Greater protection now available for loans secured by non-real estate collateral
First Canadian Title First in Canada to Launch PPSA Insurance for Commercial Lenders
October 30, 2003, OAKVILLE, Ontario
“First Canadian Title’s PPSA Insurance allows commercial lenders taking collateral other than real estate to secure their security interests more effectively and quickly than ever before,” said John Rider, First Canadian Title’s Vice President, Commercial Division. “With PPSA Insurance, First Canadian Title protects against uncertainty and assumes the risk of loss -- protection that had never been available in Canada until the creation of this new policy.”
PPSA Insurance protects the lender from losses stemming from loans secured by non-real estate collateral where the losses are due to a variety of defects. Essentially, with PPSA Insurance, the attachment, priority and perfection of the secured interest is protected. Coverage extends regardless of whether transactions are secured in whole or in part by non-real estate collateral. The streamlined underwriting process used for this type of insurance can make the entire process far more efficient. Additionally, First Canadian Title’s PPSA policy provides for a “duty to defend” on the part of First Canadian Title in the event of any challenge to a matter covered by the PPSA policy. In such a case, where First Canadian Title uses this method of resolution, it pays for all costs incurred to defend the insured lender, with no resultant reduction in the insured policy amount.
Currently, commercial lenders protect themselves from loss by registering PPSA financing statements. To maintain the enforceability and priority of the security, it is of critical importance that the information contained in these filings is completely accurate. Unfortunately, however, when a lender registers a security interest to protect itself, registration can fail for many reasons. Incorrect filing and errors in documentation are just a couple examples of the ways in which a PPSA registration can lose its validity. PPSA financing statements often require that long serial numbers and extensive descriptions of the collateral are recorded, making it difficult to ensure that registration is carried out with 100 per cent accuracy.
PPSA Insurance protects the lender from errors in these filings. This can have a significant impact on a lender, particularly in the face of a bankruptcy where a defective filing can result in the loss of a lender’s priority. Moreover, even a perfect filing can be defeated with fraud, forgery, undue influence, duress, incompetency, incapacity or impersonation. PPSA Insurance provides protection in these situations that was unavailable until the launch of this new type of insurance.
First Canadian Title’s PPSA Insurance also enhances the marketability of loans secured by non-real estate collateral. PPSA Insurance affords investors the confidence that they have good and valid security interests in the non-real estate collateral against which a loan was secured. It also enhances a security’s liquidity, as a PPSA policy remains in effect throughout the life of the original loan, with the benefits being passed on to the new owner of a loan subsequent to its sale, assignment, securitization or syndication. Finally, PPSA policies can be standardized for consistency in coverage from loan to loan.
First Canadian Title (http://www.firstcanadiantitle.com/) pioneered title insurance in Canada in 1991. Last year alone, First Canadian Title issued more than 380,000 title insurance policies. First Canadian Title’s responsive underwriting skills and unparalleled experience in handling and resolving claims set it apart from its competitors. The Company offers customers a number of valuable products and services including title insurance for both residential and commercial transactions, residential and commercial refinance programs for lenders and home closing services. Based in Oakville, with offices throughout Canada, First Canadian Title employs more than 400 people from coast to coast. First Canadian Title is the registered business name in Canada of First American Title Insurance Company. All title insurance policies are underwritten and issued by First American Title Insurance Company.