TX Examiners Checklist for Home Equity Transactions 1

Examination discloses unreleased Home Equity Mortgage recorded more than one year before the examination of the title: Add the following after the Home Equity Mortgage:

"This Mortgage discloses that it secures an extension of credit made pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution ("Home Equity Mortgage"). This Home Equity Mortgage must be released in order for any new Home Equity Mortgage to encumber the title to the land."

2. Unreleased Home Equity Mortgage Within 1 Year.

Examination discloses unreleased Home Equity Mortgage recorded within one year prior to the examination of the title: Add the following after the Home Equity Mortgage:

"This Mortgage discloses that it secures an extension of credit made pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution ("Home Equity Mortgage") recorded within one year prior to the effective date of this Commitment. This Home Equity Mortgage must be released in order for any new Home Equity Mortgage to encumber the title to the land. A new Home Equity Mortgage may not be insured unless the closing occurs and the documents are executed more than one year after the date of recording of this Home Equity Mortgage."

3. Released Home Equity Mortgage Within 1 Year.

Examination discloses Home Equity Mortgage recorded within one year prior to the examination of the title which has been released: Describe the Home Equity Mortgage and the release and then add the following:

"This Mortgage disclosed that it secured an extension of credit made pursuant to Subsection (a)(6) of Section 50, Article XVI, Texas Constitution (Home Equity Mortgage") recorded within one year prior to the effective date of this Commitment. A new Home Equity Mortgage may not be insured unless the closing occurs and the documents are executed more than one year after the date of recording of this Home Equity mortgage."

[exception does not need to appear in policy to purchaser or in mortgagee policy for purchase money but should appear in the Commitment]

4. Foreclosed Home Equity Mortgage.

[Note: New Rules were adopted on May 15, 1998.]
Examination discloses foreclosure of Home Equity Mortgage: Determine that an order of a District Court authorized the foreclosure of the Home Equity Mortgage and that the order was recorded in the real property records. Require court order even if land is no longer homestead and if Deed of Trust waives order if no longer homestead. Verify (1) the Deed of Trust contains a disclosure that the extension of credit secured by the lien was the type of credit defined by Section 50(a)(6), Art. XVI of the Texas Constitution; and (2) compliance with Deed of Trust (or "Security Instrument") requirements for foreclosure; and (3) compliance with other customary requirements for foreclosure of a Deed of Trust, including compliance with Section 51.002, Property Code; and (4) satisfactory evidence that the former owners/borrowers are no longer in possession. If a policy is requested to be issued to the lender which purchased at the foreclosure of the Home Equity Mortgage, the Commitment and Policy must add the following exception:

"Any claim that the Home Equity Mortgage recorded ___________________ was not valid and enforceable or properly foreclosed."

There are no guidelines available for this form at this time.