There are some cases where a prior mortgage has been paid but unreleased, and a release cannot be obtained from the lender. In these instances, consider the following alternative methods to insuring over the mortgage:

1. Prior Policy

Always attempt to obtain a prior title policy from your client. You will need a prior policy in order to obtain a hold harmless letter. Most title companies require a copy of the prior policy accompany a hold harmless request.  For more, please review our guidelines on Hold Harmless Letters. Additionally, the Illinois Inter-Underwriter Indemnification Agreement (“Agreement”) provides a limited set of circumstances where an unreleased mortgage can be waived without obtaining a hold harmless letter. However, the Agreement requires ATG be in possession of the prior policy.

2. Prior HUD-1

A HUD-1 can also be used to insure over an unreleased paid mortgage. The HUD-1 must show payment of the mortgage. Also, the lender paid off on the HUD-1 must be the last owner of the mortgage of record. If the unreleased mortgage is a MERS mortgage, you should confirm the identity of the servicer with MERS. A HUD-1 cannot be used to waive a revolving line of credit mortgage. If there is any question whether a HUD can be used to insure over the mortgage, you may contact the Underwriting Department.

3. Statute of Limitations

Check the mortgage to determine whether the statute of limitations period has passed. If the mortgage specifies the period of repayment, the mortgage will expire and become unenforceable twenty years after the last installment becomes due. 735 ILCS 5/13-116. If the mortgage does not specify the date the last installment becomes due, then the mortgage will expire and become unenforceable thirty years after the date the mortgagor signed the mortgage. 735 ILCS 5/13-116.

If there is any question whether a exception can be insured over, or waived, you may contact the Underwriting Department.