New Procedural Rules In Texas. By Richard Worsham, Vice-President/Underwriting Counsel Title Resources Guaranty Company

Transcription

1 New Procedural Rules In Texas By Richard Worsham, Vice-President/Underwriting Counsel Title Resources Guaranty Company

2 P-17 Electronically Produced Forms Paragraph (g) is added to Procedural Rule P-17 to provide for electronic filing costs to be passed through to the consumer. This rule is created to implement HB 3703 passed in the last legislative session, which allows this. This could create a new entry on your HUD-1.

3 Deleted P-9 Endorsement of Owners or Loan Policies P-9 (b), (12), relating to the Last Dollar Endorsement. The T-15 form, the Last Dollar Endorsement Effectively Deleted - Paragraph J of Rate Rule R-11, relating to the Last Dollar Endorsement. The position of TDI is that the Last Dollar Endorsement is obsolete due to prior changes in the T-1 Policy form.

4 P-9 Endorsement of Owners or Loan Policies P-9.b(6) - changed adjustable rate mortgage to variable rate mortgage, to reflect previous changes in the language on the T-33 and T-33.1 forms

5 P-9 Endorsement of Owners or Loan Policies Minor verbiage changes to P.9(b)(8) to conform with changes to the T-35 Future Advance/Revolving Credit Endorsement. Also deletes requirement a revolving credit endorsement be attached in order to give Future Advance/Revolving Credit Endorsement. This may change your loan documents some, with revolving credit provisions in the deed of trust rather than in an endorsement.

6 P-55 Non-Imputation Endorsement P-55 is amended to reference a new form, the T-24.1, labeled Non-Imputation Endorsement (Mezzanine Financing). Keeps the old T-24 Non-Imputation Endorsement, but creates the new T-24.1 for special circumstances. The T-24.1 is similar to an ALTA No Rate Rule has been issued for the new T-24.1, so we cannot issue it at this time. A T-24.1 may only be issued to a Mezzanine Lender, which is not a term clearly defined in the Basic Manual for Title Insurance. Your Borrower is always going to be a business entity of some type, not an individual.

7 P-55 Non-Imputation Endorsement Typically, a Mezzanine Lender provides financing that is a hybrid between a loan and an equity interest in the borrower. In some, but not all, Mezzanine Financing arrangements, the Mezzanine Lender has both a traditional lien on the property AND either a current indirect equity interest in borrower (typically through an owned subsidiary) or the right, through warrants or a security interest in stock, to assume control of the borrower. The purpose of the T-24.1 endorsement is to give the Mezzanine Lender the same non-imputation rights as a co-investor, even if the Mezzanine Lender is not currently an investor in the Borrowing Company. The T-24.1 also addresses coverage disputes between the Mezzanine Lender and the Borrower as to which is the insured, protecting the title company. Mezzanine Financing is typically used only in large commercial transactions, and you almost always have lender attorneys who will know if they need the coverage or not.

8 P-56 Contiguity Endorsement P-56 changes refer to a 2 nd Contiguity Endorsement Form, the T-25.1, in addition to the T-25. Applies to non-residential property only. Rate Rule R-32 currently refers to the T-25 only; you may not issue the T until we have a rate rule for it.

9 P-56 Contiguity Endorsement The primary purpose of this endorsement is to cover multiple tracts which may touch on each other but which may not have only one single border.

10 P-20 Standard Exception Relating to Taxes Highlights of P-20 P-29, related to taxes not yet due and payable, is repealed, and incorporated into P-20. Rate Rule R-24 amended to reference P-20 instead of P-29. Sets specific guidelines for when the Title Company can insure for the current years taxes. Title Agent will now be allowed to briefly escrow for certain Property Taxes. Bulletin 153, which prohibited escrowing for taxes, is replaced. Prohibits insuring around rollback taxes without an escrow.

11 P-20 Standard Exception Relating to Taxes Part A. P-20,A,1,a. OR

12 P-20,A,1,b. P-20 Standard Exception Relating to Taxes Part A.

13 P-20 Standard Exception Relating to Taxes Part A. What is satisfactory evidence that the assessed taxes have been paid by the current lender from the owner s Reserve/Escrow Account held by lender? Provided the current lender is a large institutional lender, you can accept a written statement from the current lender of the account number, date paid, and payee of each tax paid. If you re being asked to rely upon statements of an individual or non-traditional lender, contact underwriting for permission. Closer must verify these same account numbers are the same tax account numbers for this property.

14 P-20 Standard Exception Relating to Taxes Part A. If you are unsure whether the taxes have been paid, P-20(b)(2) and (3) now allows you to escrow for taxes Must be provided with a written indemnity and escrow agreement for all taxes due. Must escrow in your escrow account for the full amount of the taxes. No provision has been made in the Basic Manual for you to estimate the tax amount due if it its unknown. Must PAY the taxes according to the escrow AND before they become delinquent. This provision in P-20 will prevent you from escrowing for delinquent taxes, but only when you re unsure whether they have been paid. The P-20(b) escrow provisions are intended to cover only that narrow window between October 1 st and January 31 st, if you re unsure about whether taxes have been paid.

15 P-20 Standard Exception Relating to Taxes Part B Rollback Taxes/Tax Deletion

16 P-20 Standard Exception Relating to Taxes Part B Rollback Taxes/Tax Deletion Part B. of P-20 is essentially the old version of P- 20 with some clarifications. Clarifies that Tax Deletion can now be done by checking the appropriate box on the new loan title policy forms with a box OR by issuing a T-30 endorsement. Instead of referring to this as tax deletion, TDI attempts to clarify this by requiring this now be called, insuring against rollback taxes.

17 P-20 Standard Exception Relating to Taxes Part B Rollback Taxes/Tax Deletion P-20,B,2, now prohibits insuring against rollback taxes, what was called tax deletion, unless The property doesn t have a an agricultural or open spaces tax exemption in the current year. The presumption appears to be that rollback taxes for prior years will have already been assessed if the property no longer has an exemption on it, meaning they are current taxes due, not future rollback taxes. Rollback Taxes have already been assessed, are collected at closing, and are paid in the ordinary course of business. TRGC has not previously accepted builder indemnities for rollback taxes, and this provision indicates that practice is no longer allowed.

18 P-20 Standard Exception Relating to Taxes Part C P-20, C., Not Yet Due and Payable

19 P-20 Standard Exception Relating to Taxes Part C P-20, C., Not Yet Due and Payable Now allows you to insure SOME but not ALL taxes are not yet due and payable. Company insures that standby fees, taxes and assessments by any taxing authority for the year are not yet due and payable as to [insert name of taxing authority/authorities] only. List only the taxes that have been paid, not those that have not, in the coverage.

20 P-69 Issuance of Insured Closing Letters TDI is trying to make clear, again, that ICL s may not be issued for approved attorneys, but only fee attorneys who are also licensed escrow officers.

21 P-70 Cancellation Fees

22 P-70 Cancellation Fees Cancellation fees to the consumer are PROHIBITED. A flat rate between title companies and direct operations as to title searches, is not to be construed as a prohibited cancellation fee. Such agreements must comply with P-24. Refusal to agree to a set fee is not a refusal to provide title evidence. By itself, it does not give you the right to bypass the local agent.

23 P-71 Texas Limited Coverage Chain of Title Policy

24 P-71 Texas Limited Coverage Chain of Title Policy In connection with this TDI adopted a new insurance policy form, the T-53. There are no provisions in the policy for additional exceptions. You are unable to issue this coverage until Rate Rule R-35 is adopted. Procedural Rule states there will be no premium split allowed on this policy, and it may only be issued by an agent in the county. You should include in the search ALL mineral leases and assignments shown of record in the time period covered by the policy, which is up to 60-months (but can be shorter upon lender request). It is not clear that this coverage is intended to include mineral coverage, but TRGC declines to take the risk that the policy form might be interpreted that way. There is no specific provision in the rule or form for exception to minerals.

25 P-71 Texas Limited Coverage Chain of Title Policy When the lender requests a 24-month chain of title (after R-35 is adopted), you can give the lender some options - Provide a 24-month list of deeds as you have in the past, for which there is no insurance coverage. Offer Lender the new Texas Limited Coverage Chain of Title Policy

26 Manufactured Housing T-31.1 For those of us who have been confused for years by the term serial number on the T-31.1, T-4 and T-5, TDI has replaced that with the term Policy Number. No admission by TDI for any previous errors, so we must always wonder why they put it on the policy forms in the first place?

27 Various Items TDI Finally amended the T-1R, T-2R and T13 to refer to Loan Policy of Title Insurance instead of Mortgagee s Policy of Title Insurance, to comply with previous changes in verbiage. Also, all references to owner policy were changed to owner s policy. The T-50 Insured Closing Letter Form had minor revisions. Minor revisions to the T-47 Affidavit to remove duplicate reference to the title insurance company. Minor revisions to Schedule D Proposal to require disclosure of negotiable fees not approved! P-54 is revised to remove redundant references to non-residential property.

28 Various Items Typographical errors fixed in the T-27 (Assignment of Rents/Leases Endorsement). Schedule B of the Loan Policy Minor verbiage language change in P-7(b) [sometimes called the 12(c) Language ] to remove..and stipulations. at end of the sentence, to comply with revised T-2 forms. This is first change since Bulletin 157 in 1992, and effects those of you using this language in ICL s. Arbitration provisions in policy modified to raise ceiling to $2-million in conformance with P-36. Minor Changes to the T-7 Leasehold Loan Policy Endorsement. For those of you in administration, the Guaranty Assessment Recoupment Charge Remittance Form was revised.

29 Minimum Standards, Specific Instructions and Report Forms for Audit, etc Permits pass-through of actual expenses or reasonable estimate of charges (on a per closing basis, not as a category) for tax reports. Permits absentee notary sign up fee if a party requesting the service signs a written request that is kept in the file that gave advance disclosure of the charge. On loan payoffs, the file must contain a copy of the release of lien or evidence of payment and written demand for a release. This requires the agent transmittal letter sending the payment also demands a release from the lender being paid, and a copy be kept in the file. The rule already required a written payoff from the lender be in the file.

30 T-19, 19.1, 19.2, In Effect Since Nov. 1, 2009 T-19 is basically unchanged. T-19.1 was previously available on commercial property only, and is now available on any Owner s Title Policy. Because T-19.1 covers encroachments, it is now the exclusive manner on an OTP for providing express insurance for encroachments into any type of setback line or property line. T-19 is used to provide express insurance for encroachments on Loan Title Policies. P-39 Express insurance can no longer be provided for encroachments.

31 T-19, 19.1, 19.2, Simple Rules T-19 available for Loan Title Policies In Effect Since Nov. 1, 2009 T-19.1 available for Owners Title Policies T-19.2 or T-19.3 may be offered on Owners or Loan Policies, when requested. You may issue T-19.2 or T-19.3 with either T-19 or T19.1 if requested to do so.

32 T-19, 19.1, 19.2, Simplified In Effect Since Nov. 1, 2009 You may still delete provisions of T-19 or T if we do not wish to cover the risk. The proper manner for doing so is to list the exception, and then list which portions of T-19 or T-19.1 are deleted. Sample Exception House Encroaches into the Utility Easement on the North side of the property. T-19 paragraphs 1(b) (1),(2) and (4) and all of paragraphs 3, 5, and 6 are hereby deleted as to this exception.

33 T-19, 19.1, 19.2, Simplified MINERALS In Effect Since Nov. 1, 2009 Unless you have been informed a drilling rig or strip mine is on the premises of the property you are insuring, I don t want you to concern yourself with minerals. We are not asking you to make inquiries, but if someone says there is a rig or strip mine on the property, call underwriting. You may now give T-19 paragraph 4, T-19.1 paragraph 3, or, upon request, T-19.2 or T-19.3, without regard to whether your owner does or does not own the minerals, and without regard to surface waivers or mineral rights.

34 T-19, 19.1, 19.2, Simplified You MUST issue either T-19.2 or T-19.3 if Your commitment has a general exception for minerals in either Schedule A or Schedule B as allowed by P-5.1, AND Customer requests the coverage. In Effect Since Nov. 1, 2009 TRGC requires your commitment have one of the general exceptions provided in P-5.1 unless your commitment: Was searched back to sovereignty, with no assignment of mineral interests found. If you don t know how far back your search is, ask your examiner. You have specific exceptions evidencing 100% of the mineral interests were severed from the property and assigned to others.

35 T-19, 19.1, 19.2, Simplified P-5.1 Allowed Mineral Exceptions: Schedule A, 2:, subject to, and the Company does not insure title to, and excepts from the description of the Land, coal, lignite, oil, gas and other minerals in, under and that may be produced from the Land, together with all rights, privileges, and immunities relating thereto." Schedule B: "All leases, grants, exceptions or reservations of coal, lignite, oil, gas and other minerals, together with all rights, privileges, and immunities relating thereto, appearing in the Public Records whether listed in Schedule B or not. There may be leases, grants, exceptions or reservations of mineral interest that are not listed."

36 T-19, 19.1, 19.2, Simplified In Effect Since Nov. 1, 2009 T-19.2 is available for Residential property under 1-acre. Any other type of non-residential improved property. T-19.3 is available for Residential property over 1-acre. Any undeveloped property.

37 T-19, 19.1, 19.2, Simplified T-19.2 or T-19.3 are always $50. In Effect Since Nov. 1, 2009 T-19 and T-19.1 can vary in price. New Minimum Charge for T-19 and T is $50. From there it gets complicated.

38 T-19, 19.1, 19.2, Simplified R-29. Premium for Restrictions, Encroachments, Minerals Endorsement (T-19) and Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1) A. When the Restrictions, Encroachments, Minerals Endorsement (T-19) is issued on residential real property in accordance with Rule P-50, the premium shall be 5% of the Basic Rate for a single issue policy provided that the minimum premium shall be not less than $ B. When the Restrictions, Encroachments, Minerals Endorsement (T-19) is issued on land which is not residential real property, in accordance with Rule P-50, the premium shall be 10% of the Basic Rate for a single issue policy provided that the minimum premium shall be not less than $ C. When the Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1) is issued on residential real property in accordance with Rule P-50, the premium shall be: 1. 10% of the Basic Rate for a single issue policy; or 2. 5% of the Basic Rate for a single issue policy if an amendment of the exception to area and boundaries is also purchased in accordance with Rate Rule R-16. In either event, the minimum premium shall not be less than $50.00 D. When the Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1) is issued on land which is not residential property, in accordance with Rule P-50, the premium shall be: 1. 15% of the Basic Rate for a single issue policy; or 2. 10% of the Basic Rate for a single issue policy if an amendment of the exception to area and boundaries is also purchased in accordance with Rate Rule R-16. In either event, the minimum premium shall be not less than $50.00

39 T-19, 19.1, 19.2, Simplified In Effect Since Nov. 1, 2009 T-19 Residential - 5% of the Basic Rate Non-Residential - 10% of the Basic Rate Not Less than $50 T-19.1 Residential 10% if no Survey Deletion 5% if Survey Deletion charged for. Non-Residential 15% if no Survey Deletion 10% if Survey Deletion charged for.

40 New Procedural Rules In Texas - End