Goodbye, Creditor’s Rights Endorsement.

Posted By Cliff Tuttle | February 12, 2010

Posted by Cliff Tuttle © 2010

Most title Insurance Companies have announced that they will no longer issue the Creditor’s Rights Endorsement in connection with title insurance.  This includes First American (who sent me an email along with, apparently, every other lawyer in their databank).  It also includes the Fidelity “family” — Fidelity, Lawyers, Chicago, Commonwealth and a few others.  However, Stewart and Old Republic are reportedly still willing to write them.  The price, however is rumored to be substantial.

Most of us who have done real estate transactions for a long time can’t remember receiving a request for this endorsement.  As I understand the subject, it relates to the possibility that the transaction may be attacked and perhaps reversed in bankruptcy as a preference or a fraudulent conveyance.

When a bankruptcy filing occurs, the trustee may investigate whether the debtor “took care” of his friends within 90 days after filing. Paying selected creditors could be a preference.  So could a non-arms-length real estate transaction — a sweetheart deal.  There are different definitions of a fraudulent conveyance, but the most common is when a  property owner transfers the ownership of the property to keep it away from creditors.

The best protection for a real estate lawyer handling an ordinary transaction, it seems to me, is the seller’s affidavit.  The seller is required to swear under oath that the full consideration is being paid on the table and that the transaction is not for the purpose of defrauding creditors.

So, Goodbye Creditor’s Rights Endorsement.  We never needed you anyway.

CLT

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CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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