Bulletin: TX000056

Date:
May 31, 2000
To:
All Issuing Offices in Texas
RE:
New Title Insurance Rules: Premium Split, Refinances and Reverse Mortgages

Dear Associates:

RATE HEARING RESULTS (EFFECTIVE JUNE 1, 2000)

The Commissioner of Insurance signed an order on the 1998 Title Rate Hearing that is effective June 1, 2000.

Premium: The Commissioner ordered no change in the premium rates.

Premium Split: The Commissioner ordered that the remittance or split to agents and underwriters be 85% to title insurance agents and 15% to underwriters, effective June 1, 2000.

Rate Rule R-8 Refinance: The Commissioner amended Rate Rule R-8 (available through the references section at the end of this bulletin), effective June 1, 2000. This amendment clarifies Rate Rule R-8.

  • The refinance credit is calculated based on the written payoff balance.

  • The credit is not reduced by any payment reduction made by the borrower from the borrower's own funds at closing.

  • The credit is calculated based on the written payoff balance, which may include accrued interest.

  • For calculation of the credit, the payoff balance will not exceed 100% of the original amount of the prior (old) mortgage being refinanced.

  • The amended Rate Rule still allows credit for two or more prior (old) Mortgagee Policies refinanced by one new mortgage.

  • The amendment clarifies that the refinance credit may be given if two or more new mortgages refinance one prior (old) mortgage.

  • If two or more new mortgages refinance one prior (old) mortgage, the credit is applied to the larger new Mortgagee Policy. The additional, smaller Mortgagee Policy(ies) is the Basic Rate.

  • The total premium collected under Rate Rule R-8 on a refinance may not be less than the regular minimum promulgated rate ($270).

EXAMPLE OF RATE RULE R-8 REFINANCE

A Mortgagee Policy was issued on October 1, 1998 for $100,000. On June 1, 2000, the prior (old) mortgage is refinanced by two new mortgages for $80,000 and $20,000. The written payoff for the prior (old) mortgage is $103,000, including $98,000 in principal and $5,000 in accrued interest.

The premium for the larger new Mortgagee Policy ($80,000) is subject to the Rate Rule R-8 credit. The credit is calculated based on the written payoff, not to exceed the original amount of the prior mortgage ($100,000). The credit is 40% (since within two years) of the current basic rate for a $100,000 policy (since the prior policy is less than the written payoff), or $397. The premium for the new $80,000 Mortgagee Policy (exclusive of endorsement and tax coverage charges) is $434 ($831-397).

The premium for the smaller new Mortgagee Policy ($20,000) is the Basic Rate, or $350 (plus any endorsement and tax coverage charges).

REVERSE MORTGAGE AMENDMENT (EFFECTIVE JUNE 5, 2000)

The Commissioner of Insurance has approved an amended Texas Reverse Mortgage Endorsement (T-43) effective June 5, 2000. (available through the references section at the end of this bulletin) The Commissioner also amended Procedural Rule P-45 - Texas Reverse Mortgage Endorsement.

There is no additional charge for this endorsement. You calculate the regular premium for your Mortgagee Policy insuring the Reverse Mortgage, subject to any credits and charges for endorsements and tax coverage.

If you insure a reverse mortgage, you must attach the Texas Reverse Mortgage Endorsement (T-43) to the Mortgage Policy. Our underwriting guidelines are available through the references section at the end of this bulletin, via Form T-43.

A reverse mortgage is a mortgage type of homestead loan that was originally approved by a constitutional amendment effective January 1, 1998. The constitution was amended last year to change the requirements for the reverse mortgage.

A reverse mortgage is made on the home of persons, where the owner or spouse is at least 62 years of age.

The reverse mortgage provides for future disbursements to the mortgagors pursuant to a plan. Since the lender makes disbursements over time and the loan is generally not due and payable until the owners die, abandon the home, or sell the home, the mortgage is called a "reverse mortgage."

The principal (but not only) types of reverse mortgages are the HUD HECM (Home Equity Conversion) Mortgage and the Fannie Mae Homekeeper Mortgage.

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.