Collateral Document Standards and Guidelines for Original Notes and Title Insurance Policies 
For Original Note
Submission Instructions
  • The following data must match supporting documentation in the file:
  • Note Date
  • Property Address
  • Loan Amount – whole dollar loan amount only; no cents
  • Lender Name
  • Interest Rate
  • First Payment Date
  • Maturity Date
  • Principal and Interest
  • Grace Period
  • Late Charges
  • Borrower Signature and Typed Name
  • The Name and NMLS ID of the Loan Originating Company and the Loan Originator must be disclosed below the borrower signature lines and/or notary section or where required by state law.
  • All pages of the Note must be consistent with regards to the borrower initials. The signature page does not require initials given that a complete signature is required.
  • Corrective covering (i.e., white out or tape) on the document is not permitted. All corrections must be initialed the borrower(s).
Note Endorsement
  • The endorsement must read as follows:

For Alabama:
Alabama Housing Finance Authority, Without Recourse
Lenders Name Typed
(Original Authorized Signature)
Name of Authorized Signer Typed
Title of Authorized Signer Typed

For NC/MS/MO:
Servisolutions, A Department of Alabama Housing Finance Authority, Without Recourse
Lenders Name Typed
(Original Authorized Signature)
Name of Authorized Signer Typed
Title of Authorized Signer Typed

  • Endorsements utilizing a Power of Attorney require a copy of the POA to be delivered in the closed loan file.
  • An Allonge to the Note may be used for the purpose of endorsement, at AHFA's discretion, and must contain the following information:
  • All Borrower names as they appear on the Note and the standard endorsement
  • An Allonge may be used as corrective on FHA or VA Notes only if there is insufficient space on the back of the Note for the full endorsement.
  • A loan suspended for a corrected note endorsement requires the following:
  • Original Allonge to the Note with endorsement
  • Letter of Authorization to void the incorrect endorsement
For Title Insurance
AHFA requires, as evidence of title, that an American Land Title Association (ALTA) Mortgagee Policy of Title Insurance and any required endorsements thereto, or its state approved equivalent, be provided for each mortgage loan purchased.
Chain of Title
AHFA requires a complete title commitment to be included in every closed loan package. Conventional and VA loans require a 6-month chain of title from the effective date of the title commitment including new construction or construction to permanent loans. 

FHA and USDA loans require a 12-month chain of title. A minimum of 12-months chain of title as evidenced by the title commitment, satisfactory to AHFA review and meeting FHA anti-flipping requirements.

The Chain of Title documentation provided within the commitment must include the dates of transfer, the transferor, and transferee. In cases where there have been no conveyances, verbiage such as “six-month Chain of Title clear” or “there have been no documents conveying the land in the past XX (6, 12 or 24) months” are acceptable.  
Evidence of Title
The Mortgage Policy of Title Insurance may be in the form of either (i) an ALTA Short Form Residential Loan Policy, including any related addenda or attachments, or (ii) an ALTA Residential Loan Policy, or its equivalent, provided that:

  • The policy is validly issued in the jurisdiction in which the property is located.
  • The policy is on a standard ALTA form that does not include the creditor’s rights exclusion language from the 1990 ALTA loan policy.
  • The insurance coverage and documents meet the requirements set forth herein.
  •  In the case of a Short Form Policy:
  • Any Addenda thereto (i) includes only subordinate lien matters (if other matter are included, AHFA requires an ALTA Residential Loan Policy).

The title policy must insure that the title is generally acceptable and that the mortgage constitutes the first lien on a fee simple of leasehold estate in the property. All subordinate liens must be listed and state that they are subordinate to the first lien. 

The policy must bear an effective date no earlier than the later of the date of the final disbursement of the loan proceeds or the date the mortgage was recorded. It must be in an amount or least equal to the original loan amount, and include, if applicable, any maximum possible increase due to negative amortization. 

NOTE: The named insured should be the “Originating Lender, and its successors and/or assigns.”

Environmental Protection Lien Endorsement 
For conventional loans, each policy of title insurance must include the ALTA Form 8.1, Environmental Protection Lien Endorsement, or its equivalent. Part (b) of ALTA Form 8.1 may make an exception only for those specific state statutes that provide for possible subsequent super liens that could take priority over the mortgage. This endorsement is not required for government loans. 
Exceptions to Title
The title to the property that secures the mortgage must be good, salable and free and clear of all liens and encumbrances. AHFA will not purchase a mortgage that has an unacceptable title impediment. 

Unacceptable Title Exceptions
Two of the more common unacceptable impediments to title are unpaid real estate taxes and survey exceptions.

  • Real estate taxes must be shown as being current or as being future taxes that are not yet due and payable. Any situation in which taxes are not current is not acceptable. If the tax bill has not been issued, the Lender must provide proof that the taxes are not delinquent.
  • Survey exceptions are not acceptable. If surveys are not commonly required in particular jurisdictions, the Lender should provide an ALTA 9 endorsement and, if applicable, a CLTA endorsement 116. If the title company will not issue a policy without a survey exception, AHFA will not purchase the mortgage. A letter on company letterhead from the title company stating they will issue a final title policy with no survey exceptions will be required prior to loan purchase if there is not an ALTA 9 endorsement on the long form title commitment. 
Coverage of PUDs and Condos
If the mortgage is secured by a unit in a planned unit development or a condominium project, and a homeowners’ association exists, all components of the unit estate must be described in the legal description, including (i) the name of the project; (ii) the unit itself; (iii) the undivided interest in the common elements (for a condo); (iv) the non-exclusive easement to use the common areas and facilities (for a PUD); and (v) any significant limited common elements or exclusive easements over the common areas.

If the unit owners own the common areas of the project as tenants in common, the policy must reflect that ownership. The Policy may describe limited common elements or exclusive easements specifically or by reference to the constituent documents.

Coverage
In addition to the general title insurance requirements, the title policy must insure that the mortgage is superior to any lien for unpaid common expense assessments. In jurisdictions that give these assessments have been paid through the effective date of the policy.

As applicable the policy must:

  • Insure against any impairment or loss of title of the first lien caused by any past, present or future violations of any covenants, conditions or restrictions of the master deed for the project. It must specifically insure against any loss that results from violation that existed as of the date of the policy.
  • Insure that the unit does not encroach on another unit or on any of the common elements, areas or facilities. The policy must also insure that there is no encroachment on the unit by another unit or by any of the common elements, areas, or facilities.
  • Insure that the mortgage is secured by a unit in a condominium project that has been created in compliance with the applicable enabling statutes.
  • Insure that real estate taxes are assessable and lienable only against the individual condominium unit and its undivided interest in the common elements, rather than against the project as a whole.
  • Insure that the owner of a PUD unit is a member of the owners’ association and that the membership is transferable if the unit is sold.

If the owners’ association owns the common elements, areas or facilities of a project separately, AHFA requires title insurance on those areas to insure that ownership. The title must be free and clear of any liens and encumbrances, including any statutory or mechanics’ liens for labor or materials related to improvements on the common areas that began before the title policy was issued.

Endorsements
  • An ALTA 4 endorsement, or its equivalent, must be attached to each policy or incorporated in the text of the policy for condominium loans.
  • An ALTA 5 endorsement, or its equivalent, must be attached to each policy or incorporated in the text of the policy for PUD loans.
Coverage for Leasehold Estates
An ALTA Leasehold Loan Policy or a CLTA 107.5 endorsement which stipulates that the property improvements are insured in the same manner as the land, or its equivalent is required for a mortgage that is subject to a leasehold estate.  
Survey Requirements
If the title company insuring the mortgage requires a survey to remove exceptions to survey matters, the Lender must provide in the Loan Delivery Package a survey of the subject property. The survey provided must conform to the title insurance company’s standards and any community or local laws or standards relating to surveys. If a survey is not provided, the title company must insure against the risk of not having a survey performed. The survey must not be more than 120-days-old and, as applicable, must include in detail the legal description, lot dimensions, street address, front and side set back of improvements, size and location of improvements, dimensions and location of easements, size and location of any encroachments, location of street or access, and surveyor’s certification. 

AHFA must be provided with a Hold Harmless Agreement/Survey executed by the borrower(s) in acknowledgement of any encroachments or protrusions.

A letter on company letterhead from the title company stating they will issue a final title policy with no survey exceptions will be required prior to loan purchase if there is not an ALTA 9 endorsement on the long form title commitment.