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TLTA Dateline March 26, 2008 Important Dates (covered in this Dateline)
April
1, 2008
April 8, 2008
May 1, 2008
May 13, 2008
July 1, 2008
October 1, 2008
Commissioner Adopts Rule Changes with Multiple Effective Dates Make note of effective dates - The majority of adopted agenda items will be effective May 1, 2008. Agenda item 2006-65 relating to P-24 will be effective July 1, 2008. Agenda item 2006-38 relating to the database for insured closing letters to be maintained by underwriters will be effective October 1, 2008. The following information is a brief summary of adopted agenda items; however we urge you to review each adopted agenda item for specific changes.
ADOPTS NEW FORMS AND RULES 2006-07 Adopts a new Procedural Rule (P-63) that incorporates the procedural portion of R-2(d) concerning policy issued to a qualified intermediary under IRS Code 1031 and also contains deletions and improved formatting. 2006-08 Adopts a new Procedural Rule (P-64) regarding the treatment of subordinate liens and leases in order to better alert title companies to comply with the instruction in P-11.b.(8). 2006-9 Adopts a new Procedural Rule (P-65) to conform with sections in the Insurance Code. The former Article 9.55 (now Section 2704.051 of Title 11) was enacted to ensure that a consumer would be offered the option to purchase an owner policy of title of insurance, concurrently with a mortgagee policy of title insurance required by a lender. Adding a Procedural Rule in regard to this requirement will ensure that consumers are made aware of the availability and cost of owner’s coverage and have an opportunity to purchase or reject same at the time they purchase a home. 2006-10 Adopts a new Procedural Rule (P-66) to include procedures currently in other rate (R-3, R-4, R-6) and procedural rules (P-45) into one rule relating to determining the correct amount of insurance in owner and mortgagee policies. 2006-38 Adopts a new Procedural Rule (P-67) to provide better auditing tools regarding ICL’s to ensure compliance with Chapter 2702 of the Insurance Code. The later effective date was requested in order to provide sufficient lead time for underwriters to retool their databases to capture all of the items listed in P-67 and to upgrade their data gathering capabilities to comply with the new rule. THIS AGENDA ITEM 2006-38 IS EFFECTIVE October 1, 2008 2006-39 (See Agenda Item 2006-43) Adopts a new Procedural Rule (P-68) to clarify that Insurance Code 521.101-521.103 applies to the title insurance industry and to ensure title industry compliance with the statute. By Commissioner’s Order No. 06-1327, dated January 2, 2007, the Commissioner of Insurance adopted amendments to 28 Texas Administrative Code (TAC) §1.601, concerning the notice of toll-free telephone numbers and procedures for obtaining information and filing complaints that insurers are required to provide to consumers with each insurance policy, certificate, or evidence of coverage issued or renewed in the State of Texas. 28 TAC §1.601 implements Texas Insurance Code (TIC) §§ 521.101-521.103, which expressly applies to Title Insurance Companies under TIC § 521.101(a)(3). This change is necessary to ensure that Title industry practices comply with TIC §§ 521.101-521.103 and 28 TAC §1.601. 28 TAC §1.601 contains a single page form template that can be readily attached to each policy containing all of the elements required by the rule. Title Division Staff is satisfied that the form template promulgated by the Commissioner in 28 TAC §1.601 adequately ensures Title industry compliance with TIC §§ 521.101-521.103.
REPEAL AND
ADOPT
AMENDS
PROCEDURAL RULES 2006-12 Amends P-7 to incorporate the language from Bulletin 157 into the procedural rules and to resolve the question as to whether it is permissible to include the “successor in ownership” language as part of the Proposed Insured in a Commitment. This does not extend the scope of the Commitment, as it merely mirrors the definition of insured in the policy and it is responsive to the needs of the lending community who want to be assured that the title company will follow their instructions in regard to including this language on the policy when issued. 2006-14 Amends P-21 to make the terms used in the rule consistent with Insurance Code, §2651.203 and to update references to the Commissioner of Insurance. Paragraph 3 of the Procedural Rule sets forth the procedures for the use of Schedule D of the Commitment. Schedule D is authorized by Section 2651.203 of Title 11, Texas Insurance Code, and specifically uses the term “a portion of the premium”. This amendment will make the Procedural Rule consistent with the statute. The amendment also updates the Procedural Rule to make the correct reference to the Commissioner of Insurance rather than the State Board of Insurance. 2006-15 Amends P-28 to eliminate the need for a company owning multiple title insurance companies to make multiple course submissions and/or assignments between the related title insurance company providers. There are now several “holding companies” which own two or more title insurance companies authorized to do business in Texas. Frequently, these companies have a shared training department for the purposes of providing education to the agents representing their various title insurance companies. Under the current regulations, courses may only be provided by individual title insurance companies, requiring multiple course submissions and/or assignments between related title insurance company providers. The change will reduce the work of the department in handling requests for approval of CE courses without diminishing the quality of education provided to agents. 2006-16 Amends P-45 to make the rule consistent with the federal requirements regarding the Maximum Claim Amount for FHA-insured loans and to allow the insured amount to be determined by lenders through a lender estimation of the maximum amount that may be secured by lien. Under federal regulations FHA-insured loans must be insured up to the Maximum Claim Amount which may not equal or may exceed 150% of the total advances made in accord with the plan established by the original loan agreement. 2006-17 combined with 2006-42 Amends P-53 to remove the sunset provision to ensure that the rule will remain in effect. 2006-27 Amends P-1 to make conforming changes based on the proposed amended Owner and Mortgagee Policies renaming the two policies to coincide with terminology utilized in the corresponding ALTA policies. Also provides that the new terminology may be incorporated in newly printed or electronically generated forms and clarifies that forms and rules referring to defined terms or the Conditions of the Owner’s Policy (T-1) or the Loan Policy (T-2) shall be deemed to make such reference, even if the term is not capitalized or if the reference is made to the Conditions and Stipulations, instead of the Conditions. 2006-29 Amends P-32 to clarify time periods for retention of documents and to conform to provisions of UETA and E-SIGN and allows for electronically produced or scanned documents to be retained in place of hard copies. Escrow accounting information must be retained for three years, evidence of insurability must be retained for at least 15 years and title insurance policies must be retained indefinitely. 2006-30 Amends P-36 to conform with the amended Owner Policy and Mortgagee Policy and to make other changes including increasing the threshold for arbitral matters to two million dollars and deleting the choice of law provision. 2006-31 Amends P-37 to conform the reference to the Access Exception provisions to the Mortgagee Policy (T-2) and Owner Policy (T-1) as amended. 2006-40 Amends P-1, subparagraph f to conform the definition of closing the transaction to the statutory definition of closing the transaction in Insurance Code 2501.006. 2006-42 combined with 2006-17 Amends P-53 to remove the sunset provision to ensure that the rule will remain in effect. EFFECTIVE July 1, 2008 2006-65 Amends P-24 to provide restrictions on a title insurance company, agent, or direct operation regarding prior written agreements that deviate from the premium split set forth in P-24.
AMENDS
INSURING FORMS 2006-06 Amends T-47 Residential Real Property Affidavit to remove specific language in the affidavit that requires the name of the title company to be identified and to insert generic language to allow the affidavit to be prepared and executed early in the transaction process. 2006-05 Amends T-35 the Revolving Credit Endorsement (to be called the Future Advance/Revolving Credit Endorsement) conforming the Endorsement to the coverage provided in the ALTA Endorsement (ALTA 14). 2006-24 Amends the T-1 Owner Policy based on the new 2006 ALTA Owner’s Policy. 2006-26 Amends the T-2 Mortgagee Policy based on the new 2006 ALTA Loan Policy. 2006-32 Amends the T-18.1 Facultative Reinsurance Agreement Form based on changes contained in the new ALTA Reinsurance Agreement and to clarify a reinsurer’s payment obligations. 2006-33 Amends the T-19 Restrictions, Encroachments, Minerals Endorsement to conform to the new ALTA Endorsement 9.3-06 which may be issued with the proposed amended Mortgagee Policy (T.2). 2006-34 Amends the T-19.1 Restrictions, Encroachments, Minerals Endorsement – Owner Policy to conform to the new ALTA Endorsement 9.5-06 which may be issued with the proposed amended Owner Policy (T-1). 2006-35 Amends the T-21.1 Tertiary Facultative Reinsurance Agreement (Type I) Form to conform to the proposed amendments to the Facultative Reinsurance Agreement Form T-18.1. 2006-36 Amends the T-21.2 Tertiary Facultative Reinsurance Agreement (Type II) Form to conform to the proposed amendments to the Facultative Reinsurance Agreement Form T-18.1. 2006-43 (See Agenda Item 2006-39) Amends insuring forms T-7, T-1, T-1R, T-2, T-2R to remove outdated language regarding the consumer complaint notice. This change was necessary to repeal language concerning the required consumer notice provisions within the title forms and to ensure that Title industry practices comply with TIC §§ 521.101-521.103 and 28 TAC §1.601. The current practice of including the consumer notice at the end of each title policy does not comply with 28 TAC §1.601(a)(3), which provides that "...(t)he notice must appear on a full, separate page with no text other than that provided in this section..." Moreover, 28 TAC §1.601 contains a single page form template that can be readily attached to each policy containing all of the elements required by the rule. Title Division Staff is satisfied that the form template promulgated by the Commissioner in 28 TAC §1.601 adequately ensures Title industry compliance with TIC §§ 521.101-521.103.
AMENDS MINIMUM
STANDARDS, SPECIFIC INSTRUCTIONS AND REPORT FORMS 2006-44 (Partial adoption see agenda item) Amends the Minimum Standards, Specific Instructions and Report Forms for Audit of Trust Funds Required of Texas Title Insurance Agents, Direct Operations, Title Attorneys and Attorneys Licensed as Escrow Officers by adding additional language to Minimum Escrow Account Procedures and Internal Controls, 18, to help identify fraudulent real estate transactions. Some lenders have released money based on settlement statements that are later substantially revised. In order to prevent title agents who commit fraud from taking advantage of the flexibility allowed by this standard, the Department requires a final revised settlement statement be delivered to the lender and borrower. ***Important note – Read the Commissioner’s order, pages 17-19, for explanation of the issue relating to “search services” as a pass-through fee chargeable to consumers. The Department did not adopt the proposed changes to Specific Areas and Procedures 5. However, they assert that tax search services have always been considered to be part of the overhead and that a fee for such services is not enumerated as a consumer pass-through fee in the language of the current Specific Areas and Procedures 5. In addition, the comment asserts that Specific Areas and Procedures 5 does not disallow the use of tax search services, but merely reflects that such fees have already been accounted for in the rate for title insurance.
AMENDS
ADMINISTRATIVE RULES 2006-45 Amends Administrative Rule L-1 to clarify that a title insurance agent may not commence business in a county until authorized by the Department. 2006-46 Amends Administrative Rule L-2 to require attorneys who are licensed escrow officers to close the transaction in the title agent’s name, to require attorneys who are licensed escrow officers to use the title agent’s escrow account, and to require escrow officers to keep a current address on file with the Department. 2006-47 Amends Administrative Rule L-2 to clarify that a non-attorney employee of an attorney must be licensed as escrow officer prior to performing the duties of an escrow officer. 2006-48 Amends Administrative Rules L-1 and L-2 to ensure that the Title Agent and Escrow Officer licensing procedures are consistent with the Texas Business Organizations Code, which went into effect on January 1, 2006, and to simplify the merger, exchange, and conversion process when an organizational restructuring results in a less than 50% change in ownership. 2006-49 Amends Administrative Rule G-1 to clarify that Policy Guaranty Fees must be postmarked on or before the due date to be considered timely.
AMENDS
STATISTICAL PLAN
Commissioner
Adopts Changes to P-24 – Effective July 1, 2008
For more information about TLTA’s position on Agenda Item 2006-65 and to review its movement, refer to the October 4, 2007 Breaking News.
Several
Changes to Current Rate Rules Effective May 1, 2008 Parties to the rate hearing became concerned by the uncertainty in the real estate market over the last several months and agreed that no change to the rates should be made at this time. As part of the settlement, the Texas Department of Insurance has also agreed in the Consent Order to issue a Notice of Public Hearing for the 2008 Texas Title Insurance Biennial Hearing after July 1, 2008. Some items in the ratemaking phase of the Biennial Hearing were adopted as part of the Consent Order and some were withdrawn but may be resubmitted at a future hearing. All ratemaking adopted agenda items will be effective May 1, 2008. We have included a brief summary of changes below; however encourage you to review each agenda item as adopted. Click here for a list of all adopted items.
Guaranty Fee
to Increase April 1, 2008 Click here to download a copy of the official notice and new form for your use in submitting the fee (or download an interactive form). The new fee will be due with this new form on or before August 1, 2008. Remember to use the old form for the first quarter of this year, which is due on or before May 1, 2008, and will cover January 1, 2008, through March 31, 2008. Click here for a helpful question and answer document.
Basic Manual
Changes Coming Soon – Become a Subscriber and Save $$$$
The easiest and most cost-effective way to update your manual is to subscribe to our subscription service. Not only will you save money but you will automatically receive the last two updates without having to place an order. Click here to subscribe to this valuable service. Updates to the Basic Manual regarding the rule and rate hearing will be similar to what you have received in the past. However, changes to the Basic Manual regarding the business of personal property title insurance will be included in a separate binder and referred to as Section 8; and will be available as a separate purchase. We will also make it available online as soon as possible.
P-24 and
More: Sign Up Today for TLTA’s Teleconference on the New Rule and
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Regional
PREP Chapter Meets in Denton
2008 Primary
Election Update
If you are a registered voter in one of the run-off districts and did not vote in the Democratic Primary, you are eligible to vote in the April 8 Republican run-off election. Those districts include:
TLTA Legislative Committee at Work
The committee also discussed several interim charges that effect the title insurance industry, specifically the Intergovernmental Relations Committee’s charge to review title insurance requirements relating to the purchase of a home under an installment contract or contract for a deed. We have been asked by Chairman Royce West (D-Dallas) to testify on this charge at his committee hearing schedule for March 26 in Dallas. We will report the outcome of this meeting in the April issue of Dateline Austin. ▲TOP
TLTAPAC Annual Golf Tournament Please consider being a sponsor to make this tournament a huge success for the PAC! Show your company support in TLTA’s legislative efforts by donating corporate money to assist in TLTAPAC. We have several sponsorship opportunities still available. Find out how your company can support the PAC or contact Mary Beth Kiser.
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HUD
Proposes Major Changes to RESPA Once TLTA has analyzed the 94-page proposal, we will then begin drafting comments to submit to HUD. However, an initial reading of the rule leads us to believe there will be major concerns for the settlement services industry. We urge you to take a close look at the proposed rule; specifically the new four-page Good Faith Estimate (GFE) and HUD-1, as well as the closing script, and provide us with your feedback at mindy@tlta.com. At a later date, we will provide you with talking points and ask you to submit comments to HUD. It is important to remember that these are only proposed changes. After the comment deadline, HUD’s next steps can be any of the following including:
Depending on HUD’s resolution, the Office of Management and Budget (OMB) retains oversight and will review the final proposed rule and either affirm or reject the proposal to HUD. TLTA supports HUD's efforts to simplify the settlement process and make it more transparent; however we believe the revised rule falls short of this goal. We believe HUD will be urged to adopt and Congress will be pressured to support these changes to RESPA due to the downturn of the real estate market; therefore it is very important for TLTA and its members to remain engaged and mobilized. While Congress is on break and members are back in their districts, we encourage you to meet with and educate them about this issue and how it will affect your business. The American Land Title Association (ALTA) has created simple talking points on the proposal that you can use when discussing this issue: The proposed rule will make the process more complicated, less transparent and would not promote consumer choice - 1. Confusing and Unclear – Although the rule attempts to clarify the costs involved in the closing process, in reality it creates a complicated and confusing set of forms that may further baffle consumers. (a) The proposed rule would turn the present one-page GFE into a four-page document that includes much more information than an estimate of settlement charges. The proposed GFE would provide loan term information and comparison data for other loans in a format which consumers are not likely to understand or use to shop. (b) The proposed changes to the HUD-1 are meant to make it easier to compare costs with the GFE by parenthetically referring to GFE sections, but they could make it more confusing because they still don’t provide an “apples to apples” comparison of pricing. 2. The Rule Would Not Promote Shopping – The proposed rule may have the unintended effect of inhibiting consumer shopping. (a) The proposed rule would allow originators to recommend settlement services providers, whose estimates would be subject to a 10% “tolerance.” There is nothing in this rule to ensure that recommended settlement service providers are the least expensive, most knowledgeable or qualified. (b) The rule would inhibit a consumer’s willingness to shop if consumers felt that there would be no restriction on increased fees if they chose settlement service providers other than those recommended by the lender Consumers also would be discouraged from shopping and obtaining multiple GFEs because lenders are allowed to charge a fee for each GFE a consumer requests. (c) The rule would incentivize the consolidation of settlement service providers and encourage lender-owned affiliated business arrangements, which may create less competition and shopping. 3. Timing – HUD’s proposed changes are ill advised in light of the down business market. (a) Given the present credit crunch, settlement service providers are reducing their staff. This is not the time to propose sweeping changes to the real estate industry that will burden settlement service providers with the time and expense to retool and retrain staff. 4. Closing Script – The rule would require the settlement agent or closer to draft, read aloud, and provide a closing script in writing to consumers, which would explain the loan terms and compare fees on the HUD-1 to those estimated on the GFE. While fine in concept, the rule fails to foresee and address several practical considerations. (a) It is unclear what action a consumer should take if questions are raised that cannot be answered by the closer who is not in the position to provide answers. (b) Today, closers often don’t receive closing information from the lender until just prior to the closing. The rule would not change that practice. (c) Rather than require a closing script, require earlier submission of closing information to the closer, to enable our members to provide closing documents to the consumer in advance. (d) The proposed closing script explanation could subject the closer to state charges of the unlicensed practice of law.
TLTA Visits
with Members of Congress Attending the conference was timely considering the buzz surrounding the release of the new RESPA reform rule. TLTA’s Washington, DC lobbyist Jim Hyland scheduled several appointments with members from the Texas Congressional delegation to discuss the new proposed rule as well as other issues affecting the title insurance industry. TLTA had breakfast with Congressmen Pete Sessions (R-Dallas) and Randy Neugebauer (R-Lubbock) to discuss the latest RESPA proposal. We also met with the top aides to Senators Kay Bailey Hutchison and John Cornyn as well as Congressmen Kevin Brady (R-The Woodlands), John Carter (R-Round Rock), Mike Conaway (R-Midland), Henry Cuellar (D-Laredo), Kay Granger (R-Fort Worth), Al Green (D-Houston), Ruben Hinojosa (D-Mercedes) and Kenny Marchant (R-Carrollton). We received very positive feedback from the Texas delegation and they expressed desire to help assist in our efforts. We also provided them with information about the FHA Reform bill which would help open funding to first time homebuyers and others. Overall, the ALTA Federal Conference was very informative. Panel topics included state regulatory systems, uniform closing instructions, housing finance reform and RESPA. The final session of the Federal Conference featured Hon. Brian D. Montgomery from HUD, who discussed the FHA effort and initiatives to help homeowners avoid foreclosure and keep their homes by working with FHA loan counselors.
Financial
Services Committee to Hold April 9 Hearing on Economic, Mortgage and
Housing Rescue Bill The legislative proposal, which Mr. Frank outlined in a March 14 press conference with Senator Dodd, seeks to stem the significant rise in mortgage foreclosures by allowing the Federal Housing Administration (FHA) to insure refinanced mortgages that have been significantly written down by mortgage holders and lenders. In addition, the bill will allow for the bulk refinance and guarantee troubled loans and provide loans and grants to communities to purchase and return to occupancy vacant foreclosed homes. A detailed summary and the legislative text can be found on the Financial Services Committee Web site. The bill contains three main parts:
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Department of Banking Launches New Tool to Combat Identity Theft
Texas Land Title Association |