T-43 Guideline - TX Reverse Mortgage Endorsement
Texas is the only state in the United States to regulate reverse mortgage lending though its constitution. Accordingly, compliance with constitutional provisions is crucial for the loan to be valid, enforceable and insurable. Lenders have sought assurance that their loans are in compliance. The Texas Insurance Department has promulgated endorsement form T-43 which is unique to Texas, to address these concerns. The T-43 endorsement is mandatory.
A number of matters set out in the Art. 16, Section 50 a7 of the Texas Constitution are fairly straightforward and can be easily addressed. Other matters must be deleted from the endorsement under circumstances. Procedural Rule P-45 governs these matters.
Procedural Rule P-45 governs the issuance of the T-43 Reverse Mortgage Endorsement
In pertinent part P-45 reads as follows: Please note that explanatory notes are included with the rule in bold italics.
The Loan Policy of Title Insurance (T-2) insuring the lien securing a reverse mortgage loan may be issued in an amount not exceeding:
150% of the total advances to be made according to a plan established by the original loan agreement; 0r
The maximum amount that may be secured by the lien of the insured mortgage, as estimated by the lender according to the written lender instructions; or,
In the case of an FHA-insured loan, the Maximum Claim Amount as established by FHA.
· You may rely on any of the 3 methods set out above
The Company may delete any subdivision in Paragraph 3 of the Texas Reverse Mortgage Endorsement (T-43) if it does not consider the additional risk insurable. Unless deleted, said paragraph 3 provides the following coverage:
(i) the failure of the insured mortgage to be created under a written agreement with the consent of each owner of the estate or interest described in Schedule A and each owner's spouse, as set forth in Subsection (k)(1) of Section 50, Article XVI, Texas Constitution;
(ii) the failure of the extension of credit secured by the insured mortgage to be made to a person who is or whose spouse is 62 years or older, as set forth in Subsection (k)(2) of Section 50, Article XVI, Texas Constitution;
(iii) the failure of the written document purporting to be made pursuant to Subsection (k)(8) of Section 50, Article XVI, Texas Constitution to be executed by the owner on the date that the insured mortgage and promissory note secured thereby are executed by the owner, provided that the Company does not insure that the written document complies with Subsection (k)(8) of Section 50, Article XVI, Texas Constitution; or
These coverages require certain actions by the issuing office:
(i) Review the deed of trust to determine that it specifies prominently on its face that it is a Texas Reverse Mortgage and/or that it is a loan made pursuant to Art. 16, Section 50 a7 of the Texas Constitution
(ii) This provision can be met by a number of ways, however the easiest would be to review the driver's licenses of the borrowers (which must be done for proper identification any way) to determine their ages or obtain a copy of the loan application since the ages must be disclosed.
(iii) This provision will be met if the reverse mortgage agreement and the note and deed of trust are signed at the settlement.
(iv) This provision applies to the Constitutional (ly?) mandated form styled "Important Notice to Borrowers Related to Your Reverse Mortgage. The issuing office must obtain that a copy of this form from the lender and provide a copy to the borrower(s) at the settlement.
If you cannot comply with any of the requirements (i) through (iv) above you must delete the appropriate item and the following language shall be placed below Paragraph 3:
"Subdivision ________ of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) is hereby deleted. The Company does not insure against failure to comply with the Subsection of the Constitution referred to in said subdivision of Paragraph 3."
P-45 provides the basic underwriting guidelines for each of the subdivisions (ii) through (iv) of the T-43 endorsement:
The Company must delete subdivisions (ii) through (iv) of Paragraph 3 of the Texas Reverse Mortgage Endorsement (T-43) if the insured mortgage and the promissory note are not executed at the office of a title company. For purposes of this Rule P-45, "the office of a title company" shall mean the leased or owned Texas office location(s) of: (1) a title insurance company; or, (2) a direct operation; or, (3) a title insurance agent; or, (4) an attorney conducting the attorney's business in the name of a title insurance company or direct operation or title insurance agent where the attorney and the attorney's bona fide employees who close transactions are licensed as escrow officers as provided in Article 9.42.C, Texas Insurance Code. In order to evidence the deletion required by this Paragraph E, the following language shall be stated on the Texas Reverse Mortgage Endorsement (T-43):
"Subdivisions (ii) through (iv) of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) are hereby deleted. The Company does not insure against the failure to comply with the Subsections of the Constitution referred to in said subdivisions of Paragraph 3."
The Company must delete subdivision (ii) of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) as provided in Paragraph D, above, if the Company is not furnished with government issued photographic identification showing that the owner of the land or the spouse of the owner of the land is 62 years or older.
The Company must delete subdivision (iii) of Paragraph 3 of this Texas Reverse Mortgage Endorsement (T-43) as provided in Paragraph D, above, if the document furnished by the insured and purporting to attest or acknowledge that the owner received counseling regarding the advisability and availability of reverse mortgages and other financial alternatives is not executed by the owner of the land at an office of a title company on the date that the insured mortgage and the promissory note secured thereby are executed.
For further guidance, refer to the applicable subsections in Section 11.04 of the National Underwriting Manual on Virtual Underwriter http://www.vuwriter.com/vumanuals.jsp?displaykey=UM00000208
The underwriting guidelines contained herein have been provided for general reference. The facts, circumstances, and location of the subject property should be considered when determining the issuance of the requested form or endorsement. Please note that all of the forms and endorsements included in this system may not be available in all states. Accordingly, please contact the appropriate Stewart Title Guaranty Company underwriting personnel in order to determine availability.
Compliance with the underwriting guidelines contained herein in no way obligates Stewart Title Guaranty Company to issue any form or endorsement.
This guideline applies to the following form(s):