Subchapter A. Basic Manual of Rules, Rates and Forms
for the Writing of Title Insurance in the State of Texas
INTRODUCTION. The Texas Department of Insurance proposes an amendment to §9.1 to adopt by reference a change to the Texas Reverse Mortgage Endorsement, Form T-43, relating to home equity reverse mortgage loans, which form is contained in the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual). The amendment to §9.1 updates the date of the Basic Manual to accommodate incorporation of the amended Form T-43. The 79th Legislature, Regular Session, adopted Senate Joint Resolution 7 proposing a constitutional amendment authorizing line-of-credit advances for liens securing a reverse mortgage on Texas homestead property. By voter approval on November 8, 2005 , Section 50, Article XVI of the Texas Constitution was amended to authorize line-of-credit advances under a reverse mortgage loan. The amendment to endorsement form T-43 in the Basic Manual is necessary to facilitate the issuing of mortgagee title policies insuring home equity liens on homestead property. The proposed modification to the existing title insurance form relating to home equity reverse mortgages refers to the correct and applicable law contained in the constitutional amendment as authorized by Texas voters and sets forth the scope and limitations of the insurance coverage of this form. The proposed amended endorsement will facilitate title insurance companies writing title insurance coverage regarding home equity reverse mortgage lending in Texas .
The department has filed a copy of the proposed amended form with the Secretary of State's Texas Register section. The proposed amended form is available from the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104 , Austin , Texas , 78714-9104 . To request a copy, please contact Sylvia Gutierrez at 512/463-6327.
2. FISCAL NOTE. Robert R. Carter, Jr., deputy commissioner for the title division, has determined that, for each year of the first five years the amendment is in effect, there will be no fiscal impact on state or local government as a result of enforcing or administering the amendment. Mr. Carter has also determined that there will be no measurable effect on local employment or the local economy.
3. PUBLIC BENEFIT/COST NOTE . Mr. Carter has also determined that for each year of the first five years the proposed amendment is in effect, the public benefit anticipated as a result of administering and enforcing the amendment will be to ensure the appropriate policy and endorsement language on title insurance policies covering home equity reverse mortgage loans. The department expects the public to benefit from the introduction of line-of-credit advances under reverse mortgage loans, which is likely to facilitate the continued availability of mortgage loan funds in the State of Texas . Both Texas homeowners and lenders will benefit from a strong secondary market for Texas home equity loans, thus potentially increasing mortgage lending in Texas . The department expects the current premium rates for these existing endorsements to fully cover the costs of producing the amended endorsement. The sale of such endorsements is voluntary and imposes no additional regulatory costs on companies that decide to participate in the market. Additionally, the department anticipates that the premium schedules will fully compensate small, large, and micro-businesses, and therefore, expects no differential impact between small, large, and micro-businesses that decide to participate in such sales. The cost per hour of labor should not vary between small, large, and micro-businesses. Further, it is neither legal nor feasible to exempt small or micro-businesses or to waive compliance considering the purpose of the constitutional amendment, which authorizes line-of-credit advances under a reverse mortgage, and the purpose of the proposed amendment to the Texas Reverse Mortgage Endorsement, Form T-43, which is to ensure the appropriate policy and endorsement language on title insurance policies covering home equity reverse mortgage loans.
4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on December 26, 2005 , to Gene C. Jarmon , General Counsel and Chief Clerk, Mail Code 113‑2A, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714‑9104. An additional copy of the comments must be submitted simultaneously to Robert R. Carter, Jr., Deputy Commissioner, Title Division, Mail Code 106-2T, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714‑9104. Request for a public hearing should be submitted separately to the Chief Clerk's office.
5. STATUTORY AUTHORITY . The amended section is proposed pursuant to the Insurance Code, §2551.003, Chapter 2703, and 36.001, and Section 50, Article XVI of the Texas Constitution. Chapter 2703 authorizes and requires the commissioner to promulgate or approve rules and policy forms of title insurance and otherwise to provide for the regulation of the business of title insurance. Section 2551.003 authorizes the commissioner to promulgate and enforce rules prescribing underwriting standards and practices, and to promulgate and enforce all other rules necessary to accomplish the purposes of Title 11, concerning regulation of title insurance. Section 36.001 of the Insurance Code provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state. By voter approval on November 8, 2005 , Section 50, Article XVI of the Texas Constitution was amended to provide for home equity line-of-credit advances on reverse mortgages.
The following statutes are affected by this proposal: Insurance Code, §2551.003 and Chapter 2703
7. TEXT .
§9.1. Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas . The Texas Department of Insurance adopts by reference the
Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of
Texas as amended effective
January 20, 2006 [
November 1, 2005]. The document is available from and on file at the Texas Department of Insurance, Title Division, Mail Code 106-2T, 333 Guadalupe Street , Austin , Texas 78701-1998 .
Texas Reverse Mortgage Endorsement - T-43
Attached to and made a part of
___________________TITLE INSURANCE COMPANY
Mortgagee Policy No. __________________________
dated the _______ day of _______________, 20____
BLANK TITLE INSURANCE COMPANY
Notwithstanding anything to the contrary contained in this policy, the following terms and provisions shall control and apply:
1. This policy insures only up to, and liability hereunder is limited to, the amount of proceeds of the loan secured by the lien instrument set forth under Schedule A hereof actually disbursed as of the date of this policy, but increases as each subsequent advance or disbursement of loan proceeds is made from time to time and as unpaid interest accrues on loan proceeds, so that any loss payable hereunder shall be limited to the amount of unpaid accrued interest and aggregate amount of loan proceeds actually disbursed and outstanding at the time a loss occurs hereunder; provided that in no event shall the liability of the Company hereunder exceed the face amount of this policy.
2. The Company insures the Insured that any disbursements of such loan proceeds made subsequent to the date of this policy shall be deemed to have been made as of the date of this policy and such disbursements and accrued interest shall have the same priority as any advances made as of the date of this policy, except as to (i) bankruptcies affecting the estate or interest described on Schedule "A" hereof prior to the date of any such advance or disbursement; and (ii) taxes, costs, charges, damages and other obligations to the government secured by statutory liens arising or recorded subsequent to the date of the Policy.
3. Notwithstanding the provisions of paragraph 5 of the Exclusions from Coverage set out in the main policy entitled Mortgagee Policy of Title Insurance relating to consumer credit protection laws, the Company insures the insured against loss, if any, sustained by the insured under the terms of the policy because of invalidity or unenforceability of the lien of the insured mortgage by reason of: (i) the failure of the insured mortgage to be created under a written agreement with the consent of each owner of the estate or interest described in Schedule A and each owner's spouse, as set forth in Subsection (k)(1) of Section 50, Article XVI, Texas Constitution; (ii) the failure of the extension of credit secured by the insured mortgage to be made to a person who is or whose spouse is 62 years or older, as set forth in Subsection (k)(2) of Section 50, Article XVI, Texas Constitution; (iii) the failure of the written document purporting to be made pursuant to Subsection (k)(8) of Section 50, Article XVI, Texas Constitution to be executed by the owner on the date that the insured mortgage and promissory note secured thereby are executed by the owner, provided that the Company does not insure that the written document complies with Subsection (k)(8) of Section 50, Article XVI, Texas Constitution; or (iv) the failure of the Company or its Title Insurance Agent to furnish the owner with a copy of the written notice purporting to be made pursuant to Subsection (k)(9) of Section 50, Article XVI, Texas Constitution on the date that the owner executed the insured mortgage and the promissory note secured thereby, provided that the Company does not insure that the written document complies with Subsection (k)(9) of Section 50, Article XVI, Texas Constitution.
4. The Company does not insure against loss or damage based on (a) usury; or (b) any consumer credit protection or truth-in-lending law and/or violation of Subsections (k)(3), (k)(4), (k)(5), (k)(6), (k)(7), (k)(8), (k)(9), (k)(10), (k)(11), (m), [
, or (v) of Section 50, Article XVI, Texas Constitution and any regulatory or statutory requirements for a mortgage made pursuant to Subsection (a)(7) of Section 50, Article XVI, Texas Constitution except as expressly provided in paragraph 3 of this endorsement; or (c) costs, expenses or attorney's fees required to obtain a determination of the amount of interest or indebtedness.
For purposes of this endorsement, "interest" means interest, compound interest, interest on interest, interest calculated at a rate that varies from time to time in accordance with the provisions of the insured mortgage, and interest contingent on the appreciation in the fair market value of the land charged in accordance with the terms of the insured mortgage. In this endorsement, the term "owner" refers to each owner described in Schedule "A" of this Mortgagee Policy. This endorsement does not represent or insure that a Title Insurance Agent of the Company is the agent of the Company other than for issuance of title insurance policies, as provided by applicable law.
This endorsement when countersigned below by an Authorized Countersignature is made a part of said policy. Except as expressly modified by the provisions hereof, this endorsement is subject to the following policy matters: (i) Insuring Provisions; (ii) Exclusions from Coverage; (iii) Schedule "B" Exceptions; (iv) the Conditions and Stipulations; and (v) any prior endorsements. Except as stated herein, this endorsement does not: (i) extend the effective date of the policy and/or any prior endorsements; or, (ii) increase the face amount of the policy.
(Printed Name of Title Insurance Company)
Printed Name: ________________________
(ATTEST IS OPTIONAL)
(Printed Name of Title Insurance Agent or
Printed Name: ________________________
(ATTEST IS OPTIONAL)