Bulletin: TX000014

Dear Associates:

The State Board of Insurance has adopted numerous rules effective October 30, 1992. These rules are:

• Refinance
  
  The Refinance Credit increases. Rule R-8 will provide these credits on a full refinance of the unpaid balance of a lien covered by a prior policy:
  
  
  • 40% within two (2) years;
    
    
  • 35% between two (2) years and three (3) years;
    
    
  • 30% between three (3) years and four (4) years;
    
    
  • 25% between four (4) years and five (5) years;
    
    
  • 20% between five (5) years and six (6) years; and,
    
    
  • 15% between six (6) years and seven (7) years.

The new credits apply if you disburse the insured loan after October 29, 1992, and you date the policy after October 29, 1992.

• Delivery of Commitment
  
  The TREC form already requires the seller to deliver a Commitment to the buyer.
  
  Amended Rule P-18 requires the title company to deliver a Commitment to a proposed insured owner if:
  
  
  • The land is residential real estate (one-to-four family housing (1) that is in a recorded subdivision, or (2) that is on five(5) acres or less, or (3) that is not over 200 acres to be used by individual insureds for agricultural production; or
    
    
  • We will issue an Owners Policy of not over $300,000 on other land (e.g., commercial or unimproved).

Delivery must be as "soon as practicable." It may be by mail, FAX, or other means, as appropriate.

You may deliver to (1) the proposed insured; or (2) the proposed insured's agent (not the seller's broker); or (3) other fiduciary of the proposed insured (e.g., attorney). If none of these are available, deliver to, or as instructed by, the person who placed the order (e.g., broker).

• Express Insurance
  
  New Rule P-39 authorizes express (affirmative) insurance on encroachments, defects in title, and liens. We discuss this rule in a separate Bulletin (see Bulletin TEX 4-10/92 dated October 15, 1992).
  
  
• Mechanics' Lien Exception
  
  Amended Rule P-8 contains new mechanics' lien exceptions during construction. Use these new exceptions starting October 30, 1992. Continue to add the "Pending Disbursement" clause in current P-8.
  
  
• Arbitration
  
  Amended Rule P-36 requires the title company to notify the proposed insured of the insured's right to delete the policy arbitration provision. You should give the Deletion of Arbitration Provision Form to each proposed insured: (1) attach it to the Commitment; or (2) if you do not issue a Commitment to the insured, furnish this form to the insured before issuing the policy.
  
  
• Claims
  
  New claims principles regulate the way underwriters handle claims.
  
  
• Interest-Bearing Escrow Accounts
  
  You should require two signatures on all escrow checks. One must be a licensed escrow officer.
  
  An interest-bearing escrow account must be in the name of the beneficiary. The account may name the title company as "escrow agent" or "trustee". The title company must retain written instructions from the beneficiary to open the account. The tax I.D. number is the beneficiary's number.
  
  
• Minimum Standards of Audit of Trust Funds
  
  This regulation simplifies the audit instructions.
  
  
• Commitment Schedule D Disclosure
  
  The Commitment must disclose ownership of each title insurance agent that receives part of the premium. If an agent receives premium for closing or examination, the Commitment must disclose its ownership.
  
  The Commitment must show each owner (e.g., partner, stockholder) of 1% or more of the agent. The Commitment also must show each owner of 10% or more of a partnership, venture, or corporation that owns (1% or more of) the agent.
  
  We attach a Stewart Schedule D. If you pay another agent a part of the premium, also add that agent's Schedule D to your Commitment to reflect the agent's ownership.
  
  
• Other Changes
  
  Amended Rule P-28 provides Department Staff review and approval of continuing education courses. The Rule prorates the course hour requirements (8 hours for 2 years) for relicensing.
  
  Amended Administrative Rule L-1 implements new title insurance agent licensing and fee requirements.
  
  Amended Administrative Rule L-2 modifies escrow officer licensing and fee requirements.
  
  The Board amends the Abstract Plant Information Form.
  
  Amended Rule P-12 says that a title company ?furnishing title evidence? (on home office issue) must go back no less than 25 years or any greater period of time necessary for title determination. The title company can update prior ?indicia of title? (e.g., prior policy) to satisfy the required exam.

Other Changes Effective January 1, 1993

The Board adopted other items (e.g., plain language Owner Policy, amended Commitment, amended Owner Policy, amended Mortgagee Policy, amended Binder, and certain amended endorsements effective January 1, 1993. We will discuss these changes in a later Bulletin.