Title Exceptions for Conventional Loans

Requirements

For conventional mortgage loans, the following exceptions to the title insurance policy or to the attorney's opinion of title are acceptable:

Subsurface Public Utility Easements

Exceptions for subsurface public utility easements for local residential distribution, such as lines for gas and water, and cable for electric, telephone or television utilities are acceptable provided that the location of the easements is ascertainable and fixed. The exercise of the rights there under must not interfere with the use and enjoyment of any present improvements on the mortgaged premises or proposed improvements on which the appraisal or Mortgage is based.

Surface Public Utility Easements

Exceptions for surface easements for public utilities for local residential distribution are acceptable provided that the location of the easements is ascertainable and fixed. The exercise of the rights there under must not interfere with the use and enjoyment of any of the following:

  • Present improvements on the mortgaged premises
  • Proposed improvements upon which the appraisal or mortgage is based.
  • Part of the mortgaged premises outside the easement and not occupied by improvements.
Encroachments on Public Utility Easements

Exceptions for encroachments on easements for public utilities by a garage, tool shed or similar structure that is not attached to, or a portion of the dwelling structure are acceptable provided that the encroachments do not interfere with the use and enjoyment of the easements or the exercise of rights of repair and maintenance in connection therewith.

Restrictive Agreements

Exceptions for restrictive agreements or restrictive covenants of record related to cost, use, setback, minimum size and building materials, and architectural, aesthetic or similar matters (other than single-family-use restrictions on 2-4 unit properties) are acceptable provided that the following conditions are met:  

  • The restrictive agreements or restrictive covenants do not create or provide for any lien that would be prior to the lien of the home mortgage nor provide for the elimination of the lien of the home mortgage
  • The terms and provisions of the restrictive agreements or restrictive covenants are commonly acceptable to private institutional mortgage investors in the area where the mortgaged premises are located
  • An endorsement to the title insurance policy affirmatively insures that no violation of any such restrictive agreement or restrictive covenant exists and that any future violation shall not result in forfeiture or reversion of title
Mutual Easement Agreements

Exceptions for mutual easement agreements of record that establish a joint driveway or a party wall are acceptable if such improvements are constructed in any of the following ways:

  • Partly on the mortgaged premises and partly on adjoining property, or
  • Wholly on the mortgaged premises, or
  • Wholly on the adjoining property
Fence Misplacements

Exceptions for fence misplacements on either side of the property line of the mortgaged premises are acceptable provided that neither the misplacement, nor a future correction thereof, will interfere with the use and enjoyment of any improvements on the mortgaged premises, nor with the use and enjoyment of the balance of the mortgaged premises not occupied by improvements. The definition of fence in this section shall not include retaining walls or other permanent structures.

Encroachments on the Mortgaged Premises by Improvements on Adjoining Property

 Exceptions for encroachments on the Mortgaged Premises by improvements on adjoining property are acceptable provided that the following conditions are met:

  • The encroachment must not touch any improvements on the Mortgaged Premises<
  • The encroachment must not interfere with the use and enjoyment of any improvements on the Mortgaged Premises nor with the use and enjoyment of the Mortgaged Premises not occupied by improvements
Oil, Gas, Water, and Mineral Rights

Exceptions for outstanding oil, gas, water or mineral rights are acceptable if commonly granted by private institutional mortgage investors in the area where the Mortgaged Premises are located, and:

  • The exercise of such rights will not result in damage to the Mortgaged Premises or impairment of the use or marketability of the Mortgaged Premises for residential purposes and there is no right of surface or subsurface entry within 200 feet of the residential structure, or
  • There is a comprehensive endorsement to the title insurance policy that affirmatively insures the lender against damage or loss due to the exercise of such rights
Liens for Taxes Not Due

Exceptions for liens for real estate or ad valorem taxes and assessments that specifically state that such liens are not yet due and payable are acceptable

Sums Re-advanced

This includes the priority of the lien for any sum repaid and subsequently re-advanced under the terms of the mortgage insured thereby.

Tenants in Possession

Exceptions for rights of tenants in possession, as tenants only, under prior unrecorded leases, are acceptable.

Other Exceptions

Any exception not set forth above is acceptable only if all of the following conditions are met:

  • The subject of the exception must not interfere with the use and enjoyment of any present or proposed improvements on the mortgaged premises or with the use and enjoyment of the balance of the mortgaged premises not occupied by improvements
  • The subject of the exception must not affect the marketability of the mortgaged premises
  • The subject of the exception must have no or minimal effect on the value of the mortgaged premises
  • The subject of the exception must be acceptable to the MI if the mortgage is insured
  • The subject of the exception must be commonly acceptable to private institutional mortgage investors in the area where the mortgaged premises are located

The Seller shall warrant that all exceptions to the title insurance policy or to the attorney's opinion of title are permissible under this section. PennyMac will not issue any letters addressing the acceptability of particular exceptions nor waivers of the above requirements.