Bulletin: TX000039

Dear Associates:

The Home Equity Constitutional Amendment is effective January 1, 1998.

This Constitutional Amendment also authorizes Reverse Mortgages on the residential homestead. It does not authorize a Reverse Mortgage on business homestead or rural homestead.

Reverse Mortgages are mortgages made on the homestead by persons over 55 years of age in return for advances to be made for (1) a certain term, or (2) the rest of their lives or (3) the period of occupancy of the land. Reverse Mortgages generally may not be foreclosed as long as the borrowers are alive.

In order to clarify the coverage of title insurance on Reverse Mortgages, the Texas Land Title Association requested the Commissioner of Insurance to adopt:

• New Texas Reverse Mortgage Endorsement (T-43) to the Mortgagee Policy (T-2).
  
  
• New Procedural Rule P-45 concerning the Texas Reverse Mortgage Endorsement.

The Commissioner of Insurance has adopted these proposals, effective January 12, 1998. (See the references section at the end of this bulletin.)

There is no additional charge for the Texas Reverse Mortgage Endorsement (T-43). You must charge the applicable rate for the Mortgage Policy, including any credit available under R-8, if the loan is made partly to refinance a prior insured mortgage.

CHECKLIST FOR TEXAS REVERSE MORTGAGE ENDORSEMENT (T-43)

Attach the Texas Reverse Mortgage Endorsement (T-43), if you issue the Mortgagee Policy.

Issue the Mortgagee Policy in the amount requested by the insured, but the amount may not exceed 150% of the maximum total of advances (or estimated total) to be made according to the loan agreement.

The Reverse Mortgage must encumber only the residence homestead. It may not cover business homestead or rural agricultural homestead.

Do not insure if the owners sign the documents by mailouts or by power of attorney.

Require the joinder of all owners and their spouses in the Home Equity Mortgage.

The Reverse Mortgage must say that it is a Reverse Mortgage made pursuant to Subsection (a)(7) of Section 50, Article XVI, Texas Constitution.

The Reverse Mortgage Note or Loan Agreement and the Reverse Mortgage must be signed in your office.

Require the owners and spouse to execute the Reverse Mortgage Affidavit. (See the references section at the end of this bulletin.)

The Commitment for Title Insurance covering a proposed Reverse Mortgage should include the following requirement:

"Any Mortgagee Policy issued by the Company insuring a Reverse Mortgage (made pursuant to Subsection (a)(7), Section 50, Article XVI, Texas Constitution) will be subject to the terms of and insurance provided by the Texas Reverse Mortgage Endorsement (T-43). The Reverse Mortgage must be executed at the office of the Company or its title insurance agent by the owners of the land and any spouse and must disclose that it is a Reverse Mortgage made in accordance with Subsection (a)(7), Section 50, Article XVI, Texas Constitution. The owners and any spouse must execute the Reverse Mortgage Affidavit and other documents required by the Company or the lender."