Bulletin: TX2010011

Date:
November 22, 2010
To:
All Texas Issuing Offices
RE:
Home Owner Association Dues and Home Equity and Reverse Mortgages

Dear Associates:

Virtual Underwriter Underwriting Manual section 8.04.2 deals with the Title Insurance Considerations of Home Owner Association dues. This section reads as follows:

Finding a homeowners' association declaration of record makes it necessary:

  • To show all the pertinent recorded documents as exceptions.
  • To except specifically to the right of the association to assess liens or charges (if the right exists).
  • To except any recorded certificate of nonpayment of assessments.
  • To require proof that, as of the date of the policy, there are no due and unpaid assessments.
  • Sec. 209.004 of the Texas Property Code provides that the Homeowners Association must provide upon request a statement as to the payment of fees and assessments. It must also record a management certificate which states how to reach the association and its management.

    Sec. 209.010 of the Texas Prop. Code provides that the Homeowners Association has 30 days after a foreclosure sale to notify the homeowner of his right to redeem the property and the steps necessary to exercise such right.

We are having multiple calls where the Home Owners Association refuses to issue the so-called 60 day letter asserting, properly, that a resale certificate only applies to sales and not to home equity or reverse mortgages. The HOA could agree to do so, but the law currently does not require them to do so. Unfortunately, HOA restrictions normally do not subordinate HOA dues except as to purchase money liens and construction liens. Accordingly, HEL liens and Reverse Mortgage liens are subordinate to the HOA lien.

Lender instructions insist that their lien be in first lien position and unless the HOA subordinates to a HEL or Reverse Mortgage, you cannot comply with the lender's instructions. Please recall that assistance that you provide to a borrower in dealing with Home Owner Associations is just that: assistance. If the HOA will not issue a subordination, it becomes the responsibility of the borrower to work with the lender and the HOA to reach an acceptable compromise. Failure of the borrower to reach an acceptable compromise leads you to the requirement that you except to the HOA dues in Schedule B.

If the lender will accept a qualifier to the exception that essentially states that HOA dues appear to be current through current year based on information provided by the borrower or other sources, you may add that to the exception.

If you have any questions relating to this or other bulletins, please contact your local underwriting personnel or Stewart Legal Services.

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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:
None
Underwriting Manual:
TX 8.04.2 Title Insurance Considerations
Exceptions Manual:
None
Forms:
None