TX Underwriting Summary

Search/Exam

• Minimum Search Requirements -- Full plant search (can bring forward a starter if it is a full owners or loan policy – not short form)
• Plant or other search restrictions -- Yes, geographic plant in every county licensed must cover period back to 1979

• Additional Requirements for REO Searches -- NO
• Foreclosure Checklist -- N/A
• Special Searches Required (Code, HOA, Utilities)? -- No
• Survey Requirements -- YES – for survey deletions (and any short form policy); either new survey or existing survey and T-47 Survey Affidavit
• UPL Hot Button Issues -- Doc prep only

UPL

• Attorney involvement not required other than for doc preparation
• Fee attorneys act as escrow officers for title companies and receive a percent of premium and can have the title company’s name on door in return for audit of their escrow accounts.
• Third party attorneys operate under authority of Procedural Rule P-22, are not escrow officers and cannot receive Insured Closing Protection.
• Search, exam and closing the transaction can all be done by layperson.
• Title insurance agents must provide title evidence from a licensed abstract plant. Attorneys can, for an agreed upon fee, examine or close the transaction as defined in procedural rule P-1f of the Texas Basic Manual for Writing of Title Insurance promulgated by the Texas Insurance Department.

Witness Requirements

None Required. Two witnesses may substitute for notary acknowledgement but not a common or desireable practice.

Mortgage/Transfer Tax

None

Spousal Joinder Requirements/Homestead

• If the property is homestead of the owner and non-title holding spouse, joinder of the spouse is required.
• for mortgages, the non-titled spouse may sign only the lien instrument and not the debt instrument.
• A rural homestead is limited to 100 acres for a single person and 200 acres for a family.
• An urban homestead is limited to a lot or contiguous lots which do not exceed 10 acres.
• In order to be effective, a homestead disclaimer must designate other property then owned as homestead, and the other property must use up all of the declarant’s homestead allotment.
• Homestead property may not be conveyed or mortgaged without the joinder of both spouses. The rule applies whether the homestead is community property or the separate property of one spouse.

Community Property

• Texas is a community property state.
• All property acquired during marriage is presumed to be community, unless acquired by gift, devise or descent.
• A divorce decree should divest one spouse of the property and award the property to the other spouse.
• If community property is not disposed of in a divorce decree the parties thereafter hold the property as tenants in common.
• Community property cannot be conveyed or mortgaged without the consent of both spouses.
• A deed by one spouse of community property to a third party is void, but creates a cloud on title.
• Texas follows the “inception of title” rule. Whether something is separate or community is determined by the facts existing at the time the property was acquired.

Power Of Attorney

• The statutory form for a durable POA is found in Ch. 751 and 752 of the Estates Code.
• The POA must be recorded if it is used in a real property transaction.
• A POA may be used in a home equity transaction only if the POA was signed in the office of a lender, an attorney, or a title company, all of which must be in Texas.
• POAs signed in other states are acceptable in Texas if they are executed in conformity with the laws of the state where they were signed.
• Agent may only exercise authority specifically granted in the power of attorney and any authority reasonably necessary to give effect to that express grant of specific authority.
• A general POA, such as “to do all acts that the principal can do” are not express grants of specific authority and are not accepted by WFG.

Construction Liens

If the property is homestead, any lien securing a construction loan must be evidenced by a mechanic’s lien contract signed by both spouses and filed for record prior to the commencement of construction. If this requirement is not satisfied, the lien is void.

Additionally, if the property is homestead and the construction constitutes “repairs and renovation” as opposed to “new construction” the lien is void unless at least 5 days elapsed between the application for credit and the signing of the lien contract. Additionally, the contract must provide for a 3 day right of rescission, and must be signed at the office of the lender, an attorney or a title company, any of which must be in Texas. Texas Constitution, Art. XVI, Sect. 50(a)(5). On non-homestead property, a valid construction lien may be evidenced by a deed of trust securing advances for the purpose of construction.

Mortgages And Trust Deeds

• Most mortgages in Texas take the form of deeds of trust. The property owner conveys the property, in trust, to the trustee; the trustee has no authority to do anything unless and until the beneficiary (the lender) instructs the trustee to act.
• When the loan is paid off, the release comes from the beneficiary (the lender) and not from the trustee.
• A mortgage lien on real property is barred by limitations 4 years after the date of maturity of the loan, which is the date the final payment is due.

Foreclosure Review

• We will not insure the title of someone who was the purchaser at a foreclosure sale; we will not insure until there is a subsequent arm’s length sale.
• Always leave the ‘rights of parties in possession’ exception in the commitment/policies. You may remove this exception when requested by the proposed lender. You may remove this exception when requested by the proposed buyer only upon compliance with Rule P-3, which allows the agent to make a reasonable charge for inspecting the property.

1. Review the Appointment of Substitute Trustee; contact Underwriting if you believe the Appointment was signed by someone other than the mortgagee, the mortgage servicer, or an attorney authorized by the mortgage servicer.

Note:	The “mortgage servicer” is the last entity to whom a debtor has been instructed by the current mortgagee to send payments; the mortgagee and the mortgage servicer may be the same entity.

• You may accept as true the recitals contained in an affidavit or incorporated into the substitute trustees’ deed. The recitals should cover the following:
  • A Notice of Sale was posted at the courthouse door of each county in which the property is located, at least 21 days before the sale;
  • A copy of the posted Notice of Sale was filed in the office of the county clerk of each county in which the property is located, at least 21 days before the sale;
  • At least 21 days before the sale, the servicer sent written notice of the sale to each debtor who is obligated to pay the debt, according to the records of the servicer; the notice was sent by certified mail to the debtor’s last known address, according to the records of the servicer.
  • The property was sold between the hours of 10:00 AM and 4:00 PM, and the sale commenced not later than 3 hours after the earliest time stated in the Notice of Sale;
  • If the property was the debtor's residence, the servicer served written notice of default on the debtor, at the debtor’s last known address according to the records of the servicer, and the debtor was given at least 20 days to cure the default before the debt was accelerated and notice of sale was given;
  • The debtor was alive at the time of the foreclosure; and,
  • The debtor was not on active military duty at the time of the sale, or within 9 months prior to the sale.

If you have reason to believe that any recital is inaccurate, please contact Underwriting before proceeding.  

• We will also insure subsequent sales and mortgages by parties who acquired title from a foreclosure sale purchaser, provided (1) your exam does not uncover any foreclosure related issues and (2) the seller or borrower has an existing owner policy. If no prior policy is available, contact Regional Underwriting for guidance.

Who May Serve As Trustee On Deed Of Trust

• Any person or entity may be named as the trustee. Trustee does not have to be a resident of Texas.
• An underwriter or title agent may be designated as the trustee, but it is not customary or required.
• In actual practice, the named trustee is almost always removed and a substitute trustee (usually an attorney) is appointed by the lender to handle the foreclosure.

=Liens Imposed by Multiple Jurisdictions

Ad Valorem Taxes

• The lien “exists in favor of each taxing unit having power to tax the property.”
• The lien is prior to a federal tax lien unless US law determines otherwise. Sect. 32.04.

Sec. 32.05.  PRIORITY OF TAX LIENS OVER OTHER PROPERTY INTERESTS.  
(a)  A tax lien on real property takes priority over a homestead interest in the property.
(b)  Except as provided by Subsection (c)(1), a tax lien provided by this chapter takes priority over:
(1)  the claim of any creditor of a person whose property is encumbered by the lien;
(2)  the claim of any holder of a lien on property encumbered by the tax lien, including any lien held by a property owners' association, homeowners' association, condominium unit owners' association, or council of owners of a condominium regime under a restrictive covenant, condominium declaration, master deed, or other similar instrument that secures regular or special maintenance assessments, fees, dues, interest, fines, costs, attorney's fees, or other monetary charges against the property; and
(3)  any right of remainder, right or possibility of reverter, or other future interest in, or encumbrance against, the property, whether vested or contingent.
(b-1)  The priority given to a tax lien by Subsection (b) prevails, regardless of whether the debt, lien, future interest, or other encumbrance existed before attachment of the tax lien.
(c)  A tax lien provided by this chapter is inferior to:
(1)  a claim for any survivor's allowance, funeral expenses, or expenses of the last illness of a decedent made against the estate of a decedent as provided by law;
(2)  except as provided by Subsection (b)(2), a recorded restrictive covenant that runs with the land  and was recorded before January 1 of the year the tax lien arose; or
(3)  a valid easement of record recorded before January 1 of the year the tax lien arose.

• Delinquent HOA assessments are inferior to the lien unless there is a notice of lien in a liquidated amount filed of record before the tax suit is commenced. Sect. 32.05(d). In that situation, the HOA must be joined as a party defendant. Setting up the lien in the restrictions does not constitute ‘notice’ to the tax collector.

• “A tax delinquent for more than the limitation period prescribed by this section and any penalty and interest on the tax is presumed paid unless a suit to collect the tax is pending.” Sect. 33.05(b). “If there is no pending litigation concerning the delinquent tax at the time of the cancellation and removal, the collector for a taxing unit shall cancel and remove from the delinquent tax roll: (1) a tax on real property that has been delinquent for more than 20 years; (3) a tax on real property that has been delinquent more than 10 years if the property has been owned for at least the preceding 8 years by a home-rule municipality in a county with a population of more than 3.3 million.” Sect. 33.05(c).

• A tax lien cannot be foreclosed non judicially, there must be a law suit. The plaintiff must obtain a judgment, which, like all judgments is only binding on the defendants who were joined and properly served.

• The tax lien attaches to reversionary and remainder interests but the holders of those interests must be joined in order to wipe them out.

• Foreclosure of the tax lien will not wipe out a recorded easement or a recorded restrictive covenant which was placed of record prior to January 1st of the calendar year for which taxes are due.

• Beware of AJs based on tax suit judgments.

Liens Imposed by Counties

Assessments for Road Improvements

• Citation: Transportation Code 253.009
• Priority: Date of filing
• Duration: No limitation
• Inferior To: Ad valorem tax liens; existing liens and interests

Repair/Removal of Shoreline Protection Structure

• Citation: Local Govt. Code 233.001
• Priority: Date of filing, but has priority over any judgment lien
• Duration: No limitation
• Inferior To: Ad valorem tax liens; previously recorded mortgage liens
• Superior To: Any judgment lien; later recorded liens and interests

• Applies to bulkheads or “other methods of shoreline protection.”
• The assessed lien is superior to all other previously recorded judgment liens and is inferior to previously recorded mortgage liens. Sect. 233.001 (c).

Litter Lien (Litter near a public highway)

• Citation: Health & Safety Code 365.034
• Priority: Date of filing
• Duration: No limitations
• Inferior To: Ad valorem tax liens; previously recorded mortgage liens
• Superior To: Any judgment liens; later recorded liens and interests

Public Nuisance

• Citation: Health & Safety Code, 343.011; 343.0111; 343.022; 343.023
• Priority: Date of filing
• Duration: No limitations
• Inferior To: Ad valorem tax liens; previously recorded mortgage liens
• Superior To: Later recorded liens and interests

• This declares various situations to be a public nuisance. Sect. 343.001(a).
• Weeds, rubbish, junk, refuse, hazardous and abandoned structures, etc.
• The lien is effective upon filing, Sect. 342.023(d) and is inferior to ad valorem taxes and to preexisting mortgage liens.

Other Liens

• US Judgment Liens -- 20 years, renewable for 20 years
• State Court Judgment Liens -- Money judgments – 10 years renewable for 10 years
• Federal Tax Liens -- 10 years (+30 days); can be refiled
• State Tax Liens --
• Estate Tax Lien -- Federal 10 years
• State Inheritance Tax Liens --
• Mechanics Liens -- ___ if homestead; ___ for non-homestead property unless action to foreclose is commenced
• Financing Statements -- 5 years; 30 years for Manufactured Housing
• Mortgages -- 4 years from Maturity Date
• HOA Liens --
• Condominium assessments --
• Child Support Liens --

Odd Stuff

• Underwriter can sign a release affidavit after settlement agent has paid the loan and given lender notice that the loan was paid, no release has been sent by lender, and that the affidavit is being filed as a release. Proof of payment must be attached to the letter to the lender.
• Texas practices are highly regulated with details set forth in the Texas Basic Manual for Writing of Title Insurance
• General exceptions are not allowed if an insured objects (P-5). Parties in possession is governed by P-3. Mechanic’s liens are governed by P-8. Taxes and rollback taxes are printed in the commitment and policy.
• Texas forms, policies, commitments, binders and endorsements are promulgated by the Insurance Commissioner. After May 1, 2008, they are essentially the ALTA forms with minor variations.
• By law, Texas title insurance policies may not insure marketable title.Texas policies insure good and indefeasible title.
• No usury coverage available.
• Definitions in Texas Rules:
  • Escrow Officer - An attorney, or bona fide employee of either an attorney licensed as an escrow officer, bona fide employee of a title insurance agent, or bona fide employee of a direct operation whose duties include any or all of the following: (1) countersigning title insurance forms; or (2) supervising the preparation and supervising the delivery of title insurance forms; (3) signing escrow checks; or (4) closing the transaction.
  • Closing the Transaction - The investigation made on behalf of a title insurance company, title insurance agent or direct operation before the actual issuance of the title policy to determine proper execution, acknowledgment and delivery of all conveyances, mortgage papers, and other title instruments which may be necessary to the consummation of the transaction and includes the determination that all delinquent taxes are paid, all current taxes, based on the latest available information, have been properly prorated between the purchaser and seller in the case of an Owner’s Policy, the consideration has been passed, all proceeds have been properly disbursed, a final search of the title has been made, and all necessary papers have been filed for record.