Texas Register
(22 TexReg 11231).
The amendment concerns 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 (the Basic Manual). The amendments to the Basic Manual
are necessary to facilitate the administration and regulation of title insurance
in this state by adopting new rules and forms, which clarify and standardize
the rules and forms which regulate title insurance. The effective date of
the amended section is January 12, 1998. The new procedural rules in the Basic
Manual facilitate the issuing of mortgagee title policies insuring home equity
liens and reverse mortgages on homestead property. Procedural Rule P-44, relating
to the Equity Loan Mortgage Endorsement (T-42); Procedural Rule P-45, relating
to the Texas Reverse Mortgage Endorsement (T-43); Equity Loan Mortgage Endorsement
T-42; and Texas Reverse Mortgage Endorsement T-43 will enable title insurance
companies to properly issue mortgagee policies for home equity and reverse
mortgage loans on Texas homestead property. A typographical error in the Equity
Loan Mortgage Endorsement T-42 was noted at the public hearing on December
17, 1997, and has been corrected.
Amended §9.1 incorporates by reference certain amendments to the Basic
Manual, which facilitate the issuance of mortgagee title policies insuring
home equity liens and reverse mortgages on homestead property. The section
adopts by reference and amends the Basic Manual, Section IV, Procedural Rules
to add new Procedural Rule P-44, relating to the Equity Loan Mortgage Endorsement
(T-42); and amends the Basic Manual, Section II to add a new Equity Loan Mortgage
Endorsement T-42. The Endorsement T-42 includes a definition of "consumer
credit protection law." The promulgated Mortgagee Title Policy does not insure
against consumer credit protection laws. However, the endorsement acknowledges
that the requirements for "equity" mortgages include consumer credit protection
laws. The endorsement provides additional insurance relating to the requirements
and conditions for equity mortgages that can be underwritten by title companies
from an examination of the record title or of the insured mortgage. The endorsement
provides insurance relating to the requirement that the mortgage be executed
by all owners and their spouses. The endorsement provides insurance relating
to the prohibition against the mortgage of a homestead designated for agricultural
use as provided by statutes governing property taxes (unless used primarily
for production of milk). The endorsement provides insurance relating to the
prohibition against a new "equity" mortgage that closes before the first anniversary
of a prior "equity" mortgage. The endorsement provides insurance relating
to the requirement that the mortgage disclose that the loan is an "equity"
mortgage. The endorsement may provide insurance relating to the requirement
that the extension of credit close at the office of the lender, an attorney
at law, or a title company if the closing is at the title company. The section
also adopts by reference and amends the Basic Manual, Section IV, Procedural
Rules, to add new Procedural Rule P-45, relating to the Texas Reverse Mortgage
Endorsement (T-43) and amends the Basic Manual, Section II to add a new Texas
Reverse Mortgage Endorsement T-43. The Endorsement T-43 ensures that the policy
liability will include subsequent proceeds of the loan actually disbursed
plus accrued interest, not exceeding the amount of insurance. The endorsement
insures the priority of future disbursements and accrued interest. The endorsement
includes a definition of "interest" to include compound interest, interest
on interest and interest contingent on appreciation.
Comment: A commenter expressed support for the amendment, but suggested
future consideration of the following additional coverages to ensure that:
owners receive copies of all documents signed at closing; all fees imposed
or collected by the title company are shown on the settlement statement approved
by the lender; no blanks are left to be filled in when the owner signs the
documents at closing; the closing does not take place before the lender's
stated closing date; no document evidencing an election not to rescind under
a three-day right of rescission is executed by the owner/spouse before the
expiration of the rescission period; no loan proceeds are disbursed prior
to expiration of the right of rescission; the owner and lender sign a written
acknowledgment of the "fair market value" of the homestead property; and any
part of the land described in Schedule A of the policy which is not the homestead
of the owner of the land is noted.
Agency Response: The department agrees that the current amendment is an
appropriate interim step, and the department will consider the suggested additional
coverages in future proposed rules. The department notes, however, that many
of the suggested coverages may fall outside the realm of title insurance,
and may not be able to be included in proposed rules.
For: Fannie Mae (formerly known as Federal National Mortgage Association).
The amendment is adopted pursuant to the Insurance Code, Articles
9.07, 9.21, and 1.03A and Section 50, Article XVI, Texas Constitution. Article
9.07 authorizes and requires the commissioner to hold a biennial hearing
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 and regulations
prescribing underwriting standards and practices, and to promulgate and enforce
all other rules and regulations necessary to accomplish the purposes of Chapter
9, concerning regulation of title insurance. Article 1.03A authorizes the
commissioner to adopt rules and regulations for the conduct and execution
of the duties and functions of the department as authorized by statute. By
voter approval on November 4, 1997, Section 50, Article XVI, Texas Constitution
was amended to permit an encumbrance against homestead property for certain
extensions of equity credit. The Government Code, §§2001.004-2001.038
et seq. (Administrative Procedures Act), authorizes and requires each state
agency to adopt rules of practice stating the nature and requirements of
available procedures and to prescribe the procedures for adoption of rules
by a state administrative agency.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on December 23, 1997.
TRD-9717139
Carloline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: January 12, 1998
Proposal publication date: November 21, 1997
For further information, please call: (512) 463-6327