Pari Passu Mortgage Loan Endorsement

06/06/2024 04:37 AM Mark Goodman

The Pari Passu Mortgage Loan Endorsement addresses the needs of lenders who are obtaining co-equal lien priority with other lenders relating to parcels of real property collateral of a debtor. This type of transaction typically arises in the context of credit facility transactions where multiple lenders seek to obtain equal lien priority through separately recorded mortgages and an associated intercreditor agreement.

The endorsement insures the lender that the lien will not be invalid or unenforceable due solely to the provisions of the mortgage or intercreditor agreement providing for co-equal lien priority. The endorsement also insures against loss or damage if the insured mortgage does not have equal lien priority with the other pari passu lenders. Liability under the endorsement is conditioned upon the insured lender and the other pari passu lenders complying with the terms of the mortgages and intercreditor agreement and requires that all of the lenders involved simultaneously foreclose their respective mortgages. Loss or damage arising from preferences for the sharing of Indebtedness in the intercreditor agreement is not covered. Finally, if there is a dispute as to the loss payable under the policy for a covered matter, the issuing company has the option of interpleading the loss amount into court allowing the insured and the other lenders to resolve their differences judicially.

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