Glossary of Endorsements

ALTA ENDORSEMENT FORM 6 (AKA FORM 111.5)

Provides adjustable rate mortgage lender with coverage as to (1) validity and enforceability of mortgage lien, despite terms therein providing for changes in the rate of interest; and (2) a later loss of priority caused by said changes in the rate of interest.


The endorsement is derived from the insuring provisions 5 and 6 of the ALTA Loan Policy. The first four insuring provisions of all ALTA policies apply to pure title risks. Insuring provisions 5 and 6, on the other hand, are not included in any owners form of policy because they are focused on the three most significant issues concerning the lien of the insured mortgage. Paragraph 5 insures against the invalidity or unenforceability of the lien of the insured mortgage, and paragraph 6 insures against the priority of any lien or encumbrance over the lien of the insured mortgage.

The ALTA 6 insures that a provision in the loan allowing the interest rate to vary will not impair the lien of its mortgage. By using the language and structure of insuring provisions 5 and 6, the ALTA created an endorsement which will insure the policyholder with respect to this issue to exactly the same extent it insures the lien of the mortgage itself. Consequently, the ALTA 6 Endorsement insures a lender against invalidity, unenforceability or loss of priority of the lien of the insured mortgage as a result of changes in the rate of interest.

The definition of “changes in the rate of interest” was inserted in the endorsement in the winter meeting of the ALTA in 1981 to limit the effect of the endorsement to the formula established at the Date of Policy and disclosed in the insured mortgage. It was never intended that this endorsement would apply prospectively to changes in the rate of interest resulting from modifications to the loan agreements after the Date of Policy.

As a result of that amendment, the endorsement requires that the insured mortgage or deed of trust disclose that the secured loan has a variable interest rate feature, at least the disclosure of the index by which the interest rate fluctuates. It is not necessary to disclose the actual interest rate or formula for determining the interest rate agreed upon between the borrower and lender.