and on foreclosure of the mortgage the same is adjudged to be a lien inferior to that designated in the policy.

5. Where the insured has negotiated a loan on the security of a mortgage on the insured estate or interest and the lender rejects the title because of some defect or objection not excepted in the policy. In such cases the company agrees to submit the question of the validity of the title at its own expense to the proper judicial tribunal, and agrees that its liability shall depend upon the judgment of that court.

6. Where the insured has transferred the insured title by an instrument containing covenants in regard to the title, and a final judgment is rendered against the insured on any of such covenants because of a defect in the title covered by the policy.

Relative to the payment of losses, title policies generally provide that the company will pay the expenses of litigation, including any costs recovered against the insured, in addition to the loss. The company, however, reserves the right to appeal from any judgment which fixes its liability. Losses will be paid within thirty days after written notice of the loss unless the company, within the thirty days, elects to take an appeal from a judgment adverse to the insured title, in which case the loss shall not be payable until the final determination of the suit. The company, however, is willing to pay losses prior to the final determination of the suit, provided the insured will either give satisfactory security to the company for the repayment of the amount of loss paid by it in case the company ultimately wins the suit, or consents to convey the insured estate to the company, or to some other purchaser named by it, at the price at which the insured has contracted to sell the property (if such contract has been made), or at the option of the company, at a valuation of the insured estate or interest as made by three arbitrators,

Mortgage Policies Guaranteeing the Principal and Interest on Mortgages.-It is becoming the practice of a number of large mortgage companies to sell mortgages to investors which are insured against loss of interest, principal, and title. In most instances the title of the property which secures the mortgage is insured by a title-insurance company, and the mortgage is then sold and insured as to principal and interest by a subsidiary company. Generally, the mortgage company adheres to certain limitations, which aim to safeguard its business. Not only do these companies render expert service in placing the mortgages on property which will amply secure them, but the total outstanding guaranteed mortgages are limited to twenty times the capital and surplus of the company. To make this limitation practically irrevocable, such companies usually provide in their by-laws that the limitation is "not to be amended or repealed except with the written consent, duly acknowledged, of the owners of all the policies of mortgage insurance then outstanding and issued by the company." It may be added that this is the standard generally accepted in Europe by this class of companies. Furthermore, the loans of the company are limited to a certain definite territory, and to certain designated income-producing business or residence properties.

In the case, for instance, of the Lawyers' Mortgage Company, all guaranteed mortgages are taken through the Lawyers' Title Insurance and Trust Company of New York, with a capital, surplus, and undivided profits of $10,000,000, which guarantees the title, the identity of the property, and the genuineness of the signatures, thus protecting the mortgage company against bad titles, false descriptions, or forged papers. The profits of the Mortgage Company are limited to one-half per cent, the difference between the one-half per cent retained by the company, and the interest paid by the borrower being received by the investor. In return for this one-half per cent, the company acts as an agent of the mort

gagee for the collection of interest. It will also look after the fire insurance, the payment of taxes and assessments, and all other matters which the mortgagor should attend to. The company also protects the mortgagee with a mortgage policy, which provides for the payment of interest the day it is due, and for the payment of the principal of the mortgage at maturity after collection from the mortgagor; or, in any event, within eighteen months after maturity, the regular semi-annual interest being paid meanwhile. The policy usually contains no exceptions as to loss resulting from fire, riot, tornado, earthquake, defects in title, or any other cause. When the guaranteed mortgage is purchased, the investor receives the bond, the mortgage, the guaranteed policy of the company; and, if desired, the title policy of the titleinsurance company. The fire-insurance policies are, for the sake of convenience, retained in the office of the company.

Judging from a recent semi-annual report of one of the largest mortgage companies in New York, with a capital and surplus of $26,000,000, such mortgages, insured as to interest, principal, and title, furnish a very safe and profitable investment. Within a period of six months during 1909, this company sold nearly $17,000,000 worth of mortgages, over $2,000,000 netting the mortgagee 4 per cent, nearly $14,000,000 netting 4 per cent, and over $1,000,000 netting 5 per cent.

The distribution of these mortgages by customers is interesting, since it appears that savings banks took $2,232,000 worth out of the $17,000,000; trustees, $5,552,000; charitable institutions, $2,289,000; insurance companies, $1,372,000; trust companies, $272,000; and individuals $5,178,000. Since its beginning, in 1894, this company has made approximately 10,000 loans, aggregating $155,000,000. Out of this entire number the company has been compelled to purchase only eighteen at foreclosure sale, amounting to only $424,000, and resulting in a total loss of only $13,000.

Not only is the holder of the mortgage protected because of the expert service which is given him in selecting the security back of the mortgage, but, because of the large assets of the mortgage company or the title-insurance company, as

APPLICATION FOR INSURANCE OF TITLE.

Louisville, Ky..

190

The undersigned hereby applies to the LOUISVILLE TITLE COMPANY for a policy of insurance, in its usual form, in the sum of 8. which is the true consideration for the interest to be insured, on the title to the premises hereinafter described, hereby covenanting that the following statements are true and correct to the best of the applicant's knowledge and belief, and that if before the delivery of the policy to be based hereon he should have any further information or any intimation as to any defect of title, objection, lien or incumbrance affecting said premises or any part thereof, he will at once make the same known to this Company. Applicant further agrees that any untrue statement herein, or any suppression of material information, or any failure to communicate any such information or intimation shall avoid the said policy.

Description of premises:

Person to whom the policy is to be issued.

Interest to be insured:

Present owner of property:

How title of present owner acquired:

Person in possession of property:

By what title is such possession held:

Are there any unpaid taxes or assessments, mortgages, liens or other incumbrances on the property?

If any, which are to remain?

Does any other property drain over or under the property described berein?

Does any person other than the present owner use or claim any right to use any portion of the premises for any purpose?

Are there any buildings or repairs now being made or any other work now being done on the premises?

Do you know or have you heard of any objection to the title?

By whom, and for whom was the title last examined?

Are there any unrecorded deeds or agreements, or any adverse claims or interests, or any secret trusts, known or rumored to exist?

Shall a survey of the property be made? It is understood that unless a survey is ordered the Company will not be responsible for adverse possession of any part of the premises by others than the present owner, or for any deficiency of land or for any easements or licenses therein not disclosed by the records affecting the title. The fee charged for the survey is in addition to the fee charged for the policy

Charge $

It is understood that where the title is insured any delay or expense in obtaining actual possession of the premises is to be borne wholly by the insured and not by this Company.

Applicant hereby agrees to pay the Company for such policy $.

; and if the Company declines to insure the title as herein applied for, to pay for its time and expense in the investigation of the title, $ . Provided, however, that notwithstanding the rejection for insurance, if applicant shall accept the title or shall receive a complete written statement of its condition, applicant agrees to pay the full fee first named in this clause. It is understood that any investigation made under this application is made for the Company's information, and not as agent for the applicant.

How is consideration to be paid? If already paid, how was it paid?_

the case may be, he is protected against loss through any defect in the title of the property, or through failure on the part of the borrower to pay interest and return the principal.

SAMPLE FORM OF TITLE INSURANCE POLICY Policy No.

Title No. LAWYERS TITLE INSURANCE AND TRUST COMPANY

This Policy of Insurance Witnesseth: That the LAWYERS TITLE INSURANCE AND TRUST COMPANY in consideration of its premium in dollars to it paid doth hereby insure and covenant that it will keep harmless and indemnify...

.executors,

(hereinafter termed the assured), administrators, heirs, and devisees, and all other persons to whom this policy may be transferred with the assent of this company, testified by the signature of the proper officer of this company, indorsed on this policy, against all loss or damage not exceeding...

dollars, which the said assured shall sustain by reason of defects, or unmarketability of the title of the assured to the estate, mortgage or interest described in Schedule "A," hereto annexed, or because of liens or incumbrances charging the same at the date of this policy, Excepting judgments against the assured and estates, defects, objections, liens, or incumbrances, created by the act or with the privity of the assured, or mentioned in Schedule "B," or excepted by the conditions of this policy hereto annexed and hereby incorporated into this contract. The loss and the amount to be ascertained in the manner provided in the annexed conditions and to be payable upon compliance by the assured, with the stipulations of said conditions and not otherwise. If this policy be one issued to an owner, and only in that case, any loss hereunder may be applied by this company to the payment of any mortgage mentioned in Schedule "B," or to the payment of any purchase money mortgage, given by the assured, where such mortgage is held by this company, or by an assured of this company. The payment so made shall be deemed a payment under this policy. This Policy is issued upon application, Number..... made on behalf of the assured....

Examining Counsel of the company.