See Also:	12.26 Loan Policies ; 14.12 Owner Policies
Exceptions:	None
Bulletins:	None
Forms:	None

 

Land (P-1.a)

See Also:	1.48 Air Space And Air Rights ;  3.88 Crops ; 5.00 Easements And Easement Insurance ; 6.20 Fixtures ; 12.24 Mobile And Manufactured Homes ; 19.20 Timber Lands .
Exceptions:	None
Bulletins:	TX000007 New Title Insurance Policies (effective October 1, 1991);
	TX000032 1995 Texas Legislation.
Forms:	None

 

P-1.a Land:

The land described, specifically or by reference, and improvements affixed thereto which by law constitute real property.

Comment: The insured land includes growing crops, fixtures, and standing timber.
In order to insure an easement, you must describe the easement in Schedule A and you must examine the title to the easements for the benefit of the title insurer.

A mobile home may be an improvement that is part of the insured land.

Air space (such as an avigation easement or severed air rights) may be separately insured.

 

Company (P-1.b)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.b Company:

Any Title Insurance Company and/or any Title Insurance Agent or direct operation each as herein defined.

Comment: These regulations apply to all title insurance agents, title insurers, and direct operations doing business in Texas.

 

Board (P-1.c)

See Also:	None
Exceptions:	None
Bulletins:	TX000009 House Bill 2.
Forms:	None

 

P-1.c Board:

The State Board of Insurance of the State of Texas. A reference to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective power and duties of the Commissioner and the department. Note: The Texas State Board of Insurance was abolished in the early 1990s and replaced by the Commissioner. References to the SBI now mean either the TDI or the Commissioner. Most references to the SBI have been and continue to be corrected.

Comment: The State Board has been replaced by the Commissioner of Insurance. The Commissioner promulgates forms, premiums, and rules pursuant to Article 9.07, Texas Insurance Code. The Commissioner (or an administrative law judge) shall conduct biennial hearings no earlier than July of even-numbered years.

 

Policy (P-1.d)

See Also:	12.26 Loan Policies 14.12 Owner Policies 20.12 United States Of America Policy Forms
Exceptions:	None
Bulletins:	None
Forms:	TX Certificate of Title T-6 TX Certificate of Title for Easements (U.S.A.) T-9 TX Loan Policy T-2 TX Loan Policy Schedule A T-2 TX Loan Policy Schedule B T-2 TX Owner’s Policy T-1 TX Owner’s Policy Schedule A T-1 TX Owner’s Policy Schedule B T-1 TX Policy of Title Insurance (U.S.A.) T-11 TX Residential Owner Policy Schedule A T-1R TX Residential Owner Policy Schedule B T-1R TX Residential Owner Policy T-1R TX Short Form Residential Loan Policy of Title Insurance and Addendum T-2R Limited Pre-Foreclosure Policy T-98 Texas Limited Coverage Residential Chain of Title Policy T-53 Loan Title Policy Binder on Interim Construction Loan T-13 Texas Residential Limited Coverage Junior Loan Policy Combined Schedule T-44

 

P-1.d Policy:

Please refer to Procedural Rule P-1.d on the TDI Website.  

Comment: Texas has the following promulgated policies:

• Certificate of Title (USA) T-6
• Certificate of Title for Easements (USA) T-9
• Loan Policy of Title Insurance T-2
• Owner’s Policy of Title Insurance T-1
• Policy of Title Insurance (USA) T-11
• Residential Owner Policy of Title Insurance T-1R
• Texas Short Form Residential Loan Policy of Title Insurance T-2TR
• Limited Pre-Foreclosure Policy T-98
• Texas Limited Coverage Residential Chain of Title Policy T-53
• Loan Title Policy Binder on Interim Construction LoanT-13
• Texas Residential Limited Coverage Junior Loan Policy Combined Schedule T-44

American Land Title Association (ALTA) policies may not be issued in Texas.

 

Title Examination (P-1.e)

See Also:	None
Exceptions:	None
Bulletins:	TX000045 Title Search Requirements MU000018 Time Search Requirements
Forms:	None

 

P-1.e. Title Examination:

The search and examination of a title to determine the conditions of the title to be insured and to evaluate the risk to be undertaken in the issuance of a title insurance policy.

Comment: The title examination is undertaken for the benefit of the title company to determine insurability of title. Title insurance agents may rely upon "starters" or prior policies by other title companies under some circumstances. A company may not charge for examination if a transaction fails to close.

 

Closing The Transaction (P-1.f)

See Also:	3.20 Closing Protection Letters .
Exceptions:	None
Bulletins:	TX000030 New Rules and Forms; Effective August 1, 1995 NL000022 Insuring Around.
Forms:	None

 

P-1.f Closing the Transaction:

f. The investigation made on behalf of a title insurance company, title insurance agent or direct operation before the actual issuance of the title policy to determine proper execution, acknowledgment and delivery of all conveyances, mortgage papers, and other title instruments which may be necessary to the consummation of the transaction and includes the determination that all delinquent taxes are paid, all current taxes, based on the latest available information, have been properly prorated between the purchaser and seller in the case of an Owner Policy, the consideration has been passed, all proceeds have been properly disbursed, a final search of the title has been made, and all necessary papers have been filed for record. 

Comment: This provision is consistent with the statutory definition under article 9.02(n) of the Texas Insurance Code. The title insurance company may issue an insured closing service or closing protection letter to a lender (on any transaction) or to a buyer/seller (if the transaction exceeds $250,000) at no charge.

 

Insuring Around (P-1.g)

See Also:	TX 5.30 Express Insurance TX 9.14 Insuring Around
Exceptions:	None
Bulletins:	TX000013 Express Insurance: October 30, 1992.
Forms:	None

 

P-1.g Insuring Around:

Please refer to Procedural Rule P-11 on the TDI website.

Comment: Texas Insurance Code § 2502.003, prohibits willful issuance without exception to an outstanding enforceable recorded lien, except as allowed by Rules P-11 and P-39(c). [Note that P-11 still refers to Article 9.08]

 

Title Insurance Agent (P-1.h)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.h Title Insurance Agent: 

A person, firm, association or corporation owning or leasing and controlling an abstract plant, or participating in a bona fide joint abstract plant operation, and authorized in writing by a title insurance company to solicit insurance and collect premiums and to issue or countersign policies in its behalf.

Comment: A title insurance agent must be licensed and have an abstract plant (as defined in Rule P-12) for each county in which it maintains an office. Only a title insurance agent licensed in Texas may receive a portion of the title premium, pursuant to Article 9.30 B(2).

 

Abstract Plant (P-1.i)

See Also:	None
Exceptions:	None
Bulletins:	TX000045 Title Search Requirements MU000018 Title Search Requirements.
Forms:	None

 

P-1.i Abstract Plant:

A geographically arranged abstract plant, currently kept to date, that is adequate for use in insuring titles, so as to provide for the safety and protection of the policyholders. An abstract plant as further defined in Rule P-12 and as further provided for in the Insurance Code, Article 9.02 (f) and Article 9.30, must include an abstract plant for each county in which a title insurance agent or direct operation maintains an office.

Comment: An abstract plant must include geographically indexed records for 25 years. A title insurance agent must have an abstract plant for each county in which it maintains an office. Title searches for the benefit of the underwriter are governed by separate guidelines and not by the period covered by the abstract plan.

 

Endorsement (P-1.j)

See Also:	1.36.5 Endorsement Forms Relative to the Insurance Provisions of the Policy 5.04 Endorsements T-3 Guideline - General Endorsement T-3 Guideline - TX Down Date Endorsement for Owner Policy T-3 Guideline - TX Down Date Endorsement for Owner Policy T-3 Guideline - TX Assignment of Lien Endorsement T-3 Guideline - TX Down Date Endorsement for Loan Policy T-3 Guideline - TX Down Date Interim Construction Loan Endorsement T-4 Guideline - TX Leasehold Owner's Policy Endorsement T-4R Guideline - TX Residential Leasehold Endorsement T-5 Guideline - TX Leasehold Loan Policy Endorsement T-12 Guideline - USA Title Policy and Endorsement Texas Forms T-14 Guideline - TX First Loss Endorsement T-16 Guideline - Texas Loan Policy Aggregation Endorsement - Loan to T-2 Loan Policy T-17 Guideline - TX Planned Unit Development Endorsement T-19 Guideline - TX Restrictions, Encroachments, Minerals Endorsement T-19.1 Guideline - (Restrictions, Encroachments, and Mineral Endorsement-Land; Owner's) T-19.2 Guideline - Minerals and Surface Damage Endorsement T-19.3 Guideline - TX Minerals and Surface Damage Endorsement T-23 Guideline – Access T-24 Guideline - TDI Endorsement (Non-imputation) T-24.1 Guideline - Mezzanine Financing T-25 Guideline – Contiguity T-25.1 Guideline - Contiguity-Multiple Parcels T-26 Guideline - TX Additional Insured Endorsement T-27 Guideline - TX Assignment of Rents/Leases Endorsement T-28 Guideline - TX Condominium Endorsement T-30 Guideline - Tax Deletion Endorsement T-31 Guideline - TX Manufactured Housing Endorsement T-31.1 Guideline - TX Supplemental Coverage Manufactured Housing Unit Endorsement T-33 Guideline - Variable Rate Mortgage T-33.1 Guideline - TX Variable Rate Mortgage-Negative Amortization Endorsement T-34 Guideline - TX Increased Value Endorsement for Owner Policy T-35 Guideline - TX Revolving Credit Endorsement T-36 Guideline - TX Environmental Protection Lien Endorsement T-38 Guideline - TX Partial Release, Release of Additional Collateral, Modification Agreement, Reinstatement Agreement, or Release from Personal Liability Endorsement T-39 Guideline - TX Balloon Mortgage Endorsement T-42 Guideline - TX Equity Loan Mortgage Endorsement T-42.1 Guideline - TX Supplemental Coverage Equity Loan Mortgage Endorsement T-43 Guideline - TX Reverse Mortgage Endorsement T-45 Guideline - Texas Residential Limited Coverage Junior Loan Policy Home Equity Line of Credit/Variable Rate Endorsement T-46 Guideline - Texas Residential Limited Coverage Junior Loan Policy Additional Coverage Endorsement T-48 Guideline – Coinsurance T-99 Guideline - TX Limited Pre-Foreclosure Policy Down Date Endorsement
Exceptions:	None
Bulletins:	None
Forms:	Form T-3: General Endorsement (See Form T-3 instructions for details) T-3 – I:  TX Extension of Construction Binder Endorsement T-3- II:  Use Upon Completion of Improvements Endorsement T-3 – III: TX Assignment of Lien Endorsement T-3 – IV: TX Correction of Policy or Binder Endorsement T-3 – V: TX Date Down Endorsement for Loan Policy T-3 – VI: Use to Amend Exception as to Area and Boundaries Endorsement T-3 – VII: TX Date Down Interim Construction Loan Endorsement T-3 – VIII: TX Date Down Endorsement for Owner's Policy of Title Insurance Form T-4: Leasehold Owner's Policy Endorsement Form T-4R: Residential Owner's Leasehold Endorsement Form T-5: Leasehold Loan Policy Endorsement Form T-12: Endorsement (USA) Form T-14: First Loss Endorsement Form T-16: Loan Policy Aggregation Endorsement Form T-17: Planned Unit Development Endorsement Form T-19: Restrictions, Encroachments, Minerals Endorsement Form T-19.1: Restrictions, Encroachments, Minerals Endorsement - Owner's Policy Form T-19.2: Minerals and Surface Damage Endorsement Form T-19.3: Minerals and Surface Damage Endorsement Form T-23: Access Endorsement Form T-24: Non-Imputation Endorsement Form T-24.1: Non-Imputation Endorsement (Mezzanine Financing) Form T-25: Contiguity Endorsement Form T-25.1: Contiguity Endorsement Form T-26: Additional Insured Endorsement Form T-27: Assignment of Rents/Leases Endorsement Form T-28: Condominium Endorsement Endorsement Form T-30: Tax Deletion Form T-31: Manufactured Housing Endorsement Endorsement Form T-31.1: Supplemental Coverage Manufactured Housing Unit Endorsement Form T-33: Variable Rate Mortgage Endorsement Form T-33.1: Variable Rate Mortgage-Negative Amortization Endorsement Endorsement Form T-34: Increased Value Endorsement Form T-35: Future Advance/Revolving Credit Endorsement Endorsement Form T-36: Environmental Protection Lien Endorsement Form T-36.1: Commercial Environmental Protection Lien Endorsement Endorsement Form T-38: Loan Policy of Title Insurance Endorsement Form (Pursuant to P-9.b.(3)) Endorsement Form T-39: Balloon Mortgage Form T-42: Equity Loan Mortgage Endorsement Form T-42.1: Supplemental Coverage Equity Loan Mortgage Endorsement Form T-43: Texas Reverse Mortgage Endorsement Form T-45: Texas Residential Limited Coverage Junior Loan Policy Down Date Endorsement Form T-46: Texas Residential Limited Coverage Junior Loan Policy Home Equity Line of Credit/Variable Rate Endorsement Form T-48: Co-Insurance Endorsement Form Form T-54 : Severable Improvements Endorsement Form T-99: Limited Pre-Foreclosure Policy Down Date Endorsement Form

 

P-1.j Endorsement:

Please refer to Procedural Rule P-1.j on the TDI website.  

Comment: Only promulgated endorsements may be issued in Texas. Those endorsements include those listed above. 

 

Person (P-1.k)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.k Person:

As used in these rules, "person" includes individuals, corporations, associations, partnerships, trusts and estates.

 

Title Insurance Company (P-1.l)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.l Title Insurance Company: 

Any domestic company organized under the provisions of Chapter 9, Insurance Code, for the purpose of conducting the business of title insurance, any title insurance company organized under the laws of another state, or foreign government meeting the requirements of Chapter 9, Insurance Code, and holding a certificate of authority to transact business in Texas and any domestic or foreign company having a certificate of authority to insure titles to real estate within this state and which meets the requirements of Chapter 9, Insurance Code.

Comment: Only licensed title insurance companies may engage in the business of title insurance as defined by Article 9.02(b), Texas Insurance Code.

 

Date of the Original Indebtedness (P-1.m)

See Also:	None
Exceptions:	None
Bulletins:	TX000014 New Rules Effective October 30, 1992 TX000017 Refinancing Loans on Homestead.
Forms:	None

 

P-1.m Date of the Original Indebtedness: 

The date of the original indebtedness as used in Rule R-8 is the stated date of the Mortgagee Policy of Title Insurance first issued to insure the lien securing the indebtedness described in such Mortgagee Policy without consideration of any Endorsement subsequently placed upon such Mortgagee Policy.

Comment: According to Staff Letter (October 4, 1993) by the Department of Insurance, the date of the mortgagee policy insuring the existing deed of trust to be refinanced is equivalent to the "Date of the Original Indebtedness" as used in Rule R-8. To determine the available refinance credit under R-8, the most recent mortgagee policy is the "Date of the Original Indebtedness".

 

Fiscal Year (P-1.n)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.n Fiscal Year:

An accounting period of twelve (12) months (or less) designated in writing prior to usage and filed with the Title Insurance Section of the Texas Department of Insurance. For the purpose of audits of trust fund accounts, provided, however, no such designation shall extend any audit period beyond twelve (12) months.

 

Verifying The Services Rendered (P-1.o)

See Also:	3.28 Commitments .
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies TX000044 Commissioner's Order for 1996 Rate Hearing.
Forms:	None

 

P-1.o Verifying The Services Rendered:

As used in Procedural Rule P-22, this term shall require completion of promulgated Form T-00, Failure to substantially complete Form T-00 is a violation of Procedural Rule P-22. A copy of the completed T-00 form shall be made available to all parties to a transaction upon request.

Comment: If third parties (title insurance companies, title insurance agents, or Texas licensed attorneys) are paid a portion of the premium, the payment must be disclosed in Schedule D of the Commitment (Rule P-21) or Schedule D of the Limited Pre-Foreclosure Policy (T-40) (Rule P-43). The party receiving payment must complete Form T-00 and furnish an invoice; any attorney receiving payment must file a schedule of charges with the payor title company 30 days before rendering service.

 

Title Insurance (P-1.p)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.p Title Insurance:

Insuring, guaranteeing or indemnifying owners of real property or others interested therein against loss or damage suffered by reason of liens, encumbrances upon, or defects in the title to said property, or the invalidity or impairment of liens thereon, or doing any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of Chapter 9, Insurance Code.

Comment: Article 9.02(a) Texas Insurance Code, defines title insurance. Title insurance is regulated in Texas pursuant to Article 9.01, et seq., Texas Insurance Code. In issuing title insurance forms, the title company may use only those premiums, rules, and forms promulgated by the Commissioner as provided in Article 9.07.

 

The business of title insurance (P-1.q)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.q The business of title insurance:

(1) the making as insurer, guarantor or surety, or proposing to make as insurer, guarantor or surety, of any contract or policy of title insurance or any equivalent thereof; (2) the transacting or proposing to transact, any phase of title insurance, including solicitation, title examination, except when conducted by an attorney, closing the transaction, except when conducted by an attorney, execution of a contract of title insurance, insuring and transacting matters subsequent to the execution of the contract and arising out of it, including reinsurance; (3) the making of a guaranty or warranty of a title search, a title examination, or any component thereof by a person other than the one performing the search or examination; or (4) the doing or proposing to do, any business in substance equivalent to any of the foregoing whether or not designed to evade the provisions of Chapter 9, Insurance Code.

Comment: Article 9.02(b), Texas Insurance Code, defines the business of title insurance. Article 9.09 provides that only title insurers may engage in the business of title insurance and that title insurers may not engage in the business of other insurance. In issuing title insurance forms, the title company may use only those premiums, rules, and forms promulgated by the Commissioner as provided in Article 9.07.

 

Commissioner (P-1.r)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.r Commissioner:

The Commissioner of Insurance of the State of Texas.

Comment: The Commissioner promulgates the premiums, rules, and forms for use by title companies. Title companies may not issue other forms such as CLTA (California Land Title Association) or ALTA (American Land Title Association) forms.

 

Escrow Officer (P-1.s)

See Also:	None
Exceptions:	None
Bulletins:	SLS2018003 - UNDERWRITING - Remote Online Notarization TX2018005 - UNDERWRITING - Remote Online Notarization (RON) TX2020005 - UNDERWRITING - Use of RON in Home Equity Transactions TX2020006 - UNDERWRITING - Notarization by video and audio conference for durable powers of attorney and certain other documents [Revised 4-17-20; 4-30-20] TX2020007 - UNDERWRITING - Notarization by video and audio conference for Real Estate Instruments
Forms:	None

 

P-1.s Escrow Officer:

Please refer to Procedural Rule P-1.s on the TDI website.

Comment: The Minimum Escrow Accounting Procedures and Internal Controls require two signatures on escrow checks (one must be an escrow officer), unless the "escrow agent "has four or fewer employees or unless the "escrow agent "is a sole proprietorship and the owner signs the checks. Texas Insurance Code §.2652.001 prohibits a person from acting in capacity of an escrow officer unless licensed and bonded. §.2652.001 prohibits an attorney from conducting business in the name of the title company unless the attorney and the attorney's bona fide employees who close transactions are licensed as escrow officers. Rule P-28 requires escrow officers to obtain 10 hours of continuing education every two years.

 

Foreign Title Insurance Company (P-1.t)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.t Foreign Title Insurance Company:

A title insurance company organized under the laws of any jurisdiction other than the State of Texas.

Comment: Foreign title insurance companies conducting the business of title insurance in Texas must comply with and use the premiums, rules, and forms promulgated by the Commissioner.

 

Residential real property (P-1.u)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.u Residential real property:

Please refer to Procedural Rule P-1.u on the TDI website.

Comment: Rule P-18 requires issuance of a commitment on residential real property if an owner policy has been ordered. Rule P-38 requires issuance of the Residential Owner Policy of Title Insurance (T-1R) if the land is residential real property and if the insured is a natural person. Article 9.07A, Texas Insurance Code, requires issuance of the Residential Owner Policy (T-1R) only if the insured is a natural person. If the insured is not a natural person (e.g., corporation. limited liability company, or partnership), you must issue the Owner Policy (T-1). You may issue the Residential Owner Policy (T-1R) upon request to a natural person prior to construction of improvements on residential real property if the policy includes the cost of construction.

The environmental protection lien endorsement (T-36) also may be issued on apartment complexes and on all residential property not exceeding 25 acres. If the land exceeds 25 acres, please call our underwriting personnel.

 

Thing of Value (P-1.v)

See Also:	17.06 Real Estate Settlement Procedures Act (RESPA) .
Exceptions:	None
Bulletins:	NL000015 RESPA NL000033 Amendments to Real Estate Settlement Procedures Act (RESPA) Regulation NL000058 New RESPA Rule and Policy Statements TX000009 House Bill 2.
Forms:	None

 

P-1.v Thing of Value:

Includes any payment, advance, funds, loan, service, or other consideration.

Comment: Article 9.30, Texas Insurance Code, and RESPA prohibit the giving of any thing of value for referral of business. Staff Letter (April 5, 1994) of the Texas Department of Insurance concluded that Article 9.30 prohibits (1) cash payments to a realtor, builder, developer, lender, or other party for business; (2) furnishing services such as fax service, telephone service, mail or delivery services at the expense of the title company without charge to the party receiving the benefit; (3) printing services to solicit title business, such as flyers, brochures, or other printed material; and (4) paying for and sponsoring open houses. Staff Letter (April 1994) stated that a title insurance agent may advertise. The title insurance agent may pay for advertising the title company in a publication, but a title insurance agent may not pay for any other company's advertisements. According to Bulletin 143 by the State Board of Insurance (December 18, 1973), holding earnest money checks or lending earnest money to prospective clients is a rebate. Article 9.30 authorizes "legal promotional and educational activities? not conditioned on referrals. Bulletin 158 by the Department of Insurance (August 6, 1996) states that a builder or realtor may own stock in the title agent corporation, but this form may not be utilized to pay dividends in any way based upon the shareholders' performance in referring or soliciting title insurance business. Bulletin 158 also states that certain matters constitute a non-exclusive list of illegal rebates:

Providing or contributing to recreational activities or vacation trips.

Conducting, sponsoring or promoting open houses and social functions for realtors, builders or other intermediaries.

Christmas gifts, open house gifts or gifts for other occasions.

Providing personnel, equipment or office space for the use of an intermediaries business.

Providing property profile reports, "farming "reports and brochures promoting the business of realtors, builders or other intermediaries.

Renting space from an intermediary at an inflated cost.

Providing for drawings at educational or promotional events where the winner receives a cash prize or other thing of value.

Providing free meals to intermediaries or their employees at seminars.

 

Premium (P-1.w)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.w Premium:

The rate promulgated by the Commissioner pursuant to Article 9.07, Insurance Code, including the charges of title examination and for closing the transaction, whether or not performed by an attorney, and for issuance of a policy.

Comment: The title company must charge the premium promulgated by the Commissioner. The title examination is conducted solely for the benefit of title insurer to determine the risk it will take. Closing the transaction does not include escrow and related services.

Attorney (P-1.x)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.x Attorney:

A person who is both licensed to practice law and a member of the State Bar of Texas, including a Texas professional corporation organized for the purpose of rendering professional legal services.

Comment: In order to receive premium pursuant to Article 9.30 B(4), an attorney must be licensed in Texas. The title company must disclose payments to an attorney on Schedule D of the commitment pursuant to Rule P-21. Payments to an attorney must be reflected by an invoice, statement of charges executed 30 days before performance, and Form T-00. Article 9.41 prohibits an attorney from conducting business in the name of the title company unless the attorney and the attorney's bona fide employees who close transactions are licensed as escrow officers.

 

Direct Operation (P-1.y)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.y Direct Operation:

The operations of a title insurance company under the authority of a license issued under Article 9.36A, Insurance Code. Whenever the term "title insurance agent" is used in this Chapter, it shall be construed to include "direct operation" unless the context indicates to the contrary.

 

Furnishing title evidence (P-1.z)

See Also:	17.06 Real Estate Settlement Procedures Act (RESPA) .
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies TX000045 Title Search Requirements MU000018 Title Search Requirements
Forms:	None

 

P-1.z Furnishing title evidence:

Furnishing title evidence---Providing information regarding instruments affecting title to a tract of land, going back not less than 25 years or such greater period of time as is necessary to determine the ownership and appropriate liens, encumbrances upon or defects in the title. The information must include, at a minimum, the following:
           1. Grantor of each instrument;
           2. Grantee of each instrument;
           3. Type of each instrument;
           4. Recording information of each instrument;
           5. Copy of each instrument as needed by the examiner.
           It is not required that the information include:
           1. Following the title to a right of way or easement, or showing instruments executed by the grantee in such right of way or easement, other than amendments to such right of way or easement;
           2. Following the title to an oil, gas, or mineral lease or interest.
      In considering the necessary length of time to determine ownership and search the title, the searcher may be authorized by the title insurance company to accept what it considers prior indicia of title. Prior indicia of title include, for example, a prior title policy, a final order of a court of competent jurisdiction determining the entire title, or, on subdivision tracts, the base title of the dedicated subdivision

Comment: The requirement of 25 years of title information pursuant to Rules P-24 and P-25 (relating in part to directly issued policies) may be satisfied by starters acceptable to the title insurer and by down date searches.

 

Directly Issued Policy (P-1.aa)

See Also:	None
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies.
Forms:	None

 

P-1.aa Directly Issued Policy:

A title insurance policy issued and countersigned by a duly authorized officer, or employee, of a title insurance company, whose principal activities performed on behalf of such title insurance company take place in one or more designated offices maintained by the title insurance company located in the State of Texas, and which address is designated in writing and placed on file with the Title Insurance Section of the Texas Department of Insurance.

Comment: In order to issue a directly issued policy (or home office issue), the title insurance company must comply with Article 9.34, Texas Insurance Code. It must secure title evidence from the title insurance agent. If all agents refuse to provide the evidence within the time specified, the title company may issue based on the best evidence available (e.g., standup opinion). Rule P-24 provides guidelines as to the premium paid for title evidence and closing. Those provisions may be varied by written agreement. Rule P-25 defines the reasonable time that the title insurance agent has to furnish title evidence. Otherwise, the title insurance company may rely upon the best evidence available. Under Rule P-26, the title insurance agent furnishing title evidence must be provided a copy of the policy within 30 days after issuance. Under Rule P-22, the person rendering services for a portion of the premium must file a written schedule of charges at least 30 days prior to rendering of the service. However, this provision does not apply to title insurance agents; it applies to attorneys. The person receiving a portion of the premium must furnish a T-00 verifying rendition of the services and an invoice.

 

Owner Policy (P-1.AB)

See Also:	14.12 Owner Policies 17.38 Residential Owner Title Policies
Exceptions:	None
Bulletins:	None
Forms:	TX Owner Policy T-1 TX Owner Policy Schedule A T-1 TX Owner Policy Schedule B T-1 TX Residential Owner Policy T-1R TX Residential Owner Policy Schedule A T-1R TX Residential Owner Policy Schedule B T-1R

 

P-1.AB Owner Policy:

Please see Procedural Rule P-1.AB on the TDI Website.

Comment: 

Rule P-38 requires issuance of the Residential Owner Policy of Title Insurance (T-1R) if the land is residential real property and if the insured is a natural person. The Residential Owner Policy of Title Insurance (T-1R) may not be issued to other persons.  You must issue the Owner Policy (T-1) if the insured is not a natural person (e.g., corporation, limited liability company, or partnership). On all other (nonresidential) property, you must issue the Owner Policy (T-1).

 

Commitment for Title Insurance (P-1.cc)

See Also:	3.28 Commitments .
Exceptions:	None
Bulletins:	TX000015 New Forms Effective January 1, 1993 TX000044 Commissioner's Order for 1996 Rate Hearing
Forms:	TX Commitment T-7

 

P-1.cc Commitment for Title Insurance:

A commitment for title insurance is a title insurance form that offers to issue a title policy subject to stated exceptions, requirements, and terms. The term includes a mortgagee title policy binder on an interim construction loan. The commitment, mortgagee title policy binder on an interim construction loan, title policy, or other insurance form is not an abstract of title. The commitment or binder constitutes a statement of the terms and conditions on which the title insurance company is willing to issue its policy. The title insurance policy or other insurance form constitutes a statement of the terms and conditions of the indemnity under the title insurance policy or other form. An abstract of title prepared from an abstract plant for a chain of title of real property described in the abstract of title is not title insurance, a commitment for title insurance or any other title insurance form.

Comment: The commitment is an insurance form and a statement of the conditions for issuance of a policy; it is not a representation of status of title. The commitment must be delivered (1) to a proposed insured owner on residential real property, or (2) to a proposed insured under an owner policy not exceeding $300,000, or (3) to any other proposed insured upon request if the company is willing to issue, as provided in Rule P-18. There is no charge for the commitment unless it is issued to the Texas Department of Transportation (P-14) or unless it is issued to the FDIC where no sale is applicable (P-15, R-25). A commitment may not be issued prior to issuance of the Limited Pre-Foreclosure Policy (T-40, P-43).

Department (P-1.dd)

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-1.dd Department:

The Texas Department of Insurance.

 

Loan Policy (P-1.AE)

See Also:	11.28.1 Loan Policies
Exceptions:	None
Bulletins:	None
Forms:	T-2 TX Loan Policy Schedule A  T-2R TX Short Form Residential Loan Policy of Title Insurance and Addendum

 

P-1.AE Loan Policy:

Please refer to Procedural Rule P-1.AE on the TDI website. 

 

See Also:	5.30 Express Insurance ;
	18.36 Surveys .
Exceptions:	None
Bulletins:	TX000013 Express Insurance: October 30, 1992;
	TX000015 New Forms Effective January 1, 1993;
	TX000030 New Rules and Forms; Effective August 1, 1995;
	TX000054 Area and Boundary Exception;
	TX000061 Commissioner's Order for 2002 Hearing.
Forms:	TX Commitment T-7 ;
	TX Title Company Disclosure for Residential Closings 1995 .
	TX Residential Real Property Affidavit T-47

Use of Survey in Residential or Commercial Sales, Leases and Construction (P-2.a)

In either an Owner or Mortgagee Policy, when the Insured desires to have amended the exception as to area and boundaries, (i.e. Item 2 of Schedule B) to delete all save "shortages in area", a title insurance company may accept an existing real property survey and not require a new survey when providing area and boundary coverage if the title insurance company is willing to accept evidence of an existing real property survey, and an affidavit verifying the existing survey, notwithstanding the age of the survey or the identity of the person for whom the survey was prepared. If the transaction involves Residential Real Property, the affidavit verifying the existing survey shall be the Form T-47 Residential Real Property Affidavit. The policy to be issued shall cover the same land as described in the evidence of the existing real property survey. The Company may, if it considers the additional hazard insurable, amend such exception (the Company may waive the requirement of a survey in connection with the issuance of its Mortgagee Policy insuring the lien on a condominium unit), by indicating same in Schedule B of the policy or by endorsement as provided herein upon payment of the premium prescribed in R-16 in the case of an Owner Policy. The survey must be acceptable to the Company.

Comment: The rules define a current survey as evidence of a survey of any date, issued to any person brought current by use of an affidavit as to improvements and boundaries. This procedure applies to residential and commercial properties (and platted property) up to $5 Million. If a current survey is furnished and the area and boundary exception is amended, the Company may provide express insurance against enforced removal pursuant to P-39 if the Company's guidelines are met.(See discussion on T-19). The Title Company Disclosure for Residential Closings (1995) discloses the availability of area and boundary coverage. The commitment (Texas Title Insurance Information) also discloses availability of area and boundary coverage. Because of possible copyright issues, do not provide anyone with a photocopy of a survey, not another title company, lender or even another file. You may give out duplicate signed original surveys. You may note in a current file that you have relied on a review of a survey in prior file no. ______.

Residential Refinance, Affidavit in Lieu of Updated Survey (P-2.b)

This Sub-Section P-2.b. shall apply solely to transactions involving Residential Real Property in connection with a Mortgagee Policy issued on a loan to renew, extend or satisfy a lien already covered by a Mortgagee Policy. On transactions covered by this Sub-Section, the Company shall notify the borrower of the borrower's right to substitute a qualifying Affidavit in Lieu of an Updated Survey. Such notice shall be given: (i) when the application for title insurance is received; or (ii) when the commitment for title insurance is first issued. On qualifying transactions under this Sub-Section, the exception as to area and boundaries shall be amended to read: "Shortages in area" {subject to any additional exceptions, or express insurance coverage, deemed appropriate by the Company} provided that the following requirements are satisfied:
            1) The borrower provides to the Company an original, or legible copy of the survey {hereinafter the "Prior Survey"} performed in connection with: (i) the transaction under which the borrower acquired title to the Residential Real Property; or, (ii) a prior loan transaction by the borrower involving the Residential Real Property. The Prior Survey shall not be dated earlier than 7 years prior to the date of the Mortgagee Policy to be issued or performed for another person, unless the Company is willing to accept evidence of an existing survey in accordance with Sub-section-P-2.a.
            2) The borrower has actual knowledge of the physical condition of the Residential Real Property since the date of the Prior Survey.
            3) The Mortgagee Policy to be issued in connection with the current refinance transaction will describe under item "5" of Schedule "A" the same land described in the Prior Survey.
            4) The borrower executes an affidavit concerning the Residential Real Property stating that, since the effective date of the Prior Survey and up to and including the date of the affidavit, there have been no:
                 (i) construction projects such as new structures, additional rooms, garages, swimming pools or deckings;
                 (ii) changes in the location of boundary fences or boundary walls;
                 (iii) construction projects on immediately adjoining property(ies) which construction occurred near the boundary of the Residential Real Property;
                 (iv) conveyance or replattings or easement grants or easement dedications by the borrower.

Comment: This rule requires acceptance of surveys dated within 7 years of a mortgagee policy covering a refinance on residential real property if the owner executes an acceptable affidavit. We will accept copies of surveys of any date for mortgagee policies on residential refinances if the borrower executes an acceptable affidavit. We are willing to provide express insurance as to encroachments on the Mortgagee Policy if our guidelines are met.

 c. A title insurance company may not discriminate in providing area and boundary coverage in connection with residential real property solely because: (1) the real property is platted or unplatted; or (2) a municipality did not accept a subdivision plat in relation to the real property before September 1, 1975.

 d. A title insurance company may not require an indemnity from a seller, buyer, borrower, or lender to provide area and boundary coverage.

 e. If an affidavit is provided to the Company pursuant to this Rule and the affidavit is incorrect, whether due to the negligence or intentional act of the affiant, the area and boundary coverage given pursuant to this Rule shall be unaffected and in full force and effect; provided, however, the exclusions contained in the policy shall not be affected in any way.
 

See Also:	15.04 Parties In Possession .
Exceptions:	None
Bulletins:	TX000010 Waiver of Inspection and Disclosure to Owner;
	TX000028 Disclosures: Texas Residential Owner Policy of Title Insurance.
Forms:	TX Title Company Disclosure for Residential Closings 1995 .

P-3. Exception to "Rights of Parties in Possession" - In an Owner or Mortgagee Policy, the Company shall have the right to make a general exception as to the Rights of Parties in Possession, as that term is hereinafter defined, on the condition that Insured executes a written instrument stating that Insured waives inspection of the property and that Insured is satisfied to accept the policy subject to such general exception. In all such cases, the Company must retain and preserve said written instrument. If such inspection is made by the Company, it may charge its reasonable and actual cost therefor. As used herein and in Owner and Mortgagee Policies, the term "Rights of Parties in Possession" shall mean one or more persons who are themselves actually physically occupying the property or a portion thereof under a claim of right adverse to the record owner of the property as shown in Schedule A of the policy. In no event shall the term "Rights of Parties in Possession" include any right, claim or interest which is evidenced by a document recorded in the county where all or part of the property is located.

Comment: The exception may be inserted in the policy if the insured executes a written waiver of inspection. The title company may rely on an affidavit regarding possession to issue a mortgagee policy on residential real property or apartment complexes or may make an inspection in other transactions in order to issue without this exception. We do not rely on this exception to issue if a foreclosed owner remains in possession. The Title Company Disclosure for Residential Closings (1995) includes a waiver of inspection.

See Also:	3.76 Covenants, Conditions And Restrictions ;
	5.30 Express Insurance ;
	12.26 Mortgagee Policies .
Exceptions:	None
Bulletins:	TX000002 Restriction Disclosures: City of Houston;
	TX000013 Express Insurance: October 30, 1992;
	NL000050 Restrictions Based on Race, Color, Religion, Sex, Handicap, Familial Status, or National Origin.
Forms:	None

P-4. Restrictive Covenants Exception - When the examination does not disclose that restrictive covenants affect the applicable land, lien or estate, the Company shall delete the restrictive covenant exception prescribed in policy forms. When such are disclosed, the Company shall indicate, following the prescribed exception, the restrictive covenants by giving specific reference to the volume and page where each appears of record.
      When examination of title discloses that restrictive covenants have expired by their terms, or if in the opinion of counsel, the restrictive covenants are void and unenforceable by statute, have been effectively released, or have been cancelled by final judgment of a court of competent jurisdiction binding upon all of the property owners and lienholders affected by said restrictions, the Company may delete the restrictive covenant exception prescribed in the policy forms.

Comment: The Company must approve deletion of or express insurance against restrictions based upon violations, subsequent suit, or agreement to terminate restrictions. The mortgagee policy exception to restrictions insures that violations will not result in invalidity of the insured mortgage; it does not insure against all violations.

An exception to restrictions which contain discriminatory provisions (based on race, color, religion, sex, handicap, familial status, or national origin) must note the invalidity of or omit such provisions. Restrictions which contain no other provisions must not be excepted.

Sellers of property in some cities without zoning must provide written notice of restrictions to purchasers.

See Also:	14.12 Owner Policies .
Exceptions:	None
Bulletins:	TX000010 Waiver of Inspection and Disclosure to Owner;
	TX000028 Disclosure: Texas Residential Owner Policy of Title Insurance.
Forms:	TX Standard Commitment Transmittal Letter 1992 ;
	TX Title Company Disclosure for Residential Closings 1995 .

P-5. Special Exceptions - With the knowledge of the Insured, it shall be permissible for the Company to insert such special exception(s) as shall develop from the examination of the title under consideration. Such special exception(s) shall in all cases specifically describe the particular item(s) excepted to, and shall not be general in its terms.

Comment: "General Exception? (such as "parties in possession) are allowed only if provided in a promulgated form or rule.

See Also:	TX 3.24 Coinsurance T-48 Guideline - Coinsurance 17.24 Reinsurance
Exceptions:	(COI) Coinsurance
Bulletins:	TX2015001 Increasing Texas Single Risk Retention Limits TX2014003 Coinsurance Endorsement Form (T-48) NL000059 Overlimit Authority and Reinsurance Form
Forms:	Co-insurance Endorsement T-48

 

P-6. Co-Insurance: 

Please refer to Procedural Rule P-6 on the TDI website. 

Comment: Coinsurance with another title company occurs if each title company issues a separate policy covering a portion of the risk. We require a separate title examination by our title insurance agent, unless underwriting personnel agree otherwise, if the Company coinsures with another title company. The insured generally does not prefer coinsurance since the insured must present claims to each title company and negotiate settlement separately. The cost of insurance is higher if the policies do not total at least $15,000,000 in the aggregate because the charge for each policy is calculated from dollar one for its allocated risk.

See Also:	12.26 Mortgagee Policies .
Exceptions:	None
Bulletins:	None
Forms:	None

P-7.  Name of Insured on Loan Policy of Title Insurance or Proposed Insured on Commitment for Loan Policy of Title Insurance A.        When the Department of Housing and Urban Development, the Federal Housing Administration or the Veterans' Administration, or as their names may be changed from time to time, is guaranteeing the payment of loans, or portions thereof, the Secretary of Housing and Urban Development or the Administrator of Veterans' Affairs, or as their names may be changed from time to time, may be included as one of the Insureds.B.        At the request of the proposed insured, the following may be included when describing the Proposed Insured (in the case of a Commitment) or Name of Insured (in the case of a Loan Policy):                        “, and each successor in ownership of the indebtedness secured by the insured mortgage, except a successor who is an obligor under the provisions of Section 12(c) of the Conditions and Stipulations”C.        No words may be added to, deleted from or substituted for the language allowed by Section B of this rule.  Section B language may not be added by or to any endorsement nor may it be inserted in an Owner's Title Policy or a Loan Title Policy Binder on Interim Construction Loan.

Comment: Bulletin No. 157 (July 31, 1992) of the Texas Department of Insurance generally prohibits the use of "its successors and assigns "in the name of the insured on Schedule A of the mortgagee policy and authorizes "ABC Mortgage Company, its successors, and/or assignees who are the lawful owner or owners of the evidence of debt identified herein and any subsequent owner or owners thereof." This limitation does not apply to policies issued to FNMA, VA, or HUD (which can say "and their successors and assigns as their interests may appear).

 

 

See Also:	TX 12.12 Mechanic's Liens TX 14.12 Owner Policies .
Exceptions:	None
Bulletins:	TX000004 Sales Prior to Completion of Improvements TX000022 Mechanic's Lien Procedures.
Forms:	STG Indemnity Agreement 1 TX Final Affidavit and Agreement 1 TX Final Affidavit and Agreement 2 TX Affidavit and Indemnity as to Debts, Liens and Possession 1993

 

P-8 Issuance of Policies Prior to Completion of Improvements:

Please refer to Procedural P-8 on the TDI website. 

 

P-8.a Owner Policy

Mechanic's Lien Exception

Limited Liability Exception

Pay As You Go Provision

Comment on P-8(a)(1): If the owner policy includes the cost of contemplated improvements or is issued after commencement of construction, you must insert the mechanic's lien exception and limited liability exception (if applicable) in the policy. The Policy must include the "Pay As You Go" provision if the policy is paid in installments under Rule R-2.           

Comment on P-8(a)(2): Upon completion of improvements, the completion endorsement may be issued at no charge on the T-3 form pursuant to Endorsement Instruction II. You must be furnished satisfactory evidence of completion of improvements and payment of all bills to contractors and subcontractors.

In addition, if the Company's underwriting requirements have been met, the T-19.1 Endorsement may be issued or coverage affirmed as set out in Rules R-29 and P-50, using the promulgated Endorsement form and containing the applicable promulgated language.

 

Mortgagee Policy (P-8.b)

Mechanic's Lien Exception

Pending Disbursement Clause

Pay As You Go Provision

Comment on P-8(b)(1): If the insured mortgage secures construction advances or if the insured mortgage is recorded after construction commences, the mortgagee policy must include the mechanic's lien exception and pending disbursement clause (if applicable). If the mortgage encumbers homestead, a mechanic's lien contract must be secured and the title company must verify that no work commenced before execution of the contract. The Policy must include the "Pay As You Go "provision if the Policy is paid in installments under Rule R-2.

Comment on P-8(b)(2): Upon completion of improvements, the completion endorsement may be issued at no charge on the T-3 form pursuant to Endorsement Instruction II. You must be furnished satisfactory evidence of completion of improvements and payment of all bills to contractors and subcontractors. On homestead, the owner must acknowledge that the improvements comply with the contract.

Mechanic's Lien Exception

Pending Disbursement Clause

Comment on P-8(b)(3): If a Mortgagee Policy is issued after commencement of construction, the policy must include the mechanic's lien exception and pending disbursement clause. If the mortgage encumbers homestead, a mechanic's lien contract must be executed before commencement under that contract.

 

See Also:	P-1(j) Endorsements 12.24 Mobile And Manufactured Homes
Exceptions:	None
Bulletins:	None
Forms:	None

 

P-9. Endorsement of Owner’s or Loan Policies:

Please refer to Procedural Rule P-9 on the TDI website. 

P-9.a Owner Policy

Comment to P-9(a)(1): See T-4 Guideline - TX Leasehold Owner's Policy Endorsement

Comment to P-9(a)(2): See T-34 Guideline - TX Increased Value Endorsement for Owner Policy and T-34 Guideline - TX Increased Value Endorsement for Residential Owner Policy

Comment to P-9(a)(3): See T-3 Guideline - TX Down Date Endorsement for Owner Policy

 

P-9.b Loan Policy

Comment to P-9(b)(1-2): See T-3 Guideline - TX Assignment of Lien Endorsement

Comment to P-9(b)(3): See T-38 Guideline - TX Partial Release, Release of Additional Collateral, Modification Agreement, Reinstatement Agreement, or Release from Personal Liability Endorsement

Comment to P-9(b)(4): See T-3 Guideline - TX Down Date Endorsement for Loan Policy and T-3 Guideline - TX Down Date Interim Construction Loan Endorsement

Comment to P-9(b)(5): See T-5 Guideline - TX Leasehold Loan Policy Endorsement

Comment to P-9(b)(6): See T-33 Guideline - Variable Rate Mortgage and T-33.1 Guideline - TX Variable Rate Mortgage-Negative Amortization Endorsement

Comment to P-9(b)(7): See T-31 Guideline - TX Manufactured Housing Endorsement

Comment to P-9(b)(8): See T-35 Guideline - TX Revolving Credit Endorsement

Comment to P-9(b)(9): See T-36 Guideline - TX Environmental Protection Lien Endorsement

Comment to P-9(b)(10): See T-39 Guideline - TX Balloon Mortgage Endorsement

See Also:	17.24 Reinsurance .
Exceptions:	None
Bulletins:	NL000059 Overlimit Authority and Reinsurance Form;
	MU000026 Stewart Reinsurance Retention.
Forms:	STG Overlimits Approval Request 1 .
	ALTA Facultative Reinsurance Agreement (9/24/94) 1
	TX Facultative Reinsurance Agreement T-18.1
	Form T-21.1: Tertiary Reinsurance Agreement Type I
	Form T-21.2: Tertiary Reinsurance Agreement Type II

P-10. Faclutative Reinsurance

Unless any Company submits to the commissioner a form such Company proposes to use, the Facultative Reinsurance Agreement Form T-18.1; Tertiary Facultative Reinsurance Agreement (Type I) Form T-2.1; and Tertiary Facultative Reinsurance Agreement (Type II) Form T-21.2 shall be used by all title insurance companies authorized to do business in Texas. If the commissioner approves the form submitted by any such company, then such form may be used by the submitting Company after it has been approved by the commissioner.
      The Maximum Liability which may be assumed by any title insurance company hereunder is governed by Article 9.19 of the Texas Title Insurance Act---1967, as amended.

EFFECTIVE November 1, 1999

Comment: There is no additional charge in Texas to the public for reinsurance. Although Article 9.07, Texas Insurance Code, provides that premium rates for reinsurance are not promulgated by the Texas Department of Insurance, the promulgated reinsurance forms include a reinsurance commitment, facultative reinsurance agreement (Form T-18.1; ALTA Facultative Reinsurance Agreement 4/6/90) and tertiary reinsurance agreement (Form T-21). The reinsurance commitment form is rarely used. Confirmation usually is evidenced by an acceptance letter. The Texas Facultative Reinsurance Agreement (T-18.1) is not the most current ALTA form (the most current ALTA form being dated 9/24/94). Paragraph 3 of the Texas form provides for direct access by the insured against the reinsurer. Under this form, the policy issuing company (the ceder) retains a portion of the risk as its "primary loss risk." The secondary loss risk is generally shared by the ceder and reinsurers. This Form may not be amended. Reinsurance may occur in three circumstances: (1) the statutory limits for the Company may be exceeded; (2) the Company's self-imposed limits may be exceeded; and (3) the insured may require reinsurance if it is not satisfied with the retention limits of the Ceder (policy issuing company). Under Article 9.19 of the Texas Insurance Code, no company may retain (without reinsurance) more than 50 percent of its surplus on a single risk. The title insurer may reinsure through companies licensed to do business in Texas. The Texas Department of Insurance may authorize a company to secure reinsurance from a non-qualified title insurer if the Company has exhausted its opportunity to acquire reinsurance from other companies doing business in Texas. The Department also may permit a title insurer and reinsurers to retain additional liability of not more than 40 percent of surplus (for a total of 90 percent of surplus) if the title insurer has exhausted the opportunity to acquire reinsurance and the additional liability is incurred as "tertiary insurance "only for loss exceeding the amount of insurance and reinsurance otherwise authorized. In such circumstance, the additional liability must be accepted on a tertiary level. The Texas Tertiary Reinsurance Agreement contains direct access provisions in the event of discontinuance of business by the ceder, if the ceder is adjudged "bankrupt "or if the ceder fails to pay a loss within the time provided in the policy. The insured may notify the reinsurer under the Facultative Reinsurance Agreement (Form T-18.1) that the insured intends to enforce the agreement against the reinsurer and may request payment directly to the insured under the Facultative Reinsurance Agreement pursuant to paragraph 4. On all large policies over the issuing agent's single policy limits, the issuing agent must complete the STG Overlimits Approval Request form.

See Also:	4.04 Decedent's Estates ;
	5.20 Estate Taxes ;
	6.08 Federal Tax Liens ;
	9.04 Indemnity Agreements ;
	9.14 Insuring Around ;
	10.08 Judgments ;
	12.12 Mechanic's Liens ;
	12.26 Mortgagee Policies ;
	18.32 State Tax Liens Other Than Liens Directly On Real Property ;
	19.04 Taxes And Assessments .
Exceptions:	None
Bulletins:	TX000007 New Title Insurance Policies (effective October 1, 1991);
	TX000008 Recent Legislation;
	TX000013 Express Insurance: October 30, 1992;
	TX000021 New Texas Legislation;
	TX000032 1995 Texas Legislation;
	TX000036 1997 Legislation;
	NL000012 Federal Debt Collection Procedures Act of 1990;
	NL000026 Federal Tax Liens;
	NL000052 Federal Update.
Forms:	TX Affidavit as Release of Lien 1993 ;
	TX Insuring Around Consent Letter 1 ;
	TX Letter of Intent to Execute Affidavit 1993 ;
	Form T-13: Mortgagee Title Policy Binder on Interim Construction Loan
	Form T-29: Texas Master Indemnity Agreement

P-11. Insuring Around

Article 9.08 of the Texas Title Insurance Act - 1967, defines "Insuring Around" as follows:
      "'Insuring Around' is defined as the willful issuance of a title binder or title insurance policy showing no outstanding enforceable recorded liens while the Title Insurance Company knows that in fact a lien or liens are of record against the real property, and shall be prohibited, except under circumstances as the commissioner under his or her rulemaking powers shall approve. A title insurance company knows that an outstanding enforceable recorded matter exists if it determines that the matter is valid and enforceable based on the examination of the title pursuant to which the title binder or title insurance policy is issued. In its discretion, the title insurance company may determine the insurability of title and those matters which it considers to be insurable under the title binder or title insurance policy; provided, however, that insuring around enforceable recorded liens shall be prohibited except as allowed by regulation."
      Pursuant to the authority and instruction given the commissioner by the Legislature as above stated, the commissioner hereby sets forth the following rule to be followed by all title insurance companies and title insurance agents in complying with such Article 9.08, viz.:

Comment: "Insuring around "relates only to outstanding enforceable recorded liens.

      a.  "Willful issuance" shall be defined as the issuance of a title insurance policy or binder with intent to conceal information by suppressing or withholding title information, the consequence of which could result in a monetary loss either to the title insurance company or to the Insured under the policy or binder.

Comment: Illegal insuring around applies only to intentional concealment or intentional issuance without exception to an outstanding recorded lien known to be enforceable.

      b.  "Insuring Around" shall not be construed as prohibiting the issuer of a title insurance policy or binder from issuing a policy or binder without taking exception to a specific lien, or liens, of record when sound underwriting standards and practices would not otherwise prohibit such issuance. Specifically, but not limited to, the term "insuring around" shall not include the issuance of a title insurance policy or binder under the following circumstances:

Comment: The following list of authorized insuring around events is not exhaustive since "sound underwriting "also may comply with this regulation. In such case, we must approve issuance of the policy.

           (1)  Where liens securing obligations which, though not released of record, have been discharged to the satisfaction of the title insurance company or agent, and the title insurance company or agent has evidence in its file that the lien has been paid in full;

Comment: You generally should disclose the lien pursuant to the Insuring Around Consent Letter and expressly insure under P-39 if a policy will be issued based on conclusive evidence that the lien has been fully satisfied and if the lien has not been released of record. Proof of payment of a specific note may not be sufficient evidence of satisfaction of a mortgage, if the mortgage secures additional debt. A title insurance company can execute a release of mortgage on one-to-four family property in some cases.

           (2)  Where funds are in escrow to pay same, and a recordable release is forthcoming and will be filed for record in the ordinary course of business;

Comment: This rule allows issuance without exception to a lien if the title company secures a written payoff and disburses payment at closing. Bulletin No. 131, dated June 8, 1970 by the State Board of Insurance, prohibits holding a payoff check until a later event (such as subsequent disbursement) before payment of the lien.

           (3)  Where liens, in the opinion of counsel, are barred by the statute of limitation;

Comment: A variety of statutes of limitation apply to bar liens.

A federal tax lien will be unenforceable after 10 years and 30 days after date of assessment if no notice of lien is refiled.

State tax liens are generally barred from collection after three years after recordation.  Note that state tax liens for workforce liens are priority liens with no real limitations period.

United States judgment liens are barred after 20 years after recordation (for U.S. judgments rendered on or after May 29, 1981) if not continued by refiling.

Abstracts of judgment (other than U.S. Judgments) are valid only for 10 years after recordation (note that child support judgments filed before September 1, 1997 and restitution liens can be extended by refiling); child support liens filed on or after September 1, 1997 are valid until released. A bankruptcy may terminate an abstract of judgment in some cases.

Mortgages are subject to various possible time limitations for enforcement after the stated maturity date of the note (if the maturity date is not stated, you cannot assume the note is a demand note):

• 6 years after appointment of FDIC as receiver or conservator or after final maturity of the note, whichever is longer;
• 4 years after final maturity of the negotiable note if the note is payable on demand, in installments or has a fixed maturity date; and
• no time limit if held by an U.S. agency or instrumentality (e.g., FmHA or SBA or FDIC corporate).

Suit must be brought on mechanic's lien affidavits within two years after recordation or within one year after completion of all construction, whichever is later. If the land is a residential construction project (on a single family residence), suit must be brought within 1 year after recordation.

Ad Valorem tax liens are unenforceable after 20 years.

Most governmental liens, such as paving, environmental, and weed cutting liens, are not subject to any statute of limitation. Legislation effective 9-1-2002 requires all liens in favor of a state or local government to be recorded using a legal description of the land. Certain exceptions apply. Please consult a Texas Underwriting Counsel if you have any questions.

           (4)  Where liens are inchoate and sufficient indemnity executed by a financial institution regulated by State or Federal Government, such as a bank, savings and loan association, life insurance company or surety company has been delivered to, and accepted by, the title insurance company, or where sufficient funds have been deposited with the title insurance company or its agent to assure the ultimate payment and release of record of the liens; provided the written consent of the Insureds (owner and mortgagee) shall be delivered to the title insurance company and retained in its file;

Comment: "Inchoate "liens may include taxes (such as rollback taxes or taxes apparently paid at the end of the year where no evidence of payment is furnished) and paving liens. You must consult with the Company before insuring around such lien. Generally, the Company will not accept an unsecured indemnity from financial institutions, life insurance companies, or surety companies. If the Company does accept an indemnity and/or escrow, it requires an Insuring Around Consent Letter from the insured. The Company prefers to expressly insure under P-39 if it accepts an indemnity.

           (5)  Where sufficient indemnity executed by a financial institution regulated by State or Federal Government, such as a bank, savings and loan association, life insurance company or surety company is delivered to, and accepted by, the title insurance company, or where sufficient funds have been deposited with the title insurance company or its agent to protect against mechanic's liens by affidavits which are being contested or disputed; provided the written consent of the Insureds (owner and mortgagee) shall be delivered to the title insurance company and retained in its files;

Comment: The Company generally requires a satisfactory statutory indemnity bond or escrow of funds to insure around mechanic's lien. The Company generally does not rely on unsecured indemnity from a life insurance company or financial institution to insure around mechanic's liens. The Company prefers to expressly insure (under Rule P-39) and will require that the insured sign an Insuring Around Consent Letter. The Company prefers not to insure against a recorded mechanic's lien if suit has been filed to foreclose. The Company will rely upon a proper statutory Bond to Indemnify Against Lien and will consider a Hardeman Act Bond, if no suit has been filed.

           (6)  Where a title insurance company has previously issued a policy without taking exception to a specific lien and is called upon to issue a new policy and is already obligated under such prior policy, and will not increase its liability or exposure to the lien by the issuance of such new policy; provided the written consent of the Insureds (owner and mortgagee) shall be delivered to the title insurance company and retained in its files;

Comment: If the Company has previously issued without exception to a lien, it may continue to reissue policies without exception. You must secure an Insuring Around Consent Letter from the insured.

           (7)  Where a title insurance company has erred as in (6) above, and another title insurance company discovers the error in preparing to make a subsequent issuance, the second title insurance company may rely upon an indemnity agreement and/or an agreement to defend by the first company, and insure against such lien; provided the written consent of the Insureds (owner and mortgagee) shall be delivered to the title insurance company and retained in its files;

 Comment: The Company will not accept an indemnity from a title insurance agent; it must receive an indemnity from a title insurer in form acceptable to the Company. The insured must sign an Insuring Around Consent Letter.  Effective November 1, 2005, the Texas Insurance Department approved for use the Master Indemnity Agreement (T-29) which covers liens of less than $500,000 consensual and non-consensual , such as abstracts of judgment and state and federal liens.  It does not cover mechanic's lien affidavits.  This form has been approved by the company which has issued it to all underwriters licensed in the State of Texas .  The form covers defects, homestead issues, authority of trustees and executors and others.   

           (8)  When issuing a Mortgagee Policy insuring the validity and priority of a lien, the issuer shall not be required to itemize liens and leases that affect the title to the estate or interest, which are subordinate to the lien insured, either by express subordination or by operation of law, unless requested to do so in writing by the insured in which case paragraph 4 of Schedule B may be deleted, and the subordinate lien(s) and lease(s) shall be excepted in Schedule B and the Company may insure therein such lien(s) and lease(s) are subordinate; however, when issuing a Mortgagee's Title Policy Binder on Interim Construction Loan, the Company shall be required to show all subordinate liens in Schedule B-Part 2 of said binder, but a statement may be made therein that such lien(s) is subordinate. When insuring that a lien or lease is subordinate to the lien of the insured mortgage, the Company shall state: "Company insures the insured against loss, if any, sustained by the insured under the terms of the Policy if this item is not subordinate to the lien of the insured mortgage."

Comment: The Company may delete Schedule B, Item 4, upon request. If you delete this item, you should except to specific known subordinate liens and leases. If the subordination, such as a nondisturbance agreement, is conditional, the Company prefers to add "subject to the terms of the subordination "at the end of the insuring provision on priority (Company insures the insured against loss, if any, sustained by the insured under the terms of the Policy if this item is not subordinate to the lien of the insured mortgage, subject to the terms of the Subordination Agreement.") or to separately except to the Subordination Agreement. Examples of matters that may be subordinate include a judgment or tax lien against the purchaser on a purchase money mortgage transaction, leases subject to subordination agreements, or association assessment liens (if the declaration provides).

           (9)  In instances where federal estate taxes and state inheritance taxes have not been paid, but the title insurance company:
                (a)  Examines a balance sheet of the estate and determines that the estate will have no difficulty in paying its estate and inheritance taxes, and the title insurance company takes an indemnity from responsible persons protecting itself against loss due to unpaid estate and inheritance taxes, or
                (b)  Requires sufficient money or other securities to pay estate and inheritance taxes to be left in escrow with it pending payment of such taxes, or pending the receipt of waivers of lien from the taxing authority or authorities, or
                (c)  Examines the balance sheet of the estate and determines the estate will have no difficulty in paying its inheritance and estate taxes, and the title insurance company obtains a letter from a responsible person agreeing to see that such taxes are paid out of the assets of the estate.

Comment: If the estate is taxable the Company generally requires a release of the lien by the state and federal government or escrow of funds approved by underwriting personnel and will not rely upon an unsecured indemnity. If the estate furnishes an estate closing letter, you must review the canceled check to the U.S. and you must receive proof of payment of state inheritance taxes (a receipt). If the estate of the decedent is the following net amount or less, no estate taxes are owed:

Lifetime gift amount $1,000,000

Decedent Dying Size of Estate

2002-2003 $1,000,000
2004-2005 $1,500,000
2006-2008 $2,000,000
2009 $3,500,000
2010 tax repealed
2011 and thereafter
(unless changed) $1,000,000

           (10)  When a title insurance company previously issues a policy without taking exception to matters covered by the Master Indemnity Agreement (T-29) and is called upon to issue a new policy and is already obligated under such prior policy, and will not increase its liability or exposure to some matter by the issuance of such new policy.
      c.  "Texas Master Indemnity Agreement (T-29)" A title insurance company may, in lieu of the execution of separate transaction specific indemnity letters or agreements, indemnify another title insurance company in accordance with P-11b(7) and/or P-11b(10) above by executing the Texas Master Indemnity Agreement (T-29). If a title insurance company elects to provide another title insurance company with a master indemnity agreement, the Texas Master Indemnity Agreement (T-29) must be used if the master indemnity agreement is intended to cover the liens and other matters set forth in the Texas Master Indemnity Agreement (T-29).

See Also:	None
Exceptions:	None
Bulletins:	TX000014 New Rules Effective October 30, 1992;
	TX000024 Home Office Issue Policies.
Forms:	None

P-12.  Abstract Plants
      a.  Definition:  An abstract plant used as the basis for issuance of title insurance policies in the State of Texas shall consist of fully indexed records showing all instruments of record affecting lands within the county for a period of at least 25 years immediately prior to the date of search. The indices pertaining to land shall be arranged in geographic order (i.e.: Lot and Block for subdivided lands, and by Survey or Section Number for acreage tracts). Miscellaneous alphabetical indices shall be maintained according to name. Said indices, land and miscellaneous, may be stored in a computer, and as to land, be subject to retrieval by reference to description of the property under search. The records of the abstract plant shall be maintained to current date, and shall include, but not be limited to, plat or map records, deeds, deeds of trust, mortgages, lis pendens, abstracts of judgment, federal tax liens, mechanic's liens, attachment liens, divorce actions, wherein real property is involved; probate records; chattel mortgages, attached to realty and financing statements relating to items which are, or are to become, attached to realty, if available for indexing from the office of the County Clerk of the county which is covered by said plant.
Rule P-1.i
      b.  Leased Abstract Plants: A lessee is not necessarily excluded from the phrase "owning and operating an abstract plant" as used in Article 9.30 of the Texas Title Insurance Act - 1967, (Now 2502.051, Texas Insurance Code) but will be so excluded unless in actual, exclusive, physical possession and control of an abstract plant meeting the requirements of paragraph "a" above, operating it under the terms of a bona fide lease agreement, which places the lessee in exclusive possession and control of such abstract plant facilities for a determinable period and for a fixed rental.
      c.  Joint Abstract Plants: Two or more Companies may combine their operations into a single abstract plant for the purpose of increasing the efficiency and speed of producing title evidence for examination purposes. In such event, if the base plants owned or leased by the individual participants are not merged into a single plant, then the base plants and the joint abstract plant, when considered as one, must meet all the requirements of an abstract plant as set forth under paragraph "a" above. Ownership of such joint abstract plant may be by corporate ownership, joint venture or partnership agreement, but ownership must rest with the Company participants.

Comment: Rule P-1.i requires the title insurance agent to be licensed and to have an abstract plant for each county in which it maintains an office. The plant is maintained and examination is performed for the sole benefit of the title company. Rule P-12 defines "furnishing title evidence "on direct issues.

See Also:	3.20 Closing Protection Letters ;
	12.26 Mortgagee Policies ;
	19.48 Truth-In-Lending .
Exceptions:	None
Bulletins:	NL000051 Regulation Z: High Cost Mortgage Act None.
Forms:	TX Mortgagee Policy T-2 .

P-13.  Truth-In-Lending---The disclosures required in "CONSUMER CREDIT PROTECTION ACT," "TRUTH-IN-LENDING," and similar acts are duties imposed on lenders and constitute no part of the issuance of title insurance policies. Therefore, the title insurance companies and agents may not prepare or pass judgment on disclosure documents and notice of right of rescission documents as required by such acts or make any computation as required thereunder. However, this rule shall not prohibit said title insurance companies or agents from performing the ministerial act of inserting in loan disclosure statements, prior to the delivery of same and at the request of and under the direction of creditors, items or figures, not readily ascertainable by creditors prior to the actual closing of the transaction, which items are not a part of the financing charge; nor shall it prohibit said title insurance companies or agents from presenting said disclosure statements and notices of rights of rescission to borrowers and having said borrowers properly acknowledge and sign said statements. All of the foregoing shall be applicable, either fully or to the extent that it is not contrary to superior law, but in no event shall the title insurance company be liable, or its policy provide such liability, to an Insured in respect of such matters, except as expressly provided and authorized by this rule.

Comment: Paragraph 5 of the Exclusions from Coverage of the Mortgagee Policy excludes liability because of "invalidity or unenforceability of the lien of the insured mortgage or claim thereof, which arises out of the transaction evidenced by the insured mortgage, and is based upon insuring or consumer credit protection or truth-in-lending law." The Mortgagee Policy does not insure against recision under Truth-in-Lending. The Insured Closing Service Letter does not indemnify against "consumer credit protection "laws.

See Also:	3.28 Commitments ;
	3.36 Condemnations .
	17.02 Rate Rules and Definitions
Exceptions:	None
Bulletins:	TX000030 New Rules and Forms; Effective August 1, 1995.
Forms:	TX Owner Title Policy Commitment to Texas Department of Transportation T-20 .

P-14.  Owner Title Policy Commitment to Texas Department of Transportation---The Owner Title Policy Commitment to the Texas Department of Transportation shall be issued only as follows:
      a.  The Commitment shall be issued only to the Texas Department of Transportation.
      b.  As provided in Rate Rule R-23 there shall be a premium charge of $200.00 within sixty (60) days of issuance of an original Owner title Policy Commitment or Owner Title Policy Commitment for eminent domain proceedings to the Texas Department of Transportation. If title is conveyed to the Texas Department of Transportation a credit of $200.00 shall be given upon issuance of an Owner Title Policy to the Texas Department of Transportation by the Company which issued the previously issued commitment. No credit shall be allowed if title is not conveyed within thirty-six (36) months from the date of the original Commitment.
      c.  The term "negotiation of said warrant" in said form is hereby defined to include the right of the Company to refuse to negotiate the warrant in the even the release of existing liens cannot be obtained, or in the further event adverse matters affecting the title become known to it subsequent to the date of the Commitment.
      d.  The issuance of such Commitment to the Texas Department of Transportation, in those cases where there are outstanding and enforceable recorded liens which have been previously or contemporaneously disclosed to said Department, shall not be construed a violation of Rule P-11, "Insuring Around".

Comment: The Company may charge premium only for commitments issued to the Texas Department of Transportation or to the FDIC (if no sale is pending) (Rules P-15, R-25). The $200 premium for the commitment issued to the Texas Department of Transportation shall be applied as a credit on a policy issued within three years after the commitment if issued by the same title insurer.

See Also:	3.28 Commitments .
	17.02 Rate Rules and Definitions
Exceptions:	None
Bulletins:	TX000015 New Forms Effective January 1, 1993;
	TX000021 New Texas Legislation;
	NL000052 Federal Update.
Forms:	TX Standard Commitment Transmittal Letter 1992 ;
	TX Commitment T-7 .

P-15.  Commitment for Title Insurance to or for the Benefit of the Federal Deposit Insurance Corporation, Office of Thrift Supervision or Resolution Trust Corporation
      A Commitment for Title Insurance to or for the benefit of the Federal Deposit Insurance Corporation, Office of Thrift Supervision, or Resolution Trust Corporation shall be issued only as follows:
      (a)  To the Federal Deposit Insurance Corporation, Office of Thrift Supervision, or Resolution Trust Corporation, or as its interest may appear, as the proposed insured.
      (b)  A premium charge shall be collected as provided in Rate Rule R-25.
      (c)  The Commitment Form to be used shall be the then current promulgated Commitment form, except such form shall, prior to issuance, be modified by providing in Schedule "C" of the form an expiration date of the Commitment, which expiration date shall not extend beyond one (1) year subsequent to the Commitment's effective date.
      (d)  The commitment insurance amount shall be $25,000.00.
      The provisions of this Procedural Rule P-15 shall not be applicable to any commitment for title insurance issued in connection with a contract of purchase and sale to which the Federal Deposit Insurance Corporation, Office of Thrift Supervision, or Resolution Trust Corporation is a party.*
*(Replaces former P-15 which was withdrawn July 1, 1979.)

Comment: This rule requires a premium of $390 to be paid by the FDIC if there is no proposed buyer. This rule does not allow a credit if a policy is subsequently issued to the FDIC or its purchaser. This rule does not apply if the FDIC has a contract to sell the land or if the commitment is issued at an auction. The RTC ceased to function January 1, 1996. It was replaced by the FDIC as receiver conservator as to assets held by the RTC in its corporate capacity. Legislation passed in 1993 allows recordation of affidavits or memoranda to evidence transfer of financial institution assets.

See Also:	12.27 Mortgagee Title Policy Binder On Interim Construction Loan (Interim Construction Binder) .
Exceptions:	None
Bulletins:	TX000015 New Forms Effective January 1, 1993.
	TX000079 New Forms and Rules; Commissioners Order for 2004 Hearing
Forms:	TX Mortgagee's Title Policy Binder on Interim Construction Loan T-13 ;
	TX Mortgagee's Title Policy Binder on Interim Construction Loan Schedule A T-13 ;
	TX Mortgagee's Title Policy Binder on Interim Construction Loan Schedule B T-13 ;
	TX Mortgagee's Title Policy Binder on Interim Construction Loan Schedule C T-13 .

P-16.  Mortgagee Title Policy Binder on Interim Construction Loan (Interim Binder)---The Mortgagee Title Policy Binder on Interim Construction Loan (Interim Binder) shall be used only with respect to interim construction loans in which it is contemplated in good faith that the Company issuing the Interim binder shall be asked to issue its Mortgagee Policy or Policies; issued simultaneously with Owner Policy or Policies of Title Insurance or at the basic rate, on a permanent loan or loans covering the identical property (in one or more parcels) when improvements are completed, but which permanent loan or loans may be made by a mortgagee or mortgagees other than the mortgagee named in the Interim binder. The use of such Interim Binder shall be limited solely to interim construction loans and pledges of the interim construction notes and liens wherein: (i) the obligor on the indebtedness is an original contractor who is also the record owner of the land upon which improvements are to be constructed; and, (ii) the security document for the indebtedness is not in the form of a Mechanic's Lien Contract.
      Construction loans may include sums advanced for acquisition of land and/or to take up, renew or satisfy prior existing liens on land upon which construction is to occur.
      Interim Binder shall not be issued on vacant lots or tracts, except in connection with the immediate construction of improvements thereon, nor shall such Interim Binder be issued after completion of improvements to which it relates, but this does not prohibit the issuance of Extensions after completion of improvements. In all cases not specifically enumerated in this rule, a Mortgagee Policy shall be used.
      The Company shall be required to show all subordinate liens in Schedule B-Part 2 of the Interim Binder, but a statement may be made therein that such lien(s) is subordinate.

Comment: The rule does not prohibit issuance of multiple binders. For instance, the Modification Endorsement (T-38) or Assignment Endorsement may not be issued to the Binder, but a new Binder (describing the modification or assignment) may be issued during construction. There is some difference of opinion over whether development loans may be covered by a Binder because of the requirement that there be "immediate construction of improvements." Bulletin No. 136 (May 2, 1972) by the State Board of Insurance is critical of issuance of a Binder on a development loan. Please call our underwriting personnel if you are requested to issue a Binder in such case. The Binder is required to except to subordinate liens in Schedule B - Part 2, but the Binder may insure that the liens are subordinate. The Binder does not provide coverage as to access and does not promise to insure priority of the Deed of Trust over mechanic's liens. The Binder may be amended by the rollback tax deletion, insurance that taxes are not yet due and payable, down date endorsements, extension endorsements, and amendment of the area and boundaries exception. Other endorsements are not available.

Effective Nov.1, 2005, an interim construction binder can only be used when the owner of the property is the original contractor and no mechanic's lien contract is used.   This effectively means that only a spec built home can qualify for the binder.  In all other cases, a Mortgagee Policy must be issued insuring the construction loan and at the time of the permanent loan, a new Mortgagee Policy under R-18 is issued for the minimum basic premium rate.(If the new loan amount exceeds the old loan amount, an additional premium over the minimum basic premium is required.  Please see the rule for details.)

 

See Also:	None
Exceptions:	None
Bulletins:	TX000030 New Rules and Forms; Effective August 1, 1995.
Forms:	None

P-17.  Electronically Produced Forms
(a)  Permission to Electronically Produce
      It shall be permissible for a Company to computer generate or electronically produce any Texas promulgated form. If a Company elects to use electronically produced forms, the Company shall use the appropriate promulgated language for the relevant form as set forth in the BASIC MANUAL OF RULES, RATES AND FORMS FOR THE WRITING OF TITLE INSURANCE IN THE STATE OF TEXAS. An "electronically produced form" shall be signed either with an original signature or by a safeguarded electronic signature as provided in subsection (e) of this rule and issued by the Title Insurance Agent or Direct Operation or Title Insurance Company preparing the form and shall state the name of the Title Insurance Company having liability under the title insurance form.
(b)  Permissible Changes to Promulgated Forms
      (1)  It shall not be necessary for an electronically produced form issued by a Company to contain:
           (A)  the facsimile corporate execution of the Title Insurance Company; or,
           (B)  the facsimile corporate attest of the Title Insurance Company; or,
           (C)  the facsimile corporate seal of the Title Insurance Company.
      (2)  With the permission of its Title Insurance Company, it shall be permissible for a company to make the following non-substantive changes to an electronically produced form:
           (A)  omit the promulgated blank for inserting an endorsement number;
           (B)  omit the use of endorsement numbers if the Title Insurance Company elects not to individually inventory endorsements;
           (C)  add accounting information (such as, without limitation, county codes, statistical code numbers, rate rule references, and premium amounts) to the top or bottom margin of an electronically produced form; and,
           (D)  format general identifying information to be printed in convenient locations. For purposes of this sub-paragraph, general identifying information includes such items as (i) name of Title Insurance Company; (ii) name or title of form; (iii) form "T-__" number, if applicable; and, (iv) signature blanks for the Company.

Comment: This rule allows electronic production of endorsements. You must contact the Company and receive a block of assigned endorsement numbers if you issue endorsements electronically. This rule does not prohibit electronic production of other forms, such as policy schedules and commitments.

(c)  Directly Issued Policies
      This rule shall not affect the requirement for countersignature of a Directly Issued Policy pursuant to Procedural Rule P-31, which policy may be computer generated or electronically produced.
(d)  Consumer Protection
      The Company must comply with the provisions of the Electronic Signatures in Global and National Commerce Act, including the requirements for Consumer Disclosures set forth in Section 101 (c) of said act, and the Uniform Electronic Transactions Act, Texas Business and Commerce Code, Chapter 43, where applicable.
(e)  Electronic Safeguards
      Information that is generated, scanned, or otherwise stored electronically must accurately reflect the information set forth in the document or record as of the time it was first generated in its final form and must remain unaltered and accessible for later reference and audit.
(f)  Document Retention
      This rule shall not affect the requirements of document retention pursuant to Article 9.34, Texas Insurance Code and the rules promulgated thereunder, except that documents or records which are initially computer generated or electronically produced in conformity with this rule may be retained in that medium.

 

See Also:	3.28 Commitments ;
	6.26 Foreclosures - Deed Of Trust ;
	14.14 Owner Policy Rejection ;
	15.52.43 P-43. Limited Pre-Foreclosure Policy (T-40) and Limited Pre-Foreclosure Policy Downdate Endorsement (T-41) .
	17.02 Rate Rules and Definitions
Exceptions:	None
Bulletins:	TX000009 House Bill 2;
	TX000012 New TREC Contracts;
	TX000015 New Forms Effective January 1, 1993;
	TX000028 Disclosures: Texas Residential Owner Policy of Title Insurance;
	TX000032 1995 Texas Legislation;
	TX000044 Commissioner's Order for 1996 Rate Hearing.
Forms:	TX Title Company Disclosure for Residential Closings 1995 ;
	TX Commitment T-7 ;
	TX Limited Pre-Foreclosure Policy T-40 ;
	TX Standard Commitment Transmittal Letter 1992 .

P-18.  Commitment for Title Insurance
      A.  After receipt of a bona fide order for an Owner Policy of Title Insurance on residential real property or for an Owner Policy not to exceed $300,000.00, the Company must deliver to the proposed insured a Commitment in the form approved by the State Board of Insurance. Delivery may be had upon the proposed insured's authorized agent, other person in a fiduciary relationship with it, or its attorney, and if none of the aforementioned persons are available after using the Company's best efforts, then to the person designated by the person opening the order for insurance. Such Commitment shall be delivered as soon as practicable, using the Company's best efforts allowing reasonably sufficient time for review prior to the closing of the transaction.
      B.  The Commitment for Title Insurance shall be issued only as preliminary instrument in instances in which the Company has a bona fide order for the policy or policies of title insurance specified therein, to be issued within 90 days from the effective date of the Commitment as shown under Schedule A of said Commitment.
      C.  For title insurance policies not included in A. above, the Commitment must be issued if the proposed insured so requests.
      D.  The Company shall not be required to issue a Commitment on an order it is unwilling to insure or when a bona fide order for the policy is placed after the real estate transaction is closed.
      E.  The liability and obligations under the Commitment end ninety (90) days after the Commitment's effective date, or when the Policy is issued, whichever occurs first, unless the failure to issue the Policy is the Company's fault. In no event shall such Commitment for Title Insurance be used in lieu of a policy of title insurance.
      F.  Amount(s) of the policy or policies to be issued shall be as established in the same manner as to the amount of coverage as established under Rate Rules R-3 and R-4.

Comment: This rule requires delivery of a commitment (1) if the Company will issue an Owner Policy of any amount on residential real property (defined in Rule P-1u) or (2) if the Company will issue an Owner Policy of $300,000 or less on any type of land (e.g., residential, commercial, agricultural, unimproved) or (3) to any other proposed insured if that proposed insured requests a commitment.

You must deliver the commitment to the proposed insured purchaser, the proposed insured purchaser's authorized "agent," other person in fiduciary relationship with the proposed insured purchaser, or proposed insured purchaser's attorney. If those persons are not available, then delivery may be made to the person opening the order (typically the broker who represents the seller). It is common to mail a copy of the commitment directly to the proposed insured. The current TREC contract provides that "within twenty (20) days after the Title Company receives a copy of this contract, Seller shall furnish to Buyer a commitment for title insurance (the Commitment) and, at Buyer's expense, legible copies of restrictive covenants and documents evidencing exceptions in the Commitment other than the standard printed exceptions. Seller authorizes the Title Company to mail or hand deliver the Commitment and related documents to Buyer at Buyer's address shown below. If the Commitment is not delivered to Buyer within the specified time, the time for delivery will be automatically extended up to fifteen (15) days. Buyer will have five (5) days after the receipt of the Commitment to object in writing to matters disclosed in the Commitment." The contract also provides that the title policy shall be "subject to the promulgated exclusions (including existing building and zoning ordinances) and the following exceptions:

1. Restrictive covenants common to the platted subdivision in which the Property is located.
2. The standard printed exception for standby fees, taxes and assessments.
3. Liens created as part of the financing described in Paragraph 4.
4. Utilities easements created by the dedication deed of plat of the subdivision in which the Property is located.
5. Reservations or exceptions otherwise permitted by this contract or as may be approved by Buyer in writing.
6. The standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements.
7. The standard printed exception as to marital rights.
8. The standard printed exception as to waters, tidelands, beaches, streams, and related matters."

However, "Buyer may object to existing building and zoning ordinances and items 6(A)(1) through (8) above if Buyer determines that any such ordinance or item prohibits the following use or activity: (for example: swimming pool, construction of garage, current residential use and so on)."

In other circumstances where requested by the proposed insured, the title company must issue a commitment to that proposed insured unless the company is unwilling to insure.

The commitment is effective for 90 days.

The commitment provides that "our liability is only to you and others who are included in the definition of the Insured in the Policy to be issued. Our liability is only for actual loss incurred in your reliance on the Commitment to comply with its requirements or to acquire the interest in the land. Our liability is limited to the amount shown in Schedule A of this Commitment and will be subject to the following terms of the Policy: Insuring Provisions, and Conditions and Stipulations, and Exclusions." A commitment is not a title report or opinion of title.

Article 9.55, Insurance Code, (Now 2704.051 Texas Insurance Code) provides that whenever improved residential real estate is sold and a mortgagee policy is issued, the title insurance company or title insurance agent issuing the mortgagee policy shall also issue an owner policy. This requirement may be rejected by a written acknowledgment and rejection by the purchaser.

There generally is no charge for a commitment (except the Texas Department of Transportation as provided in R-14 and R-23 and the FDIC where there is no contract as provided in P-15 and R-25). A "cancellation fee "to the customer is not authorized, as stated in Bulletin No. 133 (May 10, 1971) issued by the State Board of Insurance.

The Texas Deletion of Arbitration provision relates only to the Owner Policy (T-1) and Mortgagee Policy (T-2). It does not relate to the Residential Owner Policy (T-1R) or to a policy issued to an individual.

Insurers may not refuse to issue commitments based in geographic location of the land or disability of a party; but the commitment may make requirements relating to those issues. You may not issue a commitment if you are issuing a Limited Pre-Foreclosure Policy (T-40).

P-61, Timely Provision of Title Policies, states that title policies shall be provided and furnished to the insured within ninety (90) days after receipt by the title company, of proof of compliance with the company's Schedule C requirements.  Effective Nov. 1, 2005

See Also:	12.26 Mortgagee Policies ;
	15.32 Pending Disbursement Clause .
Exceptions:	None
Bulletins:	None
Forms:	TX Revolving Credit Endorsement T-35

P-19.  When a Mortgagee Policy is to be issued and the full proceeds of the loan have not been disbursed by the insured therein, the "Pending Disbursement" clause in Paragraph "P-8.b.(1)" must be inserted as an exception to said policy.
      When the full proceeds of the loan have been disbursed by the insured, the exception provided for above may be eliminated by the issuance of the promulgated endorsement form containing the appropriate language to effect such elimination.

Comment: If the loan is not fully disbursed at the time of the issuance of the policy, the policy must contain a pending disbursement clause (unless the loan is a revolving credit loan and the Form T-35 Revolving Credit Endorsement is issued). After full disbursement, the clause may be deleted. The Rules do not provide for a down date endorsement at the time of disbursement unless the loan is made for construction. If the loan is made for construction, the mechanic's lien exception of Rule P-8 also must be added.

 

See Also:	12.27 Mortgagee Title Policy Binder On Interim Construction Loan (Interim Construction Binder) ;
	19.04 Taxes And Assessments .
	17.02 Rate Rules
Exceptions:	None
Bulletins:	TX000015 New Forms Effective January 1, 1993;
	TX000032 1995 Texas Legislation;
	TX000033 Rollback Taxes;
	TX000035 Tax Abatement (Chapter 312, Texas Tax Code).
Forms:	TX Tax Deletion Endorsement T-30 .
	TX Blank Endorsement T-3

P-20.  Amendment of Standard Exception in Mortgagee Policy or Mortgagee Title Policy Binder on Interim Construction Loan (Interim Binder) Relating to Taxes---In connection with the issuance or amendment (after issuance) of any Mortgagee Policy or any Mortgagee Title Policy Binder on Interim Construction Loan (Interim Binder), and upon payment of the premium required under Rate Rule R-19, the words: "and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership" as contained in the standard tax exception (designated "3." in Schedule B of the Mortgagee Policy or in Schedule B-Part 1 of the Interim Binder) may be deleted by: (a) deletion of such words upon the policy or binder form; or (b) by attachment to the policy or binder of (i) endorsement form T-30, or (ii) a completed form T-3 providing for the deletion of the hereinbefore quoted words.

Comment: The rollback tax language may be deleted from Mortgagee Policy or the Binder or the Assignment Endorsement for a premium charge of $20. It may not be deleted from an Owner Policy. The Company will agree to delete the rollback tax language if the land is not subject to special valuation (such as open space or agricultural use valuation). The Company will consider deletion of the language from a Binder or Mortgagee Policy if the land is subject to special use valuation and if the Company's requirements are met (e.g., the tract cannot exceed 25 acres).

The Company may be willing to consider an escrow if the land is subject to special use valuation and if the lender consents to the escrow. If the improvements are subject to tax abatement pursuant to an agreement by the taxing authority, you must except to the tax abatement agreement.

See Also:	3.28 Commitments .
Exceptions:	None
Bulletins:	TX000009 House Bill 2;
	TX000014 New Rules Effective October 30, 1992;
	TX000044 Commissioner's Order for 1996 Rate Hearing.
Forms:	TX Commitment T-7 ;
	TX Limited Pre-Foreclosure Policy T-40 .

P-21.  Additional Requirements for Contents of Commitment for Title Insurance---Each Title Insurance Company and each Title Insurance Agent, licensed to do business in Texas, shall, in connection with the issuance of each Commitment for Title Insurance whereby a commitment is made to issue either a binder or policy of title insurance (insuring either alien or the title to real property), add to the promulgated Commitment for Title Insurance form an additional schedule (which schedule shall be designated "Schedule D") setting forth the following:
1.       As to each Commitment for Title Insurance, the issuing Title Insurance Company shall disclose:
         (a)  A listing of each shareholder owning or controlling, directly or indirectly, ten percent (10%) or more of the shares of the Title Insurance Company; there shall also be disclosed all individuals, partnerships, corporations, trusts or other entities owning ten percent (10%) or more, of those entities directly owning ten percent (10%), or more, of the Title Insurance Company. Such additional disclosure requirement shall not, however, apply to a publicly held company whose stock is traded on a stock exchange or in the over-the-counter market or is a part of an insurance holding company system the parent of which is so publicly held;

(b)  The names of the directors of the Title Insurance Company; and
         (c)  The names of the president, the executive or senior vice-president, the secretary and the treasurer of the Title Insurance Company.
         In connection with such disclosure, each Title Insurance Company (i) may use in such listing the officers and directors so holding each such respective office on the December 31st immediately preceding the date of such Commitment for Title Insurance, and (ii) shall furnish to each of its appointed Title Insurance Agents the above required information for such Title Insurance Agent to comply with this Paragraph 1 of this Rule P-21; and (iii) each Title Insurance Agent shall be entitled to rely upon and use the information furnished to the Title Insurance Agent by its appointing Title Insurance Company.

2.  As to each Commitment for Title Insurance issued by a (i) a Title Insurance Agent, or (ii) a Title Insurance Company, where not issued by a Title Insurance Agent, the issuing Title Insurance Agent or Title Insurance Company shall disclose:
         (a)  A listing of each shareholder, owner, partner, or other person having, owning or controlling one percent (1%) or more or the Title Insurance Agent that will receive a portion of the premium.
         (b)  A listing of each shareholder, owner, partner, or other person having, owning or controlling 10 percent (10%) or more of an entity that has, owns or controls one percent (1%) or more of the Title Insurance Agent that will receive a portion of the premium.
         (c)  If the Agent is a corporation: (i) the name of each director of the Title Insurance Agent, and (ii) the name of the President, the Executive or Senior Vice-President, the Secretary and the Treasurer of the Title Insurance Agent.
         (d)  The name of any person who is not a full-time employee of the Title Insurance Agent and who receives any portion of the title insurance premium for services performed on behalf of the Title Insurance Agent in connection with the issuance of a title insurance form; and, the amount of premium that any such person shall receive.
         (e)  For purposes of this paragraph 2, "having, owning or controlling" includes the right to receipt of a percentage of net income, gross income, or cash flow of the Agent or entity in the percentage stated in subparagraphs (a) or (b).

3.         As to each Commitment for Title Insurance, the following additional language shall be included in each Schedule D, together with all required information included within the blanks contained below:              "You are entitled to receive advance disclosure of settlement charges in connection with the proposed transaction to which this commitment relates. Upon your request, such disclosure will be made to you. Additionally, the name of any person, firm or corporation receiving a portion of the premium from the settlement of this transaction will be disclosed on the closing or settlement statement.             You are further advised that the estimated title premium* is:

Owners Policy	$________________
Mortgagee Policy	$________________
Endorsement Charges	$________________
Other	$________________
Total	$________________

Of this total amount: $_________________(or %) will be paid to the policy issuing Title Insurance Company; $_________________(or %) will be retained by the issuing Title Insurance Agent; and the remainder of the estimated premium will be paid to other parties as follows:

Amount	To Whom	For Services
$____(or%)____	_______________	_________________
$____(or%)____	_______________	_________________
$____(or%)____	_______________	_________________

 

"*The estimated premium is based upon information furnished to us as of the date of this Commitment for Title Insurance. Final determination of the amount of the premium will be made at closing in accordance with the Rules and Regulations adopted by the Commissioner of Insurance."             Each Title Insurance Company and each Title Insurance Agency shall, prior to usage, file its proposed Schedule D form with the State Board of Insurance; in like manner each Title Insurance Company and each Title Insurance Agent shall file all amended Schedule D forms with the Commissioner of Insurance prior to usage.              Nothing contained in this Rule P-21 shall ever be deemed or considered to require the issuance of a Commitment for Title Insurance prior to the issuance of any policy or binder for title insurance.              Each Title Insurance Agent and Title Insurance Company may, in preparing its Schedule D, use whatever reasonable format it elects, provided that such format does not alter or delete the furnishing of the disclosures hereby required. It is the express intent of this paragraph to enable usage of electronic equipment in preparation of the required Schedule D.

Comment: This Rule requires disclosure of two tiers of ownership of the title insurance agent and disclosure of payment of premium. The disclosure of ownership of the title insurance agent applies to any title insurance agent that will receive a portion of the premium, whether receiving the premium for search examination or for closing the transaction. Article 9.38(c) of the Insurance Code also requires disclosure of the ownership of the title insurance agent. The Limited Pre-Foreclosure Mortgagee Policy (T-40) must include a Schedule D disclosure.

See Also:	None
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies.
Forms:	TX Verification of Services Rendered T-00

P-22. Payment of a Fee for Examination and/or Closing---No payment shall be made by a Title Insurance Company, Title Insurance Agent, Escrow Officer or any employee or agent of any of them, to any Person who is not its bona-fide employee for furnishing title evidence, examination of a title and/or closing a transaction unless:
      (A) Such Person is (i) a Title Insurance Company as defined in Article 9.02, Insurance Code, and qualified to do business in the State of Texas, (ii) a Title Insurance Agent as defined in Article 9.02, Insurance Code, and licensed to do business in the State of Texas by the Texas Department of Insurance, or (iii) an attorney at law duly licensed by the Supreme Court of Texas to practice law in the State of Texas, to the extent not inconsistent with Article 9.34, Texas Insurance Code, or (iv) any Person legally authorized to perform such services; and
      (B) Such Person has performed all of the services described in P-1, paragraph f, that such Person is legally authorized to perform and/or the examination of the title required for the issuance of a commitment for title insurance prior to the issuance of any such commitment, construction binder, policy or other contract of title insurance, to determine the condition of the title to be insured. If the parties to the transaction are located in different counties, this paragraph of this rule does not prohibit payment to a Person who has actually performed all the services described in P-1, paragraph f in relation to either(i) the seller(s) or the buyer(s) or (ii) the mortgagor(s) or the mortgagee(s) for closing the transaction and issuance of the policy;and
      (C) Timely disclosures of such payment have been made as required by Rule P-21 and Article 9.53; and
      (D) Any payment made must be commensurate with the services actually performed; and
      (E) The Person rendering the service shall have filed with the Company at least thirty (30) days prior to the rendering of such service a written schedule of charges normally imposed by such Person for such services (Schedule) and such Schedule shall have been agreed to and approved by the Company as being reasonable charges for such services. However, payments to licensed title insurance agents are excluded from the requirements of this paragraph (E); and
      (F) The Person rendering the services shall have presented to the Company, at or prior to the time of payment of said services, a written itemized statement or invoice which clearly sets forth in detail the actual services rendered and billed for in representing the Company in the respective settlement, closing and/or examination, and such Company verifies, in writing, that such services were actually rendered in accordance with form T-00; and
      (G) In the event of collection of the title insurance premium by such Person, the entirety of such premium shall have been remitted to the Company; and
      (H) No portion of the charge for the services actually rendered shall be attributable to, and no payment shall be made for the solicitation of, or as an inducement for the referral or placement of the title insurance business with the Company; and
      (I) Any portion of any payment inconsistent with the requirements hereof, or any payment by the Company to any Person for the solicitation of, or as an inducement for the referral or placement of title insurance business, is deemed to be a violation of Article 9.30; and
      (J) The Company shall keep written itemized statements or invoices, and the Schedule, in its official records for a period of three years and shall make such copies thereof available to the Texas Department of Insurance and its representatives for inspection and duplication upon request.
(Go to definition in Rule P-1.o)

Comment: Article 9.30 of the Texas Insurance Code prohibits payment of a portion of the premium to an out-of-state title insurance agent (not licensed in Texas) for closing the transaction. Payments may be made to a licensed Texas attorney for examination or closing as long as the payment does not exceed a reasonable charge. Payments to a title insurance agent may not exceed percentages of premium or amounts set by the Board (pursuant to P-24) unless otherwise agreed in writing. An attorney who receives a portion of the premium must furnish a written schedule of charges at least thirty (30) days prior to rendering the service. The title company must receive invoices and T-00s from persons (including the title insurance agent) receiving a portion of the premium.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-23. Division of Premiums between Title Insurance Agents and Title Insurance Companies.
           (a) All agency contracts between title insurance companies and title insurance agents must provide for the division of premium between the title insurance company and its title insurance agent on the following basis:
           (b) At each hearing required by or held pursuant to Article 9.07, Texas Insurance Code, the Commissioner shall consider what portion of gross title insurance premiums is to be remitted to or retained by the title insurance companies (the Underwriter Portion of the Premium) and what portion is to be remitted to or retained by the title insurance agents (the Agent Portion of the Premium) until after the next hearing is held. The Commissioner shall establish such portions contemporaneously with the fixing and promulgating of the premium rates to be charged to the public.
           (c) The sum of the Underwriter Portion of the Premium and the Agent Portion of the Premium shall be the Basic Premium for title insurance charged to the public. Wherever the words "Basic Premium", "Basic Rate" or "Basic Premium Rate" shall appear or be referenced in any other rules, they shall mean the Basic Premium described in the preceding sentence.
           (d) The amounts of the Underwriter Portion of the Premium and the Agent Portion of the Premium shall be set by the Commissioner in view of the experience of the title insurance companies as a group (excluding all agents affiliated with a title insurance company, all direct operations of a title insurance company, and all agents unaffiliated with any title insurance company).
           (e) The division of premium established by the Commissioner shall be the same for all agents unaffiliated with any title insurance company, all affiliated agents and all direct operations.
           (f) During 2000, and thereafter until changed by the Commissioner, on all title insurance written by title insurance agents, the division of premiums between title insurance companies and title insurance agents shall be as follows:
                (1) title insurance companies shall receive 15% of each title insurance premium, and
                (2) title insurance agents shall receive 85% of each title insurance premium;
                (3) provided, however, all Assessment Recoupment Charges authorized and approved by the Commissioner shall be apportioned only to certain underwriters pursuant to other orders and rules of the Commissioner, and shall not be apportioned pursuant to this Rule P-23.

Comment: Articles 9.07 and 9.30B(1) of the Insurance Code authorize the Commissioner to promulgate the allowable split between the title insurance company and the title insurance agent.

See Also:	3.28 Commitments .
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies;
	TX000045 Title Search Requirements;
	MU000018 Title Search Requirements;
	NL000017 Use of Starter Files.
Forms:	None

P-24. Payment for Services Rendered by a Title Insurance Company, Title Insurance Agent, or Direct Operation to Another Title Insurance Company, Title Insurance Agent or Direct Operation.
     

(a) If the insured policy amount is in excess of $125,000

Furnishing title evidence, or furnishing title evidence and title examination by the Company, Agent, or Direct Operation furnishing the evidence  50% Closing the transaction, or Closing the transaction and title examination  50%

(b) If the insured policy amount is 125,000, or less.

Furnishing title evidence, or furnishing title ` evidence and title examination by the Company, Agent, or Direct Operation furnishing the evidence  90% Closing the transaction, or Closing the transaction and title examination   10% In addition to these percentages, reasonable charges may also be made and paid for copies of documents. Any payment in excess of the sums calculated by use of the percentages specified in this Rule shall be deemed to be an unreasonable and excessive amount, unless the Company, Agent, or Direct Operation providing such services and the Company, Agent, or Direct Operation, paying for such services (i) under section (a) above enter into a prior written agreement not less than ninety (90) days prior to closing specifying and agreeing to percentages (but not services) different from those provided in this Rule or (ii) under section (b) above are licensed in the same county or in contiguous counties and enter into a prior written agreement not less than ninety (90) days prior to closing specifying and agreeing to percentages (but not services) different from those provided in this Rule . All payments must be remitted no later than the thirtieth (30th) day after the date of recording by the county clerk of an instrument conveying an interest in the land.

On and after January 1, 2013, the insured policy amount in sections (a) and (b) above shall be $150,000.00.

 

This Rule, including the provisions pertaining to prior written agreements, and the percentages specified in this Rule apply to each Escrow Officer of a Company, Agent, or Direct Operation to the same extent and in the same manner as is applicable to the Company, Agent, or Direct Operation for which the person is acting as an Escrow Officer.

 Nothing in this Rule shall affect the division of premium between a title insurance company and its subsidiary title insurance agent when the title insurance company directly issues its policy or contract of title insurance company pursuant to § 2704.002, Insurance Code.  For purposes of this Rule, a subsidiary is a company at least fifty percent (50%) of the voting stock of which is owned by the title insurance company or by a wholly owned subsidiary of the title insurance company. The amendments to P-24 adopted on May 1, 2008, are effective July 1, 2008. 

Comment: Although this rule establishes maximum percentages of the premium after payment of the underwriter's portion of the premium, the rule states that "the Company providing such services and the Company paying for such services (may) enter into a prior written agreement specifying and agreeing to percentages different from those provided in this Rule." The amounts to be paid must be disclosed in Schedule D of the Commitment as required by Rule P-21. ?Starters "or prior policies or bases may be used in many circumstances and updated by the local title insurance agent.

See Also:	None
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies;
	TX000045 Title Search Requirements;
	MU000018 Title Search Requirements;
	NL000017 Use of Starter Files.
Forms:	None

P-25. Reasonable Time for Furnishing Title Evidence. Pursuant to Art. 9.34, Texas Insurance Code, a reasonable time for furnishing title evidence is determined to be as follows:
                (1) With Prior Title Evidence Satisfactory to the Title Insurance company:
                         (a) On Acreage Tracts---15 days.
                         (b) On Subdivision Tracts---10 days.
                (2) Without Prior Title Evidence Satisfactory to the Title Insurance Company:
                         (a) On Acreage Tracts---30 days.
                         (b) On Subdivision Tracts---21 days.
      These time periods shall begin on the date the order for title evidence is received. If all title insurance agents and direct operations for the county refuse to provide title evidence within such time and for the payments provided in Rule P-24, a title insurance company may directly issue its policy if the title insurance company obtains the best evidence available.

Comment: If title insurance agents will not furnish title evidence within the time stated in this rule, the title insurer may secure its title evidence by a courthouse examination pursuant to Article 9.34 of the Texas Insurance Code. A starter or prior policy may be acceptable in some circumstances if down dated.

See Also:	None
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies.
Forms:	None

P-26. Copies of Policies Provided to Agents. Title insurance agents or direct operations that provide title evidence on which policies of title insurance are issued shall be provided with legible complete copies of all policies or contracts of title insurance actually issued in the transaction within 30 days from the date of the policy, which is determined to be a reasonable time.

Comment: Article 9.34 of the Texas Insurance Code requires that the title insurance agent which provided title evidence on a direct (home office) issue be provided with complete copies of the title policies within a reasonable time determined by the Board. This rule establishes that reasonable time as 30 days after issuance of the policy.

See Also:	None
Exceptions:	None
Bulletins:	NL000031 Mortgage Company Funds.
Forms:	TX Immediately Available Funds Procedure Agreement T-37

P-27. Disbursement From Escrow or Trust Fund Accounts. This Rule shall implement Art. 9.39A, Texas Insurance Code.
A.  Definitions
      1. "Good funds" means:
           a. Cash or wire transfers;
           b. Cashier's check. For purposes of this Rule, a cashier's check is defined to mean a check that is (1) drawn on a financial institution; (2) signed by an officer or employee of the financial institution on behalf of the financial institution as drawer; (3) a direct obligation of the financial institution; and (4) provided to a customer of the financial institution or acquired from the financial institution for remittance purposes.
           c. Certified check. For purposes of this Rule, a certified check is defined to mean a check with respect to which the drawee financial institution certifies by signature on the check of an officer or other authorized employee of the financial institution that: (1) the signature of the drawer on the check is genuine; (2) the financial institution has set aside funds that are equal to the amount of the check and will be used to pay the check; or (3) the financial institution will pay the check upon presentment.
           d. Teller's check. For purposes of this Rule, a teller's check is defined to mean a check (1) provided to a customer of a financial institution or acquired from a financial institution for remittance purposes, (2) that is drawn by the financial institution, and (3) is drawn on another financial institution or payable through or at a financial institution.
           e. Any other instrument that has been determined by the Board of Governors of the Federal Reserve System to be the functional equivalent of a cashier's, certified or teller's check.
           f. Uncertified funds in amounts less than $1,500, including checks, traveler's checks, money orders, and negotiable orders of withdrawal; provided multiple items shall not be used to avoid the $1,500 limitation;
           g. Uncertified funds in amount of $1,500 or more, drafts, and any other items when collected by the financial institution;
           h. State of Texas Warrants;
           i. United States Treasury Checks;
           j. Checks drawn on an insured financial institution and for which a transaction code has been issued pursuant to, and in compliance with, a fully executed Immediately Available Funds Procedure Agreement (Form T-37) or a fully executed Immediately Available Funds Procedure Agreement (Agent Designation for Federally-insured Lender) (Form T-37A) with such financial institution;
           k. Checks by city and county governments located in the State of Texas.
      2. "Received and deposited" means:
           a. Good funds are in the possession of an employee or representative of the trustee, and
           b. A record of the actual date of receipt has been entered on the books of the trustee, and
           c. The funds are actually delivered for deposit to the financial institution in a timely manner, which shall not exceed three business days as defined in Federal Reserve Board Regulation CC, 12 C.F.R., Part 229, after the funds are received.
           d. In the case of a wire transfer, good funds shall be considered to be "received and deposited" when the financial institution notifies the trustee that the funds have been received.
      3. "Trust account" or "escrow account" means an account maintained at a financial institution for holding and disbursing funds to be paid to and on behalf of parties to a transaction and which are subject to annual audit pursuant to Art. 9.39, Texas Insurance Code.
      4.  "Transaction" means the purchase and sale, mortgage, or other act for which a trustee receives trust funds and a guaranty file is opened.
      5.  "Trustee" as used in this rule means a title insurance company, title insurance agent, direct operation, or escrow officer that maintains a trust fund account.
      6.  "Financial institution" as used in this Rule has the meaning given to "depository institution" in 12 USC Sec. 461(b)(1)(A), which includes (1) any insured bank, mutual savings bank, savings bank, or savings association as defined in the Federal Deposit Insurance Act or (2) any insured credit union.
      7.  "Insured" as used in this Rule means that a financial institution is insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF). Any cashier's check, certified check, teller's check or other instrument as used in this Rule must be drawn upon a financial institution insured by the FDIC or NCUSIF. In addition, for teller's checks, both the drawer and drawee financial institutions must be insured.

Comment: Article 9.39A prohibits disbursements by the title company until "good funds,? as defined in this rule, in an amount sufficient to fund all disbursements have been received. Uncertified checks may not exceed $1,500 in the aggregate; however, a title company is not required to accept such checks for that amount. Similarly, a title company may require that some certified or cashiers checks (particularly non-local checks) be collected before disbursements are made. Form T-37 (a three-party agreement between the disbursing title company, (federally insured) financial institution, and third party such as a mortgage company) must be signed by the issuing office (direct operation or title insurance agent) that disburses funds. Under the T-37 agreement, authorization by the financial institution to disburse will be evidenced on the check by funding and "transcode "numbers (one of which is furnished over the phone upon or after completion of the closing). Checks by local governments (other than cities or counties), such as municipal utility districts, are not "good funds "until collected. If the title company is concerned that a check may not be paid (such as where it is concerned about the financial institution), it may require wired or other collected funds. In order to explain the requirement of good funds, title companies often communicate this to brokers and also note the good funds requirement on the commitment. A purchaser's "management "or "investment account "check is not good funds until collected. Teller checks (e.g., credit union checks) are "good funds,? although the title company will want to be satisfied as to the credit union. It is the title insurance agent's responsibility to determine that funds constituting good funds under this rule can be collected.

B.  General Provisions
      1.  Good funds in an amount equal to all disbursements must be received and deposited before any disbursement may be made. Partial disbursements, prior to the receipt and deposit of good funds, are not permitted. If a party to the transaction submits too much money, that overage which will not ultimately be a part of the transaction may be refunded at or prior to settlement.
      2.  A record of all receipts reflecting the date on which the funds are actually received must be entered on the books of the trustee before any disbursements are made.
      3.  The financial institution or branch of a financial institution in which the trust fund account is maintained must be located within the geographic bounds of the State of Texas.
      4.  Even though funds are defined as good funds in this Rule, a trustee is not required to disburse if reasonable business judgment would indicate that the funds may not be collected.
      5.  An Immediately Available Funds Procedure Agreement (Form T-37) must be fully executed by the Financial Institution, the Federally-insured Lender and the Title Company prior to issuance of checks intended to qualify pursuant to subparagraph A.1.j. of this rule. If the Federally-insured Lender has appointed an Agent and delegated to the Agent some of the duties and responsibilities of the Federally-insured Lender, the Title Company must use an Immediately Available Funds Procedure Agreement (Agent Designation for Federally-insured Lender) (Form T-37A) which must be fully executed by each of the four parties to the Agreement including the Agent for the Federally-insured Lender.

See Also:	None
Exceptions:	None
Bulletins:	TX000014 New Rules Effective October 30, 1992.
Forms:	None

P-28.   Requirements for Continuing Education for Title Agents and Escrow Officers

1.  Purpose and Scope. The purpose of this rule is to set forth procedures and requirements for certification of continuing education courses for title insurance agents licensed under the Insurance Code, Article 9.36 and/or escrow officers licensed under the Insurance Code, Article 9.43, as authorized under the Insurance Code, Article 9.58. This rule shall not apply to a corporate agent licensee.

2.  Definitions. The following words and terms, when used in this rule, shall have the following meanings, unless the context clearly indicates otherwise.

Continuing Education Coordinator --- The person in the Agents License Section, Licensing Group or in the Title Division of the Texas Department who is delegated authority to review continuing education courses and licensee compliance and who may be addressed as follows: Texas Department of Insurance, Continuing Education Coordinator, 333 Guadalupe Street, Post Office Box 149104, Austin, Texas 78714.

Department --- The Texas Department of Insurance.

Licensee --- Any individual person holding a license under the authority of the Insurance Code, Article 9.36 and/or Article 9.43.

Provider - A statewide title insurance association, statewide title agents' association or professional association, or a local chapter of a statewide title insurance or title agents' association or professional association; an accredited college or university; a proprietary school as defined in the Texas Proprietary School Act (the Education Code, Chapter 32); the State Bar of Texas; an educational publisher; a title insurance company authorized to do business in the State of Texas; a company owning one or more title insurance companies authorized to do business in the State of Texas; a Texas public school system; or an individual accredited by any of the organizations described in this paragraph as an instructor.

3.    Applicability of Requirements.

(a) Title insurance agents licensed under the Insurance Code, Article 9.36 and escrow officers licensed under Article 9.43 shall complete the required number of hours of continuing education set forth in subparagraph (c) below for each reporting period, unless otherwise exempt.

(b)    The reporting period is from the issue date or last renewal date of the license to the expiration date or date of cancellation of the license.

(c)    A Licensee subject to relicense shall complete continuing education on a prorated schedule for each reporting period. The number of required credit hours shall be based upon the reporting period from the issue date of the original license or the most recent renewal date of the license to the relicense date:   In accordance with the following schedule for all licenses renewing on or after July 1, 2004.

 

 

LICENSE PERIOD	REQUIRED HOURS
Less than 4 months	0
4 months up to and including 6 months	4
7 months up to and including 9 months	5
10 months up to and including 12 months	6
13 months up to and including 15 months	7
16 months up to and including 18 months	8
19 months up to and including 21 months	9
22 months or more	10

<><>(INCREMENTS ARE IN FULL MONTHS - DO NO COUNT PARTIAL MONTHS) </>

4.    Exemption From Continuing Education.

 (a)  The continuing education requirement shall not apply to title insurance agents and escrow officers who meet the criteria of illness, medical disability or circumstances beyond the control of the licensee.

 (b)  A licensee shall apply for an exemption from or an extension of time for meeting the continuing education requirements by completing an application form obtained from the Texas Department of Insurance and submitting all requested documents and information. The form must be received within the reporting period for which it applies and shall include at least the following:

 (1)  Statement of the exact nature of the illness, medical disability or other extenuating circumstances beyond the control of the licensee.

 (2)  Evidence in the form of medical reports from attending physician(s) and insurance claims regarding the illness or medical disability of the licensee, or evidence of insurance claims and/or other documentation as determined regarding circumstances beyond the control of the licensee.

 (3)  Assessment of the condition of the licensee whether it is temporary, permanent or unknown.

  (4)  Statement as to whether the licensee will or will not be able to perform activities including any acts of a title agent or escrow officer.

 (5)  Estimated date when the licensee will be able to perform any activities including any acts of a title agent or escrow officer in accordance with the medical reports or other documents pertaining to circumstances beyond the control of the licensee.

 (6)  Any other information that may be requested by the Department.

5.  Course Criteria.

           (a)  The purpose of continuing education is to increase the licensee's professional competence with regard to title insurance coverage which can be used to assist customers in making informed decisions regarding their insurance needs.

           (b)  The course shall have a stated purpose that reflects the goal(s) or the overall intent of the course.

           (c)  The course shall have specific written learning objectives which support the achievement of the purpose statement of the course. The learning objectives are the desired outcomes for the learning process and identify the knowledge, skills, or attitudes the licensee is expected to obtain.

           (d)  The course shall have a method of evaluation which measures how effectively the course meets its objectives.

           (e)  Persons conducting a course should be knowledgeable and well versed on the topic(s) and be able to conduct/instruct a class and provide appropriate feedback on questions.

           (f)  The course content must be designed to increase the licensee's knowledge and understanding of one or more of the following: title insurance principles and coverages; applicable laws, land title search or examination; mortgage lending; closing transactions; rules and regulations promulgated by the commissioner; recent and prospective changes in coverages, law, regulations, and practices; management of the licensee's insurance business; or duties and responsibilities of the title insurance agent or escrow officer.

           (g)  A State Bar of Texas course is acceptable as an approved course as long as the course includes material pertaining to the business of title insurance, real property, surveys, mortgage lending or transfer of land titles.

           (h)  Each course must be reviewed every two years by the provider and updated to remain relevant to the professional development of a licensee.
     
6.  Types of Courses. Continuing education courses shall consist of three types:

           (1)  Classroom courses may include lectures, seminars, audio, video and computer-based instruction, remote classroom training, and teleconferences that take place in a classroom setting or a monitored environment that allows question and answer or discussion period. Internet, CD-Rom, DVD, or other remote computer-based presentations must have an interactive electronic component that has a means to reasonably authenticate the student's identity and attendance.

           (2)  Self-study courses must be certified for continuing education and may include textbook, audio, video, computer based instruction, or any combination of these in an independent study setting with some measurement of completion of the objective of the course.

           (3)  The State Bar of Texas approved credit courses which pertain to the business of title insurance, real property, surveys, mortgage lending or transfer of land titles.
     
7.  Hours of Credit. Each provider must complete and submit a New Provider Application. The provider must complete and submit a Course Application for each course. Credit hours for continuing education courses are determined by the methods set forth in paragraphs (1) - (9)  of this subsection.

           (1)  Credit for classroom courses is determined by the number of minutes of actual instruction time divided by 60. Actual instruction time is considered the amount of time devoted to the actual instruction/reading of the topic, and does not include breaks, lunch or dinner, introductions of speakers, instructions, etc. No more than 10 hours of credit shall be recognized for any one course.

           (2)  Credit for independent self-study courses shall be calculated by using a total of 2600 words as equal to one credit hour. Total words of a text divided by 2600 words will equal the course credit hours. No more than 4 hours of credit shall be recognized for any one course.

           (3)  Credit for applicable State Bar of Texas courses is determined by the number of credit hours approved by the State Bar of Texas, but only those hours which pertain to title insurance, real property, surveys, mortgage lending or transfer of land titles. No more than 10 hours of credit shall be recognized for any one course. No self-study hours approved by the State Bar of Texas will be accepted.

           (4)  Credit for accredited college or university courses is determined by the number of semester hours approved for the course by the college or university, but only those hours which pertain to title insurance, real property, surveys, mortgage lending or transfer of land titles. Each semester hour will be equal to 8 credit hours.

           (5)  Credit for title insurance agents or escrow officers who teach a qualified continuing education course or a portion of a course is determined by the number of hours of course instruction or by the number of hours assigned to the full course whichever is applicable plus the actual hours of preparation for teaching the course reported by the teacher to the provider. The provider of the course is responsible for issuing a letter of certification reflecting the number of credit hours of preparation and the number of credit hours that the individual taught.

           (6)  Credit for any course may be issued for less than the number of hours the course was assigned (i) to an instructor teaching a portion of the course who does not attend the full course and (ii) to a licensee for attending only a portion of the course. Providers must certify the actual number of hours taught or attended on the certificates of completion it issues to teachers or licensees.

           (7)  Credit for completing the same continuing education course more than once within the same reporting period shall not be granted for compliance with the continuing education requirement. Credit for teaching the same continuing education course more than once within a three-month period shall not be granted for compliance with the continuing education requirement.

           (8)  The licensee shall report to the Department on the license renewal form the course title or course number and the number of credit hours of certified continuing education courses claimed by the licensee for all license renewals.

           (9)  An approved provider may request that a certified course be assigned to another provider by completing and submitting a Course Assignment Agreement to the Department.
     
8.  Course Requirements for Successful Completion.

           (a)  Providers must use attendance rosters or an assessment measurement to certify completion of all or a portion of a classroom continuing education course. Attendance of at least 90% of the course is required to complete all of the course when using attendance rosters. Attendance of at least fifty-five (55) minutes of each hour claimed for a portion of a course is required for each hour of credit issued to a licensee attending only a portion of the course. A means to ensure that the licensee attended the full or at least 90% of the course or the requisite number of minutes for a portion of the course claimed for credit must be established.

           (b)  Providers must use a written examination to evaluate the licensee's competency and the effectiveness of the self-study courses and classroom courses that do not use attendance as the means of completion. Written examinations shall meet the criteria set forth in paragraphs (1) - (7) of this subsection.

                 (1)  Final examination questions shall not be the same or substantially the same questions the licensee previously encountered in the course materials or review exams.

                 (2)  Security measures shall be in place to maintain the security and integrity of the examination and ensure that the enrolled licensee is the individual who took the examination.

                 (3)  Answers to the examination shall not be given to the licensees at any time before, during or after the course.

                 (4)  Examinations shall be graded by an authorized staff member.

                 (5)  Licensees shall be allowed to retake an examination if a 70% passing score is not achieved. The retest shall consist of an alternate examination consisting of different questions from the original examination.

                 (6)  Final examinations shall consist of three exams which are distributed alternatively to enrollees of the course, and are revised/updated every two years by the provider consistent with the course update/revision.

                 (7)  The final examination shall be a comprehensive examination of the course and thoroughly test the licensee's knowledge of the content of the course.

           (c)  Providers must issue certificates of completion to licensees who successfully complete all or a portion of a certified course. The certificate must be issued in a manner which will ensure that the person receiving the certificate is the licensee who took the course, be issued within a reasonable period of time, and be completed to reflect the date the licensee took the course/examination. Information on the certificate of completion can be duplicated from a form obtained from the Texas Department of Insurance. A certificate of completion is valid to renew multiple licenses issued under the Insurance Code, Articles 9.36 and 9.43, if such completion occurred within the renewal period of each license.

9.  Course Certification.

           (a)  Providers of courses must certify each continuing education course with the Texas Department of Insurance prior to offering the course using a certification form obtained from the Texas Department of Insurance. All courses filed with the Department for certification shall be deemed approved unless the Continuing Education Coordinator notifies the provider of disapproval of certification within 30 days of the date on which the certification is filed.

           (b)  Courses from the State Bar of Texas must be certified with the department to recognize the number of credit hours approved for the course.

           (c)  Providers must certify within 150 days from the effective date of this rule on a form obtained from the Texas Department of Insurance that each course offered for continuing education credit meets these requirements.

           (d)  Providers must notify the department when a course is discontinued or no longer active, and when there is a change in the provider's name, address or telephone number in order for the department to maintain an up-to-date registry of courses and to prepare, if courses are to be available to the public, a list of such courses upon request.

10.  Obtain Forms. Application forms for exemption, provider and course certification forms, certificate of completion forms, and the list of courses can be obtained from the Texas Department of Insurance, Continuing Education Coordinator, Agent Activity, 333 Guadalupe, P. O. Box 149104, Austin, Texas 78714-9104.

11.  Appeals. A decision of the Continuing Education Coordinator to deny an application for an exemption from or extension of time for meeting continuing education requirements or a decision disapproving certification of a continuing education course may be appealed to the Director of Licensing, Agent Activity, who shall decide the appeal within 30 days following the filing of the appeal. An appeal of the Director of Licensing decision may be appealed to the Commissioner.

12.  Licensee Compliance.

           (a)  Licensees may choose courses from any of the courses approved for their type of license which are certified with the Texas Department of Insurance to meet their continuing education compliance requirements.

           (b)  Title insurance agents and escrow officers shall attach copies of completion certificates as part of the license renewal or submit a certified summary of completion certificates. Each licensee must maintain evidence of course completion for each course for the current and next preceding renewal period which generally consists of four years.

           (c)  Evidence of compliance is a certificate of completion from a provider of the course which has been successfully completed.

13.  Audit of Continuing Education Records.

           (a)  All continuing education records and evidence of continuing education compliance of licensees must be maintained for a minimum period of four years and are subject to the review of the department at any time. Accuracy of a licensee's records is subject to verification at any time.

           (b)  All continuing education records, course rosters, and all other course materials of providers must be maintained for at least four years and are subject to the review of the department at any time.

           (c)  If continuing education records are audited or reviewed and the validity or completeness of same are questioned, the licensee or provider shall have 30 days to correct discrepancies or submit new documentation.

14.  Failure to Comply.

           (a)  Failure to comply with the continuing education requirements in the absence of a valid exemption, or falsification of records of compliance by the licensee is subject to disciplinary action after notice and hearing. Disciplinary action may include a fine, suspension, revocation or cancellation of license in accordance with the Insurance Code, Chapter 82 and any other applicable laws or statutes.

           (b)  Failure to comply with the rules or falsification of any records by the provider may subject the courses of the provider to be removed from the list of certified courses.

           (c)  Continuing education requirements must be completed by the licensee's renewal date. If continuing education requirements are not met by the renewal date, the license will not be renewed. The 90-day late renewal filing period cannot be used to complete continuing education requirements.

Comment: Article 9.58 of the Texas Insurance Code requires the Commissioner to establish continuing education of up to 15 hours for each 24-month period for licensing of escrow officers and title insurance agents. You may contact Allison James at Stewart Title Guaranty Company (800/292-57129 or 210/979-6622) if you have any questions concerning continuing education requirements.

See Also:	12.27 Mortgagee Title Policy Binder On Interim Construction Loan (Interim Construction Binder) ;
	19.04 Taxes And Assessments .
Exceptions:	None
Bulletins:	None
Forms:	TX Mortgagee's Title Policy Binder on Interim Construction Loan Schedule B T-13 ;
	TX Mortgagee Policy Schedule B T-2 .

P-29. Amendment of Standard Exception in Mortgagee Policy or Mortgagee Title Policy Binder on Interim Construction Loan (Interim Binder) Relating to Taxes Not Yet Due and Payable---In connection with the issuance of a Mortgagee Title Policy or Mortgagee Title Policy on Interim Construction Loan (Interim Binder), the Company may, if satisfied that all taxes, standby fees and assessments by any taxing authority for the year of the issuance of the Mortgagee Policy or Interim Binder are not yet due and payable, and upon payment of the premium in R-24, state the following after the standard tax exception: "Company insures that standby fees, taxes, and assessments by any taxing authority for the year ________ are not yet due and payable."

Comment: A Title Company may add this provision (Company insures that standby fees, taxes, and assessments by any taxing authority for the year _____ are not yet due and payable) on a Binder or Mortgagee Policy). A Title Company may not add this provision on an Owner Policy. According to Department of Insurance Staff Letter (October 4, 1993), taxes are not yet due and payable and this insurance may be provided as to unpaid taxes until after receipt of the tax bill. Customarily title companies have provided this insurance with respect to some taxing authorities even though taxes for other authorities are due and payable. This may be done by substituting the specific taxing unit for "any taxing authority." However, staff letter dated October 29, 1997 states the following: ?Your specific question was whether P-29 prohibits title insurers from splitting the tax exception deletion on those policies where some taxes are available and some are not. Title companies should not vary the promulgated language in this rule. Granted, the rule says if the Company is satisfied that all taxes, standby fees and assessments by any (emphasis added) taxing authority for the year of the issuance of the policy are not yet due and payable the additional language may be added to the tax exception. However, the promulgated language is very specific and does not permit any additional language naming a specific taxing unit to be added. All taxes for all applicable taxing units in a stated tax year must be *not yet due and payable* in the application of this rule and amendment to policies thereunder". According to prior oral Staff position, it is possible to provide this coverage for taxes, standby fees and assessments for the following year. Bulletin No. 153 (April 4, 1988) by the State Board of Insurance prohibits deletion of the exception for the current year's taxes (based on an escrow of estimated taxes) when current taxes are not paid and the tax roll is not certified. This bulletin does not prohibit escrow for payment of the current year's taxes in accordance with P-11 when a lender or owner asserts that those taxes are paid and the tax roll is certified, but satisfactory proof of payment is not furnished. This situation often exists when payment has been made by the owner's mortgage company or tax service and the check has not cleared.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-30. Guaranty Assessment Recoupment Charge.
      Whenever an assessment has been made by the Commissioner upon title insurance companies (the "Assessed Companies") pursuant to Section 7 of Article 9.48, Insurance Code, and the Board has promulgated a special additional charge of up to 1% of a subsequent year's premium rates, pursuant to Section 15 of Article 9.48, to permit the Assessed Companies to recoup a portion of such assessment, the special additional charge shall be collected, distributed and accounted for in the following manner:
(1)  The special additional charge (hereinafter referred to as the "Guaranty Assessment Recoupment Charge" or "Recoupment Charge") shall be collected upon every title insurance policy, whether issued separately or simultaneously, and every other title insurance insuring form for which a premium is charged, including, but not limited to, endorsements and construction loan binders. It shall be collected directly from the persons paying the premiums for the policies and forms by all title insurance agents (including all insurers' direct operations and all title attorneys as defined in Section 2(d), Article 9.56, Insurance Code) and shall be remitted by such agents to the Texas Title Insurance Guaranty Association (the "Association") quarterly, along with the agent's remittance form, in accordance with the following schedule:
      (a)  those funds collected during the first calendar quarter shall be remitted on or before the next May 1;
      (b)  those funds collected during the second calendar quarter shall be remitted on or before the next August 1;
      (c)  those funds collected during the third calendar quarter shall be remitted on or before the next November 1; and,
      (d)  those funds collected during the fourth calendar quarter shall be remitted on or before the next February 1.
(2)  This charge shall be disclosed as a separate itemized charge entitled "Guaranty Assessment Recoupment Charge" on the closing/settlement statement, or, if a closing/settlement statement is not used, on the billing for the endorsement, binder or other insuring form. The agent shall forthwith deposit all Recoupment Charge funds into an audited escrow or trust account, and, for that purpose, may use the same account into which it deposits the State of Texas Policy Guaranty Fees. The agent is responsible for the actual remittance of such funds to the Association, and must maintain an accurate record of the amount of Recoupment Charge funds it has collected, the amount it is holding on deposit and the amount it has remitted.
(3)  Within thirty days after each of the dates mentioned in paragraph (1), above, the Association shall distribute to each Assessed Company that company's pro rata share of the Recoupment Charge funds so collected, according to the portion of the assessment that company has paid.
(4)  The Association shall furnish to each Assessed Company during the month of January each year a written statement on Form T-G3 with respect to any assessment paid, or recouped through a Recoupment Charge, in whole or part, by such company within the preceding calendar year. In the event the Company has made payments or received Recoupment Charge funds with respect to more than one assessment during such year, the Association shall furnish a separate Form T-G3 pertaining to each assessment.
Each Assessed Company may file the Association's statement(s) on Form T-G3 with the company's premium tax return, in support of its claiming the tax credits authorized by Section 15 of Article 9.48, Insurance Code.

Comment: The Guarantee Assessment Recoupment Charge (GARC) ceased to be collected on transactions closed after December 31, 1991. The Policy Guarantee Fee (not to exceed $5) ceased to be collected on transactions closed after March 31, 1992.  It was reinstated in 2004, and was collected on owner title policies and mortgagee title policies, and not on binders. Article 9.48 of the Texas Insurance Code creates the Texas Title Insurance Guarantee Association. Covered claims are claims under a title policy of an insured not in excess of the policy amount or claims against trust funds or an escrow for which an impaired insurer is liable under an insured letter or against trust funds or an escrow account of an impaired title insurance agent. Claims for trust funds of an impaired title insurance agent due to shortages in trust funds must be paid from guarantee fees and not from assessments. A covered claim is limited to the lesser of $250,000 per claimant or $250,000 per policy. Covered claims do not include attorney's fees and expenses incurred before receivership of the title company or enhanced damages (arising out of Article 21.21 of the Insurance Code or the Deceptive Trade Practices Act.). The insured real property must be located within Texas.

See Also:	None
Exceptions:	None
Bulletins:	TX000024 Home Office Issue Policies.
Forms:	None

All directly issued policies of title insurance (authorized by Art. 9.34, Insurance Code, defined in Procedural Rule P-1.aa., and sometimes referenced "Home Office Issue") shall be countersigned, prior to delivery, by a bona fide officer or employee of the Title Insurance Company issuing the directly issued policy. Each employee or officer countersigning directly issued policies shall be employed at a designated office location in the State of Texas maintained by the issuing Title Insurance Company for the issuance of directly issued policies. Each Title Insurance Company shall file annually on or before January 31 of each calendar year a written designation of its office addresses with the Texas Department of Insurance, together with the name and position of each person or persons at each designated address it has authorized to countersign directly issued policies at such address.
      No person or entity may be authorized, designated or empowered to countersign directly issued policies for a Title Insurance Company until designated with the Texas Department of Insurance in compliance with this Rule P-31. For the purpose of this rule all directly issued policies must reflect original countersigned signatures and it is prohibited to affix facsimile or any other form of signature that is not the originally executed signature of a designated individual.

 

1. unsigned policy jackets from the title company inventory to be directly issued;

2. completed unsigned policy schedules;

3. check for 17.75 percent of the premium payable to Stewart Title Guaranty Company;

4. copies of T-00s;

5. copies of invoices (for portions of premium);

6. written agreement for search, examination or closing if the amount paid exceeds the parameters of P-24;

7. title evidence to the date of policy and/or closing of the transaction

8. tax certificates;

9. closing statement;

10. photo copies of deed(s) and deed(s) of trust delivered at closing;

11. affidavit of debts and liens;

12. waivers of inspection (if applicable); and

13. owner policy rejection (if applicable).

See Also:
Exceptions:
Bulletins:
Forms:

P-32.  Document Retention.

Pursuant to Tex. Ins. Code Ann. § 2704.001, evidence of insurability shall be preserved and retained in the files of the title insurance company, direct operation, or title insurance agent for a period of not less than fifteen (15) years after the policy or contract of title insurance has been issued. Electronically produced or scanned documents may be retained in place of hard copies. Hard copies, electronically produced or scanned copies shall be retained for the following periods:  (1) escrow accounting documentation (such as signed settlement statements, disbursement sheets, invoices, and check copies) must be retained for at least three years; (2) evidence of insurability, including a title insurance commitment, a title report, a title opinion, or a run sheet, but not including copies of documents filed in the public records, must be retained for at least fifteen (15) years; and (3) title insurance policies must be retained indefinitely.  These time periods for retention shall apply to electronically produced forms retained in compliance with Procedural Rule P-17.

 

P-33.  Repealed

Exceptions:

None.

Bulletins:

None.

Forms:

None.

P-34. Repealed. Procedural Rule P-34 is repealed effective August 1, 1995, pursuant to Commissioner’s Order No. 95-0663.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-35. Prohibition Against Guaranties, Affirmations, Indemnifications, and Certifications.
      No Title Insurance Company, Title Insurance Agent, Direct Operation, Escrow Officer, nor any employee, officer, director or agent of any such entity or person, shall issue or deliver any form of verbal or written guaranty, affirmation, indemnification, or certification of any fact, insurance coverage or conclusion of law to any insured or party to a transaction other than: (i) a statement that a transaction has closed and/or has been funded, (ii) issuance of an insured closing service letter, or any insuring form or endorsement promulgated by the State Board of Insurance, or (iii) certification of copies of documents as being true and exact copies of the original document or of the document recorded in the public records.

Comment: According to Bulletin No. 155 (April 30, 1991) issued by the State Board of Insurance this Rule does not prohibit the certification relating to disbursements on the HUD-1 by the settlement agent or acknowledgment of receipt of closing instructions. Among other things, this Rule prohibits "first lien letters "certifying the status of the lien at closing. The rule prohibits certification that proceeds were disbursed according to a special set of instructions or that the escrow officer had personally closed according to special instructions. It does not prohibit a title insurance agent or escrow officer from signing a statement that a set of standard instructions was read by and is familiar to the agent or escrow officer and it does not prevent a title insurance agent or escrow officer from following or applying standard closing instructions (Fabian Gomez, "Regulatory Notes,? TLTA News, Spring 1991). According to Staff Letter dated December 1, 1997 the title company can not agree to the following: ?Prior to closing, the Bank will request an updated title commitment. Upon searching title from the effective date of the previously issued title commitment until the date of the closing, the Title Company will deliver an updated title commitment with an effective date the business day immediately preceding the date of closing. The Bank will record required transfer or lien instruments creating the estate or interest to be insured within one (1) business day following the date of closing. If for any reason a scheduled closing is delayed, the Bank will follow the same procedure set forth above to request an updated title commitment prior to the rescheduled closing date; and as long as the procedures set forth herein are followed by the Bank, the risk of an intervening transfer, lien or other encumbrances being filed between the time and effective date of the updated title commitment and filing of documents will be borne by the title company and its underwriter so that the title policies when issued will not contain any exceptions for any such intervening transfer, lien or other encumbrances."

 

See Also:	3.28 Commitments .
Exceptions:	None
Bulletins:	TX000007 New Title Insurance Policies (effective October 1, 1991);
	TX000010 Waiver of Inspection and Disclosure to Owner;
	TX000014 New Rules Effective October 30, 1992;
	TX000015 New Forms Effective January 1, 1993.
Forms:	TX Mortgagee Policy T-2 ;
	TX Owner Policy T-1 ;
	TX Residential Owner Policy T-1R ;
	TX Waiver of Inspection and Disclosure to Owner 1993 .

P-36.  Arbitration Provisions.
     

A Company shall notify its proposed insured under a Mortgagee Policy or an Owner Policy (Form T-1) of the insured's right to delete the arbitration provision [§13 of the Conditions of the Mortgagee Policy and §14 of the Conditions of the Owner Policy (Form T-1) from the policy at no additional charge to the insured.                        1.  A Company shall, upon specific request of the proposed insured under a Mortgagee Policy, delete Section 13 of the Conditions relating to arbitration from that policy by typing in Schedule B of the policy the following language:            "Section 13 of the Conditions of this Policy is hereby deleted."                        2.  A Company shall, upon specific request of the proposed insured under an Owner Policy (Form T-1), delete Section 14 of the Conditions relating to arbitration from that policy by typing in Schedule B of the policy the following language:            "Section 14 of the Conditions of this Policy is hereby deleted."                        3.  If a Company does not issue a commitment prior to issuance of the Owner Policy (Form T-1) or Mortgagee Policy (Form T-2), it shall provide the promulgated Deletion of Arbitration form to the insured before issuance of the policy or shall delete the arbitration provision as provided above.            Any request made under this procedural rule must be made prior to the issuance of the policy.            The Deletion of Arbitration Provision form shall read as follows: DELETION OF ARBITRATION PROVISION(Not applicable to the Texas Residential Owner Policy) Arbitration is a common form of alternative dispute resolution. It can be a quicker and cheaper means to settle a dispute with your Title Insurance Company. However, if you agree to arbitrate, you give up your right to take the Title Company to court and your rights to discovery of evidence may be limited in the arbitration process. In addition, you cannot usually appeal an arbitrator's award.Your policy contains an arbitration provision (shown below). It allows you or the Company to require arbitration if the amount of insurance is $2,000,000 or less. If you want to retain your right to sue the Company in case of a dispute over a claim, you must request deletion of the arbitration provision before the policy is issued. You can do this by signing this form and returning it to the Company at or before the closing of your real estate transaction or by writing to the Company.The arbitration provision in the Policy is as follows: “Either the Company or the Insured may demand that the claim or controversy shall be submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land Title Association (“Rules”).  Except as provided in the Rules, there shall be no joinder or consolidation with claims or controversies of other persons.  Arbitrable matters may include, but are not limited to, any controversy or claim between the Company and the Insured arising out of or relating to this policy, any service in connection with its issuance or the breach of a policy provision, or to any other controversy or claim arising out of the transaction giving rise to this policy.  All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be arbitrated at the option of either the Company or the Insured, unless the Insured is an individual person (as distinguished from an Entity).  All arbitrable matters when the Amount of Insurance is in excess of $2,000,000 shall be arbitrated only when agreed to by both the Company and the Insured.  Arbitration pursuant to this policy and under the Rules shall be binding upon the parties.  Judgment upon the award rendered by the Arbitrator(s) may be entered in any court of competent jurisdiction.”  _________________________________________              ____________________SIGNATURE                                                                          DATE

Comment: The arbitration clause in the Texas Residential Owner Policy (Form T-1R) contains a nonbinding arbitration clause. The arbitration clause may not be deleted from the T-1R. The arbitration clause in the Owner Policy (T-1) and Mortgagee (T-2) contains an arbitration clause requiring binding arbitration at the request of either the insured or the insurer, if:

1. the policy does not exceed $1 million (if the policy is larger, arbitration may not be required);

2. the insured is not an individual (if the insured is a natural person, arbitration may not be required); or,

3. the arbitration clause is not deleted (by promulgated provision added to Schedule B) pursuant to request of the insured before the policy is issued. There is no charge to delete the arbitration clause.

Before the title company issues the Owner Policy (T-1) or Mortgagee Policy (T-2) it must deliver the Deletion of Arbitration Clause to the proposed insured (in the commitment or separately). If it does not do so, the title company must delete the arbitration clause. Rule P-18 requires delivery of a commitment upon request of the proposed insured and, in most circumstances, if an Owner Policy will be issued.

See Also:	1.08 Abutting Owners Rights of Access ;
	1.12 Access, Rights Of ;
	3.28 Commitment ;
	17.38 Residential Owner Title Policies .
Exceptions:	None
Bulletins:	TX000007 New Title Insurance Policies (effective October 1, 1991).
Forms:	TX Commitment T-7 ;
	TX Mortgagee's Title Policy Binder on Interim Construction Loan Schedule C T-13 ;
	TX Mortgagee Policy T-2 ;
	TX Owner Policy T-1 ;
	TX Residential Owner Policy T-1R .

P-37.  Lack of a Right of Access---

If the company is not satisfied as to the insurability of access to and from the land, the title to which or a lien thereon is to insured, it may make the following exceptions to the insuring form:
             a.  To the Owner Policy ( Form T-1 ): "Lack of a right of access to and from the Land. Covered Risk number 4 is hereby deleted."            b.  To the Mortgagee Policy: "Lack of a right of access to and from the Land. Covered Risk number 4 is hereby deleted."            c.  to the Residential Owner Policy ( Form T-1R ): "Lack of a right of access to and from the land. Company deletes the insurance of access under Covered Title Risks."

Comment: Those policies issued on or after October 1, 1991 contain an insuring provision against loss because of a right of access (unless an exception or exclusion applies). Access is defined in the Owner Policy (T-1) and Mortgagee Policy (T-2) as "legal right of access to the land and not the physical condition of access. The coverage provided as to access does not assure the adequacy of access for the use intended." Access insured in the Texas Residential Owner Policy is legal right of access. The additional chain charge ($270) may not be made for determining access (1) within a subdivision if the recorded plat is within one county, the plat is lawfully approved, and the road is dedicated or (2) owned by the owner of the proposed insured land at the time of the application. The title insurance agent must examine the title to access (for the benefit of the title insurance company) before insuring an access easement or right of access. The Commitment requires satisfactory evidence of right of access. This requirement can be deleted if already satisfied. The Binder does not commit to insure access.

See Also:	14.12 Owner Policies ;
	17.38 Residential Owner Title Policies .
Exceptions:	None
Bulletins:	TX000015 New Forms Effective January 1, 1993;
	TX000032 1995 Texas Legislation.
Forms:	TX Owner Policy T-1 ;
	TX Owner Policy Schedule A T-1 ;
	TX Owner Policy Schedule B T-1 ;
	TX Residential Owner Policy T-1R ;
	TX Residential Owner Policy Schedule A T-1R ;
	TX Residential Owner Policy Schedule B T-1R .

P-38.  Residential Owner Policy of Title Insurance---One-to-Four Family Residences
      A Company shall only issue a Residential Owner Policy of Title Insurance-One-to-Four Family Residences ( Form T-1R ) on property that is Residential Real Property, and the insured is a natural person(s) at the date the policy is issued. In the application of this rule it is permissible to issue a Residential Owner Policy of Title Insurance ( Form T-1R ) prior to the construction of improvements provided that the Residential Owner Policy of Title Insurance ( Form T-1R ) is issued to a natural person, in accordance with P-8.a. In all other cases, the Company shall issue the Owner Policy ( Form T-1 ) when issuing a policy to an owner.

( See definition in Rule P-1.u )

Comment: Rule P-1u defines "Residential Real Estate." Rule P-1bb defines "Owner Policy." Rule P-38 and Article 9.07 require issuance of the Texas Residential Owner Policy of Title Insurance (T-1R) on residential real estate if the insured is a natural person. If the insured is not a natural person (e.g., a corporation, partnership, or company), then the title company must issue the Owner Policy (T-1) on residential real estate. On property that is not "Residential Real Property "the title company must issue the Owner Policy (T-1). The Texas Residential Owner Policy of Title Insurance (T-1R) may be issued to a natural person prior to construction of improvements if the policy includes the cost of improvements.

See Also:	5.30 Express Insurance ;
	9.14 Insuring Around ;
	18.40 Surveys .
Exceptions:	None
Bulletins:	TX000013 Express Insurance: October 30, 1992.
Forms:	None

P-39.  Express Insurance.
      (a)  Encroachments. If Company amends its Area and Boundary Exception, pursuant to Procedural Rule P-2, it may except, pursuant to Procedural Rule P-5, to those matters shown on the survey that it deems to cause a possible defect in title. The Company may, if it deems the risk insurable as to encroachments, add the following language after the exception:
      "Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that orders the removal of this improvement because it encroaches over or into ____________________. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to require the removal of this improvement because it encroaches as herein stated."

Comment: The Company may provide affirmative insurance against encroachments and other survey matters. To provide the coverage, the Company must amend its area and boundary exception. To amend the area and boundary exception, the Company must receive a current survey and (on the Owner Policy) must be paid 15 percent of the basic premium for amendment of the area and boundary exception. If the Company's guidelines are met, the Company then may except to the encroachment and add the following:

"Encroachment of ________ into __________. Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, nonappealable judgment of a court of competent jurisdiction that orders the removal of this improvement because it encroaches over or into __________. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to require the removal of this improvement because it encroaches as herein stated."

      (b)  Possible Defects. If Company determines that a title matter may cause a possible defect in title, it may except, pursuant to Procedural Rule P-5, to the matter in Schedule B, and, if it determines that the risk is insurable, it may add the following language after the exception:
      "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that divests the Insured of its interest as Insured because of this right, claim, or interest. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to divest the Insured of its interests as Insured because of this right, claim, or interest."

or

   "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of the enforcement of said rights as to the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to enforce said rights as to the land."

Comment: Under this rule, the Company may except to a "defect in title "and then provide affirmative insurance against that defect.

For example, if underwriting personnel of the Company considers the risk insurable, it may except to a lis pendens and underlying suit, gap in the chain of title, or other adverse claim and then state:

?(describe defect). Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, nonappealable judgment of a court of competent jurisdiction that divests the insured of its interest as insured because of this right, claim, or interest. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to divest the insured of its interest as insured because of this right, claim or interest."

If underwriting personnel of the Company consent, the Company may provide another form of affirmative insurance against certain encumbrances on the title (such as blanket easements not in use on the land) by excepting to the matter and then adding the following:

?(describe defect). Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of the enforcement of said rights as to the land. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to enforce said rights as to the land."

This latter form of affirmative insurance might be given in the following circumstances after specific approval by underwriting personnel of the Company:

1. (undefined or unlocated) easements not in use or evidenced by lines located on other property.

2. Mineral interests or mineral leases that may have expired;

3. Rights to use the surface of the land for extraction of development of minerals excepted by separate exception.

4. Restrictions that may be unenforceable because of widespread violation or that may have been amended by consent of owners.

Example: The Company is satisfied that surface rights have been waived by all owners of mineral interests. It may then except to the minerals and, in a separate exception, state the following:

"Those rights to use the surface of the land for extraction or development of minerals (hereinafter "said rights) set forth in exceptions _____ above. Company insures the insured against loss, if any, sustained under the terms of this Policy by reason of the enforcement of said rights as to the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the Insured to enforce said rights as to the lands."

According to Staff Letter dated November 26, 1997, the promulgated language may not be modified to acknowledge that title was acquired by limitations and that the company is not obligated to file suit.

      (c)  Liens.
          (1)  If Company intends to provide insurance against an enforceable lien, it shall comply with P-11. If Company then determines to issue without exception to lien pursuant to P-11b(1), (4), (5), (6), (7), it may show the lien in Schedule B of the Policy and then may state:
            "Exception No. ________ is hereby deleted. Company provides insurance as to said lien in accordance with the terms of this Policy."
            (2)  If Company then determines to issue with exception to the lien after otherwise complying with P-11, it may, pursuant to Procedural Rule P-5, show the lien in Schedule B and may state one of the following:
            (a)  If the Lien may only be foreclosed judicially:
            "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, non-appealable judgment of a court of competent jurisdiction that orders foreclosure of said lien on the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land."

Comment: If the Company intentionally provides insurance against outstanding enforceable recorded liens, it must comply with Rule P-11. This rule relates to "insuring around." The insured must consent in writing to this procedure.

The Company may, if it insures against a lien under P-11 after approval of underwriting personnel of the Company, omit exception to the lien or provide express insurance in one of three ways:

1. It may except to the lien and then state: ?Exception number ___ is hereby deleted. Company provides insurance as to said lien in accordance with the terms of this Policy." This affirmative insurance simply deletes the exception to the lien.

2. If the lien (such as a mechanic's lien) must be foreclosed judicially and underwriting personnel of the Company agree to insure, the Company may except to the lien and then state:

?(describe lien) Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a final, nonappealable judgment of a court of competent jurisdiction that orders foreclosure of said lien on the land. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land."

3. If the lien (such as an abstract of judgment, state tax lien, federal tax lien, or deed of trust) may be foreclosed nonjudicially and underwriting personnel of the Company agree to insure, the Company may except to the lien and then state:

?(describe lien). Company insures the insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a foreclosure of said lien on the land. Company agrees to provide defense to the insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land and to take action in accordance with the terms of the Policy if the holder of the lien commences a foreclosure action based on said lien."

Procedural Rule P-39 is not mandatory.

Only express insurance authorized by the promulgated rules may be used in Texas. A number of Bulletins issued by the Department of Insurance have prohibited other forms of affirmative coverage:

1. Bulletin No. 140 (March 20, 1973): Unless affirmative insurance or certification (such as insurance that the mortgage is a valid first mortgage lien in accordance with New Jersey law) is expressly authorized, it may not be provided.

2. Bulletin No. 138 (February 21, 1973): A company may not insure as of some future date an estate to be acquired in the future. (When the lessee-optionee obtains title upon the exercise of the option, the lessee will have fee simple title.")

3. Bulletin No. 113 (May 27, 1968): Affirmative insurance relating to a mineral exception (clarifying that it does not apply to water use) is not available absent a specific procedural rule.

4. Bulletin No. 89 (October 5, 1967): Acknowledgment or affirmative insurance that a chattel constituting a fixture is protected by the mortgagee policy against any security interest being prior to the mortgage is not authorized.

Although Rule P-39 establishes the most commonly known express or affirmative insurance, the following rules also authorize express insurance:

1. Rule P-8 (insurance against recorded mechanic's liens);

2. Rule P-11b(8) (insurance that a lien or lease is subordinate to lien of insured mortgage);

3. Rule P-29 (insurance that standby fees, taxes, and assessments by taxing authorities are not yet due and payable).

or

  (b)  If the lien may be foreclosed nonjudicially:
            "Company insures the Insured against loss, if any, sustained by the insured under the terms of this Policy by reason of a foreclosure of said lien on the land. Company agrees to provide defense to the Insured in accordance with the terms of this Policy if suit is brought against the insured to foreclose said lien on the land and to take action in accordance with the terms of the policy if the holder of the lien commences a foreclosure action based on said lien."
           The provisions of this Rule shall not modify or diminish the requirements of P-11.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-40.  Standards for Reserve Setting and Reviewing
      Upon acceptance or conditional acceptance of a claim under a title insurance policy, the title insurer must:
            (a)  set an initial reserve within thirty (30) days.
            (b)  base the reserve required in (a) on an accurate estimate, in the best judgment of the Company's personnel, of the costs expected to be paid to the insured or other parties in the settlement and processing of the claim. A nominal initial reserve may be used only when opening a file without adequate information to make an appropriate assessment of the risk.
            (c)  when a nominal initial reserve has been set in accordance with (b) above, change the reserve to reflect the risk as soon as sufficient information has been received.
            (d)  review each reserve on a regular basis (at least quarterly) and adjust the reserves as warranted by new information or changed circumstances. It is equally important that a claim not be over-reserved or under-reserved.
            (e)  maintain written records of the initial reserve and any change to the reserve, including the reasons for any change in the reserve, in the file for review by the Commissioner for a period of four (4) years.

Comment: Article 9.17 of the Texas Insurance Code requires the title insurance company to maintain reserves against unpaid losses and loss expense for costs of defense of the insured and other costs expected to be paid to other parties in the defense, settlement, or processing of the title policy claim. Section II H of "Claims Handling Principles and Procedures" requires compliance with this rule after acceptance or conditional acceptance of a title policy claim.

 

P-41. Reserved for Future Use. This Rule has been reserved for future use.

P-42. Reserved for Future Use. This Rule has been reserved for future use.

See Also:	6.26 Foreclosures - Deed Of Trust .
Exceptions:	None
Bulletins:	TX000044 Commissioner's Order for 1996 Rate Hearing.
Forms:	TX Limited Pre-Foreclosure Policy T-40 ;
	TX Limited Pre-Foreclosure Policy Down Date Endorsement T-41 .

A)  Limited Pre-Foreclosure Policy ( Form T-98 )
      All the following requirements (items 1 through 11) apply to issuance of a Limited Pre-Foreclosure Policy:
      1)  The premium prescribed in Rate Rule R-26 must be collected prior to issuance of the Limited Pre-Foreclosure Policy.
      2)  The indebtedness secured by the Foreclosing Mortgage must be in default at the time of application for, and issuance of, the Limited Pre-Foreclosure Policy. The term "Foreclosing Mortgage" means the deed of trust, or other lien, specifically described under the section entitled Foreclosing Mortgage in the Limited Pre-Foreclosure Policy Combined Schedule ( Form T-98 ).
      3)  The Limited Pre-Foreclosure Policy may not be issued if the Foreclosing Mortgage is not insured under a Mortgagee Policy of Title Insurance on the date that the Limited Pre-Foreclosure Policy is issued. If a Mortgagee Policy of Title Insurance is issued for the purposes of qualifying the Foreclosing Mortgage for a Limited Pre-Foreclosure Policy, the Date of Policy of the Mortgagee Policy of Title Insurance shall be the date of recording of the Foreclosing Mortgage.
      4)  A Commitment for Title Insurance may not be issued prior to, or in connection with, the issuance of a Limited Pre-Foreclosure Policy or Limited Pre-Foreclosure Policy Downdate Endorsement.
      5)  The Name of Insured in the Limited Pre-Foreclosure Policy may include one or more of the following: (i) a named mortgagee or mortgagees; (ii) an assignee or assignees of the named mortgagee or assignee; (iii) a loan servicer(s); (iv) a trustee(s); and/or, (v) an attorney(ies).
      6)  The Amount of Insurance for the Limited Pre-Foreclosure Policy must be the least of: (i) the unpaid balance of the indebtedness secured by the Foreclosing Mortgage; or, (ii) the value of the land encumbered by the Foreclosing Mortgage. If the proposed insured does not provide the Company with written evidence of the value of the land, the Amount of Insurance shall be the unpaid balance of the indebtedness secured by the Foreclosing Mortgage.
      7)  Express insurance pursuant to Procedural Rule P-39 shall not be available for the Limited Pre-Foreclosure Policy.
      8)  The arbitration clause may not be deleted unless all the requirements of this section are satisfied. The Company shall delete the arbitration provisions of the Limited Pre-Foreclosure Policy {i.e. Section 9 of the Conditions and Stipulations} if the proposed Insured requests, in writing, the deletion of the arbitration provisions on or before two months after the Date of Policy of the Limited Pre-Foreclosure Policy. The arbitration clause may be deleted by following these instructions:
            a)  The language to be used to delete the arbitration clause {hereinafter the "Deletion Language"} under P-43.A.(8) is as follows:
            "Item 9 of the Conditions and Stipulations is hereby deleted."
            b)  The arbitration clause may be deleted by: (i) inserting the Deletion Language in the Exceptions From Coverage of the Limited Pre-Foreclosure Policy Combined Schedule; or, (ii) including the Deletion Language in a T-3 endorsement; or, (iii) inserting the Deletion Language in a Limited Pre-Foreclosure Policy Downdate Endorsement issued in accordance with Procedural Rule P-43.B.
      9)  As required by Article 9.38(c) of the Texas Insurance Code, a Schedule "D", which complies with Procedural Rule P-21, shall be attached to the Limited Pre-Foreclosure Policy. Provided, however, in the case of Schedule "D" to the Limited Pre-Foreclosure Policy, Procedural Rule P-21.3, is amended to read as follows:
            "As to each Limited Pre-Foreclosure Policy, the following additional language shall be included in each Schedule D, together with all required information included within the blanks contained below:
                  Of the total premium shown on the Limited Pre-Foreclosure Policy Combined Schedule, $________ (or %) will be paid to the policy issuing Title Insurance Company; $________ (or %) will be retained by the issuing Title Insurance Agent; and the remainder of the estimated premium will be paid to other parties as follows:

Amount	To Whom	For Services
$______ (or %) ____	__________________	_________________
$______ (or %) ____	__________________	_________________
$______ (or %) ____	__________________	_________________

  Each Title Insurance Company and each Title Insurance Agent shall, prior to usage, file its proposed Limited Pre-Foreclosure Policy Schedule D form with the Texas Department of Insurance; in like manner each Title Insurance Company and Title Insurance Agent shall file all Amended Limited Pre-Foreclosure Policy Schedule D forms with the Texas Department of Insurance prior to usage.
                  Each Title Insurance Company and Title Insurance Agent may, in preparing its Limited Pre-Foreclosure Policy Schedule D, use whatever reasonable format it elects, provided that such format does not alter or delete the furnishing of the disclosures hereby required. It is the express intent of this paragraph to enable usage of electronic equipment in preparation of the required Schedule D."
      10)  No proforma or specimen Limited Pre-Foreclosure Policy Combined Schedule may be issued.
      11)  A T-3 Correction Endorsement may be issued to delete errors or erroneous exceptions contained in the Limited Pre-Foreclosure Policy Combined Schedule. The requirements of Section 2, Paragraph IV, of the Basic Manual, entitled "Correction of Policy or Binder" shall apply to a Correction Endorsement for a Limited Pre-Foreclosure Policy Combined Schedule.
B)  Limited Pre-Foreclosure Policy Downdate Endorsement ( Form T-99 )
      All the following requirements apply to issuance of a Limited Pre-Foreclosure Policy Downdate Endorsement:
      1)  The Limited Pre-Foreclosure Policy may be endorsed no more than four times pursuant to issuance of a Limited Pre-Foreclosure Policy Downdate Endorsement.
      2)  A Pre-Foreclosure Policy Downdate Endorsement may not be issued later than 24 months subsequent to the first {initial} issued Limited Pre-Foreclosure Policy "Date of Policy".
      3)  Express insurance under Procedural Rule P-39 shall not be available for the Limited Pre-Foreclosure Policy Downdate.
      4)  A commitment for title insurance may not be issued prior to, or in connection with, the issuance of a Limited Pre-Foreclosure Policy Downdate Endorsement.
      5)  The indebtedness secured by the foreclosing mortgage must be in default at the time of application for, and issuance of, the Limited Pre-Foreclosure Policy Downdate Endorsement.

Comment: The Limited Pre-Foreclosure Policy (T-98) provides insurance as to record matters recorded subsequent to the foreclosing mortgage and as to general liens (such as judgment and tax liens) against the mortgagor and successors, and as to standby fees, taxes and assessments. The Policy may be issued to the mortgagee, an assignee, a loan servicer, an attorney, a trustee (or substitute trustee). The Policy may be issued to a lender, which was issued a Mortgagee Policy. You may assume an institutional lender previously received a mortgagee policy (T-2). The Policy may be issued for the value of the land or amount owed; you may assume the requested policy amount is the value of the land for issuance of this policy. The premium is 40% of the Basic Rate, but not less than $237 pursuant to Rule R-26. No credit is available because of issuance of a prior mortgagee policy or in connection with a later policy.

See Also:	8.08 Homestead .
Exceptions:	None
Bulletins:	TX000037 Home Equity Constitutional Amendment (HJR 31, Proposition 8);
	TX000040 Home Equity Mortgages; Constitutional Amendment (HJR 31; Proposition 8) (Effective January 1, 1998);
	TX000043 Current Home Equity Questions.
Forms:	TX Affidavit for Home Equity Transactions 1 ;
	TX Affidavit Regarding Dairy Production (Home Equity Transactions) 1 ;
	TX Equity Loan Mortgage Endorsement T-42 ;
	TX Mortgagee Policy T-2 ;
	TX Mortgagee Policy Schedule A T-2 ;
	TX Mortgagee Policy Schedule B T-2 .

P-44.  Equity Loan Mortgage Endorsement (T-42)
      A.  When a Mortgagee Policy of Title Insurance ( T-2 ) is to be issued insuring the lien securing an extension of credit made pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution, the Company shall attach to the Mortgagee Policy of Title Insurance (T-2) the Equity Loan Mortgage Endorsement ( T-42 ).
      B.  The Company may delete any provision of paragraph 2 of the Equity Loan Mortgagee Endorsement (T-42) if it does not consider the additional risk insurable.
      C.  The Company may add subparagraph (f) to paragraph 2 of the Equity Loan Mortgage Endorsement (T-42) if it considers the risk insurable, provided that the following requirements are met:
            (1)  The promissory note secured by the insured mortgage and the insured mortgage must be executed by the borrower(s)/grantor(s) at the office of a title company and the insured mortgage must be acknowledged by the borrower(s)/grantor(s) at the office of a title company. For purposes of this subparagraph C(1), "the office of a title company" shall mean the leased or owned Texas office location(s) of: (a) a title insurance company; or, (b) a direct operation; or, (c) a title insurance agent; or, (d) an attorney conducting the attorney's business in the name of a title insurance company or direct operation or title insurance agent where the attorney and the attorney's bona fide employees who close transactions are licensed as escrow officers as provided in Article 9.42.C, Texas Insurance Code.
            (2)  Subparagraph (f) of paragraph 2 of the Equity Loan Mortgage Endorsement (T-42) must read as follows:
            "(f) The extension of credit secured by the lien of the insured mortgage being closed at a location other than the office of the lender, an attorney at law, or a title company, as set forth in Subsection (a)(6)(N) of Section 50, Article XVI, Texas Constitution."
      D.  The Company may not provide Express Insurance (pursuant to P-39) as to matters set forth in the Equity Loan Mortgage Endorsement (T-42).

Comment: The Equity Loan Mortgage Endorsement (T-42) must be issued on a Mortgagee Policy (T-2) insuring a home equity mortgage. There is no charge for this endorsement. The coverages of paragraph 2 of the endorsement relate to: (a) joinder of all owners and spouses; (b) no other home equity mortgages on the land; (c) no prior home equity mortgages on the land closed within a year; and, (d) disclosure in the mortgage that it is a home equity mortgage.

See Also:	8.08 Homestead .
Exceptions:	None
Bulletins:	TX000039 Reverse Mortgages; Constitutional Amendment (HJR 31; Proposition 8) (Effective January 1, 1998).
Forms:	TX Affidavit for Reverse Mortgages 1 ;
	TX Mortgagee Policy T-2 ;
	TX Mortgagee Policy Schedule A T-2 ;
	TX Mortgagee Policy Schedule B T-2 ;
	TX Reverse Mortgage Endorsement T-43 .

P-45  Texas Reverse Mortgage Endorsement (T-43)

A.  When a Mortgagee Policy of Title Insurance ( T-2 ) is to be issued insuring the lien securing a reverse mortgage loan made pursuant to Subsection (a)(7) of Section 50, Article XVI, Texas Constitution, the Company shall attach to the Mortgagee Policy of Title Insurance (T-2) the Texas Reverse Mortgage Endorsement ( T-43 ).

B.  The Company may not provide Express Insurance ( pursuant to P-39 ) as to matters set forth in the Texas Reverse Mortgage Endorsement (T-43).

C. The Loan Policy of Title Insurance (T-2) insuring the lien securing a reverse mortgage loan may be issued in an amount not exceeding:1. 150% of the total advances to be made according to a plan established by the original loan agreement; or2. The maximum amount that may be secured by the lien of the insured mortgage, as estimated by the lender according to the written lender instructions; or, 3. In the case of an FHA-insured loan, the Maximum Claim Amount as established by FHA.

D.  The Company may delete any subdivision in Paragraph 3 of the Texas Reverse Mortgage Endorsement (T-43) if it does not consider the additional risk insurable. The following language shall be placed below Paragraph 3:

The Company shall complete the blank with the appropriate subdivision of Paragraph 3 of the Texas Reverse Mortgage Endorsement (T-43) if the above format is used.

E.  The Company must delete subdivisions (ii) through (iv) of Paragraph 3 of the Texas Reverse Mortgage Endorsement (T-43) if the insured mortgage and the promissory note are not executed at the office of a title company. For purposes of this Rule P-45, "the office of a title company" shall mean the leased or owned Texas office location(s) of: (1) a title insurance company; or, (2) a direct operation; or, (3) a title insurance agent; or, (4) an attorney conducting the attorney's business in the name of a title insurance company or direct operation or title insurance agent where the attorney and the attorney's bona fide employees who close transactions are licensed as escrow officers as provided in Article 9.42.C, Texas Insurance Code. In order to evidence the deletion required by this Paragraph E, the following language shall be stated on the Texas Reverse Mortgage Endorsement (T-43):

F.  The Company must delete subdivision (ii) of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) as provided in Paragraph D, above, if the Company is not furnished with government issued photographic identification showing that the owner of the land or the spouse of the owner of the land is 62 years or older.

G.  The Company must delete subdivision (iii) of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) as provided in Paragraph D, above, if the document furnished by the insured and purporting to attest or acknowledge that the owner received counseling regarding the advisability and availability of reverse mortgages and other financial alternatives in not executed by the owner of the land at an office of a title company on the date that the insured mortgage and the promissory note secured thereby are executed.

H.  The Company must delete subdivision (iv) of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) as provided in Paragraph D, above, if the document furnished by the insured and purporting to disclose to the owner of the land the provisions contained in Subsection (k)(6) of Section 50, Article XVI, Texas Constitution under which the payment of principal and interest secured by the insured mortgage may be required is not given to the owner of the land and receipt is not acknowledged in writing by the owner of the land at an office of a title company on the date that the insured mortgage and the promissory note secured thereby are executed.

Comment: This endorsement must be attached to a Mortgagee Policy (T-2) insuring a reverse mortgage on a homestead. Under the Texas Constitution, a reverse mortgage may be made if one of the spouses is over 62. There is no charge for this endorsement.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

A.  Texas Residential Limited Coverage Junior Mortgagee Policy (T-44)
      (1)  A Company may issue the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) if:
            (a)  the land is encumbered by one or more mortgages recorded in the public records, and
            (b)  the land is residential property (as defined in this rule P-46.A.(4)), and
            (c)  the proposed insured is an entity which is an institutional lender (such as a bank, savings and loan association, savings bank, or credit union), and
            (d)  the proposed insured intends to secure a junior mortgage (the insured's mortgage) on the land that secures an extension of credit pursuant to Subsection (a)(6), of Section 50, Article XVI, Texas Constitution, and
            (e)  the extension of credit to be secured by the insured$#146;s mortgage will not exceed $100,000.
      (2)  The Amount of Insurance of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) shall be the estimated amount of the extension of credit to be secured by the insured's mortgage.
      (3)  The Company shall not delete the arbitration provisions of the Texas Residential Limited Coverage Junior Mortgagee Policy.
      (4)  For purposes of this Rule P-46, "residential property" is real property which has improvements designed principally for the occupancy of from one to four families (including individual units of condominiums and cooperatives) that (1) is located in a platted subdivision of record, or (2) consists of five acres or less.

B.  Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement
      (1)  A Company may issue a Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement to the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) by inserting the following provisions in Endorsement Form T-3 on issuance of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44), if the Company considers the risk insurable:
            (a)  The following Insuring Provision is substituted for Insuring Provision number 4 of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44):
                  "4.  Any other Monetary Lien affecting the title, recorded in the public records."
            (b)  The following is added to the Texas Residential Limited Coverage Junior Mortgagee Policy Combined Schedule:
                  "Tax Designation of Land:
                  [   ] is designated for agricultural use as provided by statutes governing property tax.
                  [   ] is not designated for agricultural use as provided by statutes governing property tax."
            (c)  The following Insuring Provisions are added to the Texas Residential Limited Coverage Junior Mortgagee Policy:
                  "5.  At Date of Policy, the Tax Designation of Land shown on the Combined Schedule to this policy being incorrect."
                  "6.  Any lien for standby fees, taxes or assessments of any taxing authority that are due and payable at Date of Policy."
            (d)  The following exception is substituted for Exception A of the exceptions of the Texas Residential Limited Coverage Junior Mortgagee Policy Combined Schedule:
                  "A.  Standby fees, taxes or assessments by any taxing authority for the year 20 __ and subsequent years, and subsequent taxes and assessments by any taxing authority for prior years.
      (2)  A Company may incorporate or add the provisions of the Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement to the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) if such coverage is requested prior to the issuance of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44).

C.  Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45)
      (1)  A Company may issue one or more Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsements (T-45) within one year after issuance by that Company of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44). A Company may not issue a Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) more than one year after issuance of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44).
      (2)  A company may delete Paragraph B from the Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) if that paragraph is not applicable at the time of the issuance of the Endorsement.
      (3)  If the amount of the extension of credit secured by the insured's mortgage exceeds the amount of insurance previously stated in the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44), the amount of insurance shall be increased by noting that change as a Paragraph D in the Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45), subject to payment of the applicable premium as provided in Rule R-27. The Paragraph D shall read as follows: "D. The amount of insurance of the Policy is hereby amended to be $_______."

D.  Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46)
      (1)  A Company may issue one Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) within one year after issuance by that Company of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44). A Company may not issue a Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) more than one year after issuance of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44).
      (2)  The Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) shall not be issued unless the insured's mortgage described on the Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) secures a variable rate loan or home equity line of credit. For purposes of this rule, a variable rate loan is a loan made pursuant to Subsection (a)(6), of Section 50, Article XVI, Texas Constitution which permits adjustments of the interest rate, with such adjustments being implemented through changes in the payment amount and/or as otherwise allowed by applicable law. For purposes of this rule, a home equity line of credit is an open-end account made pursuant to Subsections (a)(6) and (t), of Section 50, Article XVI, Texas Constitution.

E.  Procedures Applicable to Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) and Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) and Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) and Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement
      (1)  A Company may not issue a Commitment for Title Insurance prior to or in connection with the issuance of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) or Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) or Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) or Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement.
      (2)  No proforma or specimen Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) Combined Schedule or Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) or Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) or Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement may be issued.
      (3)  A T-3 Correction Endorsement may be issued to delete errors or erroneous exceptions contained in Paragraph 2 of the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) Combined Schedule or Paragraph A of the Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45). The requirements of Section 2, Paragraph IV, of the Basic Manual, entitled "Correction of Policy or Binder" shall apply to a Correction Endorsement for a Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) Combined Schedule or Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) or Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) or Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement.
      (4)  The Company may not provide Express Insurance (pursuant to P-39), or coverage or endorsements applicable to a Mortgagee Title Policy of Title Insurance (T-2) or Interim binder (T-13).
      (5)  The agent portion of the premium for the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) or Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) or Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46) or Texas Residential Limited Coverage Junior Mortgagee Policy Additional Coverage Endorsement shall be retained by and paid to only the title insurance agent in the county where the land described in the policy or Endorsements is located if such title insurance agent performs either the: (i) title search; (ii) title examination; or (iii) issuance of the policy or Endorsements.

See Also:	15.52.28 P-28. General Requirements For Continuing Education .
Exceptions:	None
Bulletins:	TX000049 Orders on Home Equity Endorsements (T-42, T-42.1) Effective November 12, 1998.
Forms:	TX Supplemental Coverage Equity Loan Mortgage Affidavit Checklist for T-42.1 Endorsement 1 ;
	TX Supplemental Coverage Equity Loan Mortgage Affidavit Checklist for T-42.1 Endorsement 1 .

P-47  SUPPLEMENTAL COVERAGE EQUITY LOAN MORTGAGE ENDORSEMENT (T-42.1)

A.  General Requirements

       When a Mortgagee Policy of Title Insurance (T-2) is to be issued insuring the lien securing an extension of credit made pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution, the Company may attach the Mortgagee Policy of Title Insurance (T-2) and the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the Company considers the risk insurable and the Company complies with this Procedural Rule P-47. The general requirements and limitations for issuance of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) are as follows:

       1)  The Company shall not attach the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) to the Mortgagee Policy of Title Insurance (T-2) unless:

              (a)  The Equity Loan Mortgage Endorsement (T-42) is attached to said Mortgagee Policy of Title Insurance; and

              (b)  The Company has complied with the provisions of Procedural Rule P-44 concerning the attachment of the Equity Loan Mortgage Endorsement (T-42) to the Mortgagee Policy of Title Insurance (T-2).

       2)  The Company may delete any provision of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if it does not consider the additional risk insurable. The following language may be placed along side each lettered sub-paragraph reference contained in paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) which the Company determines to delete:

       "Item ______________ of paragraph 1 of this Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) is hereby deleted."

       The Company shall complete the blank with the appropriate sub-paragraph letter of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the above format is utilized.

       3)  The Company shall not provide Express Insurance (pursuant to P-39) as to matters set forth in the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1), whether or not the Company issues T-42.1.

       4)  The Company must delete subparagraphs (a) through (h) and subparagraph (l) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if:

              (a)  the insured mortgage and the promissory note secured thereby are not executed at the office of a title company in accordance with Procedural Rule P-44(c)(1); or,

              (b)  the Company deletes subparagraph 2(f) of the Equity Loan Mortgage Endorsement (T-42).

       In order to evidence the deletion required by this subsection of P-47.A.(4), the following language may be stated on the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) in place of sub-paragraphs (a) through (h) and sub-paragraph (l) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1). The following language may be used:

       "Sub-paragraphs (a) through (h) and sub-paragraph (l) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) are hereby deleted in their entirety."

B.  SPECIFIC ENDORSEMENT PARAGRAPH REQUIREMENTS

       The requirements and limitations applicable for each numbered insuring provision of Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) are set forth in items 1 through 12 below:

       (1)  Signature Before Specified Date

       The Company must delete subparagraph (a) of paragraph 1 of Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if:

              (a)  written instructions are not furnished by the insured to the Company or its Title Insurance Agent prior to the execution of the insured mortgage and the promissory note secured thereby;

              (b)  the written instructions do not state a specific calendar date that constitutes the earliest date for execution of the insured mortgage and the promissory note secured thereby.

       (2)  Loan Proceeds Disbursement Before Fourth Day

              The Company must delete subparagraph (b) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if:

              (a)  the Company or its Title Insurance Agent does not disburse all loan proceeds received by the Company or its Title Insurance Agent; or

              (b)  any of the loan proceeds received by the Company or its Title Insurance Agent are disbursed sooner than four calendar days after the insured mortgage and promissory note are executed.

       (3)  Execution of Election Not to Rescind

              The Company must delete subparagraph (c) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if a document purporting to evidence an election not to rescind the extension of credit secured by the lien of the insured mortgage is executed in the presence of an escrow officer at an office of the Company or its Title Insurance Agent on or before the date that the insured mortgage and the promissory note secured thereby are executed.

       (4)  Document Copies

              The Company must delete subparagraph (d) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the Company or its Title Insurance Agent do not provide each owner of the land with a copy of all documents related to the extension of credit secured by the lien of the insured mortgage that were executed by the owner at an office of the Company or its Title Insurance Agency on the date that the owner executed the insured mortgage and the promissory note secured thereby.

       (5)  Fees

              The Company must delete subparagraph (e) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if:

              (a)  any fees are collected or disbursed by the Company or its Title Insurance Agent and said fees are not shown on the final settlement statement which was prepared by the Company or its Title Insurance Agent and executed by the owner and the spouse, if any, of the owner; or

              (b)  no preliminary (unexecuted) settlement statement is requested from the Company or its Title Insurance Agent, by the lender named on the final settlement statement, prior to execution of the insured mortgage and promissory note by the owner or the spouse, if any, of the owner; or

              (c)  a preliminary (unexecuted) settlement statement was requested by and sent to the lender, and the fees on the final settlement statement executed by the owner, or the spouse, if any, of the owner exceed the amount of fees on the final (unexecuted) settlement statement sent to the lender prior to execution of the insured mortgage and promissory note secured thereby.

       (6)  Blanks in an Instrument

              The Company must delete subparagraph (f) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if either (a) or (b) below occurs:

              (a)  There are any blanks in an instrument left to be filled in when executed by the owner of the land in an office of the Company or its Title Insurance agent, and:

                     (i)  the instrument was prepared by the Company or its Title Insurance Agent, or

                     (ii)  the instrument is: (a) the purported written acknowledgment as to the fair market value; (b) the insured mortgage; (c) the promissory note secured thereby; or, (d) affidavits of compliance with Section 50(a)(6), Article XVI, Texas Constitution.

              (b)  There are any blanks in an instrument left to be filled in when executed by the owner of the land in any of the following instruments when same are delivered to the Company or its Title Insurance Agent: (i) the purported written acknowledgment as to the fair market value; (ii) the insured mortgage; (iii) the promissory note secured thereby; or, (iv) affidavits of compliance with Section 50(a)(6), Article XVI, Texas Constitution.

       (7)  Attachment of Appraisal or Evaluation

              The Company must delete subparagraph (g) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the insured does not furnish to the Company or its Title Insurance Agent prior to execution of the insured mortgage and the promissory note secured thereby:

              (a)  a document purporting to be written acknowledgment as to the fair market value of the land; and

              (b)  a purported appraisal or evaluation which is attached to the purported written acknowledgment.

       (8)  Signature of Acknowledgment of Fair Market Value

              The Company must delete subparagraph (h) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if:

              (a)  the purported written acknowledgment as to the fair market value is not provided by the insured to the Company or its Title Insurance Agent prior to the execution of the insured mortgage or the promissory note secured thereby; or

              (b)  the purported written acknowledgment is not executed by the owner at an office of the Company or its Title Insurance Agent on the date that the insured mortgage and the promissory note secured thereby are executed.

       (9)  No Land In Excess of Homestead Allotment

              The Company must delete subparagraph (i) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if: (a) or (b) below is true:

              (a)  The Company does not receive a satisfactory affidavit from each owner of the land, and that owner's spouse, stating that:

                     (i)  all of the land is the homestead of the owner and that owner's spouse; and,

                     (ii)  no portion of the land is non-homestead property of the owner or owner's spouse; and

                     (iii)  the owner of the land, and that owner's spouse do not claim other land as homestead, unless that other land is described in the affidavit.

              (b)  The Company does not receive one of the following:

                     (i)  a satisfactory surveyor's certificate or letter from a Texas Licensed Registered Professional Surveyor, stating the exact amount of acreage or square footage of the land and such other facts as may be required by the Company, including whether or not the land is located within the boundaries of an incorporated municipality; or,

                     (ii)  a computation of the acreage or square footage of the land made pursuant to a software program designed for calculation of the acreage or square footage of the land and computer generated drawings of the boundaries of the land pursuant to entry of the boundary description calls.

       (10)  No Other Land With a Home Equity Mortgage

              The Company must delete subparagraph (j) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the Company does not receive a satisfactory affidavit from each owner of the land and that owner's spouse, if any, stating:

              (a)  the owner and the owner's spouse, if any, do not have or claim any other land as homestead for tax or other purposes except: (i) the land described in Schedule A of the Commitment for Title Insurance; and (ii) other land described in the affidavit; and,

              (b)  any business operated by the owner or the spouse of the owner, if any, and situated upon land owned or leased by the owner or owner's spouse is not subject to an extension of credit pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution; and,

              (c)  the residence, owned or leased by the owner or owner's spouse, if any, at which the owner and the owner's spouse live is not subject to an extension of credit pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution.

              The Company may add the phrase "or in an adjoining county" after the phrase "described in Schedule A is located" in subparagraph (j) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if (i) the land is located within the boundaries of an incorporated municipality; (ii) the municipality is located in more than one county; and, (iii) the Company considers the risk insurable.

       (11)  No Other Land With Released Home Equity Mortgage Within Past Twelve Months

              The Company must delete subparagraph (k) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the Company does not receive a satisfactory affidavit from each owner of the land and that owner's spouse, if any, stating:

              (a)  the owner and the owner's spouse, if any, do not have or claim any other land as homestead for tax or other purposes except: (i) the land described in Schedule A of the Commitment for Title Insurance; and (ii) other land described in the affidavit; and,

              (b)  any business operated by the owner or the spouse of the owner, if any, and situated upon land owned or leased by the owner or owner's spouse has not been subject to an extension of credit pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution, closed within one year prior to Date of Policy; and,

              (c)  the residence, owned or leased by the owner or owner's spouse, if any, at which the owner and the owner's spouse live has not been subject to an extension of credit pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution, closed within one year prior to Date of Policy.

              The Company may add the phrase "or in an adjoining county" after the phrase "described in Schedule A is located" in subparagraph (k) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if (i) the land is located within the boundaries of an incorporated municipality; (ii) the municipality is located in more than one county; and, (iii) the Company considers the risk insurable.

Comment: This endorsement was requested by Fannie Mae and Freddie Mac for Mortgagee Policies on loans they buy. This endorsement may be issued on closings on or after Nov. 12, 1998. This endorsement provides the following coverages:

It insures against execution of the mortgage and note before the specific date in the closing instructions. [Paragraph 1(a)]

It insures against disbursement by the title company before the fourth calendar day after closing. [Paragraph 1(b)]

It insures against execution of an acknowledgment of election not to rescind in the presence of the escrow officer on the date of execution of the note and mortgage. [Paragraph 1(c)]

It insures that the title company gave copies of the documents executed in its office to each owner. [Paragraph 1(d)]

It insures against collection and disbursement by the title company of fees not shown on the final settlement statement sent to the lender prior to execution of the mortgage and note. [Paragraph 1(e)]

It insures against blanks in the mortgage, note, acknowledgment of fair market value, affidavit of compliance, or documents prepared by the title company. [Paragraph 1(f)]

It insures against failure of the acknowledgment of fair market value to have a purported evaluation or appraisal attached when executed by the owner. [Paragraph 1(g)]

It insures that the acknowledgment of fair market value is executed by the owner when the mortgage and note are executed. [Paragraph 1(h)]

It insures against part of the land not being homestead. [Paragraph 1(i)]

It insures against home equity mortgages on other homestead land of the owner in the same county (or an adjoining county, if the city is in multiple counties). [Paragraph 1(j)] We have printed a separate form for use in cities located in more than one county.

It insures against home equity mortgages on other homestead of the owner in the same county (or an adjoining county, if the city is in multiple counties) closed within the last year. [Paragraph 1(k)] We have printed a separate form for use in cities located in more than one county.

Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) Issuing Checklist
To issue the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1), use the following checklist. If you must delete a paragraph because you cannot comply with our requirements for that paragraph, get Lender's written approval to delete the paragraph from the T-42.1 endorsement.

ISSUE T-42. Always attach the T-42 Endorsement to your Mortgagee Policy, if you issue the T-42.1 Endorsement. Comply with our underwriting to issue the T-42 Endorsement.

REQUIRE OUR AFFIDAVIT. Always have the mortgagors sign our Supplemental Coverage Equity Loan Affidavit. [See Exhibit 2]  

NOTE AND MORTGAGE. Paragraphs 1(a) through 1(h). Note and Mortgage must be executed in your Texas title company office.

CLOSING DATE. Paragraph 1(a). Note and Mortgage must be executed on or after earliest closing date expressly stated in closing instructions.

DISBURSE. Paragraph 1(b). Do not disburse Home Equity Loan proceeds before fourth business day after closing and do not disburse before closing instructions allow.

ELECTION NOT TO RESCIND. Paragraph 1(c). Do not allow the owner or spouse to sign an acknowledgment of election not to rescind when they sign the Note and Mortgage.

COPIES OF DOCUMENTS. Paragraph 1(d). Make a separate copy of all documents executed in your office after signed and give a copy to each owner and each spouse.

FAX FINAL HUD. Paragraph 1(e). Fax a final HUD-1 or HUD-1A to the Lender showing all fees you will collect or disburse (and all other fees of which you know that are POC items) before closing. Require the Lender to initial and fax back its approval.

NO BLANKS. Paragraph 1(f). Review (1) documents you prepare, (2) Note, (3) Mortgage, (4) any Affidavit of Compliance, and (5) Acknowledgment of Fair Market Value. Verify no blanks left to be filled in when signed by owners. Be sure the Acknowledgment of Fair Market Value states the agreed value.

ATTACH APPRAISAL OR EVALUATION. Paragraph 1(g). Verify the copy of the purported appraisal or evaluation is attached to the Acknowledgment of Fair Market Value when signed by the owners.

EXECUTE ACKNOWLEDGMENT OF FAIR MARKET VALUE. Paragraph 1(h). Verify that the owners sign the Acknowledgment of Fair Market Value in your office when they sign the Note and Mortgage.

ONLY HOMESTEAD. Paragraph 1(i). Verify (1) the land does not exceed one acre, (2) the land is only one tract of land (not two or more lots), 3) the land is used for a residence and not for a business [rely on our Affidavit], (4) the owners do not claim a separate homestead tract (such as business homestead) [rely on our Affidavit], and (5) all of the owners live on the land [rely on our Affidavit] [DO NOT ISSUE IF (1) ONE OR MORE COTENANTS DO NOT LIVE ON THE LAND (RELY ON OUR AFFIDAVIT), OR (2) A TRUST OWNS THE LAND, OR (3) A TENANT OCCUPIES PART OF THE LAND (RELY ON OUR AFFIDAVIT).]. Otherwise, call us. For example, you can verify that the land does not exceed one acre by (a) a surveyor's certificate or letter, or (b) use of a software program that your examiner uses by typing the land description. Examples of software programs available include (1) DeedPlotter+ ? by Greenbrier Graphics Marketing, Inc. (http://www.deedplot.com/ for approximately $200, at 1-828-495-3366); (2) AGT Deed-Chek? (http://www.agtcad.com/pr-dcdos.htm for approximately $99 at 1-800-548-9223); and (3) MapDraw "by Informatik, Inc. (http://www.informatik.com/mapdraw.html for approximately $99 plus shipping at 1-610-640-0339). If you believe that the land exceeds one acre but is rural homestead, call us.

NO HOME EQUITY MORTGAGE ON OTHER LAND. Paragraph 1(j). Require our Affidavit. If the land is business homestead, call us. If the owners own their own business (according to the Affidavit or Loan Application, if available), please call us. IF THE LAND IS IN A CITY LOCATED IN MORE THAN ONE COUNTY, YOU MAY ISSUE THE T-42.1 DESIGNED FOR CITIES LOCATED IN MULTIPLE COUNTIES.

NO HOME EQUITY MORTGAGE CLOSED ON OTHER LAND IN LAST 12 MONTHS. Paragraph 1(k). Require our Affidavit. If the land is business homestead, call us. If the owners own their own business (according to the Affidavit or Loan Application, if available), please call us. IF THE LAND IS IN A CITY LOCATED IN MORE THAN ONE COUNTY, YOU MAY ISSUE THE T-42.1 DESIGNED FOR CITIES LOCATED IN MULTIPLE COUNTIES.

Home Equity Lending after Approval of T-42.1 Endorsement

The Texas Commissioner of Insurance promulgated for use in Texas endorsement form T-42.1 and rates for it and the existing form T-42. The forms address many of the some 26 consumer credit issues found in the Home Equity Lending amendment to the Texas Constitution (Art. 16, §50 (a6)}. The forms and rates are effective today.

Premiums:

T-42: 10%
T-42.1: 15%
Total: 25% of basic premium.

Note: You may not issue a T-42.1 unless you also issue a T-42. Thus, the price of a T-42.1 is essentially 25%.

R-8 credits are available. You should compute the additional premium before the R-8 credit is applied. 

Consumer Credit Issue	T-42 coverage	T-42.1 Coverage
Loan must be agreed to by all owners and all spouses	Yes: 2a	Covered in T-42
Land not subject to ag use exemption for tax purposes	Yes: 2b	Covered by T-42
Only HEL loan on land; unless the other liens are those permitted by Texas Constitution Art. 16, Sec 50 (a) (1 through 5) and (8). * (8) being conversion liens secured by manufactured housing units.	Yes: 2c	Covered by T-42
Only HEL loan on land in 12 months * unless the loan is a home equity line of credit	Yes: 2d	Covered by T-42
Deed of Trust Discloses that loan is extension of credit under Art. 16, Sec. 50 a6, Texas Constitution	Yes: 2e	Covered by T-42
Loan closed at title company, lender or attorneys office	Yes: optional 2f only available if closed at title company	Covered by T-42
* Insures that any disbursements under a home equity line of credit deemed to have been made as of policy date and have the same priority as advance made at policy date	Yes.  Paragraph 3.  Subject to bankruptcy and statutory liens in favor of government.	Covered by T-42
12 day cooling off period	No.	Addressed: insures that loan will not close before date set out in instructions
3 day right of recession	No.	Addressed: insures that title company didn't disburse until 4thcalendar day after closing.
Election not to rescind	No.	Addressed: Insures against execution of acknowledgment of right to rescind before an escrow officer on date note & DT is executed
All persons signing note get copies of every document	No.	Addressed: Title company gave copies of all documents signed in its office to all owners and spouses
No more than 3% of loan made by borrower as costs	No.	Addressed: Insures that figures set on HUD1 and given to Lender are figures collected and disbursed
No blanks in documents	No.	Addressed: Insures that no blanks in mortgage, note, acknowledgment, affidavit of fair market value or documents prepared by title company
Total indebtedness against property, including HEL loan, can't exceed 80% of fair market value of land	No.	Addressed: (i) Insures that acknowledgment of fmv has an appraisal attached when signed by owner and (ii) insures that the acknowledgment of fmv was attached when note & DT were signed
Land must be homestead	No. Guideline: if the owners live outside of Texas, you may still insure a home equity loan provided only the T-42 is issued since the land actually being homestead is not insured by this endorsement.	Yes. Insures against part of land not being Homestead. Guidelines: Determine that urban land does not exceed ten acres and has fire and police protection and at least 3 utilities (41.002(c)) Property Code; Determine that all land is composed of only one tract used as a residence (a business located on the property with the home does not prohibit use of the land as homestead), no other property claimed as HS and all owners live on the property.
Land is homestead and is there is no other collateral for the loan	No.	Addressed: Insures that no other HEL loans on homestead property in same or adjoining county
No HEL loan in previous 12 months against other HS property	No.	Addressed: Insures that no other HEL loans on homestead property in same or adjoining county in past 12 months
Failure of Company to provide final copy of closing statement 1 day before closing *	No.	* Yes. Insures that company provided final closing figures (actual fees, points, interest, costs and charges collected or disbursed by title company at least one calendar day before the closing. ?Day "is as defined by Texas
Finance Commission and /or Texas Credit Union Commission (under Title 7, Chapter 153 of Texas Administrative Code (all calendar days except Sunday and listed federal holidays)
* Under line of credit, no more than 40% of the land value being advanced	No.	No.
* All advances under line of credit exceeding $4000	No.	No.
If any coverage is not satisfactorily proven, then that provision must be struck from the endorsement. * indicates a coverage added by amendments effective April 1, 2004

HOLD HARMLESS
If you follow these guidelines, we will not require contribution or reimbursement for losses and expenses under Endorsement T-42.1. 

(12)  Final Disclosure of Fees

              The Company must delete subparagraph (l) of paragraph 1 of the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) if the Company or its Title Insurance Agent does not provide each owner with a copy of the final settlement statement at least one day before the business day that the owner executes the insured mortgage and the promissory note secured thereby. As used in this item 12, the term business day shall have the meaning assigned to such term by the Texas Finance Commissioner and/or the Texas Credit Union Commission pursuant to the authority granted such agencies by sections 11.308 and 15.413 of the Texas Finance Code, respectively.

 

 

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-48  DATES ON AND AFTER JANUARY 1, 2000
 

Any date in any promulgated form adopted as "19___" shall on and after January 1, 2000, be changed to reflect the correct calendar year.

EFFECTIVE November 1, 1999

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-49.  ANNUAL AUDIT
A.  As provided in Article 9.39, Texas Insurance Code, every title insurance agent and direct operation shall have an annual audit prepared, and before the 91st day after the date of termination of its fiscal year, shall send by certified mail, postage prepaid, to the Texas Department of Insurance one copy of such audit report with a letter of transmittal, and each such agent, shall also send a copy of such letter of transmittal and audit report to every title insurance company which it represents.
B.  If a title insurance company fails to receive an audit report from any of its agents or direct operations before the 91st day after the date of the termination of the fiscal year of the agent or direct operation, the title insurance company shall report that omission to the department not later than the 30th day after the expiration of the 90-day period.

See Also:	None
Exceptions:	None
Bulletins:	TX 000074 Area and Boundary Exception; T-17 and T-19 No survey required
Forms:	TX Restrictions, Encroachments, Minerals Endorsement T-19
	TX Restrictions, Encroachments, Minerals Endorsements - Owner Policy (T-19.1)

P-50.  RESTRICTIONS, ENCROACHMENTS, MINERALS ENDORSEMENT (T-19) and RESTRICTIONS, ENCROACHMENTS, MINERALS ENDORSEMENT - OWNER POLICY (T-19.1).
A.  A Company may issue its Restrictions, Encroachments, Minerals Endorsement (T-19) to a Mortgagee Policy (T-2) on residential real property, if its underwriting requirements are met and if it is paid the premium prescribed in Sub-Section A. of Rate Rule R-29. The Company shall delete any insuring provision if it does not consider that risk acceptable. Any insured matter covered in the Restrictions, Encroachments, Minerals Endorsement (T-19) may be insured only by the use of this Restrictions, Encroachments, Minerals Endorsement (T-19).

B.  A Company may issue its Restrictions, Encroachments, Minerals Endorsement (T-19) to a Mortgagee Policy (T-2) on land which is not residential real property, if its underwriting requirements are met and if it is paid the premium prescribed in Sub-Section B. of Rate Rule R-29. The Company shall delete any insuring provision if it does not consider that risk acceptable. Any insured matter covered in the Restrictions, Encroachments, Minerals Endorsement (T-19) may be insured only by the use of this Restrictions, Encroachments, Minerals Endorsement (T-19).

C.  A Company may issue its Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1) on or after the date that Rate Rule R-29 is amended effective to an Owner Policy (T-1) on land which is not residential real property, if its underwriting requirements are met and if it is paid the premium, if any, prescribed in Sub-Section C. of Rate Rule R-29. The Company shall delete any insuring provision if it does not consider that risk acceptable. Any insured matter covered in the Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1) may be insured only by the use of this Restrictions, Encroachments, Minerals Endorsement - Owner Policy (T-19.1).

See Also:	None
Exceptions:	None
Bulletins:	TX000061 Commissioner's Order for 2002 Hearing
	TX000063 Texas Supplement to National Legal Bulletin NL000128 Electronic Production of Short Form Mortgagee Policies
Forms:	Texas Short Form Residential Mortgagee Policy of Title Insurance and Addendum (T-2R)

P-51.  Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R)
A Company may issue a Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R) on property that is Residential Real Property if that policy is requested by the proposed insured and the Company's requirements are met. The Company shall not issue a Texas Short Form Residential Mortgagee Policy of Title Insurance (T-2R) unless it receives a survey of the kind described in Sub-Section a. of Procedural Rule P-2, or, if the transaction qualifies under other Sub-Sections of Procedural Rule P-2, a survey and qualifying affidavit described in the other applicable Sub-Section(s) of Procedural Rule P-2.

See Also:	None
Exceptions:	None
Bulletins:	TX000061 Commissioner's Order for 2002 Hearing
Forms:	None

P-52.  Delivery of Pro Forma Policies and Promulgated Forms
1.  For purposes of this rule, a "pro forma policy" is an Owner or Mortgagee Policy prepared prior to payment for, issuance and delivery of the policy, with completed Schedules A and B, showing the proposed insured, the amount of insurance, the exceptions that are proposed to be placed in the final policy to be issued, and the name of the title insurance company and title insurance agent.
2.  A Company may not prepare and deliver to a proposed insured for review a proforma policy unless (a) the land is not residential real property and the proposed amount of insurance is $500,000 or more, and (b) each page of the completed Schedules A and B conspicuously states "This is a Pro Forma Policy furnished to or on behalf of the party proposed to be insured for discussion only. It does not reflect the present status of title and is not a commitment to insure the estate or interest as shown herein, nor does it evidence the willingness of the Company to provide any coverage shown herein. Any such commitment must be an express written undertaking issued on the appropriate forms of the Company."
3.  A Company may provide a proposed insured with a copy of any promulgated title insurance form, or a foreign language translation of such form. Any translation must conform to the following conditions: (a) the translation must not be misleading, (b) an English copy of the promulgated form also must be furnished, and (c) the translation must include the following conspicuous provision at the top of the first page in both English and the language into which the form has been translated: "This translation of (name of promulgated form) is furnished to you in order to assist you in understanding its terms. This translation is not an official form promulgated by the Texas Department of Insurance. It is not a report or opinion of title, an agreement to insure, or a representation of the insurance you may receive. If this translation conflicts with the form promulgated by the Texas Department of Insurance, the promulgated form will control in all respects."

See Also:	None
Exceptions:	None
Bulletins:	TX 000069 Procedural Rule P-53 Rebates and Discounts Prohibited
	TX 000076 2005 Texas Legislation
Forms:	None

P-53.  Rebates and Discounts Prohibited

1. For the purposes of this rule the following terms have the following meanings.

(a) "Authorized Person" means a person doing the business of title insurance under the authority of the Texas Title Insurance Act of the Insurance Code.

(b) "Producer" means a real estate broker, real estate agent, lender, mortgage company, mortgage broker, builder, developer, attorney, or architect who is not an Affiliate of an Authorized Person. A Trade Association is not a Producer; however, Paragraphs 2 and 3 of this rule apply to a Trade Association.

(c) "Affiliate" means:
(i) an officer, director, agent or employee of an Authorized Person or a Producer;
(ii) a member of the immediate family of an officer, director, agent, or employee of an Authorized Person or a Producer;
(iii) a Person who owns a Producer or Authorized Person;
(iv) a Person who is owned by a Producer or Authorized Person; or
(v) a Person who is under common ownership with a Producer or Authorized Person.

(d) "Business Expense" means a cost to operate or promote a business, including but not limited to costs of furnishings, postage, office supplies, advertising, electronic media, computer hardware, computer software, telephones, telephone charges, printing, copiers, fax machines, office equipment, vehicles, staff, employee compensation, and rent. An expense that a Producer is, in accordance with generally acceptable accounting principles, permitted to deduct for tax purposes is presumed to be a Business Expense. Without limiting this definition, the following constitute the payment of Business Expenses of a Producer by an Authorized Person, subject to the provisions of paragraph 3 herein:
(1) jointly, with a Producer, advertising real property not owned by the Authorized Person for sale or lease;
(2) contributing to a Producer or paying any part of the Producer's costs of any of the following:
(A) for sale or for lease signs;
(B) advertisements, in any media or form, that promote any one property not owned by the Authorized Person for sale or lease;
(C) boxes or similar items in which to store advertising media;
(D) hosting an open house;
(E) prizes, food, beverages, gifts, decorations, entertainment or professional services given at open houses; or
(F) parties or receptions which promote a Producer or the Producer's properties or activities of the Producer.

(e) "Trade Association" means a membership organization of persons engaging in similar or related lines of commerce, organized to promote and improve business conditions, and not engaged in a business for profit.

(f) "Market rate" means the price at which a seller, under no obligation or duress to sell, is willing to accept and a buyer, under no obligation or duress to buy, is willing to pay in an Arms-length transaction. The market rate is determined by comparing the rights or items purchased or sold to similar rights or items that have been recently purchased by others or sold to others, including others not in the title insurance business.

(g) "Arms-length transaction" means a business transaction between two unrelated and unaffiliated parties or a business transaction conducted between affiliated parties as if the parties were unrelated or unaffiliated.

2. Except as provided by this rule, an Authorized Person, directly or through an Affiliate, may not:
(a) pay, contribute, share in the cost of or finance any part of the Business Expenses of a Producer;
(b) pay, contribute, share in the cost of or finance any part of the expenses of an event or activity of a Trade Association that exists for the primary benefit of Producers and in which a majority of members are Producers; or
(c) solicit or engage in a title insurance transaction(s) involving land located in more than one state which includes land located in Texas if:
(1) the policy premium charged or solicited to be charged by the Authorized Person or Affiliate for any title insurance policy issued in the transaction(s) covering the land described in the policy outside the state of Texas violates the law of that other jurisdiction where the land is located; or
(2) the policy premium for the land in the other jurisdiction is so discounted or reduced from the normal and customary charge as to constitute a thing of value in this state.

3. Notwithstanding Paragraph 2, an Authorized Person or its Affiliates may:
(a) join a Trade Association and voluntarily participate in a Trade Association's activities provided that the level of such participation does not exceed normal participation (not more than two hours per business week) of a volunteer member of a Trade Association and is not activity that would ordinarily be performed by paid staff of a Trade Association;
(b) purchase advertising promoting the title insurance company or the title insurance agent at market rates from any person in any publication, event, or media;
(c) deliver to a party in the transaction or the party's representative legal documents or funds which are directly or indirectly related to a real estate transaction closed by the Authorized Person; and
(d) engage in legal promotional and educational activities that are not conditioned on the referral of title insurance business.

4. Authorized Persons shall maintain auditable records documenting compliance with this rule.

5. In addition to any other sanction or penalty which the Commissioner may impose by law, after notice and opportunity for hearing, any person (including a Producer or Authorized Person) found to have violated this Rule is subject to a civil penalty of not more than $10,000 for each act of violation and for each day of violation, unless a greater penalty is specified by the Insurance Code or another insurance law of Texas. The Escrow Officer, Title Insurance Agent or Direct Operation license or the certificate of authority of any person found in violation of this Rule may be suspended or revoked, after notice and opportunity for hearing.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	TX Mortgagee Policy T-2
	TX Owner Policy T-1
	TX Access Endorsement T-23

P-54.  ACCESS ENDORSEMENT (T-23)

A Company may issue its Access Endorsement (T-23) on or after the date Rate Rule R-30 is effective to a Mortgagee Policy (T-2) or Owner Policy (T-1) on land which contains improvements and which is not residential real property, if its underwriting requirements are met and if it is paid the premium, if any, prescribed in Rate Rule R-30. The Company may add any exception to the endorsement that it considers, in its sole discretion, to be appropriate. The Company shall delete any insuring provision or portion thereof if it does not consider that risk acceptable. Any insured matter covered in the Access Endorsement (T-23) may be insured only by the use of this endorsement. A Company may not issue its Access Endorsement (T-23) on residential real property.

See Also:	17.02 Rate Rules and Definitions
Exceptions:	None
Bulletins:	None
Forms:	TX Non-Imputation Endorsement T-24
	TX Owner Policy T-1 ;

P-55.  NON-IMPUTATION ENDORSEMENT (T-24)

A Company may issue its Non-Imputation Endorsement (T-24) on or after the date that Rate Rule R-31 is effective to a concurrently issued Owner Policy (T-1) on land which is not residential real property, if its underwriting requirements are met and if it is paid the premium, if any, prescribed in Rate Rule R-31. The Company may add any exception to the endorsement that it considers, in its sole discretion, to be appropriate. Any matter covered in the Non-Imputation Endorsement (T-24) may be insured only by the use of this endorsement. A Company may not issue its Non-Imputation Endorsement (T-24) on residential real property.

See Also:	17.02 Rate Rules and Definitions
Exceptions:	None
Bulletins:	None
Forms:	TX Contigiuty Endorsement T-25
	TX Owner Policy T-1 ;
	TX Mortgagee Policy T-2 ;

P-56.  CONTIGUITY ENDORSEMENT (T-25)

A Company may issue its Contiguity Endorsement (T-25) on or after the date that Rate Rule R-32 is effective to a concurrently issued Mortgagee Policy (T-2) or Owner Policy (T-1) on land which is not residential real property; if title to each tract described in the Contiguity Endorsement (T-25) is insured by the policy; if the Company receives a survey acceptable to it; if its underwriting requirements are met and if it is paid the premium, if any, prescribed in Rate Rule R-32. The Company may add any exception to the endorsement that it considers, in its sole discretion, to be appropriate. Any matter covered in the Contiguity Endorsement (T-25) may be insured only by the use of this endorsement. A Company may not issue its Contiguity Endorsement (T-25) on residential real property.

See Also:	17.02 Rate Rules and Definitions
Exceptions:	None
Bulletins:	TX000071 New Forms and Rules; Commissioner's Order for 2002 Hearing
Forms:	TX Additional Insured Endorsement T-26

P-57.  ADDITIONAL INSURED ENDORSEMENT (T-26)

A Company may issue its Additional Insured Endorsement (T-26) on or after the date that Rate Rule R-33 is effective to an Owner Policy by naming a person as an additional insured in the endorsement, if (1) its underwriting requirements are met, (2) it is paid the premium, if any, prescribed in Rate Rule R-33, and (3) the additional insured is (a) the trustee or successor trustee of a Living Trust to whom the insured transfers the title after Policy Date, and/or the beneficiaries of the Living Trust, or (b) any partner, member or stockholder that acquires the interests of the other owners of the insured in accordance with the terms and provisions of a written agreement in effect at Date of Policy, or (c) a family partnership or family corporation solely composed of or owned by members of the insured's family and the insured. Any matter covered in the Additional Insured Endorsement (T-26) may be insured only by the use of this endorsement.

See Also:	None
Exceptions:	None
Bulletins:	None
Forms:	None

P-58.  Report on Directly Issued Policy

Each Title Insurance Company shall compile and submit to the Department annually, as part of the Texas Title Insurance Statistical Plan, a report of all directly issued [sometimes commonly referred to as Home Office Issued] policies of title insurance which shall include at least the following information:

        (1)    Location of insured land identified by standard three (3) digit county code as set forth in Table 7 of
                the Texas Title Insurance Statistical Plan;
        (2)    Gross Premium (for policy and all endorsements) and limits of liability on each policy issued;
        (3)    Date of Policy;
        (4)    Transaction identification number (guaranty file number or other identifier);
        (5)    Requesting Agent's TDI Agency/Direct Operation Company ID Number as shown on the
                Agent/Direct Operation license;
        (6)    Cooperating Agent's TDI Agency/Direct Operation Company ID Number as shown on the
                Agent/Direct Operation license; and,
        (7)    Directly Issued Policy "DIP" Status Code (Best Evidence = 0; Multicounty = 1).

The report shall be sorted by county (primary sort) and by the requesting agent's TDI Agency/Direct Operation Company ID Number as shown on the Agent/Direct Operation license (secondary sort) within each county. The report may contain additional information, totals, or subtotals as deemed necessary by the Title Insurance Company or as required by the Department.