Bulletin: TX000049

Date:
November 11, 1998
To:
All Issuing Offices in Texas
RE:
Orders on Home Equity Endorsement (T-42, T-42.1) Effective November 12, 1998

Dear Associates:

EFFECTIVE DATE

The Commissioner has entered two orders relating to Home Equity Coverage. These orders are effective Nov. 12, 1998. These orders adopt a rate for the existing Equity Loan Mortgage Endorsement (T-42) and adopt a rate, a procedural rule and a form for the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1).

RATES

The Commissioner adopted a new rate rule R-28.

This rule provides that the rate for the Equity Loan Mortgage Endorsement (T-42) will be 10% of the Basic Rate for the Mortgagee Policy. If the endorsement is issued before Nov. 12, 1998, there is no additional charge for this endorsement.

This rule provides that the rate for the Supplemental Coverage Equity Loan Mortgage Endorsement will be 15% of the Basic Rate for the Mortgagee Policy.

If both the Endorsement T-42 and T-42.1 are issued, the additional charge for both endorsements is 25% (10% for T-42 and 15% for T-42.1) of the Basic Rate for the Mortgagee Policy.

You must continue to apply Rate Rule R-8 (refinance rate) if the Home Equity Mortgage is a "cash out refinance" that pays off a prior mortgage covered by a Mortgagee Policy issued within the last 7 years. You then calculate the rate for the T-42 (and T-42.1, if issued) by multiplying the Basic Rate (without consideration of the credit available under R-8) for the new Mortgagee Policy by .10 for the T-42 Endorsement and .15 for the T-42.1 Endorsement (if issued); you add those results to the rate for the Mortgagee Policy based on the credit, if any, available under R-8. Then add the costs for other endorsements and coverages, such as the tax coverage and Environmental Protection Lien Endorsement.

Example: The New Home Equity Loan will be a cash out refinance for $100,000. $80,000 will be used to pay the unpaid balance on a prior purchase money mortgage covered by a Mortgagee Policy issued 1 year, and three months ago. The remaining balance of loan proceeds will be disbursed to the borrower. The Basic Premium for a $100,000 policy is $992. The credit available under R-8 (40% of the unpaid balance) is $332. The charge for the new policy is $660 ($992 minus $332), plus $99 (10% of the basic premium for the T-42 endorsement), plus $149 (15% of the basic premium for the T-42.1 endorsement, if issued), plus any other endorsement charges.

EQUITY LOAN MORTGAGE ENDORSEMENT (T-42)

This Endorsement remains a mandatory endorsement to a Mortgagee Policy insuring a Home Equity Mortgage. If the transaction closes on or after Nov. 12, 1998, you must charge the new premium for this endorsement. If you close before that date, you must issue the endorsement, but you may not charge the additional premium for the endorsement. See our prior Bulletins for issuance of this Endorsement. [See Bulletins TX000040 and TX000043]

SUPPLEMENTAL COVERAGE EQUITY LOAN MORTGAGE ENDORSEMENT (T-42.1)

This endorsement was requested by Fannie Mae and Freddie Mac for Mortgagee Policies on loans they buy.

This endorsement may be issued on closings on or after Nov. 12, 1998.

This endorsement provides the following coverages:

  • It insures against execution of the mortgage and note before the specific date in the closing instructions. [Paragraph 1(a)]

  • It insures against disbursement by the title company before the fourth calendar day after closing. [Paragraph 1(b)]

  • It insures against execution of an acknowledgment of election not to rescind in the presence of the escrow officer on the date of execution of the note and mortgage. [Paragraph 1(c)]

  • It insures that the title company gave copies of the documents executed in its office to each owner. [Paragraph 1(d)]

  • It insures against collection and disbursement by the title company of fees not shown on the final settlement statement sent to the lender prior to execution of the mortgage and note. [Paragraph 1(e)]

  • It insures against blanks in the mortgage, note, acknowledgment of fair market value, affidavit of compliance, or documents prepared by the title company. [Paragraph 1(f)]

  • It insures against failure of the acknowledgment of fair market value to have a purported evaluation or appraisal attached when executed by the owner. [Paragraph 1(g)]

  • It insures that the acknowledgment of fair market value is executed by the owner when the mortgage and note are executed. [Paragraph 1(h)]

  • It insures against part of the land not being homestead. [Paragraph 1(i)]

  • It insures against home equity mortgages on other homestead land of the owner in the same county (or an adjoining county, if the city is in multiple counties). [Paragraph 1(j)] We have printed a separate form for use in cities located in more than one county.

  • It insures against home equity mortgages on other homestead of the owner in the same county (or an adjoining county, if the city is in multiple counties) closed within the last year. [Paragraph 1(k)] We have printed a separate form for use in cities located in more than one county.

Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1) Issuing Checklist

To issue the Supplemental Coverage Equity Loan Mortgage Endorsement (T-42.1), use the following checklist. If you must delete a paragraph because you cannot comply with our requirements for that paragraph, get Lender's written approval to delete the paragraph from the T-42.1 endorsement.

ISSUE T-42. Always attach the T-42 Endorsement to your Mortgagee Policy, if you issue the T-42.1 Endorsement. Comply with our underwriting to issue the T-42 Endorsement.

REQUIRE OUR AFFIDAVIT. Always have the mortgagors sign our Supplemental Coverage Equity Loan Affidavit. [See Exhibit 2]

NOTE AND MORTGAGE. Paragraphs 1(a) through 1(h). Note and Mortgage must be executed in your Texas title company office.

CLOSING DATE. Paragraph 1(a). Note and Mortgage must be executed on or after earliest closing date expressly stated in closing instructions.

DISBURSE. Paragraph 1(b). Do not disburse Home Equity Loan proceeds before fourth business day after closing and do not disburse before closing instructions allow.

ELECTION NOT TO RESCIND. Paragraph 1(c). Do not allow the owner or spouse to sign an acknowledgment of election not to rescind when they sign the Note and Mortgage.

COPIES OF DOCUMENTS. Paragraph 1(d). Make a separate copy of all documents executed in your office after signed and give a copy to each owner and each spouse.

FAX FINAL HUD. Paragraph 1(e). Fax a final HUD-1 or HUD-1A to the Lender showing all fees you will collect or disburse (and all other fees of which you know that are POC items) before closing. Require the Lender to initial and fax back its approval.

NO BLANKS. Paragraph 1(f). Review (1) documents you prepare, (2) Note, (3) Mortgage, (4) any Affidavit of Compliance, and (5) Acknowledgment of Fair Market Value. Verify no blanks left to be filled in when signed by owners. Be sure the Acknowledgment of Fair Market Value states the agreed value.

ATTACH APPRAISAL OR EVALUATION. Paragraph 1(g). Verify the copy of the purported appraisal or evaluation is attached to the Acknowledgment of Fair Market Value when signed by the owners.

EXECUTE ACKNOWLEDGMENT OF FAIR MARKET VALUE. Paragraph 1(h). Verify that the owners sign the Acknowledgment of Fair Market Value in your office when they sign the Note and Mortgage.

ONLY HOMESTEAD. Paragraph 1(i) . Verify (1) the land does not exceed one acre, (2) the land is only one tract of land (not two or more lots), 3) the land is used for a residence and not for a business [rely on our Affidavit], (4) the owners do not claim a separate homestead tract (such as business homestead) [rely on our Affidavit], and (5) all of the owners live on the land [rely on our Affidavit] [DO NOT ISSUE IF (1) ONE OR MORE COTENANTS DO NOT LIVE ON THE LAND (RELY ON OUR AFFIDAVIT), OR (2) A TRUST OWNS THE LAND, OR (3) A TENANT OCCUPIES PART OF THE LAND (RELY ON OUR AFFIDAVIT).]. Otherwise, call us. For example, you can verify that the land does not exceed one acre by (a) a surveyor's certificate or letter, or (b) use of a software program that your examiner uses by typing the land description. Examples of software programs available include (1) DeedPlotter+? by Greenbrier Graphics Marketing, Inc. (http://www.deedplot.com/ for approximately $200, at 1-828-495-3366); (2) AGT Deed-Chek? (http://www.agtcad.com/pr-dcdos.htm for approximately $99 at 1-800-548-9223); and (3) MapDraw? by Informatik, Inc. (http://www.informatik.com/mapdraw.html for approximately $99 plus shipping at 1-610-640-0339). If you believe that the land exceeds one acre but is rural homestead, call us.

NO HOME EQUITY MORTGAGE ON OTHER LAND. Paragraph 1(j). Require our Affidavit. If the land is business homestead, call us. If the owners own their own business (according to the Affidavit or Loan Application, if available), please call us. IF THE LAND IS IN A CITY LOCATED IN MORE THAN ONE COUNTY, YOU MAY ISSUE THE T-42.1 DESIGNED FOR CITIES LOCATED IN MULTIPLE COUNTIES.

NO HOME EQUITY MORTGAGE CLOSED ON OTHER LAND IN LAST 12 MONTHS. Paragraph 1(k). Require our Affidavit. If the land is business homestead, call us. If the owners own their own business (according to the Affidavit or Loan Application, if available), please call us. IF THE LAND IS IN A CITY LOCATED IN MORE THAN ONE COUNTY, YOU MAY ISSUE THE T-42.1 DESIGNED FOR CITIES LOCATED IN MULTIPLE COUNTIES.

HOLD HARMLESS

If you follow these guidelines, we will not require contribution or reimbursement for losses and expenses under Endorsement T-42.1.

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.