- April 05, 2002
- All Issuing Offices in Texas
- Commissioner's Order for 2002 Hearing
The Commissioner has signed an order adopting various forms and rules based on the 2000 Biennial Hearing. You may secure copies of the new forms from Stewart Forms and Information (via telephone at 800.729.1901 or via e-mail at firstname.lastname@example.org ). The order is effective April 4, 2002. The following are the matters covered in the order.
SHORT FORM MORTGAGEE POLICY (See references section at the end of this bulletin for Form and Underwriting Guidelines)
You may issue the Texas Short Form Residential Mortgagee Policy - One-to-Four Family (T-2R) on Residential Real Property, if the lender instructions request the policy.
Use of the Short Form Mortgagee Policy (T-2R) will reduce errors. That means you will spend less time correcting policies after closing. Be aware of some of the common errors that still may occur if you use the Mortgagee Policy (T-2): (1) amount of insurance less than loan amount; (2) mortgage amount incorrect; (3) insured's name incomplete or incorrect; and, (4) borrower's name does not match mortgage.
The Short Form Mortgagee Policy (T-2R) reduces time and expenses for both you and the lender in preparation and review. We recommend you market it to your lenders: many will want it once they understand it.
An example of a lender that requires the Short Form Mortgagee Policy (T-2R), where it is available is World Savings. Please be aware of this when closing World Savings loan transactions.
The premium for this policy is the same as the rate for the Mortgagee Policy (T-2). The charge for endorsements incorporated by box reference also is the same as the charge for endorsements to the Mortgagee Policy (T-2).
The Commissioner adopted the following endorsements, effective April 4, 2002, but did yet adopt a rate for those forms. If you are requested to issue these endorsements to the Mortgagee Policy (T-2) or Owner Policy prior to the adoption the Commissioner of a rate, please call a District Manager or our underwriting personnel. These endorsements are used primarily in large transactions, usually multi-state or multi-site deals.
First Loss Endorsement (T-14) to Mortgagee Policy (See references section at the end of this bulletin)
This endorsement provides for payment for a significant loss without requiring foreclosure of other collateral or acceleration of debt. This endorsement may be issued on a Mortgagee Policy (T-2) if the land is not Residential Real Estate, and if other real or personal property not described in the Mortgagee Policy is encumbered to secure the indebtedness. Please call our underwriting personnel if you are asked to issue this endorsement.
Last Dollar Endorsement (T-15) to Mortgagee Policy (See references section at the end of this bulletin)
This endorsement overrides Section 9(b) of the Mortgagee Policy, which provides that payment of principal reduces the policy coverage dollar for dollar, even if the debt exceeds the Amount of Insurance. This endorsement may be issued on a Mortgagee Policy (T-2) if the land is not Residential Real Estate, and if other real or personal property not described in the Mortgagee Policy is encumbered to secure the indebtedness. Please call our underwriting personnel if you are asked to issue this endorsement.
Mortgagee Policy Aggregation Endorsement (T-16) (See references section at the end of this bulletin)
This endorsement also is called the Tie-in, Cluster, or Spreader Endorsement. This endorsement aggregates the liability of multiple Mortgagee Policies (whether issued in Texas or elsewhere) covering multiple tracts. Please call our underwriting personnel if you are asked to issue this endorsement.
Planned Unit Development Endorsement (T-17) (See references section at the end of this bulletin)
This endorsement to the Mortgagee Policy provides coverage as to encroachments, rights of first refusal and restrictions. You may issue this endorsement if the land is Residential Real Property, and the subdivision contains common elements (whether or not insured). Please see our Underwriting Guidelines in Exhibit 5.
Restrictions, Encroachments, Minerals (T-19) (See references section at the end of this bulletin)
This endorsement to the Mortgagee Policy provides coverage as to Restrictions, Encroachments, and Minerals. This is the endorsement to issue if the lender's instructions require the ALTA 9. You may issue this endorsement on any type of land. Please see our Underwriting Guidelines in Exhibit 6.
Supplemental Coverage Manufactured Housing Unit Endorsement (T-31.1) (See references section at the end of this bulletin)
This endorsement to the Owner or Mortgagee Policy insures that a manufactured housing unit is located on the land, the unit is real property, the owner of the land is the owner of the manufactured housing unit, no personal property tax lien has attached to the unit, no federal tax lien, UCC or other personal property lien has attached to the unit, and (if applicable) the insured mortgage is a valid lien against the unit.
You must be satisfied that the unit is located on the land as a permanent improvement (by survey, inspection, or credible affidavit). You also must comply with Bulletin TX000059 (September 14, 2001) "Manufactured Housing Units."
REVISED LEASEHOLD ENDORSEMENTS
Leasehold Owner Policy Endorsement (T-4) To Owner Policy (T-1) (See references section at the end of this bulletin)
Residential Leasehold Endorsement (T-4R) To Residential Owner Policy (T-1R) (See references section at the end of this bulletin)
Leasehold Mortgagee Endorsement (T-5) to Mortgagee Policy (T-2) (See references section at the end of this bulletin)
These endorsements provide additional, favorable insurance on a leasehold: they include Tenant Leasehold Improvements in loss calculation, they expand moving costs to 100 miles, they include reasonable costs incurred by the insured to secure a replacement leasehold equivalent to the Leasehold Estate, and they include hard and soft costs in constructing Tenant Leasehold Improvements, if the insured is evicted before substantial completion. You must attach the endorsement to the policy insuring a leasehold.
The definitions of Lease and Leasehold Estate in these new endorsements do not expressly except to the terms of the lease. You should be furnished with a complete current estoppel certificate from the lessor unless you are insuring a newly created lease. You also should except to the terms of the lease in Schedule B or you should except in Schedule B to "any failure to comply with the terms, provisions and conditions of the lease (refer to lease, and any recording information)." You should be satisfied that any mortgage or assignment of the leasehold is authorized by the lease or approved by the lessor, unless you secure underwriter approval.
AMENDED SURVEY RULE
The Commissioner adopted an amendment to Procedural Rule P-2 and also adopted a new Survey Affidavit. This amendment authorizes you to rely on evidence of an existing survey, together with the Survey Affidavit. We discuss this change in a separate bulletin of the same date.
OTHER RULE AND FORM CHANGES
Electronically Produced Forms (P-17)
This rule allows electronic production of Commitments, Policies, Endorsements and other forms. If the form is electronically produced, the information set forth in the stored form must be as originally generated in its final form and must remain unaltered and accessible. You do not need to retain a hard copy of such form as long as you retain an electronic copy. You must retain hard copies of scanned documents, as provided in P-32. Please call your District Manager if you wish to electronically produce policies.
Owner Policy (T-1)
The Commissioner approved minor changes to the definition of the insured. Those changes include certain successors of a limited liability company or limited liability partnership and include succession by conversion of an insured to another entity.
Schedule A is amended to refer to the Short Form Mortgagee Policy (T-2R). Schedule B is amended to refer to the Exceptions and Express Insurance of the Short Form Mortgagee Policy. The Texas Title Insurance Information is amended to modify the requirements relating to "area and boundary" coverage.
Minimum Escrow Accounting Procedures and Internal Controls
"Escrow Account" or "Trust Account" must appear on the bank statement, signed bank agreement, disbursement checks and deposit tickets. If a bank does not return canceled checks, then copies of checks must be available in agency records, or the agency must obtain a signed acknowledgement from the bank that they will be provided upon request in accordance with TDI guidelines. All escrow and trust accounts maintained by Texas title companies shall be in financial institutions located within the geographic bounds of Texas.
Good Funds (P-27)
The Commissioner amended P-27, to expressly include appropriate definitions of terms. The amended rule requires that a record of all receipts reflecting the date on which funds are actually received must be entered on the books of the trustee before any disbursements are made. The financial institution, or branch in which the trust funds are maintained, must be located within the geographic bounds of Texas.
Document Retention (P-32)
Evidence of insurability must be retained no less than 15 years. Hard copies of evidence of insurability must be retained as hard copies no less than 3 years, after which scanned copies may be kept. Hard copies of information normally maintained in guaranty files must be retained at least 3 years. Hard copies of forms must be kept for 3 years, and thereafter scanned copies must be maintained indefinitely. Electronically produced forms and information can be stored electronically if you comply with P-17.
Texas Title Insurance Statistical Plan
The Plan has been updated. For example, it now refers to Insured Closing Service Letters, the Junior Mortgage Policy, Pre-Foreclosure Policy, and existing endorsements. The Department of Insurance will provide separate instructions relating to the new forms.
Pro-Forma Policies and Foreign Language Translations of Forms (P-52)
Pro-Forma Policies are intended as tools for negotiating the Schedule A and Schedule B provisions on commercial transactions before closing. New P-52 allows issuance of "Pro-Forma" policies on commercial (not residential) transactions. The proposed amount of insurance must be $500,000 or more. Each page of the Pro-Forma must contain the following disclaimer:
"This is a Pro Forma Policy furnished to or on behalf of the party proposed to be insured for discussion only. It does not reflect the present status of title and is not a commitment to insure the estate or interest as shown herein, nor does it evidence the willingness of the Company to provide any coverage shown herein. Any such commitment must be an express written undertaking issued on the appropriate forms of the Company."
The title insurer also may produce foreign translations of promulgated forms if we comply with P-52.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.
- Bulletins Replaced:
- Related Bulletins:
- Underwriting Manual:
- Exceptions Manual:
- T-14 TX First Loss Endorsement
- T-16 TX Mortgagee Policy Aggregation Endorsement
- T-17 TX Planned Unit Development Endorsement
- T-2R TX Short Form Residential Loan Policy of Title Insurance and Addendum
- T-31.1 TX Supplemental Coverage Manufactured Housing Unit Endorsement
- T-4 TX Leasehold Owner Policy Endorsement
- T-4R TX Residential Leasehold Endorsement
- T-5 TX Leasehold Mortgagee Policy Endorsement
- TX Last Dollar Endorsement T-15
- TX Restrictions, Encroachments, Minerals Endorsement T-19