Welcome to TRGC s Internet Conference Training Program. At the end of this seminar you will be given a password that shows you attended the entirety of this seminar. You will need to send an email to ict@trgc.com with 1) the provided password, 2) the address of the location where you attended the seminar, 3) your escrow license number, and 4) your email address. You must send this email before 5pm tomorrow to receive credit for this seminar! 1 T-17 & the T-19 s: T-19, 19.1, 19.2 and 19.3 Presented By Richard Worsham, Vice- President/Underwriting Counsel T-17 - Planned Unit Development T-17 is for Loan Policies only (no longer called MTP s). Procedural Rule P-9(b)(14): A Company may issue its Planned Unit Development Endorsement (T-17) to a Mortgagee Policy, if its underwriting requirements are met and if it is paid the premium described in Rate Rule R-11 L. The Company may delete any insuring provision if it does not consider that risk acceptable. The Company may not issue the Planned Unit Development Endorsement (T-17) if the land covered by the policy is not residential real property. Any insurance matter that may be covered by a Planned Unit Development Endorsement (T-17) may be insured only by the use of the Planned Unit Development Endorsement (T-17). 3 1
T-17 - Planned Unit Development The Company insures the Insured against loss or damage sustained by reason of: 1. Present violations of any restrictive covenants referred to in Schedule B which restrict the use of the land, except violations relating to environmental protection unless a notice of a violation thereof has been recorded or filed in the public records and is not excepted in Schedule B. The restrictive covenants do not contain any provisions which will cause a forfeiture or reversion of title. 2. The priority of any lien for charges and assessments at Date of Policy in favor of any association of homeowners which are provided for in any document referred to in Schedule B over the lien of any insured mortgage identified in Schedule A. 3. The enforced removal of any existing structure on the land (other than a boundary wall or fence) because it encroaches onto adjoining land or onto any easements. 4. The failure of title by reason of a right of first refusal to purchase the land which was exercised or could have been exercised at Date of Policy. 4 T-17 - Planned Unit Development Summary of Coverage: Insures against: Current violations of restrictive covenants. Priority of insured lien over HOA lien. Forced removal of property due to encroachment into easements or across property line. Right of First Refusal being violated in transactions. 5 T-17 - Planned Unit Development Concerns 1. Do you have restrictive covenants? Are there violations? Can they be cured? If not, you need to delete paragraph 1 of T-17. 2. Is HOA lien subordinate to the insured mortgage? If not, you need to delete paragraph 2 of T-17. 3. Do you have any encroachments across the property line or into any easement? If you do, you need to delete paragraph 3 of T-17 as to this encroachment. 4. Is there any document filed of record that creates a right of 1st refusal to purchase the property? If so, you need to delete paragraph 4 of T-17. 6 2
T-17 - Planned Unit Development HOA Resale Certificate CAN (but may not) cure many (but not all) of your T-17 issues: Texas Property Code Section 207.003(b) provides that, A resale certificate..must contain: (1) a statement of any right of first refusal or other restraint contained in the restrictions or restrictive covenants that restricts the owner's right to transfer the owner's property;.. (3) the amount of any special assessment that is due after the date the resale certificate is prepared; (4) the total of all amounts due and unpaid to the property owners' association that are attributable to the owner's property;. (11) a description of any conditions on the owner's property that the property owners' association board has actual knowledge are in violation of the restrictions applying to the subdivision or the bylaws or rules of the property owners' association;.. (15) a statement indicating whether the restrictions allow foreclosure of a property owners' association's lien on the owner's property for failure to pay assessments. 7 T-17 - Planned Unit Development Texas Property Code Section 2007.005 states that: A property owners association may not deny the validity of any statement contained in the resale certificate.a buyer, buyer s agent, lender and title insurance company and its agent are not liable for any debt or claim existing on the preparation date of the resale certificate that is not disclosed in the resale certificate. 8 T-17 - Planned Unit Development Resale Certificate will not include: Any Right of First Refusal which may exist in an instrument other than the HOA s restrictive covenants. These can exist in A Deed. Restrictive covenants that are not HOA covenants. Separate Option Agreement A Deed of Trust Such instruments should appear as an exception on your commitment. 9 3
T-17 - Planned Unit Development Resale Certificate will not include: Any dues to another HOA. There are a handful of communities out there with more than one HOA. Any violations of restrictions not solely enforceable by the HOA. Property restrictions not solely enforceable by an HOA are usually enforceable in court by any other person in the community subject to the restriction. 10 T-17 - Planned Unit Development Resale Certificate will not include: Whether HOA dues are subordinate to the insured mortgage? This requires a careful reading of the restrictive covenants: Some HOA assessments are subordinate to FHA and VA loans only. Many HOA s are subordinate to 1 st liens only. (Watch out for 2 nd liens) Many are subordinate to purchase money and construction loans only. On HOA s formed prior to 1998, when Texas home equity lending was created, are usually not subordinate to home equity loans. You must ask, What kind of loan are we insuring? Is it described as a superior lien in the restrictions? 11 T-17 - Planned Unit Development Of course, you also need a survey to assure there are no encroachments either into the easement or across the property line, or you must delete paragraph 3 of T-17. 12 4
T-17 - Planned Unit Development T-17 Checklist Get a HOA resale Certificate. Read it. If there are HOA assessments, read the restrictions carefully and make sure that they are subordinate to the type of mortgage you are insuring. Most examiners will make a note on this issue on the commitment, but not all. If you have covenants and restrictions not enforced by an HOA, review them to see if there are potential violations. If you re a closer, check your commitment for any exceptions for instruments with a 1 st right of refusal in them. If examining, read the conveyances to make sure no right of 1 st refusal was retained, and look for documents with possible purchase options in them. Get a survey, and make sure there are no encroachments across property lines or into easements. 13 RESTRICTIONS, ENCROACHMENTS, MINERALS ENDORSEMENT (T-19) Like the T-17, the T-19 Endorsement is for Loan Policies only. Portions of T-19 seem redundant of T-17 coverage, because they are. When T-19 was created, it was anticipated that lenders would not ask for both T-17 and T-19, but they do. T-19 does provide some future and broader coverage that T-17 does not provide. 14 RESTRICTIONS, ENCROACHMENTS, MINERALS ENDORSEMENT (T-19) 15 5
RESTRICTIONS, ENCROACHMENTS, MINERALS ENDORSEMENT (T-19) 16 RESTRICTIONS, ENCROACHMENTS, MINERALS ENDORSEMENT (T-19) Summary of Coverages Encroachments Paragraphs 1(b)(iii) & (iv), 3, 5 and 6. Minerals Paragraph 4 [formerly 3(b)] Covenants and Restrictions [Including HOA Assessments.] Paragraphs 1(a),(b)(i)(ii) & (v), 2, and 6. Option to Purchase or Right of 1 st Refusal Paragraph!(b)(ii)(D) 17 Restrictions, Encroachments, Minerals Endorsement Owner Policy (T-19.1) The T-19.1 is for the Owner s Policy Only Originally available only for commercial property, but available for ALL property as of November 1, 2009. The T-19.1 is the mirror image to the T-19, providing similar coverage to the T-19 for the owners policy. 18 6
Restrictions, Encroachments, Minerals Endorsement Owner Policy (T-19.1) 19 Restrictions, Encroachments, Minerals Endorsement Owner Policy (T-19.1) 20 Restrictions, Encroachments, Minerals Endorsement Owner Policy (T-19.1) Summary of Coverages Encroachments Paragraphs 1(a)(c)&(d), 2, 4, & 5 Minerals Damage to Improvements Paragraph 3 Covenants and Restrictions [Including HOA Assessments.] Paragraphs 1(b),(e),5 Right of Reverter or Options 1(b)(ii)&(iii). 21 7
Restrictions, Encroachments, Minerals Endorsement Owner Policy (T-19.1) As of February 1, 2010, T-19.1 is now available for both residential and commercial property. Therefore, P-39 express coverage for encroachments is dead. 22 T-19 & T-19.1 Survey Issues Review a survey. Compare survey to Schedule B exceptions to make sure all easements and setback lines appear on the survey. Make sure there are no encroachments into easements, across property lines, or into setback lines. 23 T-19 & T19.1 - Particular Survey Issues On survey issues, be aware there is a double standard on T-19.1 versus T-19. You are only going to get a claim on T-19 for a Lender s policy if you have a foreclosure first. On T-19.1, the owner gets express insurance for the defect and can make a claim immediately for monetary loss. 24 8
T-19 & T19.1 - Particular Survey Issues Violations on the land of any enforceable covenants, conditions or restrictions. 25 T-19 & T19.1 - Particular Survey Issues Any existing improvements on the land which violate any building setback lines. 26 T-19 & T19.1 - Particular Survey Issues Encroachment of existing improvements located on the land onto adjoining land. 27 9
T-19 & T19.1 - Particular Survey Issues Encroachment onto the land of existing improvements located on adjoining land. 28 T-19 & T19.1 - Particular Survey Issues Encroachment of existing improvements located on the land onto that portion of the land subject to any easement excepted in Schedule B. 29 T-19 & T19.1 - Particular Survey Issues Damage to existing buildings which are located on or encroach upon that portion of the land subject to any easement... 30 10
T-19 & T19.1 - Particular Survey Issues Court order requiring the removal from any adjoining land of any encroachment, other than fences, landscaping or driveways, excepted in Schedule B. 31 T-19 & T19.1 - Particular Survey Issues Size of encroachment 32 T-19 & T19.1 - Particular Survey Issues Nature of the structure encroaching 33 11
T-19 & T19.1 - Particular Survey Issues Length of time the encroachment has existed. The year a house was built can often be found on the County Appraisal District Website. 34 T-19 & T19.1 - Particular Survey Issues Access The Survey should reflect whether or not the property has access to a dedicated public roadway. This isn t covered by T- 19, but any time we discuss surveys, it should be mentioned. Don t overlook it. 35 T-17 & T-19 Without a Survey In limited circumstances, TRGC will allow you to issue T-17 and T-19 without a survey: Refinance and home equity transactions only; Property has been previously insured; and Property is a platted, Lot and Block, property. 36 12
T-17 & T-19 Without a Survey In limited circumstances, TRGC will allow you to issue T-17 and T-19 without a survey: You may NOT issue T-19.1 coverage without a Survey. Refinance and home equity transactions only; You may NOT give the lender survey deletion without a survey, which is prohibited by Procedural Rule P-2. Property has been previously insured; and Property is a platted, Lot and Block, property. 37 Mineral Issues A year ago we would have filled half this seminar with oil and gas issues. Today, we want you to give T-19, T-19.1, T-19.2 or 19.3 mineral coverage regardless of whether minerals have been assigned or there is a mineral lease. Call underwriting if someone tells you there is a drilling rig or a strip mine on the property. 38 T-19, 19.1, 19.2, 19.3 Simple Rules 39 13
T-19, 19.1, 19.2, 19.3 Simple Rules 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. 40 T-19, 19.1, 19.2, 19.3 Simple Rules T-19 available for Loan Title Policies 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. 41 T-19, 19.1, 19.2, 19.3 Simple Rules You may still delete provisions of T-19, T-17, or T-19.1 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. Paragraphs 1(b) (1),(2) and (4) and all of paragraphs 3, 5, and 6 of the T- 19 Endorsement are hereby deleted as to this exception. Paragraph 3 of Endorsement T-17 is deleted as to this exception. 42 14
T-19, 19.1, 19.2, 19.3 Simple Rules MINERALS 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. 43 T-19, 19.1, 19.2, 19.3 Simple Rules 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. 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. 44 T-19, 19.1, 19.2, 19.3 Simple Rules 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." 45 15
T-19, 19.1, 19.2, 19.3 Simple Rules T-19.2 is available for Residential property under 1-acre. Any other type of nonresidential improved property. T-19.3 is available for Residential property over 1-acre. Any undeveloped property. 46 T-19, 19.1, 19.2, 19.3 Simple Rules T-19.2 or T-19.3 are always $50. T-19 and T-19.1 can vary in price. New Minimum Charge for T-19 and T-19.1 is $50. From there it gets complicated. 47 T-19, 19.1, 19.2, 19.3 Simple Rules 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 $50.00. 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 $50.00. 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 andboundaries 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 48 16
T-19, 19.1, 19.2, 19.3 Simple Rules 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. 49 17