Endorsement Manual 2013 Cross-Referenced!

Transcription

1 Endorsement Manual 2013 Cross-Referenced! 2013 Texas Land Title Institute Janet S. Minke, CTIA VP Underwriting Support Services Alliant National Title Insurance Company

2 JANET S. MINKE, CTIA Vice President, Underwriting Support Services Alliant National Title Insurance Company Toll-free: x440 Direct: EDUCATION BA in Social Science from University of North Texas, 1970 Texas Secondary Teaching Certificate TITLE INSURANCE EXPERIENCE Ms. Minke entered the title insurance industry as an escrow assistant and conveyancer in a fee attorney office in Fort Worth, Texas, in Shortly thereafter, the attorney retired, selling his closing offices to Guardian Title Company, where Ms. Minke remained until 1994, progressing to commercial escrow officer and eventually Executive Vice President. Since that time, she has held various regional and national roles with major national title insurance companies including technology project manager, business process manager and corporate trainer. In her current position with Alliant National Title she is available to respond to underwriting questions, as well as providing reference resources, training and education for the company s partner agents. TEXAS LAND TITLE ASSOCIATION ACTIVITIES AND HONORS Certification: Certified Title Insurance Associate (CTIA) Honors: Title Woman of the Year 2006 Professional Excellence Award Outstanding Underwriter Support, 2005 Peggy Hayes Teaching Excellence Award, 1995 President s Award for Outstanding & Exemplary Contribution, & Outstanding Young Title Person, Current Member: Regulatory Committee, Federal Issues Committee, Certification Council TEACHING AND TRAINING ACTIVITIES TLTA and NMLTA Land Title School and Texas Land Title Institute State Bar of Texas: Advanced R E Law Course 2006; Agricultural Law Course 2009 TLTA, OLTA, NMLTA and NAPMW Conferences and Seminars Underwriter Agency Seminars and Training in Texas, New Mexico and Oklahoma PUBLICATIONS - Articles in TLTA News and other industry publications Money-Saving Ideas That Everyone Can Use, 1988 Proper Time Management Ensures Efficient Closings, 1989 Tips Help Clarify Procedural Rules, 1991 Training Today s Workforce: Educating for Excellence, 1997 The American Dream And the Importance of Title Insurance, 2006

3 I. Introduction TEXAS ENDORSEMENTS Title insurance coverage in Texas continues to transition from a one-coverage-fits-all state to a state in which coverage may be customized to fit the needs of the individual insured. As a result, it is increasingly important for the title insurance professional to become familiar with the terms of basic title policy coverage, as well as endorsements which may be available to provide additional coverage or to modify the terms of the existing coverage. A. Guide to Texas Endorsements As part of your course materials today, I am pleased to provide the Alliant National Title Insurance Guide to Texas Endorsements which has just been updated to include the new and revised forms and rules which go into effect on January 3, [This is a first draft so if you find any errors, please let me know.] In this Guide you will find two lists of all Texas insuring forms (not just Endorsements), one sorted alphabetically by form name and the second sorted numerically by form number. For each form listed, when applicable, are the corresponding rate rule, procedural rule and statistical code. Following the lists for each Endorsement there is a sample of the endorsement itself and on the facing page (when the Guide is printed in duplex/two-sided mode) is a statement about when the form will be issued, some brief Alliant National underwriting guidelines, the full rate rule and procedural rule, instructions for completing the form and the form numbers for similar ALTA or CLTA forms. B. What is an Endorsement? Anything that changes the terms of the title insurance policy may be considered an endorsement. Some changes come about by revisions made on Schedule B of the policy itself, such as amendment of the area and boundary exception or tax exception by lining through some of the existing language, or inserting modified language or checking a box; other changes come about by checking a box or line on Schedule A of a loan policy; still other changes are evidenced by issuing a separate form called an endorsement attaching it to a policy so that it becomes a part of the policy, thereby altering the coverage of the policy in one or more ways. C. Implementing Rules As each new endorsement is adopted, an accompanying Procedural Rule sets out the circumstances under which the endorsement may be issued, as well as defining regulatory requirements to be met or limitations on delivery of the coverage. As an example, the procedural rule may specify that the coverage afforded by the endorsement may be offered only by issuance of the endorsement. Additionally, the rule may specify that the endorsement may only be offered if the land insured is, or is not, residential real property or that it may be issued only in connection with a certain type of policy or that it must be issued concurrently with the policy, not at a later date, and so forth. And, finally, an accompanying Rate Rule will specify what premium, if any, must be collected. Sometimes, the premium will be one percentage if the endorsement is issued on residential real property and a different percentage for all other land. Or the premium may depend on the type of policy to which the endorsement is attached or amendment is made. By regulation (R-2), an adopted endorsement may not be issued until a rate has also been adopted Texas Land Title Institute Texas Endorsements Page 1

4 TEXAS ENDORSEMENTS D. All coverage may not be available In the event that only some of the coverage included in an endorsement will be given, language is inserted in Schedule B of the Commitment and the resulting policy, to delete the coverage that is not available. E. When is an endorsement issued? Most endorsements are issued at the same as the policy to which they are attached or whose coverage they modify. In some instances, however, endorsements are issued later. F. Important Note: The underwriter for an endorsement must always be the same as the underwriter for the policy to which it is attached. G. Definition of residential real property (1) Any real property which has improvements thereon designed principally for the occupancy of from one to four families (including individual units of condominiums and cooperatives) and either (a) Situated in a platted subdivision of record, or (b) Consisting of five acres or less, or (2) Any real property which has improvements thereon designed principally for the occupancy of from one to four families and (a) Consisting of more than five acres but not more than 200 acres (b) Used for agricultural production (c) By individual insureds (according to the information known by the Company at the time of issuance of the policy of title insurance). I. Endorsements by Notation on the Policy Itself A. Schedule A Loan Policies T-2 and T-2R Schedule A of the T-2 and T-2R Loan Policies allows endorsement coverage to be included without printing or attaching an endorsement form itself. Here is an example from the T-2 policy form: 6. This policy incorporates by reference those endorsements selected below: T-5 (Leasehold Mortgagee Policy Endorsement) T-17 (Planned Unit Development) T-19 (Restrictions, Encroachments, Minerals) T-19.2 (Minerals and Surface Damage) T-19.3 (Minerals and Surface Damage) T-28 (Condominium) T-31 (Manufactured Housing) referring to manufactured housing unit serial number T-31.1 (Supplemental Coverage Manufactured Housing Unit) T-33 (Variable Rate) T-33.1 (Variable Rate--Negative Amortization) T-35 (Future Advance/Revolving Credit) T-36 (Environmental Protection Lien) Paragraph b refers to the following state statute(s): 2013 Texas Land Title Institute Texas Endorsements Page 2

5 TEXAS ENDORSEMENTS T-39 (Balloon Mortgage) T-42 (Equity Loan Mortgage) and subparagraph 2(f) of the Equity Loan Mortgage Endorsement set forth in Procedural Rule P-44.C(2) is is not added. T-42.1 (Supplemental Coverage Equity Loan Mortgage) T-43 (Texas Reverse Mortgage) Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby deleted. On the T-2R short form loan policy form, there are provisions for deleting specific coverage from some of the endorsement forms because Schedule B of the Short Form Loan Policy is standard and doesn t allow for additional exceptions, such as deletion language. B. Schedule B Owner s Policies and Loan Policy (T-2) The standard (promulgated) exceptions appearing on Schedule B of the policy may be amended, as permitted by procedural rules, thereby increasing the coverage without actually issuing an endorsement. 1. Item #1 the exception to restrictions This exception is either modified to list the documents containing restrictive covenants or it is deleted in its entirety thereby giving coverage against loss or damage if there are any restrictive covenants affecting the insured land. The decision to delete an exception to restrictive covenants is subject to underwriting guidelines regarding the documents found in the search of title. 2. Item #2 the area and boundary or survey exception This exception may be modified, according to Procedural Rule P-2 and Rate Rule R-16, to read only shortages in area, removing all other general exception language with regard to matters that might be disclosed by a survey and thereby giving additional coverage. The premium for amending this exception to provide additional coverage depends on the policy type. Amendment on the T-1 Owner s Policy is 15% of the Basic Rate for the liability amount. Amendment on the T-1R Owner s Policy is 5% of the Basic Rate for the liability amount. There is no premium for amendment on the T-2 and the amendment is automatic (for no additional premium) on the T-2R. This amendment is made only when requested by the insured and when an acceptable survey has been provided (not required in the case of a loan policy for a condominium unit). When the amendment to remove the general exception language is made, specific exceptions to matters disclosed by the survey are added. In the case of an Owner s Policy (T-1 or T-1R), the amendment is made by either lining through the general language or by producing Schedule B with only the words shortages in area as Item #2. In the case of a Loan Policy (T-2), the amendment may be made in the same way, or by checking a box for example: 2. Any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements. Item 2 of Schedule B is hereby amended to read: shortages in area Texas Land Title Institute Texas Endorsements Page 3

6 TEXAS ENDORSEMENTS 3. The exception to taxes This exception may be modified, according to Procedural Rule P-20 and Rate Rule R-19, in a Loan Policy (T-2) to remove the portion of the exception that relates to roll back taxes taxes that might be due in the future if the land is now receiving preferential tax treatment as agricultural land. This amendment may only be made when the land is not currently taxed at an agricultural or open space valuation. The exception may be additionally modified, according to Procedural Rule P-20 and Rate Rule R- 24, to add an assurance that the taxes for the current year are not yet due and payable. These modifications may be made by amendment of the language in the policy itself, or by checking the appropriate box(es) on a pre-printed Schedule B for example: 3. Standby fees, taxes and assessments by any taxing authority for the year, and subsequent years; and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership, but not those taxes or assessments for prior years because of an exemption granted to a previous owner of the property under Section 11.13, Texas Tax Code, or because of improvements not assessed for a previous tax year. Item 3 of Schedule B is hereby amended to delete: and subsequent taxes and assessments by any taxing authority for prior years due to change in land usage or ownership, Item 3 of Schedule B is hereby amended to add the following: Company insures that standby fees, taxes and assessments by any taxing authority for the year are not yet due and payable. 4. The general exception to subordinate matters (loan policy only) This general exception may be deleted upon request, at no additional premium. It is deleted by substituting the language This item is hereby deleted for the omitted language, thereby preserving the standard numbering on Schedule B. When this general exception is deleted, specific exceptions to any matters that are subordinate to the insured lien are added, together with promulgated language regarding their subordinate position. This gives the lender specific affirmative coverage with regard to any subordinate matters. 5. Arbitration Provisions Owner s (T-1) and Loan (T-2) If the insured requests, the Arbitration Provision contained in the policy terms may be deleted by inserting an exception into Schedule B containing promulgated deletion language (or, in the case of the Loan Policy, by checking a box on Schedule A). II. Required Endorsements Some endorsements are mandatory they must be issued under specified circumstances. A. Leasehold Endorsements T-4, T-4R and T-5 When the estate or insured includes a leasehold estate, the applicable Leasehold Endorsement must be attached to the policy Texas Land Title Institute Texas Endorsements Page 4

7 TEXAS ENDORSEMENTS B. Increased Value Endorsement T-34 When an insured requests this endorsement, has satisfied an underwriter as to an increase in the value of the insured estate or interest, and has paid the applicable premium, the endorsement must be issued. This endorsement does not change the coverage of the policy in any other way. C. The Equity Loan Mortgage Endorsement (T-42) and the Reverse Mortgage Endorsement (T-43) are also required. III. Consumer Protection and Loan Policies Lenders must follow guidelines or rules or laws designed to protect consumers in regard to how loans are created both before and during closing. These consumer protection laws are promulgated by Federal or State governments and the burden of following these laws is placed on lenders. Title insurers do not accept liability when a loan fails because an insured lender didn t follow one or more of these laws or regulations. In the case of a Loan Policy, one of the Exclusions from Coverage is: 5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the Insured Mortgage and is based upon usury or any consumer credit protection or truth in lending law. In Texas, creation of valid home equity loans and reverse mortgages is controlled by extensive requirements set out in the Texas Constitution. In regard to both types of loan, if a borrower is able to show that the lender didn t follow all of these Constitutional requirements, the borrower may be able to avoid the consequences of the lien on his/her homestead in other words, may be able to avoid foreclosure, even if he stops making payments on the loan. All of these Constitutional provisions fall under the category of consumer credit protection laws. The Loan Policy in Texas as promulgated does not give the lender any coverage with regard to these Constitutional matters; however, lenders want to be able to rely on the title company in regard to what takes place at the closing of the loan. And, when the title company handles the loan closing, this seems reasonable. As a result, with the advent of home equity and reverse mortgage lending, the Texas Department of Insurance promulgated certain endorsement forms to give the lender coverage for some but not all of the Constitutional requirements. A. Equity Loan Mortgage Endorsement T-42 In regard to Home Equity loans, the T-42 Endorsement is mandatory meaning that when you insure this type of loan, the T-42 must be attached to the policy; however, not all of the coverage provided by the endorsement is mandatory. It is important to note, however, that one affirmative coverage paragraph may not be added to the T-42 Endorsement unless the loan closes in the office of a title company which is defined as being the leased or owned Texas office of a title insurance company, direct operation or agent or an attorney conducting his business in the name of a title agent and holding an escrow officer s license. This is because it is not reasonable for the title company to be responsible for some of the consumer protection issues unless it is directly responsible for overseeing the closing. Does this mean the lender must follow all of the Constitutional requirements? Does it mean the lender cannot authorize a mail out closing of the loan to say, California? Not at all, but what it does mean is that if the lender wants to arrange for the loan to close outside of the office of the title company, the title company won t take responsibility in regard to certain consumer protections. Use the T-42 Checklist provided by your underwriter! Print and begin completion of the Checklist when the order is first opened and continue to mark items on the Checklist through closing. Advise the lender before closing and funding if you will not be able to give all of the coverage provided in the endorsement Texas Land Title Institute Texas Endorsements Page 5

8 TEXAS ENDORSEMENTS B. Reverse Mortgage Endorsement T -43 In regard to Reverse Mortgage loans, the T-43 Endorsement is mandatory meaning that when you insure this type of loan, the T-43 must be attached to the policy; however, just as in the case of the T-42 Endorsement, not all of the coverage provided by the endorsement is mandatory. With this endorsement, also, it is important to note that several paragraphs must be deleted, unless the loan closes in the office of a title company which is defined as being the leased or owned Texas office of a title insurance company, direct operation or agent or an attorney conducting his business in the name of a title agent and holding an escrow officer s license. There is no Rate Rule and no premium charge for issuing this mandatory endorsement. I guess this is our gift to the reverse mortgage borrower, who otherwise is paying high closing costs for this type of loan. Use the T-43 Checklist provided by your underwriter and advise the lender before closing and funding if you will not be able to give all of the coverage provided in the endorsement. C. Supplemental Coverage Equity Loan Mortgage T-42.1 In regard to Home Equity loans, the optional T-42.1 Endorsement provides additional affirmative coverage in regard to a home equity loan; however, a determination must be made as to whether to delete some of the coverage from this endorsement. It is important to note that several paragraphs of the T-42.1 must be deleted, unless the loan closes in the office of a title company which is defined as being the leased or owned Texas office of a title insurance company, direct operation or agent or an attorney conducting his business in the name of a title agent and holding an escrow officer s license. Use the T-42.1 Checklist provided by your underwriter and advise the lender before closing and funding if you will not be able to give all of the coverage provided in the endorsement. II. Other Common Endorsements A. Restrictions, Encroachments, Minerals T-19 and T-19.1 Owner s or Loan Policy These are currently the most comprehensive of all of our affirmative coverage (express insurance) endorsements, including coverage against loss or damage for many of the exceptions appearing on Schedule B of the policy. They are both being completely re-written effective January 3, 2014 look for updated underwriting guidelines from your underwriter! By the terms of each of these endorsements (both the current versions and the new versions), the coverage received by the insured is largely determined by whether an exception to a listed insuring item appears in Schedule B. For example, if an improvement encroaches over a property line and you do not except to this under Schedule B, the insured has coverage against any loss or damage sustained as a result of the encroachment. However, if you do except to the encroachment in Schedule B, the coverage only extends to loss or damage sustained after a final court order or judgment requires removal of the encroachment from adjoining land. Although a survey is not a prerequisite to issuing this endorsement, without an acceptable survey most underwriters will require you to delete much of the coverage. Perform a careful review of an acceptable survey adding exceptions to Schedule B for adverse matters disclosed by the survey. Then use a Checklist to determine whether you are willing to give the provided coverage for each of these matters. If you are unwilling to provide the additional 2013 Texas Land Title Institute Texas Endorsements Page 6

9 TEXAS ENDORSEMENTS coverage, it is removed by inserting language into Schedule B to either delete a paragraph entirely from the endorsement or to delete coverage afforded by a specific paragraph as to a particular exception. Underwriting opinion with regard to including exceptions to survey matters and deleting coverage varies widely. It is important to follow the guidelines of the underwriter whose commitment and policy you are issuing. B. Minerals and Surface Damage T-19.2 and T-19.3 Owner s or Loan Policy These two endorsements offer coverage against damage to buildings or improvements resulting from use of the surface for extraction or development of minerals. Although issuance of these endorsements is no longer mandatory, lenders almost always require them. The premium for issuance of either endorsement to a loan policy is $0 per statute and, as of January 3, 2014, also by regulation as a result of a revision to Rate Rule R When issued with an owner s policy, the premium is still $ C. Planned Unit Development Endorsement T-17 Loan Policy One of the interesting things about the Planned Unit Development endorsement is that it really has nothing to do with whether the land we are insuring is or is not located in any type of official (or unofficial) planned unit development. It got its name, I presume, because it contains less coverage than the more comprehensive Restrictions, Encroachment, Minerals Endorsement sufficient coverage in the eyes of some lenders if the collateral for their loan is of the planned unit development nature thus allowing a borrower reduced closing costs because this endorsement has a lower premium than the more comprehensive form. Although a survey is not a prerequisite for issuing this endorsement, without an acceptable survey most underwriters will require you to delete some of the coverage. We recommend that you follow a Checklist to determine whether you are willing to issue the endorsement without deleting any language or whether certain provisions must be deleted as a result of existing title matters or matters found on a survey. D. Condominium Endorsement T-28 Loan Policy In addition to giving affirmative coverage (express insurance) against loss or damage for possible known matters, this endorsement actually contains some elements of coverage that don t exist in any of our Texas policy forms, relating to the formation of the condominium itself as well as to how the condo unit and common elements are assessed for real property tax purposes. And most unusual of all there is no premium for issuing this endorsement! It is important to note, that you cannot attach both a T-17 and T-28 to the same policy. Once again, we suggest that you have a Checklist to assist in determining whether the endorsement will be issued without deletion of any covered items. E. Variable Rate Mortgage T-33 and Variable Rate Mortgage, Negative Amortization T-33.1 Loan Policy These endorsements give a lender assurances in regard to the validity and priority of a mortgage that includes a feature allowing the interest rate on the loan to change during the life of the loan either with or without a feature that allows the amortization of the loan to go negative, in other words allows the principal amount of the loan to grow if the payment of principal and interest isn t sufficient to cover the new interest rate. When a lender requests one of these endorsements, you must look at the loan documents to assure that they provide for a variable interest rate with or without the possibility of negative amortization Texas Land Title Institute Texas Endorsements Page 7

10 TEXAS ENDORSEMENTS F. Future Advance / Revolving Credit T-35 Loan Policy This endorsements gives a lender assurances in regard to validity and priority, as well as policy liability, for a line of credit mortgage, one which permits the amount owing to fluctuate up and down as advances are made and repaid. When a lender requests this endorsement, you must look at the loan documents to assure that they clearly describe the revolving nature of the loan. If a lender requests this endorsement for a reverse mortgage, you may want to provide a sample of the mandatory reverse mortgage endorsement to the lender to be sure that they will require the borrower to purchase the T-35 G. Environmental Protection Lien T-36 Loan Policy This endorsement is available, upon request by a lender, if the land is used or will be used primarily for residential purposes. If you have a question about whether the land is used for residential purposes consult with your underwriter. Effective January 3, 2014, a new commercial version of this form T-36.1 has been adopted for use in transactions where the land is not residential in nature; however, it cannot be issued until a procedural rule and rate are proposed and adopted.. IV. Construction and Endorsements When a policy is issued including the cost of constructing improvements, Procedural Rule P-8 says that the policy must contain two exceptions, one of which describes the way in which the amount of insurance grows, either as the loan is funded, or as improvements are added to the land. The second exception, the same in both owner s and loan policies, excepts from coverage liability with regard to liens arising from unpaid mechanics and materialmen. This exception is necessary because the insuring provisions in both policies include coverage against this type of encumbrance but it is not coverage that we are permitted to give during construction. A. Down Date Endorsements Owner s or Loan Policy or Interim Binder Down Date Endorsements may be attached from time to time during construction to policies including the cost of construction. These endorsements do not have a unique form number but, instead, are created by inserting promulgated language (from Endorsement Instructions) into a T-3 Endorsement form. The endorsement consists of three parts, into which descriptions of documents recorded between the date of the policy (or previous Down Date Endorsement) and the date of the endorsement: matters which are superior to the insured lien; matters which are inferior to the insured lien; and claims of mechanic s liens (Affidavits Affixing Mechanic s Lien, etc.). Since policies including the cost of construction do not provide coverage against loss resulting from unpaid work or materials, prudent lenders keep close watch to see that subs and suppliers are paid and want to know when affidavits claiming liens are filed. Many lenders who make one time close construction/permanent loans require the borrower to deposit title premiums for down date endorsements into escrow at the time of closing. They then request these endorsements during the course of construction as draws are given on the construction loan. Procedural Rule P-9.b.(4) provides that a T-3 Endorsement with the down date language specified in Endorsement Instruction V may be issued in connection with any loan policy containing P-8 exceptions. (A sample of the form and instructions for issuing are attached.) Although Procedural P-9.a.(3) permits the issuance of a T-3 Endorsement with the down date language 2013 Texas Land Title Institute Texas Endorsements Page 8

11 TEXAS ENDORSEMENTS specified in Endorsement Instruction VIII, it is rare than an owner will request such an endorsement. B. Completion of Improvements Endorsements Owner s or Loan Policy When construction is complete, an owner or lender may request an endorsement to delete the P-8 exceptions. There is no premium charge for this endorsement, but before issuing the endorsement, the title agent must be satisfied construction is complete and all bills are paid. As a general rule, the endorsement will not be available sooner than days after completion to give unpaid subs and suppliers time to realize they aren t getting paid and file affidavits claiming a lien. Both owner and builder execute a Completion Affidavit, which is recorded to give evidence of the date on which construction was complete. Title is brought to date and requirements made to resolve any matters which appear. The owner or lender may also request an amendment of the area and boundary exception (survey exception) and/or may request T-19 or T-19.1 coverage. Underwriting requirements for providing this coverage might be: A current survey, showing all improvements, must be provided. Exceptions to any matters shown by the survey or the current title information must be added to the Endorsement. There is no additional premium for updating existing coverage. The standard premium(s) are collected for giving new coverage. V. A Few Less Common Endorsements A. Additional Insured T-26 Owner s Policy This endorsement currently allows an additional Insured to be added to an owner s policy upon the occurrence of an one of the three events specified in the procedural rule (P-57), which generally have to do with estate planning and continuation of business plans. With the advent of the expanded definition of Insured in the current T-1 Owner s Policy, this endorsement became less frequently requested, although it is still important with regard to the T-1R Owner s Policy. On January 3, 2014, new optional language becomes available for the T-26 Endorsement for instances in which the Named Insured is a Limited Liability Company (LLC) and, owing to a proposed change in members, there is concern about continuing coverage for the LLC. This optional language addresses the issue raised by the holding in Fairway Development Company v. Title Insurance Company of Minnesota. Before the endorsement with optional language can be issued, underwriter review of the entity documents is required to determine whether coverage is available. B. Loan Policy Aggregation T-16 Loan Policy This endorsement, ties together multiple policies insuring separate pieces of collateral for the same loan so that the aggregate amount can be used to pay any losses. On January 3, 2014, new optional language becomes available to address an issue that may be raised when the aggregate liability exceeds a self-imposed or statutory single risk limit of the underwriter with regard to the policies insuring land in Texas. C. Access T-23 available if the insured land is not residential real property Although a legal right of access is one of the Covered Risks in both the owner s and loan policies, the coverage does not address the issue of where the access to the property is located, whether the access actually exists, or whether it is to an open road Texas Land Title Institute Texas Endorsements Page 9

12 TEXAS ENDORSEMENTS If the insured wants more assurance about access than that included in the policy he may request this endorsement. When you receive a request for the access endorsement, you must first determine whether it is available for this policy. First, the land must not be residential real property. Next, it must be improved. And, finally, you must be certain that there is already physical access to the land and that the owner will have a legal right to use this access. Most underwriters require a survey with specific notations regarding the nature of access to the Land and require something that evidences governmental permission, such as a curb cut or paved driveway. D. Contiguity T-25 or T-25.1 available if the insured land is not residential real property Owner s or Loan Policy When someone acquires an interest in multiple parcels of land and wants to be sure that they touch one another, the contiguity endorsement may be available. This endorsement is available only when the insured land is not residential real property and only with regard to tracts of land included in the same policy. An acceptable survey must be provided that shows the tracts touching. If there are any gaps between parcels, those will be exceptions added to Schedule B. On January 3, 2014, the alternate version (T-25.1) officially becomes available with the adoption of a revised Rate Rule R-32 to include the alternate form. E. Severable Improvements T-54 Owner s or Loan Policy This new endorsement form was adopted with an effective date of January 3, 2013; however, it cannot be issued until a rate is proposed and adopted. VI. CONCLUSIONS As new title insurance rules and forms are adopted, the title insurance professional should stay alert to the availability of new endorsements offering additional coverage and to the implementing procedural rules, examination considerations and possible underwriting requirements. CAUTION Please keep mind that all checklists and guidelines provided are those of Alliant National Title Insurance Company as of the date of this paper and may not represent the underwriting principles of other underwriters. Always follow the most current underwriting guidelines of the underwriter whose policy will be issued. Do not ever advise a client that any Texas endorsement is the same as any other ALTA or CLTA endorsement. The attached conversion chart merely gives the best match Texas endorsements Texas Land Title Institute Texas Endorsements Page 10

13 11/15/2013 Texas Endorsements Janet S. Minke Alliant National Title Insurance Company Introduction Texas Title Insurance Transitioning from One-fits-all to Customized coverage Guide to Texas Endorsements Lists Forms Information Checklists What is an Endorsement? Something that changes the terms of coverage. Schedule A, Schedule B Separate form called an Endorsement Implementing Rules Procedural Rule = when Rate Rule = how much All coverage may not be available When is an endorsement issued? Important Note Underwriter must be the same on policy & endorsement. 1

14 11/15/2013 Residential Real Property (1).... improvements thereon designed principally for one to four families (a) in a platted subdivision or (b) five acres or less, or (2).... improvements thereon designed principally for one to four families and consisting of more than five acres but not more than 200 acres used for agricultural production by individual insureds Endorsement by Notation Schedule A of T-2 and T-2R Check boxes or lines Schedule B Restrictions Area and boundary Taxes Subordinate Matters Arbitration Required Endorsements Leasehold Increased Value T-34 And more.... 2

15 11/15/2013 Consumer Protection and Loan Policies Consumer protection laws Loan policy exclusion Endorsements Home Equity T-42 = mandatory T-42.1 = optional Reverse Mortgage T-43 = mandatory Common Endorsements Restrictions, Encroachments, Minerals T-19 and T-19.1 Minerals & Surface Damage T-19.2 and T-19.3 PUD T-17 Condominium T-28 Variable Rate Mortgage T-33 Variable Rate Negative Amortization Mortgage T-33.1 Future Advance/Revolving Credit T-35 Environmental Protection T-36 Commercial T-36.1 (Future) Down Date Endorsements During construction When requested Brings coverage forward Search title List everything found 3

16 11/15/2013 Completion of Improvements No premium for this endorsement Coverage not brought forward! Amends policy by deleting P-8 paragraphs Criteria Construction must be complete Improvements must be accepted by owner Agent must be satisfied that all bills are paid Additional options Amend area and boundary exception or bring coverage forward Issue T-19 or T-19.1 endorsement or bring coverage forward Less Common Endorsements Additional Insured T-26 Loan Policy Aggregation T-16 Access T-23 Contiguity T-25 or T Severable Improvements T-54 (future) 2013 TEXAS LAND TITLE INSTITUTE CONCLUSIONS New Endorsements available periodically Stay alert to new coverage to benefit the client Use today s resources CAUTION Follow current underwriting guidelines Texas endorsements are not the same as national endorsements 4

17 ALLIANT NATIONAL TITLE INSURANCE COMPANY A GUIDE TO TEXAS ENDORSEMENTS Effective January 3, 2014 With Appendix Researched and Compiled By Your Legal Team Kelly Bierig, Fred Schraub, Janet Minke, Phyllis Mulder, Gena Reid kbierig@alliantnational.com fschraub@alliantnational.com jminke@alliantnational.com pmulder@alliantnational.com greid@alliantnational.com

18 TEXAS ENDORSEMENTS AND OTHER INSURING FORMS Alphabetic Order No. Name Procedural Rule Rate Rule Stat Code Page T-23 Access Endorsement P-54 R T-26 Additional Insured Endorsement P-57 R T-16 Aggregation Endorsement, Mortgagee Policy P-9b(13) R-11j T-3 Area and Boundary Amendment to T-1 Ins. VI P-2 R T-3 Area and Boundary Amendment to T-2 Ins. VI P-2 R T-3 Area and Boundary Amendment to T-1R Ins. VI P-2 R T-3 Assignment of Lien/Mortgage Instruction III P-9b(1)/(2) R-11a T-27 Assignment of Rents/Leases Endorsement P-60 R T-39 Balloon Mortgage Endorsement simultaneous P-9b(10) R-11h T-39 Balloon Mortgage Endorsement subsequent P-9b(10) R-11h T-3 Binder Extension Instruction I P-16 R-13A T-13 Binder on Interim Construction Loan, Loan Title Policy P-1cc & P-16 R-13A 8020 n/a T-48 Co-Insurance Endorsement P-6C No rate T-22 Commitment for Eminent Domain Proceedings, Owner s P-14 R-23 n/a Title Policy T-7 Commitment for Title Insurance P-1cc & P-18 R-12 n/a T-7 Commitment for Title Insurance to FDIC, etc. P-15 R n/a T-20 Commitment to Texas Department of Transportation P-14 R n/a Owner s Title Policy T-3 Completion of Improvements Instruction II.A. P-8a(2) No rate Owner s T-3 Completion of Improvements Instruction II.B. Loan P-8b(2) No rate T-28 Condominium Endorsement P-9b(15) R-11l T-25 Contiguity Endorsement P-56 R T-25.1 Contiguity Endorsement P-56 R T-3 Correction Instruction IV T-3 Correction of Amount of Insurance Instruction IV T-3 Down Date of Construction Loan Policy Instruction V P-9b(4) R-11c T-3 Down Date of Interim Binder Instruction VII P-9b(4) R-11c T-3 Down Date of Owner s Policy During Construction P-9a(3) R-15b Instruction VIII T-36 Environmental Protection Lien Endorsement P-9b(9) R-11g T-36.1 Environmental Protection Lien Endorsement, Pending Pending Pending 46 Commercial T-42 Equity Loan Mortgage Endorsement P-44 R-28A T-42.1 Equity Loan Mortgage Endorsement, Supplemental P-47 R-28B Coverage T-14 First Loss Endorsement P-9b(11) R-11i T-35 Future Advance/Revolving Credit Endorsement P-9b(8) R-11f T-34 Increased Value Endorsement P-9a(2) R-15a T-5 Leasehold Loan Policy Endorsement P-9b(5) No rate T-4 Leasehold Owner s Policy Endorsement P-9b(5) No rate T-4R Leasehold Residential Owner s P-9z(1) No rate T-3 Limited Coverage Junior Mortgagee Additional P-46B & E R-27B 0880 n/a Coverage May also provide coverage by amendment of T-44 T-44 Limited Coverage Junior Mortgagee Policy and P-46A & E R-27A 3297 n/a Combined Schedule, Texas Residential T-45 Limited Coverage Junior Mortgagee Policy Down Date P-46C & E R-27C Endorsement, Texas Residential T-46 Limited Coverage Junior Mortgagee Policy Variable Rate Endorsement, Texas Residential P-46D & E R-27D Rev 1 / / J. Minke 2013 Alliant National Title Insurance Company, Inc. All Rights Reserved Page 2 of 109

19 No. Name Procedural Rate Rule Stat Page Rule Code T-53 Limited Coverage Chain of Title Policy P-71 R n/a T-3 Limited Pre-Foreclosure Policy Deletion of Arbitration P-43A(8) No rate n/a n/a May also be deleted by amending T-98 or T-99 T-98 Limited Pre-Foreclosure Policy and Combined Schedule P-43A R n/a T-99 Limited Pre-Foreclosure Policy Down Date P-43B R-26D Endorsement T-2 Loan Policy of Title Insurance P-1dd R-4, etc. Multi n/a T-31 Manufactured Housing Endorsement P-9b(7) R-11e T-31.1 Manufactured Housing Unit Endorsement, Supplemental P-9b(7) R-11e Coverage Loan Policy T-31.1 Manufactured Housing Unit Endorsement, Supplemental P-9a(4) R-15c Coverage Owner s Policy T-19.2 Minerals and Surface Damage Endorsement Owner s P-50.1 R-29.1A T-19.2 Minerals and Surface Damage Endorsement Loan P-50.1 R-29.1A T-19.3 Minerals and Surface Damage Endorsement Owner s P-50.1 R-29.1B T-19.3 Minerals and Surface Damage Endorsement Loan P-50.1 R-29.1B T-38 Modification, Partial Release, Etc. - Loan Policy of Title P-9b(3) R-11b Insurance P-9.b.(3). Endorsement Form T-2R Loan Policy of Title Insurance Short Form Residential P-1dd & P-51 R-4, etc. multi n/a T-24 Non-imputation Endorsement P-55 R T-24.1 Non-imputation Endorsement (Mezzanine Financing) P-55 R T-1R Owner s Policy of Title Insurance, Residential P-1bb & P-38 R-3, etc. multi n/a T-1 Owner s Policy of Title Insurance P-1bb R-3, etc. multi n/a T-17 Planned Unit Development Endorsement - Single P-9b(14) R-11k T-17 Planned Unit Development Endorsement P-9b(14) R-11k Simultaneous T-18.1 Reinsurance Agreement, Facultative P-10 n/a n/a T-21 Reinsurance Agreement, Tertiary n/a n/a T-21.1 Reinsurance Agreement, Tertiary Facultative (Type I) P-10 n/a n/a T-21.2 Reinsurance Agreement, Tertiary Facultative (Type II) P-10 n/a n/a T-18 Reinsurance Commitment n/a n/a T-19 Restrictions, Encroachments, Minerals Endorsement - P-50B R-29B MTP T-19 Restrictions, Encroachments, Minerals Endorsement P-50A R-29A MTP - Residential T-19.1 Restrictions, Encroachments, Minerals Endorsement - P-50C R-29C OTP T-19.1 Restrictions, Encroachments, Minerals Endorsement P-50C R-29C OTP issued simultaneously with amendment of #2 T-43 Reverse Mortgage Endorsement, Texas P-45 No rate T-54 Severable Improvements Endorsement P-72 Pending Pending 94 T-30 Tax Amendment Endorsement Rollback Taxes P-20 R T-12 USA Acquisition of Title Endorsement R T-6 USA Certificate of Title R n/a T-9 USA Certificate of Title for Easements R n/a T-11 USA Policy of Title Insurance R-3d 7050 n/a T-33.1 Variable Rate Mortgage Negative Amortization Loan P-9b(6) R-11d/R Endorsement no charge T-33.1 Variable Rate Mortgage Negative Amortization Loan P-9b(6) R-11d Endorsement - $20 T-33 Variable Rate Mortgage Loan Endorsement - $20 P-9b(6) R-11d T-33 Variable Rate Mortgage Loan Endorsement no charge P-9b(6) R-11d/R See Appendix for Affirmative Coverage Guidelines and Endorsement Checklists. Rev 1 / / J. Minke 2013 Alliant National Title Insurance Company, Inc. All Rights Reserved Page 3 of 109

20 TEXAS ENDORSEMENTS AND OTHER INSURING FORMS Numeric Order No. Name Procedural Rate Rule Stat Page Rule Code T-1 Owner s Policy of Title Insurance P-1bb R-3, etc. multi n/a T-1R Owner s Policy of Title Insurance, Residential P-1bb & P-38 R-3, etc. multi n/a T-2 Loan Policy of Title Insurance P-1dd R-4, etc. Multi n/a T-2R Loan Policy of Title Insurance Short Form Residential P-1dd & P-51 R-4, etc. multi n/a T-3 Area and Boundary Amendment to T-1 Ins. VI P-2 R T-3 Area and Boundary Amendment to T-1R Ins. VI P-2 R T-3 Area and Boundary Amendment to T-2 Ins. VI P-2 R T-3 Assignment of Lien/Mortgage Instruction III P-9b(1)/(2) R-11a T-3 Binder Extension Instruction I P-16 R-13A T-3 Completion of Improvements Instruction II.A. P-8a(2) No rate Owner s T-3 Completion of Improvements Instruction II.B. Loan P-8b(2) No rate T-3 Correction Instruction IV T-3 Correction of Amount of Insurance Instruction IV T-3 Down Date of Construction Loan Policy Instruction V P-9b(4) R-11c T-3 Down Date of Interim Binder Instruction VII P-9b(4) R-11c T-3 Down Date of Owner s Policy During Construction P-9a(3) R-15b Instruction VIII T-3 Limited Coverage Junior Mortgagee Additional P-46B & E R-27B 0880 n/a Coverage May also provide coverage by amendment of T-44 T-3 Limited Pre-Foreclosure Policy Deletion of Arbitration P-43A(8) No rate n/a n/a May also be deleted by amending T-98 or T-99 T-4 Leasehold Owner s Policy Endorsement P-9b(5) No rate T-4R Leasehold Residential Owner s P-9z(1) No rate T-5 Leasehold Loan Policy Endorsement P-9b(5) No rate T-6 USA Certificate of Title R n/a T-7 Commitment for Title Insurance P-1cc & P-18 R-12 n/a T-7 Commitment for Title Insurance to FDIC, etc. P-15 R n/a T-9 USA Certificate of Title for Easements R n/a T-11 USA Policy of Title Insurance R-3d 7050 n/a T-12 USA Acquisition of Title Endorsement R T-13 Binder on Interim Construction Loan, Loan Title Policy P-1cc & P-16 R-13A 8020 n/a T-14 First Loss Endorsement P-9b(11) R-11i T-16 Aggregation Endorsement, Mortgagee Policy P-9b(13) R-11j T-17 Planned Unit Development Endorsement P-9b(14) R-11k Simultaneous T-17 Planned Unit Development Endorsement - Single P-9b(14) R-11k T-18 Reinsurance Commitment n/a n/a T-18.1 Reinsurance Agreement, Facultative P-10 n/a n/a T-19 Restrictions, Encroachments, Minerals Endorsement - P-50B R-29B MTP T-19 Restrictions, Encroachments, Minerals Endorsement P-50A R-29A MTP - Residential T-19.1 Restrictions, Encroachments, Minerals Endorsement - P-50C R-29C OTP T-19.1 Restrictions, Encroachments, Minerals Endorsement P-50C R-29C OTP issued simultaneously with amendment of #2 T-19.2 Minerals and Surface Damage Endorsement Loan P-50.1 R-29.1A T-19.2 Minerals and Surface Damage Endorsement Owner s P-50.1 R-29.1A T-19.3 Minerals and Surface Damage Endorsement Loan P-50.1 R-29.1B T-19.3 Minerals and Surface Damage Endorsement Owner s P-50.1 R-29.1B T-20 Commitment to Texas Department of Transportation P-14 R n/a Rev 1 / / J. Minke 2013 Alliant National Title Insurance Company, Inc. All Rights Reserved Page 4 of 109

21 No. Name Procedural Rule Rate Rule Stat Code Page Owner s Title Policy T-21 Reinsurance Agreement, Tertiary n/a n/a T-21.1 Reinsurance Agreement, Tertiary Facultative (Type I) P-10 n/a n/a T-21.2 Reinsurance Agreement, Tertiary Facultative (Type II) P-10 n/a n/a T-22 Commitment for Eminent Domain Proceedings, Owner s P-14 R-23 n/a Title Policy T-23 Access Endorsement P-54 R T-24 Non-imputation Endorsement P-55 R T-24.1 Non-imputation Endorsement (Mezzanine Financing) P-55 R T-25 Contiguity Endorsement P-56 R T-25.1 Contiguity Endorsement P-56 R T-26 Additional Insured Endorsement P-57 R T-27 Assignment of Rents/Leases Endorsement P-60 R T-28 Condominium Endorsement P-9b(15) R-11l T-30 Tax Amendment Endorsement Rollback Taxes P-20 R T-31 Manufactured Housing Endorsement P-9b(7) R-11e T-31.1 Manufactured Housing Unit Endorsement, Supplemental P-9b(7) R-11e Coverage Loan Policy T-31.1 Manufactured Housing Unit Endorsement, Supplemental P-9a(4) R-15c Coverage Owner s Policy T-33 Variable Rate Mortgage Loan Endorsement - $20 P-9b(6) R-11d T-33 Variable Rate Mortgage Loan Endorsement no charge P-9b(6) R-11d/R T-33.1 Variable Rate Mortgage Negative Amortization Loan P-9b(6) R-11d Endorsement - $20 T-33.1 Variable Rate Mortgage Negative Amortization Loan P-9b(6) R-11d/R Endorsement no charge T-34 Increased Value Endorsement P-9a(2) R-15a T-35 Future Advance/Revolving Credit Endorsement P-9b(8) R-11f T-36 Environmental Protection Lien Endorsement P-9b(9) R-11g T-36.1 Environmental Protection Lien Endorsement, Pending Pending Pending 46 Commercial T-38 Modification, Partial Release, Etc. - Loan Policy of Title P-9b(3) R-11b Insurance P-9.b.(3). Endorsement Form T-39 Balloon Mortgage Endorsement simultaneous P-9b(10) R-11h T-39 Balloon Mortgage Endorsement subsequent P-9b(10) R-11h T-42 Equity Loan Mortgage Endorsement P-44 R-28A T-42.1 Equity Loan Mortgage Endorsement, Supplemental P-47 R-28B Coverage T-43 Reverse Mortgage Endorsement, Texas P-45 No rate T-44 Limited Coverage Junior Mortgagee Policy and P-46A & E R-27A 3297 n/a Combined Schedule, Texas Residential T-45 Limited Coverage Junior Mortgagee Policy Down Date P-46C & E R-27C Endorsement, Texas Residential T-46 Limited Coverage Junior Mortgagee Policy Variable P-46D & E R-27D Rate Endorsement, Texas Residential T-48 Co-Insurance Endorsement P-6C No rate T-53 Limited Coverage Chain of Title Policy P-71 R n/a T-54 Severable Improvements Endorsement P-72 Pending Pending 94 T-98 Limited Pre-Foreclosure Policy and Combined Schedule P-43A R n/a T-99 Limited Pre-Foreclosure Policy Down Date Endorsement P-43B R-26D See Appendix for Affirmative Coverage Guidelines and Endorsement Checklists. Rev 1 / / J. Minke 2013 Alliant National Title Insurance Company, Inc. All Rights Reserved Page 5 of 109