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You are here: www.tdi.texas.gov . title . titlem4b

Basic Manual of Title Insurance, Section IV (continued)

Title Manual Main Index | Section IV Index

Includes Procedural Rules P-6 | P-7 | P-8 | P-9

P-6. Co-Insurance

  1. Should a Company elect to issue a policy for a lesser amount than the whole risk, it may do so by causing other Companies qualified to do business in Texas to co-insure the excess. Each Company issuing a policy under the above provisions shall insert in Schedule B thereof the following:

    This policy is issued contemporaneously with Policy No.___________ of (Name of Title Insurance Company (ies)) for $___________. The liability of the Company hereunder is hereby limited to (proportion) of any loss, but said liability shall not exceed the face amount of this policy."
  2. Where the total amount of any and all policies issued on a single risk is in excess of $15,000,000.00 (Fifteen Million Dollars), and when such risk is insured by more than one title insurance company, the premium charged shall be determined as if the risk was being insured in one policy and shall be apportioned between and among the different companies on a pro rata basis commensurate with the amount of risk insured by each title insurance company. In the event of issuance of mortgagee title policy binders on interim construction loans, each binder shall bear the full charge provided in Rule R-13.

  3. Where the total amount of a single risk is in excess of $15,000,000 (Fifteen Million Dollars), and when such risk is insured by more than one title insurance company, one title insurance company may issue a policy and the other co-insurers may join in execution of the Co-Insurance Endorsement ( T-48), in lieu of separate issuance of a policy subject to the terms of paragraph (a). The premium shall be determined for the total risk being insured under the policy and the premium shall be apportioned between or among the different companies on a pro rata basis commensurate with the amount of risk insured by each title insurance company as specified in the Co-Insurance Endorsement (T-48). The Amount of Insurance stated in Schedule A shall be the total risk being insured under the policy, followed by the statement "Subject to the terms of the Co-Insurance Endorsement (T-48) attached hereto."


Title Manual Main Index | Section IV Index

P-7. Name of Insured on Loan Policy of Title Insurance or Proposed Insured on Commitment for Loan Policy of Title Insurance

  1. 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.

  2. 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"
  3. 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 Policy of Title Insurance or a Loan Title Policy Binder on Interim Construction Loan.


Title Manual Main Index | Section IV Index

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

  1. Owner Policy

    1. When an Owner Policy is issued in an amount to include the cost of immediately contemplated improvements, the Policy must contain the following exception in Schedule B:

      "Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, or to be placed, upon the subject land. However, the Company does insure the Insured against loss, if any, sustained by the Insured under this Policy if such liens have been filed with the County Clerk of __________County, Texas, prior to the date hereof."

      AND THE FOLLOWING "LIABILITY" PARAGRAPH:

      "Liability hereunder at the date hereof is limited to $_________. Liability shall increase as contemplated improvements are made, so that any loss payable hereunder shall be limited to said sum plus the amount actually expended by the Insured in improvements at the time the loss occurs. Any expenditures made for improvements, subsequent to the date of this policy, will be deemed made as of the date of this policy. In no event shall the liability of the Company hereunder exceed the face amount of this policy. Nothing contained in this paragraph shall be construed as limiting any exception or any printed provision of this policy."

      In the event the premium for the Owner Policy is paid in installments pursuant to Rate Rule R-2(b) or (c), the following shall be added to the "Liability" paragraph:

      "Notwithstanding the foregoing, liability hereunder shall only increase as down-date endorsements are issued pursuant to expenditures made for improvements and as the corresponding fractional premium for the policy and the full premium for the down-date endorsement are paid."

    2. Upon the completion of the improvements on said property, the owner's acceptance thereof, and satisfactory evidence to the Company that all bills for labor and materials have been paid in full, the "Liability" paragraph and the exception in Schedule B set out in "a(1)" of this rule may be eliminated from the policy by the issuance of the promulgated Endorsement form containing the applicable promulgated language covering said elimination.

      In addition to the above elimination, if a satisfactory survey made after the completion of improvements is furnished to the Company, survey coverage may be provided as set out in Rules R-16 and P-2, using the promulgated Endorsement form and containing the applicable promulgated language.

      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.
      ( Endorsement Instruction II.)

  2. Mortgagee Policy

    1. When a Mortgagee Policy is issued prior to completion of improvements made under a mortgage given in whole, or in part, for the cost of improvements, the policy must contain the following exception under Schedule B:

      "Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, or to be placed, upon the subject land. However, the Company does insure the Insured against loss, if any, sustained by the Insured under this Policy if such liens have been filed with the County Clerk of __________ County, Texas, prior to the date hereof."

      AND THE FOLLOWING "PENDING DISBURSEMENT" PARAGRAPH:

      "Pending disbursement of the full proceeds of the loan secured by the lien instrument set forth under Schedule A hereof, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects in, or objections to, the title up to the face amount of the policy. Nothing contained in this paragraph shall be construed as limiting any exception under Schedule B, or any printed provision of this policy."

      In the event the premium for the Mortgagee Policy is paid in installments pursuant to Rate Rule R-2(a), the following shall be added to the "Pending Disbursement" paragraph:

      "Notwithstanding the foregoing, liability hereunder shall only increase as down-date endorsements are issued pursuant to construction advances and as the corresponding fractional premium for the policy and the full premium for the down-date endorsement are paid."

    2. Upon the completion of the improvements on said property, the owner's acceptance thereof, and satisfactory evidence to the Company that all bills for labor and materials have been paid in full, the exception plus the "Pending Disbursement" paragraph in "b(1)" above may be eliminated from the policy and mechanic's and materialmen's lien coverage amended by issuance of the promulgated Endorsement form containing the applicable promulgated language covering said elimination and amendment.

      In addition to the above elimination, if a satisfactory survey made after the completion of improvements is furnished to the Company, survey coverage may be provided as set out in Rules R-16 and P-2, using the promulgated Endorsement form and containing the applicable promulgated language.

      In addition, if the Company's underwriting requirements have been met, the T-19 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.
      ( Endorsement Instruction II.)

    3. In the event a Mortgagee Policy is issued subsequent to the issuance of a Mortgagee Title Policy Binder on Interim Construction Loan, but prior to the improvements having been completed and accepted by the owner, and before satisfactory evidence that all outstanding bills have been paid or satisfied has been furnished to the Company issuing said Mortgagee Policy, said Mortgagee Policy must contain the following exception under Schedule B:

      "Any and all liens arising by reason of unpaid bills or claims for work performed or materials furnished in connection with improvements placed, or to be placed, upon the subject land. However, the Company does insure the Insured against loss, if any, sustained by the Insured under this Policy if such liens have been filed with the County Clerk of ________ County, Texas, prior to the date hereof, except the following:"

      (Here insert any exception necessary by reason of matters arising since the date of the Binder or delete the immediately preceding words "except the following".)

      AND THE FOLLOWING "PENDING DISBURSEMENT" PARAGRAPH : (if applicable)
      Pending disbursement of the full proceeds of the loan secured by the lien instrument set forth under Schedule A hereof, this policy insures only to the extent of the amount actually disbursed, but increases as each disbursement is made in good faith and without knowledge of any defects in, or objections to, the title up to the face amount of the policy. Nothing contained in this paragraph shall be construed as limiting any exception under Schedule B, or any printed provision of this policy.
      (Procedural Rule P-9.b.4.)


Title Manual Main Index | Section IV Index

P-9. Endorsement of Owner or Mortgagee Policies

  1. Owner Policy

    1. When an Owner Policy of Title Insurance (Form T-1) is to be issued on a leasehold estate in the land, the Company shall attach to the said Owner Policy (Form T-1) the Leasehold Owner Policy Endorsement. When a Residential Owner Policy of Title Insurance -- One-To-Four Family Residences (Form T-1R) is to be issued on a leasehold estate in the land, the Company shall attach the Residential Leasehold Endorsement form to the Residential Owner Policy -- One-To-Four Family Residences (Form T-1R). The Owner Policy shall show that the estate being insured is a leasehold and exceptions shall be shown under Schedule B to all of the terms, provisions, and conditions of said lease creating such leasehold estate.

    2. When an insured under an Owner Policy shall have satisfied the Company as to the current value of the estate or interest insured by such Owner Policy, and shall have paid the premium provided for in Rule R-3.c., the Company shall attach to the said Owner Policy endorsement form T-34.

    3. When an Owner Policy is issued in the manner provided in Rule P-8.a., and the coverage thereunder increases as provided in Rule R-2, Rule P-8 or otherwise as provided in these Rules, upon request and compliance with Rule R-15, the title insurance company which issued the Owner Policy may extend the effective date of the said Owner Policy and state the amount then existing under such Policy by issuing the endorsement provided for in Form T-3, Instruction VIII, Items (a) 1, 2 and 3 of the endorsement may not be deleted.

    4. Where an Owner Policy has been issued covering the land and a manufactured housing unit which has been affixed to the land so as to become part of the real property, the Company may, if it considers the additional risk insurable and if requested by the proposed insured, attach to the policy endorsement form T-31.1 upon the payment of the premium prescribed in Rate Rule R-15 and all expenses required by the Company (such as survey and/or inspection).

  2. Mortgagee Policy

    1. Assignment of Mortgage to Government Agencies - Where a Mortgagee Policy has been issued covering the lien securing an indebtedness, and such indebtedness and lien have been subsequently sold, transferred and assigned to Government National Mortgage Association and/or Federal National Mortgage Association and/or Administrator of Veterans' Affairs and/or Secretary of Housing and Urban Development, as their names may be changed from time to time, the Company which issued the original policy may issue an Endorsement thereto to show the Government National Mortgage Association and/or Federal National Mortgage Association and/or Administrator of Veterans' Affairs and/or Secretary of Housing and Urban Development, or as their names may be changed from time to time as a party insured. As a condition to the issuance of the Endorsement, the Company may require a showing from the assignor that such assignor has not accelerated the maturity of the indebtedness, or if he has, that there has been a proper reinstatement of the obligation. It shall be permissible for the Company to show the current owner of the fee simple title to the property in the said Endorsement II.
      (Rate Rule R-11.a. and Endorsement Instruction III)

    2. Assignment of Mortgage to Others - Except as to those loans secured by one-to-four family residential properties, the Endorsement provided for in Rule P-9b(1) may also be issued to any assignees other than those set out in said Rule P-9b(1).
      (Rate Rule R-11.a. and Endorsement Instruction III)

    3. Partial Release, Release of Additional Collateral, Modification Agreement, Reinstatement Agreement and/or Release from Personal Liability - When a Mortgagee Policy has been issued covering the lien securing an indebtedness, and the holder of such Mortgagee Policy desires to:

      1. release a part of the land described in Schedule A of said Policy; and/or
      2. release additional collateral securing indebtedness described in said Schedule A; and/or
      3. modify only one or more of the following items described in Schedule A of said policy: the mortgage, deed of trust, security instrument, guaranty or promissory note by entering into a Modification Agreement; and/or
      4. reinstate said mortgage or deed of trust by entering into a Reinstatement Agreement; and/or
      5. release the mortgagor(s) or other obligors from personal liability;

      Upon payment of the premium prescribed by rate rule R-11.b., the Company which issued the original policy may issue a Form T-38 Endorsement thereto to show that policy coverage has not been reduced or terminated solely by virtue of the modification, reinstatement or release.

      An endorsement shall not be issued under this subparagraph (3) if:

      1. the modification agreement, reinstatement agreement or other instrument expressly creates or grants a lien or power of sale; or

      2. the indebtedness secured by the lien of the insured mortgage or deed of trust is evidenced by a new promissory note; or

      3. the insured mortgage or deed of trust is modified to secure additional principal indebtedness other than accrued or deferred interest on the specific indebtedness described on Schedule A of the policy or advances made pursuant to the terms of the original mortgage or deed of trust; or

      4. the insured mortgage or deed of trust is cross-collateralized or otherwise modified to cover property not described on Schedule A of the policy.
        (Rate Rule R-11.b.)

    4. Down Date Endorsement - When a Mortgagee Title Policy is issued in the manner provided in Rule P-8.b. and construction advances are being made subsequent to such issue, upon request and compliance with Rule R-11.c., the title insurance company which issued the Mortgagee Title Policy may extend the effective date of the said Mortgagee Title Policy and state the amount of coverage then existing under the policy, by issuing the Endorsement provided for in Form T-3, Instruction V. Items (a) 1, 2 and 3 of the Endorsement may not be deleted.
      ( Endorsement Instruction VII)

      When a Mortgagee Title Policy Binder on Interim Construction Loan is issued as provided in Procedural Rule P-16, and construction advances are being made subsequent to such issue, upon request and compliance with Rule R-11.c., the title insurance company which issued the Mortgagee Title Policy Binder on Interim Construction Loan may extend the effective date of the said Mortgagee Title Policy Binder on Interim Construction Loan by issuing the Endorsement provided for in Form T-3, Instruction VIII. Items (a) 1 and 2 of the Endorsement may not be deleted.

    5. When a Mortgagee Policy of title Insurance is to be issued on a leasehold estate in the land, the Company shall attach to the said Mortgagee Policy the Leasehold Mortgagee Policy Endorsement. The Mortgagee Policy shall show that the estate being insured is a leasehold and exception shall be shown under Schedule B to all of the terms, provisions, and conditions of the said lease creating such leasehold estate.

    6. Variable Rate Mortgage Loan Instruments - For purposes of this rule a "variable rate mortgage loan" shall be one which permits adjustments of the interest rate, with such adjustments being implemented through changes in the payment amount and/or in the outstanding principal loan balance or in the loan term. When a Loan Policy of Title Insurance is to be issued insuring the lien securing a variable rate mortgage loan note, the company may attach to the Loan Policy the Endorsement T-33 or T-33.1.

      A T-33 Endorsement or T-33.1 Endorsement may be issued and attached to a previously issued Loan Policy insuring a variable rate mortgage loan upon the payment of any applicable premium charge and compliance with the underwriting requirements of the Company.
      Rule R-11.d.

    7. Where a Mortgagee Policy has been issued covering the lien securing an indebtedness against land and a manufactured housing unit which has been affixed to the land covered by said lien so as to become part of the real property, the Company may, if it considers the additional risk insurable and if requested by the proposed insured, attach to the policy endorsement Form T-31 or endorsement Form T-31.1 upon the payment of the premium prescribed in Rate Rule R-11.e. and all expenses required by the Company (such as survey and/or inspection). A company is not required to issue endorsement form T-31 in order to issue endorsement form T-31.1.

    8. Future Advance/Revolving Credit ( T-35). When a Loan Policy of Title Insurance is to be issued to insure the validity and priority of a lien created by a mortgage or deed of trust which secures a revolving credit promissory note or other such indebtedness where:

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

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

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

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

    9. When a mortgagee policy is to be issued covering the lien securing an indebtedness against land used or to be used primarily for residential purposes, the company may, if it considers the risk insurable, attach to the policy endorsement Form T-36 with any applicable exceptions in paragraph (b) upon the payment of the premium prescribed in Rate Rule R-11.g.

    10. Balloon Mortgage Endorsement - When a mortgagee policy of title insurance is to be issued on residential real property insuring a lien that contains a balloon rider, the Company may attach to the mortgagee policy endorsement Form T-39. The balloon rider must contain a conditional right to refinance. The lien as originally created and described in the mortgagee policy must contain the balloon rider. The Company must be paid the premium prescribed in Rate Rule R-11.h. for issuance of the endorsement.

    11. A Company may issue its First Loss Endorsement Form T-14 to a Mortgagee Policy ( T-2), if (1) its underwriting requirements are met, (2) other property not described in the Mortgagee Policy is encumbered to secure payment of the indebtedness secured by the insured mortgage, and (3) the Company is paid the premium prescribed in Rate Rule R-11.i. The Company may not issue the First Loss Endorsement Form T-14 if the land covered by the policy is residential real property.

    12. Subsection b(12) of Procedural Rule P-9, relating to the issuance of the Last Dollar Endorsement ( T-15) is deleted because the Last Dollar Endorsement has been deleted as of January 1, 2010 due to obsolescence.

    13. A Company may issue its Mortgagee Policy Aggregation Endorsement ( T-16) to a Mortgagee Policy (T-2), if (1) it is paid the premium prescribed in Rate Rule R-11.k.; (2) its underwriting requirements are met; and (3) multiple policies are simultaneously issued covering separate mortgages securing the same indebtedness or loan. The Company shall charge the applicable premium for each Mortgagee Policy of Title Insurance ( T-2).

    14. A Company may issue its Planned Unit Development Endorsement ( T-17) to a Mortgagee Policy, if its underwriting requirements are met and if it is paid the premium described in Rate Rule R-11.l. The Company may delete any insuring provision if it does not consider that risk acceptable. The Company may not issue the Planned Unit Development Endorsement (T-17) if the land covered by the policy is not residential real property. Any insurance matter that may be covered by a Planned Unit Development Endorsement (T-17) may be insured only by the use of the Planned Unit Development Endorsement (T-17).

    15. A Company may issue its Condominium Endorsement T-28 to a contemporaneously issued Mortgagee Policy on or after the date Rate Rule R-11.m. is effective, if its underwriting requirements are met and if it is paid the premium, if any, described in Rate Rule 11.m. The Company may delete any insuring provision if it does not consider that risk acceptable. The Company may not issue the Condominium Endorsement (T-28) if the land covered by the policy is not residential real property. Any insured matter that may be covered by a Condominium Endorsement (T-28) may be insured only by the use of the Condominium Endorsement (T-28). This endorsement may not be issued in conjunction with the Planned Unit Development Endorsement ( T-17).

Continue to P-10. Facultative Reinsurance

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