Bulletin: TX2013008

Dear Associates:

On October 11, 2013, Insurance Commissioner Julia Rathgeber issued Commissioner’s Order 2806 finally adopting the matters approved in principle several months ago. We will be issuing two bulletins, one on the solvency matters (which take effect July 2, 2014) and this one on the basic manual matters.

As stated in the Order, a number of non-substantive or typographical errors were corrected in a number of forms:

            T-43 Reverse Mortgage Endorsement

            T-42 Equity Loan Mortgage Endorsement

            T-42.1 Supplemental Coverage Equity Loan Mortgage Endorsement

            T-46 Texas Residential Limited Coverage Junior Mortgagee Policy HELOC/Variable Rate
            Endorsement

            Rate Rule R-17 Policy forms for use by USA

            Rate Rule R-22 Owner and Leasehold Policies

            R-18 First Loss Endorsement

            Form T-98 Limited Pre-foreclosure Policy

            Procedural Rule P-1w definitions

            Procedural Rule P-70b Cancellation Fees; Fees for Services Rendered

What you should do:

The forms will be corrected in our AIM system. Please make sure that if you use another form production system that the forms are corrected in those. Only approved forms should be used after January 3, 2014.

The revised rate and procedural rules will be corrected in the TDI basic manual (on line at http://www.tdi.texas.gov/title/index.html)

• Item 2012-1: The TDI amended the T-7 Commitment form to correct errors and conform the language to proper rules and forms. These changes are mostly changing Mortgagee Policy to Loan Policy and Owner to Owner’s. However, they also removed the first two paragraphs of the commitment jacket on the theory that those paragraphs generally discuss forms other than the commitment.
• Item 2012-2 amends the T-1 Owner’s Policy of Title Insurance. The changes are mostly in the name of the form as used in the form.
• Item 2012-3 amends to loan policy to correct margins.

 A number of other forms are similarly changed for mostly the same reasons.

What you should do:

The forms will be corrected in our AIM system. Please make sure that if you use another form production system that the forms are corrected in those. Only approved forms should be used after January 3, 2014.

• Agenda item 2012-20 amends the form of the T-53 Limited Coverage Residential Chain of Title Policy Combined Schedule to reflect the proper search period from 12 months to the allowed not more than 60 months.

   What you should do:

    Be aware that this change clarifies that the search period is the originally agreed 60 months.

• Agenda items 38 & 39 amend P-5.1 and P-50-1 to reflect the legislative changes to Insurance Code sections 2703.0515 and 2703.055 to reflect that a title insurance company does not have to issue a mineral endorsement after January 1, 2012.
• Agenda item 2012-41 repeals R-36 providing a rate for the T-19.2 and T-19.3 endorsements since legislation prohibited such a fee.

   What you should do:

   This item simply implements the statute that we previously discussed with you in Bulletin 
   TX2012001. No existing practices should be affected by the adoption of the rule.

• Agenda item 2012-47 amends the minimum escrow standards No. 5 as follows:
  
  
  • If actual charges for such products or services are not known by the time of closing, only reasonable estimates of such charges should be shown on closing statements and charged. The actual charge for an absentee notary sign-up may be passed through, if the notary is a third party [not affiliated with the licensee that is closing the transaction] and that licensee, prior to closing the transaction, receives a written request signed by the borrower, buyer or seller making the request and agreeing to pay for an absentee sign up by a notary as an accommodation to the requester after the licensee provides the requester with written notice of the amount of the notary fee or a reasonable estimate of the fee, if not known by the licensee. If the third party notary is affiliated with the licensee, the licensee will provide notice of the affiliated relationship to the requester prior to the absentee notary sign-up service being provided.

   What you should know:

   This change adopts the provisions of Ins. Code Section 2705.008 allowing pass through of
   notary charges to one affiliated with the title agent or direct operation with notice of the
   relationship to the party requesting such service. Be sure to give such notice if utilizing such
   notary services to avoid “write-ups” by your auditor and the TDI auditors.

• Agenda items 50 and 51 deal with the Additional Insured Endorsement to include Fairway Language as an additional coverage that is optionally available. This endorsement will now allow a transfer of an interest in a limited liability company to occur without being considered a new entity that voids the Owner’s policy coverage.

  What you should know:

  If you have any questions as to whether the particular situation complies with this change,
  please call or email a Texas underwriter.

• Agenda Item 2012-52 adds an Out of County box to the P-58 rule on Directly Issued Policies to conform the rule and the T-00 form.

  What you should know:

  Please continue to use the existing T-3 form as P-58 now requires the same information as
  the form.

• Agenda items 2012-54 and 2012-55 involve form changes to included creditor’s rights exclusions since Texas law expressly prohibits giving such coverage.

  What you should know:

   No changes to existing practices are needed. Simply use the promulgated form after January
   3, 2014.

• Agenda Item 2012-57 amends the T-16 Mortgagee Policy Aggregation endorsement to add language that all policies aggregated in Texas do not exceed a stated amount.

   What you should know:

   Please call an underwriter if you are asked to issue this endorsement. Note also that the
   form is now quite similar to the ALTA 12.06 form.

• Agenda Item 2012-62 amends the T-19 to conform closely to the ALTA 9-06.

   What you should know:

   We have guidelines for the use of this form on virtual underwriter. Follow this link to access
   these guidelines: http://www.vuwriter.com/vuguidelines.jsp?displaykey=GL115395811500000149

• Agenda Item 2012-63 amends the T-19.1 to conform closely to the ALTA 9.1.

  What you should know:

  We have guidelines for the use of this form on virtual underwriter. Follow this link to access
  these guidelines:

   http://www.vuwriter.com/vuguidelines.jsp?displaykey=GL115395811500000152

   Please note in the case of both of the T-19 series bulletins, the guidelines must be read in
   conjunction with our materials on minerals on vuwriter.com in bulletins, forms and section
   12.16. Additionally, please simply use the new forms after 1-3-14.

• Agenda item 2012-64 amends the T-4 leasehold endorsement to:

   Conform to the ALTA Endorsement 13-06 (Leasehold – Owner’s). The revisions clarify the
   definition of Leasehold Estate, Lease Term, and Remaining Lease Term (e.g. to refer to
   Insured instead of Tenant). Revisions are made to the definition of Personal Property to
   recognize that the term applies to property located on the Land on or after Date of Policy
   and to make other minor changes. Paragraph 3.e is modified to refer to subleases that are
   permitted by the Lease. Paragraph 3.f is clarified to include a list of covered expenses in
   securing leasehold reasonably equivalent to the Leasehold Estate.

   What you should do:

   Use the new form after January 3, 2014.

• Agenda item 2012-65 amends the T-4R Residential Leasehold endorsement similarly to the T-4 amendments discussed above.

   What you should do:

   Use the new form after January 3, 2014.

• Agenda item 2012-66 amends the T-5 Leasehold Loan policy endorsement similarly to the T-4 amendments discussed above.

   What you should do:

   Use the new form after January 3, 2014

• Agenda item 2012-67 amends the T-36 commercial environmental lien endorsement to conform to the ALTA Endorsement 8.2-06. In commercial loan transactions in other jurisdictions, an ALTA 8.2-06 Endorsement is commonly requested and issued. Customers frequently request this endorsement when they engage in due diligence with respect to environmental liens affecting the title, and the endorsement insures as to environmental protection liens that may be filed by the federal government, state, or local government. This endorsement relates to matters that may be disclosed by applicable search and examination and properly underwritten. Previously only the endorsement T-36 has been available on primarily residential real property, but not on commercial land.

   What you should do:

   Use the new form after January 3, 2014.   

• Agenda items 69 and 70 create the new T-54 Severable Improvements endorsement and Procedural Rule P-72 to implement the endorsement.

What you should know:

This endorsement is available for both Loan Policies and Owner’s Policies to assure owners and lenders that they have full coverage for the policy amount in the event of a loss under the policy. The Company is not responsible for determining or defending against a. the attachment, perfection or priority of any security interest in the Severable Improvement; b. the vesting or ownership of title to or rights in any Severable Improvement; c. any defect in or lien or encumbrance on the title to any Severable Improvement; or d. the determination of whether any specific property is real or personal in nature; or e. removable items as opposed to Improvements.

The Company is liable for a. the diminution in value of the Insured's interest in any Severable Improvement resulting from the Defect, reduced by the salvage value of the Severable Improvement; and b. the reasonable cost actually incurred by the Insured in connection with the removal or relocation of the Severable Improvement resulting from the Defect and the cost of transportation of that Severable Improvement for the initial one hundred miles incurred in connection with the relocation. (Note this coverage is similar to the coverage in the leasehold endorsement). This risk is justifiable since it is the title defect that causes the loss not whether the item is real or personal property. If an item appears to be a removable, exception to such item can be taken.

What you should do:

A removable is an item that although attached to a structure can be removed from the structure without immediate harm to the structure or the item. Such items are cabinets, carpet, doors and windows. Such items are not the subject matter of this endorsement. A severable improvement would be a storage tank, refinery equipment, windmill, wind generator or similar item that would appear to be permanent but which can actually be removed. Call an underwriter if asked to issue this endorsement to determine if the policy will include severable improvements or removables.  

• Agenda Item 73 amends the T-1R Residential Owner's Policy to restructure the continuation of coverage provision to comply with recent legislative changes by adding:

   The divorced spouse of the original insured who received title in the divorce

   The trustee of a trust created by the original named insured

   The beneficiaries of a trust created by the original named insured upon the death of the
   insured.

   What you should know:

The coverages are very specific. For example, a child who inherits the property and then gets divorced with the child’s wife receiving the property in the divorce would not have continuation coverage. The same basic formula would apply in the case of trusts. The key expression is “of the original insured”.  

• Agenda item 74 makes minor wording changes to R-5 dealing with simultaneous issue policies; mostly changing mortgagee to loan policies and making a small clarifying change to R-5 d.

   What you should do:  This agenda item will not require any changes in existing practices.

• Agenda item 2012-76 removes the subdivision rate rule R-10 since no new contracts could have been entered into September 1, 1975.  

   What you should know:  In the extremely rare situation where there is a subdivision where a
   subdivision contract was entered into with your company and a final lot or 2 is being sold, the
   contract has been voided by this deleted by the amendment.

• Agenda Item 2012-80 amends Texas Short Form Residential Loan Policy of Title Insurance (T-2R) and Addendum (T-2R Addendum) to rearrange the addendum to correctly reflect Endorsement T-19 may have subparagraph(s) deleted and not the T-19.2 or T-19.3 endorsement.

   Also to delete the reference to "Stipulations" of the policy which were previously deleted.

   Amend Schedule B, Item 3 to correct the reference of P-29 to P-20 pursuant to the change
   implemented by Agenda Item 2008-40.

   What you should do: Simply use the new form.

• Agenda item 2012-84 amends the T-31 Manufactured Housing Endorsement to update language and references.

   What you should do: Simply use the new form. There are no changes to existing practices or
   procedures.

• Agenda Item 2012-85 amends Administrative Rule L-1 to change the concept of licensing to title agents operating under a single license with appointments by each underwriter for a period of 2 yrs. It also requires agent notify the TDI when it changes its title plant provider(s) or when it buys or sells an abstract plant.

   What you should do:  Work with TDI and STG licensing departments to comply with the rule.

• Agenda Item 2012-87 amends Administrative Rule L-2 to provide for an escrow officer bond in the aggregate amount is to be determined by multiplying the number of Escrow Officers by: 

a. $5,000 for each individual who is a bona fide resident of this state; plus

b. $10,000 for each individual who is a bona fide resident of a state adjacent to this state;

c. Notwithstanding Subsection (a) or Subsection (b), the maximum amount of the bond or deposit shall not exceed $50,000.

What you should know:

If you are in the situation where you have an escrow officer who lives in New Mexico, Oklahoma, Arkansas, or Louisiana the amount of the bond is double for them. However if you have more than 10 escrow officers, the maximum bond is still only $50,000 even if one of them is a non-resident of Texas. If you have fewer than 10, you will need to use the formula above to determine the amount of the bond.

• Agenda item 2012-89 makes a number of changes to the Endorsement Instructions. The most significant change is the following:

 II. Use upon completion of improvements

B. 4.     Only in the event there is a specific request that the T-19 Endorsement be issued and when the Company’s underwriting requirements have been met, the following language contained in the applicable subdivision below may be inserted and shown as No. 4 of the T-3 Endorsement form. In the event the endorsement is not to be issued or the coverage affirmed No. 4 will be included should read “T-19 not requested.”

What you should do:  Read the new instructions as several changes in language have been made. Additionally be sure to add the language underlined above in the appropriate situation.

Comments and Additional Instructions:

This rule hearing and accompanying order is very detailed and makes many changes. It will be necessary to carefully read each rate and procedural rule  each time an issue comes up to make sure you are complying with the many changes. This bulletin attempts to highlight many of the most significant changes but cannot set out every change. A number of changes simply change the name of the Mortgagee Policy in the rules to reflect that the name of the form is now Loan Policy. Other changes are more substantive.

You may also note that while the order discusses the rules and changes, the order did not have the final forms and rules attached so it is possible that until the TDI publishes the revised forms in their online manual, the exact changes will not be 100% known.  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.