Bulletin: TX2009003

Date:
August 11, 2009
To:
All Texas Issuing Offices
RE:
Industry Sponsored Legislation 2009

Dear Associates:

The 2007 Texas Legislature passed a number of bills that were proposed by members of the Texas Title Insurance Industry. Covering a range of issues, the bills will clarify issues that cause delays in closing real estate contracts and should enhance our ability to provide excellent service to our customers.

HOME OWNER ASSOCIATION (HOA) LEGISLATION

SB 1918 amends 207.003 Property Code to add a new subsection (f) as follows:

(f) Not later than the seventh day after the date a written request for an update to a resale certificate delivered under Subsection (a) is received from an owner, owner's agent, or title insurance company or its agent acting on behalf of the owner, the property owners' association shall deliver to the owner, owner's agent, or title insurance company or its agent an updated resale certificate that contains the following information:

(1) if a right of first refusal or other restraint on sale iscontained in the restrictions, a statement of whether theproperty owners'
association waives the restraint on sale;

(2) the status of any unpaid special assessments, dues,or other payments attributable to the owner's property; and

(3) any changes to the information provided in the resalecertificate issued under Subsection (a).

(g) Requests for an updated resale certificate pursuant to Subsection (f) must be made within 180 days of the date a resale certificate is issued under Subsection (a). The update request may be made only by the party requesting the original resale certificate.

Changes/actions required: This legislation provides that a Property Owners Association must provide a title company with information about the status of the property. The certificate must reflect 1. any rights of first refusal and 2. status of assessments, particularly those unpaid. You may accept a resale certificate via fax or email.

SB 1919 Section 209.004, Property Code, is amended by amending Subsections (a) and (c) and adding Subsections (d), (e), and (f). The primary changes are as follows:

A property owners' association shall record in each county in which any portion of the residential subdivision is located a management certificate,

(4) the recording data for the declaration;

(5) the name and mailing address of the association;

(6) [or] the name and mailing address of the person managing the association or the association's designated representative.

(d) If a property owners' association fails to record a management certificate or an amended management certificate under this section, the purchaser, lender, or title insurance company or its agent in a transaction involving property in the property owners' association is not liable to the property owners' association for:

(1) any amount due to the association on the date of a transfer to a bona fide purchaser; and

(2) any debt to or claim of the association that accrued before the date of a transfer to a bona fide purchaser.

(e)A lien of a property owners' association that fails to file a management certificate or an amended management certificate under this section to secure an amount due on the effective date of a transfer to a bona fide purchaser is enforceable only for an amount incurred after the effective date of sale.

(f) For purposes of this section, "bona fide purchaser" means:

(1) a person who pays valuable consideration without notice of outstanding rights of others and acts in good faith; or

(2)a third-party lender who acquires a security interestin the property under a deed of trust.

Changes/actions required: The first thing to note about this legislation is that it applies to a bona fide purchaser acquiring title after September 1, 2009. HOAs have until September 1, 2010 to file the required changes to its notifications.

If the management company or HOA does not record the required information, then the HOA lien applies only to amounts incurred after the transfer of the property to the new owner. It is important to check the recorded management certificate for the HOA to determine whether or not it has been amended to include the name and address of the HOA and the name and address of any management company. If you are called upon to close a transaction where there is a dispute as to whether or not the management certificate has been properly and timely changed, our policy is that we do no take sides in these disputes. In such cases, you are authorized to issue a Loan policy where the amount in dispute is less than $3500 without resolution of the dispute or exceptionon title insurance forms.

Child Support Liens

Sec.157.3171. FAMILY CODE: RELEASE OF LIEN ON HOMESTEAD PROPERTY.

This bill adopts the same procedure for clearing a child support lien against homestead property as the procedure for clearing an abstract of judgment against homestead property set out in Section 552.0012 Property Code. In essence, the owner of the homestead may file an affidavit in the public records where the land is located claiming the property as homestead and sending the copy of the affidavit to the lien claimant who can file a controverting affidavit disputing the validity of the homestead claim. Resolution of the dispute is in the district court.

Also, a child support lien may only be enforced for 10 years against real property but may be renewed for successive 10 year periods.

This law applies only to liens filed after September 1, 2009.

Changes/actions Required: You may delete exceptions for child support liens when (1) the process outlined above has been competed; (2) you have no knowledge that the property is NOT the homestead of the Seller/Borrower and (3) the child support lien was filed after September 1, 2009.

TDI ISSUES

1. HB 2353 Limitations on enforcement actions by TDI applies section 81.001, Insurance Code to title companies. The limitations periods are now as follows (effective September 1, 2009: the earlier of:

a. 5 years after the date on which the alleged event occurred or

b. The second anniversary of

i. The date the department discovered the conduct or

ii. The date on which the conduct is brought to the attention of the department.

c. An action involving fraud can be brought for 5 years after the department discovers the activity or the activity is brought to the attention of the department.

Changes/actions required: None. Also discussed in Bulletin TX2009002: Agent Solvency- HB 4338 re-write of Title Insurance Act.

2. HB 3073 dealing with efilings and other 3rd party charges by amending Section 2501.008 Insurance code to read as follows:

Sec.2501.008.THIRD-PARTY CHARGES. A title insurance company, title insurance agent, or direct operation may charge, separate from the title insurance premium, actual costs or a reasonable estimate of costs incurred in connection with a closing and settlement, including:

(1) a charge by a third party for an electronic filing fee; or

(2) a fee of a third party for the provision of an ad valorem tax report.

Changes/actions required: This bill overrides the former position of the TDI staff that fees for electronic filing of documents and all other 3rd party charges cannot be charged to the customer. Accordingly, a title company can charge actual or estimated costs of e-filing, tax certificates and other charges that a 3rd party makes for documents, delivery or other similar charges. To the extent possible, actual charges will be less susceptible to question by TDI auditors. If you choose to use estimates, you should periodically determine what your charges are for a category of costs over a broad range of files and maintain a file with your computations to make available to the TDI auditors. You will want to compare this bill and its requirements with RESPA reforms which appear to disallow estimates.

TITLE AGENT RELEASE OF LIENS

HB 3945 amends SECTION1.Section 12.017(a), Property Code, by amending Subdivision (6) and adding Subdivision (7). This bill expands existing law allowing a title insurer to sign an affidavit releasing a lien by now allowing a title agent to do the same thing.

The property must either be 1-4 family property with a lien of any amount or property of any size with a lien amount of $1.5 million or less. The agent must use the new statutory affidavit form. The agent must send the form to the lender. The lender has the right to dispute that it received the payoff by filing a controverting affidavit within 45 days after you send them the notice and copy of the affidavit. If the lender fails to controvert the title company affidavit, the lien is released.

Changes/actions required: Underwriters have been signing these affidavits based on affidavits provided by the agent for a number of years. This new process streamlines the process since you will be able to simply file your affidavit and not wait on the underwriter to sign and return its affidavit to you. Once you have sent the notice to the lender, the lender has 45 days to file a controverting affidavit. If the lender does not file such an affidavit, the lien is released.

Once you can search your title plant for a controverting affidavit after the 45-day period, in other words, your plant includes the 45th day, you may rely on your release as releasing the lien. Likewise, when a loan closed by another title company has had a title company release of lien affidavit recorded and 45 days has passed and your plant includes the 45-day period, you may rely on that company's affidavit as releasing the lien.

The bill also requires that an agent be specifically appointed by its underwriter(s) to file these affidavits. If you wish to be so appointed, please contact your agency services manager.

If you have questions related to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

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.

References

Bulletins Replaced:
None
Related Bulletins:
TX2009002 Agent Solvency - HB 4338 re-write of Title Insurance Act
Underwriting Manual:
8.04.2 Title Insurance Considerations Regarding Homeowners' Associations
 
TX 13.12.1 In General
 
TX 17.26.1 In General
Exceptions Manual:
None
Forms:
None