Basic Manual of Title Insurance, Section IV (continued)

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Indicates new addition since last update.

Includes Procedural Rules P-64 Effective 6/10/18 | P-65 | P-66 | P-67 | P-68 | P-69 |
P-70 | P-71 | P-72 | P-73

P-64. Subordinate Liens and Leases - Pursuant to Procedural Rule P-11.b.(8)

When issuing a Loan 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.
If requested in writing prior to issuance of the policy, paragraph 4 of Schedule B of the Loan Policy (T-2) may be deleted. In such case
1. The subordinate lien(s) and lease(s), if any, shall be excepted in Schedule B and
2. The Company may insure therein such lien(s) and lease(s) are subordinate.
3. When insuring that a lien or lease is subordinate to the lien of the insured mortgage, the Company shall state, following the Exception: "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."
When issuing a Loan 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.

Effective June 10, 2018 (Order 2018-5503)

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P-65. Issuance of Owner Policy Required in Connection with Issuance of Mortgagee Policy.

Pursuant to Sec. 2704.051, Texas Insurance Code, except as provided below, whenever any improved residential real property shall be sold and a mortgagee title insurance policy issued in connection with a lien thereon, the agent or title insurance company shall also issue an owner title insurance policy to the owner of the property.
The title insurance company or title insurance agent issuing the owner title insurance policy shall charge the required premium promulgated by the commissioner.
Pursuant to Sec. 2704.052, Texas Insurance Code, at or before closing and settlement, the person acquiring title may reject the issuance of the owner title insurance policy required under this rule by executing the Owner Policy Rejection Form (Form T-56).

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P-66. Determination of Amount of Insurance (Policy Amount)

Owner's Policy - Owner's Policies shall be written to protect the estate or interest in the land, e.g. fee simple, leasehold, or easement.
1. Fee Simple
  1. All Owner's Policies shall be issued for the amount of the current sales price of the land and any existing improvements appurtenant thereto, plus, at the option of the insured, the cost of improvements immediately contemplated to be erected thereupon. In the last instance, such policy is permitted only if the applicable exception and clause provided for in Rule P-8 are placed in the policy.
  2. If no sale is being made, all Owner's Policies shall be issued for an amount equal to the value of the land and any existing improvements appurtenant thereto, plus, at the option of the insured, the cost of the improvements immediately contemplated to be erected thereupon. In the last instance, such policy is permitted only if the applicable exception and clause provided for in Rule P-8 are placed in the policy.
  3. If improvements are subsequently added, a new Owner's Policy may be issued in the aggregate amount of the original Owner's Policy, plus the cost of improvements. The premium for such policy shall be as provided in R-3.
2. Leasehold: The amount of the Owner's Policy covering a leasehold estate shall, at the option of the Insured, be based upon:
  1. the total amount of the rentals payable under the lease contract; or
  2. the value of the land and any existing improvements; or
  3. the value of the land and any existing improvements and the cost of improvements immediately contemplated to be erected thereupon. In this instance, the policy must contain the applicable exception and clause provided for in Rule P-8.
3. Easement: An Owner's Policy covering an easement estate shall be written for the amount of the value of the easement at the time the policy is issued.
4. Acquisition by the United States of America: Where improvements are located on land acquired by the United States of America and such improvements will be removed or destroyed, at the option of the United States, an Owner's Policy (Form T-11) shall be issued for the stated amount of the sales price of the land only, which price shall not include the amount paid for the existing improvements which are to be removed or destroyed.
5. Increased Value: When the value of the insured land and improvements has increased and when requested by the Insured, upon compliance with Rule P-9a(2), endorsement form T-34 shall be attached to the Owner's Policy upon payment of the premium set forth in R-15a.
6. Multiple Tracts: When multiple tracts of land are conveyed pursuant to separate contracts to a single purchaser and a single owner's policy is issued covering all the land conveyed, the conveyances shall be treated as separate transactions and the premiums shall be charged accordingly.
Loan Policy
1. Except as otherwise provided in this rule, all Loan Policies shall be for the amount of the loan(s) insured, when the land covered in the policy represents all of the security of the loan(s).
2. When the land covered in the policy represents only part of the security of the loan(s), then the policy shall be written in the amount of the value of such land or the amount of the loan, whichever is the lesser.
3. When requested by the insured, the policy may be issued in an amount equal to the original principal amount of the indebtedness plus legal interest (capitalized or otherwise) not to exceed twenty-five percent (25%) of the said principal amount.
4. A previously issued loan policy insuring variable rate mortgage loan may, when providing for negative amortization, be reissued (or endorsed), effective as of the date of the original Loan Policy, increasing the face amount of the Loan Policy from the original principal amount of the loan to an amount not to exceed one hundred twenty-five percent (125%) of the original principal amount upon the payment of additional premium as provided in R-4.
5. When a Loan Policy is issued subsequent to either an Owner's Policy or Loan Policy pursuant to Rate Rule R-6, it shall be issued in the amount of the current unpaid balance of said indebtedness.
6. When the insured lien secures a reverse mortgage loan, the Loan Policy 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; or
  
  2. 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.

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P-67. Insured Closing and Settlement Letters (T-50)

Each Title Insurance Company must maintain an electronic database record of each identifiable, specific transaction in which an Insured Closing and Settlement Letter (T-50) has been issued. The database record must include items 1 through 4 below.
1. The name of the Lender to whom the Insured Closing and Settlement Letter was issued.
2. The name of the Borrower.
3. The Guaranty File number, if known on the date of issuance of the Insured Closing and Settlement Letter.
4. The property address or legal description.
Each Title Insurance Company must provide to each of its Title Insurance Agents and Direct Operations, upon request, online access to the electronic database record.

Procedural Rule 67, adopted on May 1, 2008, is effective October 1, 2008.

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P-68. Consumer Notice

Pursuant to Texas Insurance Code §§521.101-521.103, a Title Insurance Company must provide consumer notice of insurer toll-free number for information and complaints with each title insurance policy issued in the manner prescribed by the Commissioner.
Compliance with 28 Texas Administrative Code §1.601 part A of this Rule.

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P-69. Issuance of Insured Closing Letters (T-50 or T-51)

An insured closing letter shall only be issued when the related transaction is closed by a title insurance agent, direct operation, or licensed escrow officer acting on a title insurance agent's or direct operation's behalf.
An insured closing letter shall not be issued when the related transaction is closed by an attorney that is not licensed as an escrow officer and not acting on a title insurance agent's or direct operation's behalf.
This rule applies specifically to attorneys closing the transaction under P-1f and P-22.

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P-70. Cancellation Fees; Fees for Services Rendered

A cancellation fee is defined as a fee charged by a title insurance agent, direct operation, title insurance company, or escrow officer, hereinafter "licensee" to a person or entity who is not a licensee for work done by the licensee in connection with a bona fide order for title insurance which fails to close or for which a policy is not issued. Cancellation fees are prohibited.
As long as an agreement complies with Procedural Rule P-24 with respect to transactions that close and a policy is issued, title insurance agents and direct operations may agree in writing to a fee for furnishing title evidence and examination that is a set amount of money instead of a percentage of the title insurance premium to be paid if the order for title insurance does not close and a policy is not issued. Payment under this subsection shall not be considered a cancellation fee and the payment, charge, or fee shall not be passed on or charged to the consumer.
A refusal to agree to set a fee under this rule shall not be considered a refusal to provide title evidence under Procedural Rule P-24 or P-25.

Effective January 3, 2014 (Order 2806)

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P-71. Texas Limited Coverage Residential Chain of Title Policy

A Company may issue the Texas Limited Coverage Residential Chain of Title Policy (T-53) upon request on or after the date Rate Rule R-35 is effective, if its underwriting requirements are met and it is paid the premium, if any, as prescribed by Rate Rule R-35, provided that:
1. The land is residential real property; and
2. The proposed insured is an entity which is an institutional lender including a Bank, Credit Union, or Savings Association as defined in §341.001, Texas Finance Code, or a Mortgage Banker as defined in §157.002, Texas Finance Code, or an Insurer as defined in §823.002, Texas Insurance Code.
A Texas Limited Coverage Residential Chain of Title Policy (T-53) may be issued only by an agent licensed in the county in which the land is located; and no other party may receive any portion of the premium, other than the promulgated division of premium between agent and underwriter.
The Texas Limited Coverage Residential Chain of Title Policy (T-53) shall not be issued with respect to deeds and leases recorded in the public records more than sixty (60) months immediately preceding the Date of Policy.

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P-72. Severable Improvements Endorsement (Form T-54)

A Company may issue its Severable Improvements Endorsement (Form T-54) to a Loan Policy (Form T-2) or Owner's Policy (Form T-1) on land which contains improvements and which is not residential real property, if its underwriting requirements are met, and the area and boundary amendment is made pursuant to Procedural Rule P-2. The policy amount shall be for the value of the land and improvements and the severable improvements. 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 Severable Improvements Endorsement (Form T-54) may be insured only by the use of this endorsement.

Effective January 3, 2014 (Order 2806)

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P-73. Closing Disclosure and Texas Disclosure (Form T-64)

When a settlement agent is required to use a federal Closing Disclosure form in a settlement in Texas, the settlement agent must also prepare Form T-64.
On Form T-64 (See Form T-64 completed with sample data), the settlement agent must:
1. accurately disclose the Texas title insurance premiums,
2. separately itemize all other fees and charges paid to the settlement agent (which may have been combined on the Closing Disclosure), and
3. disclose all payments of portions of the title insurance premium or real estate commission to third parties.
Settlement agents must use Form T-64 with the federal Closing Disclosure, as an acknowledgement and authorization for disbursement.
Settlement agents may use a combined Form T-64 for signature by both buyer and seller, or may use a separate Form T-64 for each party.
Additional blank lines may be added to Form T-64 as needed to disclose additional items.
The last three paragraphs, beginning with “The Closing Disclosure was assembled” and ending with the acknowledgment paragraph, must be kept together on the same page with the signatures.

Effective August 1, 2015 (Order 4038)

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