The revolving Credit Endorsement provides affirmative coverage on mortgagee policies only for obligatory future advances as provided for under the mortgage or deed of trust. Generally this is evidenced by basic future advances mortgage, but may also be provided for under a revolving line of credit mortgage, or if statutorily provided for, under a construction loan mortgage. Before issuing this policy, the mortgage to be insured must be reviewed and at a minimum determined to contain the following provisions:
1. When and how advances under the mortgage are to be made
2. When a default occurs and its effect on advances
3. The terms and conditions of both the payments and the program; and
4. The terms under the recorded mortgage must state that it secures future advances and that the lender is obligated to issue such advances under the terms of the mortgage. It must also state that it secures a revolving credit loan and advances are secured although payments may have readjusted outstanding balance over to zero.
The above provisions may be contained in the security instrument itself, or may be provided for under a separate agreement or rider which is attached to and recorded with the mortgage.
Please note that state laws vary as to whether future advances under revolving credit loans are entitled to priority. Also, the requirements for this priority may vary. You must become familiar with the laws and requirements in your state or consult with underwriting counsel for Agents National Title to find out these requirements.
A sample Revolving Credit Endorsement.