1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §9.1 and §9.401, concerning the adoption by reference of certain amendments to the Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas (Basic Manual) and to the Texas Title Insurance Statistical Plan (Statistical Plan). The proposed amendments to §9.1 and §9.401 revise the date of the amended Basic Manual and Statistical Plan. The proposed amendments to §9.1 also correct a typographical error by updating the zip code referenced in the rule. The proposed amendments to the Basic Manual and Statistical Plan, which the proposed amended sections will adopt by reference, were considered at the rulemaking phase of the 2006 Texas Title Insurance Biennial Public Hearing held on September 5, 2007, Docket Number 2668. The rulemaking phase of the hearing was conducted pursuant to Insurance Code §2703.205. At the close of the September 5 hearing, the Commissioner directed that the record be held open for 30 days in order to allow additional written comments to be submitted regarding Items 2006-64, 2006-65, and 2006-67. In accordance with Insurance Code §2703.205(d), the ratemaking phase of the hearing was referred to the State Office of Administrative Hearings. This proposal is necessary to adopt new rules and forms and modify or replace currently existing rules and forms in the Basic Manual and Statistical Plan to facilitate the administration and regulation of title insurance and to clarify or standardize the rules and forms regulating the business of title insurance in the State of Texas.
The proposed amendments to the Basic Manual and Statistical Plan are identified by the item number used in the September 5 hearing. The proposal consists of 53 items. Publication of this proposal is necessary to incorporate the items proposed for approval into the Basic Manual and Statistical Plan. Items proposed for approval are detailed below along with a brief explanation of any substantive changes to the filings made subsequent to the September 5 hearing. The Department has also made changes to the filings to correct statutory references, typographical errors, and formatting errors. The Department proposes to deny approval of Items 2006-11, 2006-13, 2006-23, 2006-25, 2006-28, 2006-37, and 2006-64. Items 2006-18, 2006-20, 2006-21, 2006-41, and 2006-67 were withdrawn from consideration during the rulemaking phase of the hearing upon the respective request of the entities that originally filed the items for consideration.
The following items are proposed for approval:
Item 2006-1 - Submission to adopt a new Co-Insurance Endorsement (Form T-48) to accommodate commercial lenders and owners who often request this endorsement in multi-state, multi-site, and other large transactions.
Item 2006-2 - Submission to amend Procedural Rule P-6 to authorize a Co-insurer to issue a Co-insurance Endorsement to another Title Insurer's Owner or Mortgagee Policy when the co-insurance transaction exceeds fifteen million dollars.
Item 2006-3 - Submission to repeal the current Verification of Services Rendered Form T-00 and adopt a new Form T-00 to organize the information each entity participating in the transaction must provide and to assist underwriters in reporting that information to the Department.
Item 2006-4 - Submission to amend the Supplemental Coverage Manufactured Housing Unit Endorsement Form T-31.1 to conform to the new American Land Title Association form by clarifying the insurance against personal property liens and by ensuring that a foreclosure of an insured mortgage may be conducted by one procedure.
Item 2006-5 - Submission to amend the Revolving Credit Endorsement Form T-35 to change the name to the Revolving Credit/Future Advance Endorsement Form T-35 and to conform to the American Land Title Association form by expanding coverage to the lender.
Item 2006-6 - Submission to amend the Residential Real Property Affidavit T-47 by removing specific language in the affidavit that requires the name of the title company to be identified and to insert generic language to allow the affidavit to be prepared and executed early in the transaction process.
Item 2006-7 - Submission to adopt a new Procedural Rule (P-63) that incorporates the procedural portion of Rate Rule R-2.(d) concerning a policy issued to a qualified intermediary under IRS Code 1031 and also contains deletions and improved formatting.
Item 2006-8 - Submission to adopt a new Procedural Rule (P-64) regarding the treatment of subordinate liens and leases in order to better alert title companies to comply with the instruction in Procedural Rule P-11.b.(8).
Item 2006-9 - Submission to adopt a new Procedural Rule (P-65) in conformity with Insurance Code §2704.051 and §2704.052 to require an Owner's Policy be issued in connection with a Mortgagee Policy unless the person acquiring title rejects it.
Item 2006-10 - Submission to adopt a new Procedural Rule (P-66) to include procedures currently in other rate and procedural rules into one rule relating to determining the correct amount of insurance in owner and mortgagee polices.
Item 2006-12 - Submission to amend Procedural Rule P-7 to incorporate the language from Bulletin 157 into the procedural rules and to resolve the question as to whether it is permissible to include the "successor in ownership" language as part of the Proposed Insured in a Commitment.
Item 2006-14 - Submission to amend Procedural Rule P-21 to make the terms used in the rule consistent with Insurance Code §2651.203 and to update references to the Commissioner of Insurance.
Item 2006-15 - Submission to amend Procedural Rule P-28 to eliminate the need for a company owning multiple title insurance companies to make multiple course submissions and/or assignments between the related title insurance company providers.
Item 2006-16 - Submission to amend Procedural Rule P-45 to make the rule consistent with the federal requirements regarding the Maximum Claim Amount for FHA-insured loans and to allow the insured amount to be determined by lenders through a lender estimation of the maximum amount that may be secured by lien.
Item 2006-17 - Submission to amend Procedural Rule P-53 to remove the sunset provision contained within the rule and to ensure that the rule will remain in effect beyond January 1, 2008. Submission to remove the sunset provision of P-53 is duplicative of Item 2006-42, and these items have been combined for efficiency.
Item 2006-19 - Submission to amend Administrative Rule L-1 to provide that the Department must send notice of renewal to each agent at least 45 days prior to the expiration of the agent's license and, if not renewed, within 45 days after the license expires. The Department has clarified that the notice provision applies only to active licenses by adding language to the submission that stipulates the notice provision applies "[u]nless revoked, terminated, cancelled or previously surrendered by the holder." The Department has additionally clarified that the additional notice provision is administrative in nature and does not undermine the responsibility of the licensed agent to maintain a current license nor does the notice provision prejudice any enforcement action brought by the Department by adding the following language to the submission: "Failure of the department to send written notice of renewal or expiration shall not, in any event, toll the expiration date of the agent license nor prejudice any enforcement action brought by the department."
Item 2006-22 - Submission to amend the Minimum Standards, Specific Instructions and Report Forms for Audit of Trust Funds Required of Texas Title Insurance Agents, Direct Operations, Title Attorneys, and Attorney's Licensed as Escrow Officers pertaining to the Policy Guaranty Fee and Guaranty Assessment Recoupment Charge to provide that maintaining a policy guarantee fee escrow account and a guaranty assessment recoupment charge escrow account separate from the agent's standard audited escrow account is optional.
Item 2006-24 - Amended submission to amend the Owner Policy of Title Insurance Form T-1 based on the new 2006 American Land Title Association Owner's Policy.
Item 2006-26 - Amended submission to amend the Mortgagee Policy of Title Insurance Form T-2 based on the new 2006 American Land Title Association Loan Policy.
Item 2006-27 -Submission to amend Procedural Rule P-1 to rename the "Owner Policy" and the "Mortgagee Policy" to coincide with the terminology utilized in the corresponding American Land Title Association policies and to provide that the new terminology be incorporated into newly printed or electronically generated forms.
Item 2006-29 - Amended submission to amend Procedural Rule P-32 to clarify time periods for retention of documents and to conform this procedural rule to the provisions of UETA and E-SIGN. The Department proposes to adopt the amended submission with changes to retain the original requirement that title insurance policies must be retained indefinitely.
Item 2006-30 - Submission to amend Procedural Rule P-36 to conform with the proposed amendments to the Owner Policy and Mortgagee Policy and to increase the threshold for arbitral matters to two million dollars and delete the choice of law provision.
Item 2006-31 - Submission to amend Procedural Rule P-37 to conform to the proposed amendments to the Owner Policy and Mortgagee Policy.
Item 2006-32 - Submission to amend the Facultative Reinsurance Agreement Form T-18.1 based on changes contained in the new American Land Title Association's Reinsurance Agreement and to clarify a reinsurer's payment obligations.
Item 2006-33 - Submission to amend the Restrictions, Encroachments, Minerals Endorsement T-19 to conform to the new American Land Title Association Endorsement 9.3-06, which may be issued with the proposed amended Mortgagee Policy T-2.
Item 2006-34 - Submission to amend the Restrictions, Encroachments, Minerals Endorsement - Owner Policy T-19.1 to conform to the new American Land Title Association Endorsement 9.5-06, which may be issued with the proposed amended Owner Policy T-1.
Item 2006-35 - Submission to amend the Tertiary Facultative Reinsurance Agreement (Type I) Form T-21.1 to conform to the proposed amendments to the Facultative Reinsurance Agreement Form T-18.1.
Item 2006-36 - Submission to amend the Tertiary Facultative Reinsurance Agreement (Type II) Form T-21.2 to conform to the proposed amendments to the Facultative Reinsurance Agreement Form T-18.1.
Item 2006-38 - Amended submission to adopt a new Procedural Rule (P-67) to provide better auditing tools regarding Insured Closing and Settlement Letters and to ensure compliance with Texas Insurance Code Chapter 2702.
Item 2006-39 - Submission to adopt a new Procedural Rule (P-68) to clarify that Insurance Code §§521.101 - 521.103 applies to the title industry and to ensure title industry compliance with the statute.
Item 2006-40 - Submission to amend Procedural Rule P-1, subparagraph f. to conform the definition of closing the transaction to the statutory definition of closing the transaction in Insurance Code §2501.006.
Item 2006-42 - Submission to amend Procedural Rule P-53 to remove the sunset provision contained within the rule and to ensure that the rule will remain in effect beyond January 1, 2008. Submission to remove the sunset provision of P-53 is duplicative of Item 2006-17, and these items have been combined for efficiency.
Item 2006-43 - Submission to amend Insuring Forms T-7, T-1, T-1R, T-2, T-2R, and T-44 to remove outdated language regarding the consumer complaint notice.
Item 2006-44 - Amended submission to amend the Minimum Standards, Specific Instructions and Report Forms for Audit of Trust Funds Required of Texas Title Insurance Agents, Direct Operations, Title Attorneys and Attorneys Licensed as Escrow Officers in Section V to clarify consumer charges in Specific Areas and Procedures 5 and to add language to Minimum Escrow Account Procedures and Internal Controls 18 to help identify fraudulent real estate transactions. The Department proposes to adopt the amended submission with changes to retain the original prohibition against pass through charges for search services.
Item 2006-45 - Submission to amend Administrative Rule L-1 to clarify that a title insurance agent may not commence business in a county until authorized by the Department.
Item 2006-46 - Submission to amend Administrative Rule L-2 to require attorneys who are licensed escrow officers to close the transaction in the title agent's name, to require attorneys who are licensed escrow officers to use the title agent's escrow account, and to require escrow officers to keep a current address on file with the Department.
Item 2006-47 - Submission to amend Administrative Rule L-2 to clarify that a non-attorney employee of an attorney must be licensed as escrow officer prior to performing the duties of an escrow officer.
Item 2006-48 - Submission to amend Administrative Rules L-1 and L-2 to ensure that the Title Agent and Escrow Officer licensing procedures are consistent with the Texas Business Organizations Code, which went into effect on January 1, 2006, and to simplify the merger, exchange, and conversion process when an organizational restructuring results in a less than 50% change in ownership.
Item 2006-49 - Submission to amend Administrative Rule G-1 to clarify that Policy Guaranty Fees must be postmarked on or before the due date to be considered timely.
Item 2006-50 - Amended submission to amend the Texas Title Insurance Statistical Plan to correct the listing of the County Code for Nolan County, to remove the Property Classification Codes for Texas Operations, and to add a new Standard Endorsement Code for Texas Operations relating to the Restrictions, Encroachment, Minerals Endorsement - Owner's Policy (T-19.1).
Item 2006-65 - Amended submission to amend Procedural Rule P-24 to provide restrictions on a title insurance company, agent, or direct operation regarding prior written agreements that deviate from the premium split set forth in P-24. The Department proposes to adopt an amended submission received on October 4, 2007. The amended submission changes the premium split for transactions involving an insured policy amount in excess of $125,000 by requiring that payment shall not exceed fifty percent for furnishing title evidence, or furnishing title evidence and title examination, and shall not exceed fifty percent for closing the transaction, or closing the transaction and title examination. The amended submission also restricts prior written agreement arrangements by requiring that prior written agreements must be entered into 90 days prior to closing and by stipulating that the parties to the agreement must be licensed in the same or in contiguous counties when an insured policy amount is $125,000 or less. The amended submission further requires that all payments must be remitted within 30 days after the date of recording of the conveying instrument and that the prior written agreement restrictions apply also to escrow officers.
The following items are proposed for disapproval:
Item 2006-11 - Submission to amend Procedural Rule P-1 to rename the "Owner Policy" and the "Mortgagee Policy" to coincide with the terminology utilized in the corresponding American Land Title Association policies and to provide that the new terminology be incorporated into newly printed or electronically generated forms.
Item 2006-13 - Submission to amend Procedural Rule P-17 by allowing for electronic filing and recording of documents and to withdraw Bulletin 163 to allow a pass-through to consumers of electronic filing fees. The Department notes that while the development and utilization of new technology to promote efficiencies in closing the transaction is strongly encouraged, such efficiencies should also minimize additional increased economic impact to consumers. The Department will continue to work with parties interested in amendments to Procedural Rule P-17 and revising Bulletin 163 to reflect acceptable practices regarding electronic filing and recording of documents. Interested parties are encouraged to organize and participate in a study group to determine a method of implementation of electronic filing and recording of documents that will minimize increased economic impact to consumers.
Item 2006-23 - Submission to amend the Owner Policy of Title Insurance FormT-1 based on the new 2006 American Land Title Association Owner's Policy.
Item 2006-25 - Submission to amend the Mortgagee Policy of Title Insurance Form T-2 based on the new 2006 American Land Title Association Loan Policy.
Item 2006-28 - Submission to amend Procedural Rule P-32 to clarify time periods for retention of documents and to conform this procedural rule to the provisions of UETA and E-SIGN.
Item 2006-37 - Submission to amend Administrative Rule L-1 to provide that, upon the filing of an application for a title insurance agent license, the Department must notify all currently licensed title insurance agents in the county in which the sponsoring title insurance company applicant is seeking approval and to provide that any currently licensed agent may make a written request to the Department for an on-site audit of the applicant's abstract plant facilities.
Item 2006-64 - Submission to adopt a new Procedural Rule to ensure that title insurance companies do not receive more than 50% of their business through Affiliated Business Arrangements, to provide that 90% of the business of a title insurance company operating in connection with an Affiliated Business Arrangement must involve property located within the county in which the company is licensed, to provide notice requirements concerning Affiliated Business Arrangements, and to ensure that such arrangements are not coercive.
The following items have been withdrawn:
Item 2006-18 - Submission to amend Administrative Rule L-2 to allow a Direct Operation, Title Insurance Agent, or an attorney licensed as an escrow officer to contract with a person to employ that person as a bona fide employee to perform any duty or work, other than that of an escrow officer, at or before an application for that person to be licensed as an escrow officer is filed with the Department and to remove the Department's ability to deny an application or decline to renew an escrow license while an investigation, audit inquiry, disciplinary action, or allegation of a violation is pending.
Item 2006-20 - Submission to amend Administrative Rule L-1 to deny the Department the ability to deny an application or decline to renew the license of an agent while an investigation, audit inquiry, disciplinary action, or allegation of a violation is pending.
Item 2006-21 - Submission to amend Administrative Rule L-3 to deny the Department the ability to deny an application or decline to renew the license of a Direct Operation while an investigation, audit inquiry, disciplinary action, or allegation of a violation is pending.
Item 2006-41 - Submission to amend Procedural Rule P-22 to clarify the terms fee and payment, to clarify who may receive payment, to reduce administrative inefficiency associated with remittance, to prevent certain types of prohibited conduct, and to update references to revised Insurance Code provisions.
Item 2006-67 - Submission to amend Procedural Rule P-24 to set reasonable percentage rates for payment for services for furnishing title evidence and title examination and to remove language in the rule that often prevents urban and rural agents from receiving the same amount of premium for the same work.
The Department has filed a copy of each of the proposed items with the Secretary of State's Texas Register Section. Persons desiring copies of the proposed items may obtain them from the Office of the Chief Clerk, Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78701-3938. To request copies, 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 proposals 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 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 amendments are in effect there are a number of public benefits anticipated as a result of the amendments to the Basic Manual and Statistical Plan. The updating and revising of the administrative rules, procedural rules, forms, endorsements, definitions, reporting forms, and Statistical Plan allow for consistent administration, facilitate the efficiencies of the Department, and the closing of title transactions. The new and updated promulgated forms will impose no additional regulatory costs on companies participating in the title insurance market, and the costs of reproducing forms, estimated to be no more than $.15 per page for the cost of a photocopy, should be fully compensated by the existing premium schedule. As to all proposals, the department anticipates no differential impact between small, large, and micro businesses.
4. ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. As required by the Government Code §2006.002(c), the Department has determined that the proposed amendments will not have an adverse economic effect on small or micro businesses. The Department's analysis of any possible costs for compliance with the proposal that are detailed in the Public Benefit/Cost Note section of this proposal are also applicable for small and micro businesses that opt to write title insurance. Additionally, the proposed rules and forms provide an economic opportunity for the businesses in the title insurance industry, and businesses will be profitably compensated by a fee schedule. In accordance with the Government Code §2006.002(c), the Department has therefore determined that a regulatory flexibility analysis is not required because the proposal will not have an adverse impact on small or micro businesses.
5. TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.
6. REQUEST FOR COMMENTS. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on January 21, 2008, 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. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered. Also, any comments received during or within 30 days of the hearing held on September 5, 2007, Docket Number 2668, are part of the record and have already been considered for purposes of this proposal.
7. STATUTORY AUTHORITY. The amended sections are proposed pursuant to Insurance Code §§2551.003, 2703.153, 2703.203, 2703.205 and 36.001. Section 2551.003 authorizes the Commissioner to adopt and enforce rules that prescribe underwriting standards and practices on which a title insurance contract must be issued, that define risks that may not be assumed under a title insurance contract, including risks that may not be assumed because of the insolvency of the parties to the transaction, and that the Commissioner determines are necessary to accomplish the purposes Insurance Code Title 11, which concerns the regulation of title insurance. Section 2703.153 authorizes and requires the Commissioner to collect data from each title insurance company and title insurance agent engaged in the business of title insurance relating to loss experience, expense of operation, and other material matters necessary for the fixing of premium rates. Section 2703.203 authorizes and requires the Commissioner to hold a biennial public hearing to consider adoption of premium rates and other matters relating to regulating the business of title insurance that an association, title insurance company, title insurance agent, or member of the public requests to be considered or that the Commissioner determines necessary to consider. Section 2703.205 authorizes and requires the Commissioner to consider rules, forms, endorsements, and related matters that do not have rate implications at the rulemaking phase of the biennial public hearing. Section 36.001 authorizes the Commissioner of Insurance to 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.8. CROSS REFERENCE TO STATUTES. The following statutes are affected by this proposal:
Rule Number Statute
§9.1 and §9.401 Insurance Code Chapters 2551 and 2703
9. TEXT.
SUBCHAPTER A. Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas
§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 April 1, 2008[ January 20, 2006]. 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- 3938[ 1998].
Agenda Items
SUBCHAPTER C. Texas Title Insurance Statistical Plan
§9.401. Texas Title Insurance Statistical Plan. The Texas Department of Insurance adopts by reference the rules contained in the Texas Title Insurance Statistical Plan as amended effective April 1, 2008[ November 1, 2005]. This document is published by the Texas Department of Insurance and is available from the Property and Casualty Data Services Division, Mail Code 105-5D, Texas Department of Insurance, William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.
Texas Title Insurance Stat Plan