5.9 EXTENSION OR MODIFICATION OF AN INSURED LOAN
A. Where a mortgage which has been previously insured is still in effect, and that mortgage is to be amended by an extension or modification agreement, an endorsement to the existing policy or a new policy may be issued by the same Insurer which covers the extension or modification agreement, after continuation searches have been obtained covering the period from the recording date of the mortgage through the recording date of the extension or modification agreement. The Charge for the issuance of an endorsement to an existing policy or the issuance of a new policy to provide coverage to insure the mortgage as amended by the extension or modification agreement shall be made in accordance with subparagraphs B through D below.
B. The Charge for a new policy or endorsement to an existing policy issued in conjunction with an extension or modification agreement, that does not increase the unpaid principal balance, shall be calculated on the basis of the unpaid principal balance with the applicable rates:
Up to 5 years........................................50% of reissue rate
Over 5 years to 10 years.........................70% of reissue rate
Over 10 years......................................100% of reissue rate
C. The Charge for a new policy or endorsement to an existing policy less than 10 years ago in conjunction with an extension or modification agreement that increases the unpaid principal balance shall be calculated in two steps. First, the Charge for the new policy or endorsement that relates to the unpaid principal balance of the loan immediately prior to the increase shall be calculated as set forth above in paragraph B. Second, the Charge for the new policy or endorsement which relates to the increase in coverage amount, i.e., the difference between the unpaid balance of loan immediately prior to its increase and the new coverage amount, shall be 80% of the reissue rate.
Example: On January 1, 1997, owner modifies his mortgage loan (originally created in the amount of $100,000 on January 1, 1991) by increasing the amount of the loan to $150,000. The unpaid balance immediately prior to the modification is $80,000. The Charge for the new policy or endorsement is calculated as follows: 70% of the reissue rate for $80,000 of coverage to which is added the difference between (i) 80% of the reissue rate on an $80,000 policy and (ii) 80% of the reissue rate on a $150,000 policy. [Note from DC. Hey guys, don't confuse this formula with other rates. This is only used for an extension or modification of an existing mortgage. You don't use this formula for a refinance.]
D. If under a modification agreement, new property(ties) are added, 80% of the reissue rate shall be charged from dollar one based upon the value if the new property(ties), together with charging the applicable rate under paragraph B of this Section, based upon the unpaid principal balance of the loan. Any increases in the unpaid principal balance of the loan shall be charged the applicable rate under Paragraph C of this Section.
Sorry....I'm bailing on this part of the manual. I just can't see typing any more of this section because folks hardly ever do modifications. Call your underwriter if you need a copy of this part.