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You are here: Home . rules . 2004 . 0102-059

Subchapter A. Basic Manual of Rules, Rates and Forms

for the Writing of Title Insurance in the State of Texas

28 TAC §9.30

The Texas Department of Insurance has received a petition proposing the adoption by reference of amendments to endorsements and procedural rules in the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual) relating to home equity. The amendments to §9.30 are proposed to adopt by reference the amended endorsements, Forms T-42, T-42.1, T-44, T-45, and T-46 and the amended procedural rules, P-46 and P-47 to the Basic Manual. The 78th Legislature, Regular Session, adopted Senate Joint Resolution 42 proposing a constitutional amendment authorizing home equity lines of credit, adding requirements for one day advance disclosure of all fees, and revising technical procedures regarding home equity loans on Texas homestead property. By voter approval on September 13, 2003, Section 50, Article XVI of the Texas Constitution was amended to provide for home equity lines of credit, to require an additional notice to borrowers prior to the origination of such mortgages, and to permit lenders to take certain actions to cure origination defects with such mortgages, including offering borrowers the opportunity to refinance such mortgages under certain circumstances. Stewart Title Guaranty Company (Stewart)has proposed amendments to the applicable procedural rules and endorsements in the Basic Manual to facilitate the issuing of mortgagee title policies insuring home equity liens on homestead property. The proposed modifications to the existing title insurance forms relating to home equity refer to the correct and applicable law, provide insurance for future advances under home equity lines of credit, and insure disclosure of fees by title insurance companies or title insurance agents who close home equity loans. The proposed amended endorsements and procedural rules will enable title insurance companies to write additional title insurance coverages regarding home equity lending in Texas. The proposed amendments will also provide both lenders and borrowers more certainty regarding the meaning of the law and a clear means of resolving origination problems.

The proposed amended endorsement forms are as follows: Proposed amendment to the Equity Loan Mortgage Endorsement (T-42) conforms this endorsement to the new amendments to constitutional provisions for home equity loans, including new provisions for home equity lines of credit. Proposed amendment to the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) provides insurance of advance disclosure of fees as required by the new amendments to constitutional provisions for home equity loans and also incorporates a definition of business day for purposes of the endorsement. Proposed amendments to the Texas Residential Limited Coverage Junior Mortgagee Policy (T-44) and the Texas Residential Limited Coverage Junior Mortgagee Policy Down Date Endorsement (T-45) conform these endorsements to the new amendments to constitutional provisions for home equity loans. Proposed amendment to the Texas Residential Limited Coverage Junior Mortgagee Policy Variable Rate Endorsement (T-46) conforms this endorsement to the new amendments to constitutional provisions for home equity loans, including new provisions for home equity lines of credit and adds to the name of the endorsement a reference to home equity line of credit.

The proposed amended procedural rules are Procedural Rule P-46, which incorporates references to applicable constitutional provisions for home equity lines of credit and to the modified Texas Residential Limited Coverage Junior Mortgagee Policy Home Equity Line of Credit/Variable Rate Endorsement (T-46), and Procedural Rule P-47, which establishes requirements for issuance of the proposed additional coverages to the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1).

The department has filed a copy of each of the proposed amended forms and procedural rules with the Secretary of State´s Texas Register section. Persons desiring copies of the proposed items can obtain them from the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. To request copies, please contact Sylvia Gutierrez at 512/463-6327.

Robert R. Carter, Jr., deputy commissioner for the title division, has determined that, for each year of the first five years the amendments are in effect, there will be no fiscal impact on state or local government as a result of enforcing or administering the amendments. Mr. Carter has also determined that there will be no effect on local employment or the local economy.

Mr. Carter has also determined that for each year of the first five years the proposed amendments are in effect, the public benefit anticipated as a result of administering and enforcing the amendments will be to ensure the appropriate policy and endorsement language on title insurance policies covering home equity loans. The department expects the public to benefit from the introduction of the expanded coverage offered by the proposed amendments, 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. The department expects the current premium rates for these existing endorsements to fully cover the costs of producing the amended endorsements. 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 efficient regulation of title insurance for which the amendments are to be adopted.

To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on February 16, 2004, 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.

The amended section is proposed pursuant to the Insurance Code, Articles 9.07, 9.21, and §36.001, and Section 50, Article XVI of the Texas Constitution. Article 9.07 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. Article 9.21 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 chapter 9, 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 September 13, 2003, Section 50, Article XVI of the Texas Constitution was amended to provide for home equity lines of credit, to require an additional notice to borrowers prior to the origination of such mortgages, and to permit lenders to take certain actions to cure origination defects with such mortgages, including offering borrowers the opportunity to refinance such mortgages under certain circumstances.

The following statutes are affected by this proposal: Rule Number Statute Articles 9.07 and 9.21

§ 9.30 Procedural Rules, Rates, and Forms Relating to Home Equity [ Rule, Rate, and Form for Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) and Rate for Equity Loan Mortgage Endorsement (T-42) ]. In addition to material adopted by reference under §9.1 of this title (relating to Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (the manual)), the Texas Department of Insurance adopts by reference, as part of the manual, amendments to Procedural Rule P-46 and Procedural Rule P-47 and endorsement forms, Equity Loan Mortgage Endorsement (T-42), [ form T-42.1 for ] Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) , Texas Residential Limited Coverage Junior Mortgagee Policy (T-44), 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), as amended effective March 15, 2004 [ and Rate Rule 28 Premium for Equity Loan Mortgage Endorsement (T-42) and Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) ]. This document is available from and on file at the Texas Department of Insurance, Title Division, Mail Code 106-2T, William P. Hobby State Office Building , 333 Guadalupe Street, P.O.Box 149104 , Austin , Texas 78714-9104 .



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