Bulletin: TX000067

Date:
October 03, 2003
To:
All Issuing Offices in Texas
RE:
2003 Legislation

Dear Associates,

In 2003, numerous bills and constitutional amendments that affect real estate transactions were approved. The following are some of the bills that affect us:

PUBLIC RECORDS

HB 2930 and SB 1559. New Disclosure in Deeds, Mortgages and Deeds of Trust. Applicable to Deeds, Mortgages and Deeds of Trust Executed on or After Jan. 1, 2004.

New Section 11.008, Property Code, applies to a deed, deed of trust or mortgage transferring an interest in land to or from an individual. If the county clerk accepts an instrument for recording, the recording of the instrument creates a conclusive presumption that the requirements of this section have been met. The deed, deed of trust or mortgage executed on or after January 1, 2004, must contain the following notice on the first page of the instrument in 12-point boldfaced type or 12-point uppercase letters:

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.

You should verify that deeds, deeds of trust and mortgages to or from individuals contain this disclosure if you file them for record. You do not need to object to recorded instruments that fail to contain the disclosure.

SB 1731. Record Archives Fee. Effective Sept. 1, 2003.

Amended Subsections 118.011(e) and 118.025(b), Local Government Code, authorize commissioners courts to impose a new fee not to exceed $5 for filing public documents in county clerk offices in any county for preserving, restoring, and managing county records. The funds may not be used to purchase, lease, or develop computer software to geographically index public records, excluding indexing public records by lot and block description. This fee expires September 1, 2008. This additional fee applies in numerous counties, including Andrews, Angelina, Bailey, Bee, Bexar, Brewster, Coke, Comal, Cooke, Coryell, Crane, Dallas, Dimmitt, Ector, Hale, Hood, Hopkins, Jefferson, Johnson, Kaufman, Kleberg, Lamb, Martin, Midland, Moore, Nacogdoches, Presidio, Real, Red River, Rusk, San Augustine, Scurry, Shelby, Titus, Tom Green, Trinity, Upshur, Ward, and Wichita. The filing fee was increased by $3.00 in Brazos County and by $2.00 in Willacy County. Collin and Denton are increasing their fees on of October 1, 2003. Many other counties are expected to impose this fee.

HB 2250 and SB 1902. Rio Grande Basin Recordings. Effective Sept. 1, 2003.

The Rio Grande Watermaster controls the use of surface water in the Rio Grande Basin from the mouth of the Rio Grande to Fort Quitman. Section 11.3271 (j), Water Code, provides that on or after September 1, 2003, a lien against a water right shall not be effective against third parties unless a certified copy of the instrument is filed with the watermaster and all requirements under other law are met. The watermaster is the official recorder for all instruments, including deeds, deeds of trust, financing statements, security agreements, and liens, that the commission authorizes or requires to be filed in connection with water rights relating to water in the lower, middle, or upper basin of the Rio Grande that are subject to a permit, certified filing, or certificate of adjudication.

HOMESTEAD

SJR 42. Home Equity Loans. Approved Sept. 13, 2003. Effective Sept. 29, 2003.

Amended Sections 50(a), Article XVI, Texas Constitution establishes a home equity line of credit. New Section 50(t) to Article XVI, Texas Constitution, defines a home equity line of credit as an open-end account. A home equity line of credit is limited to a total principal amount of up to 50 percent of the fair market value of the homestead. A lender must charge all fees related to a home equity line of credit at the time credit is extended and may not charge any fees to the homeowner in connection with any debit or advance. Single debits or advances may not be less than $4,000, and debits or advances are not permitted through the use of a credit card, debit card, preprinted solicitation check, or similar device. Subsections 50(a)(6)(Q)(x)(a) - (f) establish provisions through which a lender may cure most failures to comply with the Constitution within 60 days after being notified. The lender may not cure the failure to secure joinder of each owner and each owner's spouse, unless such individuals subsequently consent. The measure permits a home equity loan to be refinanced before the first anniversary of its closing date in order to satisfy the lender's ability to cure a defect in the loan. The amendment permits a home equity loan to be secured by a manufactured home that has been converted to real property. Amended Section 50(f), Article XVI, Texas Constitution permits the refinancing of a home equity loan as a reverse mortgage. New Section 50(u) to Article XVI, Texas Constitution permits the Legislature by statute to delegate to one or more state agencies the power to interpret certain constitutional provisions relating to home equity lending (Subsections (a)(5) - (a)(7), (e) - (p), and (t), of Section 50).

We anticipate that the existing home equity title insurance forms will be amended to conform to these changes. You may continue to insure home equity mortgages under our prior instructions. Do not issue a Revolving Credit Endorsement (T-35) on a home equity mortgage without approval of our underwriting personnel. If you are requested to insure an attempted cure of a home equity mortgage, call our underwriting personnel. You should expect closing instructions that require you to provide a copy of the final HUD settlement statement one day before closing. You may be requested to have the borrowers appear in your office one day before closing, or you may be requested to fax the final HUD settlement statement to the borrowers one day before closing.

HJR 23. Refinance by Reverse Mortgage of Home Equity Loan. Approved Sept. 13, 2003. Effective Sept. 29, 2003.

Amended Section 50(f), Article XVI, Texas Constitution permits a home equity loan to be refinanced as a reverse mortgage.
You may insure a reverse mortgage that refinances a prior home equity loan on or after Sept. 29, 2003.

HB 2292. Medicaid Lien. Effective Sept. 1, 2003.

New Section 531.077, Government Code, provides that the commissioner of the Health and Human Services Commission shall ensure that the state Medicaid program implements federal law (42 U.S.C. 1396p(b)(1)), which provides for imposition of a lien against an individual on account of medical assistance rendered under a State plan to that person who is an inpatient in a nursing facility, intermediate care facility for the mentally retarded, or other medical institution.

We will inform you of any regulations implementing this law.

MANUFACTURED HOMES

SB 521. Manufactured Homes. Effective June 18, 2003, except as otherwise provided.
This bill amends existing law relating to manufactured housing units and adopts a new statement of ownership and location for manufactured housing units. The owner also can elect to have the manufactured housing unit treated as real or personal property. For a complete discussion of manufactured housing see our Bulletin TX000066.

FORECLOSURES

HB 1493. Mortgage Servicer Foreclosures. Effective Jan. 1, 2004.

A mortgage servicer is the last person to whom the a mortgagor has been instructed by the current mortgagee to send payments, pursuant to Subsection 51.0001(3), Property Code. New Section 51.0025, Property Code, authorizes a mortgage servicer to administer the foreclosure on behalf of the mortgagee if (1) the mortgage servicer and the mortgagee have entered an agreement authorizing the current mortgage servicer to service the mortgage, and (2) the mortgage servicer discloses that the mortgage servicer is representing the mortgagee under a mortgage service agreement and (3) the mortgage servicer discloses the name and address of the mortgagee. New Section 51.0075, Property Code, allows the mortgagee to authorize a mortgage servicer to appoint a perpetual substitute trustee by power of attorney or other written instrument. The power of attorney or other written instrument must be signed by the mortgagee's representative, acknowledged and sworn to with a jurat.

You may assume that an appointment of substitute trustee by a mortgage servicer is valid if the land is 1-4 family residential property and the mortgagor does not occupy the land after foreclosure.

EASEMENTS

HB 1117. Public Roads. Effective Sept. 1, 2003. New Chapter 258, Transportation Code, expires Sept. 1, 2009.

Since 1981, counties of 50,000 or less have not been able to acquire a road by prescriptive easement. It also is illegal for a county commissioner to maintain a private road with public funds. New Chapter 258, Transportation Code, authorizes the commissioners court of a county to adopt a proposed county road map and include in the map all roads in which the county claims a public interest. A county claiming a road must provide notice to affected landowners by publication in the newspaper, and by two separate mailings in the ad valorem tax notice the year before and the year after the county adopts the map. New Section 258.004, Transportation Code, allows a person asserting a private right in a road to contest inclusion of the road in the county road map by filing suit not later than the second anniversary of the date on which the county road map was adopted. New Section 258.003, Transportation Code, provides that the adopted county road map is conclusive evidence of the public's right of access over a road included in the map, except as provided in Section 258.004.

You may rely upon a county road map showing a public road as the basis for access to insured land if the map had been adopted for at least two years and if the road is in actual use.

TAXES

HB 2424. State Tax Lien. Effective Sept. 1, 2003, except as otherwise provided.

Amended Subsection 113.006(b), Tax Code, provides that one state tax lien notice covers all taxes of any nature (formerly the same nature) administered by the comptroller, including penalty and interest accruing before or after the tax lien notice filing. This amendment applies only to liens filed after the effective date.

You may continue to assume that a state tax lien notice is barred if recorded more than 3 years prior to your examination of title and if the lien does not exceed $5,000. Otherwise, please call our underwriting personnel.

HB 3383. Agricultural Development Districts. Effective Sept. 1, 2003.

Amended Section 60.063, Agriculture Code, requires that a person who proposes to sell or convey land located in an Agricultural Development District give a written notice to the purchaser that the land is located in the district. The notice must be given prior to execution of a binding contract, either separately or as an addendum or paragraph in the contract. The purchaser must sign the notice. The board of the district must prescribe the form of notice no later than Sept. 30, 2003, and file an information form pursuant to Section 60.0631, Agriculture Code. The seller is not required to give the notice if the seller is obligated under a written contract to furnish to the buyer a title insurance commitment before the closing and the purchaser is entitled to terminate the contract because the land is located in a district.

If notice of an agricultural development district is recorded in the real property records, you should except to the notice in the title insurance commitment.

HB 335. Eligible Purchasers at Public Execution Sales and at Ad Valorem Tax Sales. Effective Sept. 1, 2003, and applicable only to public sales on or after Oct. 1, 2003.

Section 34.0445, Civil Practice and Remedies Code, and Section 34.015, Tax Code, prohibit an officer conducting a real estate execution sale or a real estate ad valorem tax sale from delivering a deed to the purchaser unless the purchaser exhibits to the officer an unexpired written statement showing that the county assessor-collector of the county of the sale has determined there are no delinquent ad valorem taxes owed by the purchaser in the county, and for each school district or municipality in the county there are no known or reported delinquent ad valorem taxes owed by the purchaser. An individual may not bid in the name of any other individual. The deed must name the successful bidder as the grantee and recite that the successful bidder exhibited to that officer an unexpired written statement issued to the person showing that the county assessor-collector determined there were no delinquent ad valorem taxes owed by that person. If a deed contains that recital, then it is conclusively presumed that this section was complied with. Any person may make a written request for a written statement as to whether there are any delinquent taxes owed by the person to that county or to a school district or a municipality. The statement expires 90 days after issuance.

You may assume that a tax sale complies with these requirements.

HB 1125 and HJR 51. Redemption of "Mineral Interest." Effective Jan. 1, 2004.

Amended Section 34.21, Tax Code, provides that the period for redemption by "the owner of a mineral interest sold at a tax sale" shall be two years. HJR 51 provides that "The former owner of a residence homestead, land designated for agricultural use, or a mineral interest sold for unpaid taxes shall within two years from date of the filing for record of the Purchaser's Deed have the right to redeem the property...." This amendment expands the time for redemption of "the property" by the "former owner" of a "mineral interest sold for unpaid taxes" to two years. Prior to the passage of HJR 51, there were two circumstances under which property could be redeemed for two years by the former owner: (1) sale of a residence homestead, or (2) sale of land designated for agricultural use. The period for redemption for other land has been six months, and the period after which the tax sale would not be vulnerable to attack is generally one year from the filing of the foreclosure deed pursuant to Section 33.54 of the Tax Code. Proposed changes to restrict the application of "mineral interest" to producing minerals, to "severed mineral interests" or to "solely mineral interests" were unsuccessful; it appears that the legislation is intended to apply to properties where mineral interests have not been severed from the surface estate prior to the tax sale.

We require that any policy insuring title based on a judicial foreclosure of a tax lien include an exception for a two year right of redemption if the land was a residence homestead, if the land was designated for agricultural use, or if the land includes ownership of some or all minerals (not simply a surface estate). See our Guidelines in Exhibit A.

HB 2902. Street Assessments. Effective June 20, 2003.

Amended Section 253.003, Transportation Code, allows the county to make assessments against a defined part of a subdivision (previously assessments could be made only against the entire subdivision) if approved by voters in that part of the subdivision.

GOVERNMENTAL ENTITIES

SB 1708. Right to Repurchase After Condemnation. Effective Jan. 1, 2004, and applicable only to land acquired by a governmental entity after that date.

New Section 21.023, Property Code, requires the government to disclose in writing at the time of acquisition that the owner and owner's heirs, successors, or assigns are entitled to repurchase the land if the public use for which the land was acquired by eminent domain is canceled before the 10th anniversary after the date of acquisition, and new Section 21.102, Property Code, requires the governmental entity that acquires land by eminent domain, other than a right of way for the county, municipality, or DOT, to offer the last owner the land before it is sold through bidding if public use is canceled before 10 years after acquisition. New Section 21.103, Property Code, provides that the purchaser must notify the governmental entity of the person's intent to repurchase within 180 days after the postmark of the notice, and the governmental entity shall offer to sell the land for the fair market value at the time the public use was canceled. The right to repurchase expires 90 days after the date of the governmental entity's offer.

You may assume that the governmental entity selling land has complied with this provision.

E-MAIL

HB 1282. Commercial E-Mail. Effective Sept. 1, 2003.

New Section 46.003, Business and Commerce Code, prohibits a person from intentionally sending an unsolicited commercial electronic mail unless "ADV;" is used as the first four characters in the subject line of the message. The sender must provide a functioning return electronic mail address through which a recipient can request, at no cost to the recipient, removal from the sender's electronic mail list.

CONTRACTS FOR DEED

SB 1527. Contracts for Deed. Effective Sept. 1, 2003, as to contracts signed on or after Sept. 1, 2003.

Prior to 2001, a seller under a contract for deed could cure a default under a contract for deed within 15 days if the equity was 10 percent or less, or longer if the equity was more. In 2001, this time to cure was changed to 60 days regardless of the amount of equity. Amended Sections 5.064 and 5.065, Property Code, decrease to 30 days the period in which to cure a default under the contract.

MECHANIC'S LIENS

HB 208. Mechanic's Lien for Demolition. Effective Sept. 1, 2003, and applicable only to labor or materials furnished by a contract entered on or after that date.

New Subsection 53.021(e), Property Code, provides that a person who furnishes labor or material for demolition of a structure by virtue of a written contract with the landowner, or that person's subcontractor, has a lien on the land. Amended Section 53.124(e) provides that the demolition lien has the same priority as the mechanic's lien for an architect, engineer, surveyor or landscaper. The priority of that lien and its inception date is determined by the date of recording of the lien. The lien is not valid or enforceable against a grantee or purchaser who acquires an interest in the land before the time of inception of the lien.

If there has been recent demolition on the land to be insured, require evidence that all demolition costs have been paid.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

EXHIBIT A

GUIDELINES FOR AD VALOREM TAX SALES PURSUANT TO JUDICIAL FORECLOSURE

Company Policy: You may insure on the basis of tax deeds based on judicial foreclosures in the chain of title, subject to the following requirements:

(1) If the tax foreclosure suit is brought before 9-1-97:

(a) Verify (by inspection or affidavit) that no one is in possession of the land (other than the person buying pursuant to the tax sale).
(b) Verify how the former owners and lienholders were served. If they were personally served, you may rely upon the order of foreclosure if it adequately describes the land.
(c) If the former owners and lienholders were not personally served, require the following:

(i) verify an attorney ad litem was appointed (required by Texas Rules of Civil Procedure, Rule 244);
(ii) verify that attorney for taxing authority made an affidavit that the defendant could not be found after diligent inquiry (this should be in suit file);
(iii) if defendant is cited by posting and not by publication, verify that attorney for taxing attorney filed an affidavit stating that publication could not be had for the maximum fee as provided (by Rule 117a) chargeable as costs payable upon sale of the land (this should be in suit file);
(iv) verify the former owners and lienholders were served by posting or publication as evidenced by affidavit of publication or posting (this should be in suit file);
(v) require a release of any lien in favor of an institutional lender, IRS, or governmental entity, unless that creditor was personally served; and,

(2) If the tax foreclosure suit is brought after 9-1-97:

(a) Verify (by inspection or affidavit) that no one is in possession of the land (other than the person buying pursuant to the tax sale);
(b) Verify the manner of service of the former owners and lienholders. If they were personally served, verify that the order of foreclosure is final (at least 45 days and no appeal or motion for new trial);
(c) If the former owners and lienholders were not personally served, require the following:

(i) verify an attorney ad litem was appointed (required by Texas Rules of Civil Procedure, Rule 244);
(ii) based on your actual knowledge and review of the foreclosure, it should not appear to you that the former owners and lienholders could have been personally served (for example, if you know that the former owner has a local telephone number or address or that the former owner's address is known, do not insure based on citation by publication or posting);
(iii) verify that attorney for taxing authority made an affidavit that the defendant could not be found after diligent inquiry (this should be in suit file);
(iv) if defendant is cited by posting and not by publication, verify that attorney for taxing attorney filed an affidavit stating that publication could not be had for the maximum fee as provided (by Rule 117a) chargeable as costs payable upon sale of the land (this should be in suit file);
(v) verify that the former owners and lienholders were served by publication or posting as evidenced by affidavit of publication or posting (this should be in suit file);
(vi) require a release of any lien in favor of an institutional lender, IRS, or governmental entity, unless that creditor was personally served; and,
(vii) add the following exception if the land was the residence homestead of the former owner or was agricultural land and if the tax sale deed was recorded within the last two years "Any claim of invalidity of the foreclosure and tax sale pursuant to that suit under cause number [describe tax foreclosure suit] and as reflected by that deed [describe tax deed];"
(viii) add the following exception if the land was not the residence homestead and was not agricultural land and if the tax sale deed was recorded within the last year "Any claim of invalidity of the foreclosure and tax sale pursuant to that suit under cause number [describe tax foreclosure suit] and as reflected by that deed [describe tax deed]."

(d) Do not insure the original purchaser at the tax foreclosure sale, unless the former owners and lienholders were personally served or unless you secure approval from our underwriting personnel.
(e) If the land was the residence homestead of the former owner or agricultural land or if the ownership of the land includes minerals, add the following exception if you issue a policy within two years after recordation of the tax deed: "Any rights of redemption in connection with that foreclosure and sale reflected by [describe tax foreclosure suit and tax deed]."
(f) If the land was not the residence homestead of the former owner or agricultural land and consists solely of a surface estate in land (all minerals were severed), add the following exception if you issue a policy within six months after recordation of the tax deed: "Any rights of redemption in connection with that foreclosure and sale reflected by [describe tax foreclosure and tax deed]."

References

Bulletins Replaced:
None
Related Bulletins:
TX000036 1997 Legislation
 
TX000066 Manufactured Housing A chronicle of underwriting standards
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None