T-35 Guideline - TX Revolving Credit Endorsement

Explanation:

Because title insurance is a contract of indemnity, Loan Policies provide that payments made by the borrower under the terms of the loan reduce the amount of insurance by the same amount.  Certain loans allow for the re-advancement of money under the terms of the loan which requires modification of the loan to preserve coverage up to the original policy amount. 

The Future Advance/Revolving Credit Endorsement T-35 adds to the T-2 Loan policy Advances as described in Section 2 of the Endorsement subject to the provisions of Section 3 of the Endorsement and the Exclusions from Coverage except Exclusion 3(d), and the remainder of the policy.  The Endorsement requires that the Loan agreement provide for future advances including payment of taxes and insurance to preserve or protect the lien of the Mortgage and reasonable amounts to prevent deterioration of the improvements together with interest on the advances.

Texas Procedural Rule P-9b8 establishes the procedures whereby this Endorsement may be issued:

(A)       mortgage or deed of trust which secures a revolving credit promissory note or other such indebtedness where:

a .        a line of credit of a specific amount is extended to a borrower for the term of indebtedness,

b.         the amount of indebtedness actually outstanding at any particular time is subject to fluctuations up or down due to future disbursements of loan proceeds and/or future repayments thereof from time to time over the term of the indebtedness (which disbursements and repayments are contemplated by the parties at the time the indebtedness is created), and

c.         repayments by the borrower neither reduce nor increase the original line of credit extended nor affect the borrower's liability to repay the principal sum of all outstanding disbursements plus all accrued interest thereon, the Company upon request and compliance with Rule R-11.f. shall attach to said Loan Policy of Title Insurance the Future Advance/Revolving Credit Endorsement.

T-35 Future Advance/Revolving Credit Endorsement shall be available only where the mortgage or deed of trust creating the lien to be insured discloses to the satisfaction of the Company that the indebtedness secured thereby is a revolving type of indebtedness as set forth above.

Underwriting Requirements:

1.    Review the deed of trust and loan agreement to determine if additional advances can be made under the terms of the loan after payments have been made. 

2.    In no event may the amounts to be advanced exceed the original policy amount.

3.    We have a strong preference that the Deed of Trust be styled “Revolving Credit Deed of Trust”.  Underwriter approval is required if it is not styled substantially in this way.

For further guidance, refer to the applicable subsections in Section 11.04 of the National Underwriting Manual on Virtual Underwriter http://www.vuwriter.com/vumanuals.jsp?displaykey=UM00000208