters, the provisions relating to the timing and measure of each possible change in the interest rate are clearly specified in the mortgage, and that the variable rate interest feature is tied to a published index.

This endorsement may not be issued on residential loan policies where there is a private lender.

Questions? Contact an Underwriter.