- November 21, 2018
- All Texas Issuing Offices
- GENERAL - General Issues
Several matters have arisen over the past several months indicating that we need to put out some reminders or instructions to our agents.
1. SUBJECT TO SALES
Transactions which occur when a buyer purchases property and simply takes title subject to (agreeing to pay) the existing loan are not considered an extra-hazardous risk.
If no due on sale or similar clause is in the deed of trust, underwriter approval of the transaction is not required by Stewart Title Guaranty Company. You should review the deed of trust being taken subject to and if it contains a due on sale clause you should obtain the instruction letter set out in section 4.44.2 of Virtual Underwriter which can be found at: www.vuwriter.com/en/underwriting-manuals/2012-12/UMTX00000130.html.
_______________________________________________, seller(s), and ______________________________, buyer(s), instruct (Stewart Title __________________) (Agent’s Name) to close this transaction without an assumption statement form or notice to the lender of the loan to be assumed. (We will provide to you) (or listed below are...) the loan balances, monthly payments due, interest for the month, and reserve account balances to be used in our settlement statements.
We know that the lender may later require the loan to be paid in full or renegotiated as to its terms because of this sale. We know that the lender may charge us fees and other expenses in connection with the assumption of the loan or may make other requirements under the terms of the loan.
You shall have no duty or responsibility to us for any consequences which may result from the closing of this sale without the lender's consent to the assumption or statement of amounts due and on deposit.
When the deed of trust contains a due on sale clause, an exception similar to the one below could be helpful to avoid claims or allegations that the buyer was not aware of the risks:
Loss, cost, damage or expense arising out of any exercise of a due on sale or similar provision in the deed of trust dated _____, recorded in ________________ of the land records of _________, County, Texas executed by _________ to _________, Trustee, securing a note in the amount of $_________ payable to ______________.
If no due on sale or similar provision is found in the deed of trust, you should make exception to the deed of trust but the additional agreement and exception are not required.
Vesting is the determination of who has title to the property to be insured. The vesting decision is the culmination of the search and examination process and should normally be done by the title examiner. Generally, underwriter approval of the vesting decision is not required. Stewart underwriters are always prepared to assist with vesting decisions when the facts or documents are unclear or particularly complex or confusing.
However, remember that your underwriter does not reexamine files nor does the underwriter have the knowledge of the property, its history or the local knowledge of the parties that the local agent and its examiner have. You will help us help you if the examiner has a question about vesting if you can provide the underwriter with a narrative of the ownership with dates and point out the complex or confusing language of the instruments in question. The more specific the question, the quicker we can provide our answer.
We would remind you too of the search periods provided in our Bulletin TX000065 which essentially allows your search to begin with the first warranty deed older than 35 years from the search date, plus the appropriate addition time and records necessary to search for easements (and minerals if not taking the general mineral exception).
3. BALANCE SHEET V. INVENTORY OR AFFIDAVIT IN LIEU OF INVENTORY
P-11b.11 reads as follows:
11. In instances where federal estate taxes and state inheritance taxes have not been paid, but the title insurance company:
a. Examines a balance sheet of the estate and determines that the estate will have no difficulty in paying its estate and inheritance taxes, and the title insurance company takes an indemnity from responsible persons protecting itself against loss due to unpaid estate and inheritance taxes, or
b. Requires sufficient money or other securities to pay estate and inheritance taxes to be left in escrow with it pending payment of such taxes, or pending the receipt of waivers of lien from the taxing authority or authorities, or
c. Examines the balance sheet of the estate and determines the estate will have no difficulty in paying its inheritance and estate taxes, and the title insurance company obtains a letter from a responsible person agreeing to see that such taxes are paid out of the assets of the estate.
The definition of a balance sheet is that it includes both assets and liabilities. An Inventory, Appraisal, and List of Claims of the Estate as provided in probate matters only contains, as it says, the assets of the estate. A balance sheet requires also a list of debts owed by the estate. Probate attorneys will frequently object to a request for a balance sheet by asserting that the Estates Code doesn’t require a balance sheet. That, of course, is a true statement; however, title insurance regulations apply to title companies and P-1.b(11) requires a balance sheet. The exact form and substance of the balance sheet are up to the underwriter to determine.
4. AFFIDAVITS OF HEIRSHIP
There appears to be a myriad of views about the use of affidavits of heirship in our Texas title insurance industry. Stewart’s position may be different than other companies.
a. How soon after death can an AOH be used? Stewart does not have a minimum time. We don’t require 1 year or any other particular time. Each case is unique and a Stewart underwriter will assist you depending on the facts.
b. Who has to sign the AOH? Stewart has no absolute requirement as to who can sign. We do expect that the person signing actually have knowledge of the facts to which they are swearing. Our preference is one family member and two disinterested 3rd parties (no family members). Depending on the facts, your Stewart underwriter will work with you to be as practical and reasonable as possible.
c. Is the statutory AOH form always acceptable? The statutory form is a good starting place. It has a deficiency which when corrected makes underwriting easier. It does not require the affiant to disclose how long and in what capacity the affiant knew the deceased. Such information is valuable to determine the reliability of the information. Affidavits that contain such information allow us to make faster and more accurate decisions.
d. When is a party disinterested in the estate? An affiant is disinterested in the estate when they will not receive money or assets as a result of being an heir or devisee of the deceased. A family friend is usually disinterested; a creditor is not. A family member may be disinterested depending on the relationship. Your Stewart underwriter can help unravel the relationships.
Stewart does not require underwriting approval of every AOH prior to its acceptance and use by Stewart agents. If, after reviewing the matters in this section, you still have questions, your Stewart underwriter stands ready to assist you.
5. POWERS OF ATTORNEY
Stewart does not require underwriter approval of every power of attorney or its use. If you have specific issues with a particular power of attorney, a Stewart underwriter will discuss those issues with you. Our general position on powers of attorney after the 2017 legislative changes is found in our Bulletin TX2017007 under the discussion of HB 1974.
Stewart does not require underwriting approval of every Power of Attorney prior to its acceptance and use by Stewart agents. If, after reviewing the matters in this section, you still have questions, your Stewart underwriter stands ready to assist you.
6. MASTER INDEMNITY LETTERS (T-29)
When another title insurance company has issued a policy without taking exception to a matter covered by the master indemnity agreement, the matter is not to be shown on the policy to be issued by Stewart and thus no express insurance would be provided.
If the matter is an unreleased lien and closing instructions from the lender require express insurance, you may comply with that instruction. If the closing instruction simply requires that the lien not be excepted to (or no liens may be excepted to), you may use express insurance under P-39.
If the matter is a restrictive covenant, you would use the T-19 endorsement and follow Procedural Rule P-50. https://www.tdi.texas.gov/title/titlem4l.html#p50
If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.
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.
- Bulletins Replaced:
- Related Bulletins:
- TX2017007 LEGISLATIVE UPDATE - 2017 Legislative Update
- Underwriting Manual:
- TX 4.44 Due-On-Sale Clause
- Exceptions Manual: