Bulletin: TX000011

Dear Associates:

Customers ask us to insure title based on the non-judicial foreclosure of maintenance assessments.

Inwood North Homeowners' Association v. Harris held that the Homeowner's Association had a valid lien for unpaid maintenance assessments on the homestead of the owner. The assessment lien (in the Declaration of Restrictions) predated the inception of homestead rights. The assessments, however, accrued after the homestead rights began.

You should call our underwriting personnel before insuring on any maintenance lien foreclosure.

We will consider the following factors before we insure:

• Are any parties in possession of the property?
  
  
• Do the restrictions create a power of sale?
  
  
• You must comply with our Durrett guidelines (on fraudulent conveyances).
  
  
• Do not insure the purchaser at a foreclosure. We will only insure a later purchaser from that person.
  
  
• Verify compliance with all other standard foreclosure requirements. For example, verify that the owners were alive at the time of foreclosure and were not in the military service.
  
  
• Verify that the first lienholder was not escrowing funds for maintenance assessment payments. If the lender escrowed funds and failed to pay, there is a higher risk of an attack on the foreclosure.
  
  
• The association officers and attorneys should disclose their contact with the owner concerning the assessments. Had the owner left the country? Had the association agreed to accept installment payments? Had the owner made partial payments for the year or month?
  
  
• The deed to the insured must be a general warranty deed.
  
  
• If the assessments were delinquent for several years and were several thousand dollars, then we are more likely to insure.