COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Presented by
Suzanne Frossard
General Counsel, Providence Title Company
PREPARING RELEASES
& LENDER DOCS
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
OVERVIEW
I.
Addressing pre-existing
liens
II.
Creation of new liens:
ensuring the liens are
valid and prior
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
A Lien on Schedule C: Where to Start
Ignore?: Never!
If a lien is not being paid at closing:
Move lien to Schedule “B” & circulate a new Commitment
Paying-off a Lien: Obtain written payoff statement
DO NOT close on “estimate”
Best to close on a current payoff vs. per diem
Prepare Release of Lien
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Releases of Lien
(pg 1)
If No Debt, Then No Lien: Debtor entitled to a release
See Norriss v. Patterson, 261 S.W.2d 758 (Tex. Civ. App.—Fort
Worth 1953, writ ref’d n.r.e.)
Liens Holders must prepare and execute a proper release…
but
Borrowers have a duty to pay a reasonable fee for preparation and
execution. See Bayless v. Strahan, 182 S.W.2d 262 (Tex. Civ.
App.—Amarillo 1944, writ ref’d w.o.m.)
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Know What is Being Released
(pg 2)
Debt Secured by Deed of Trust & Vendor’s Lien
….being secured by Vendor’s Lien retained in Deed dated
June 4, 1991, filed June 5, 1991, recorded under Instrument
No. D911873545, of the Deed Records of Tarrant County,
Texas and further secured by Deed of Trust to TRAVIS
UPSHUR, Trustee, filed for record under Instrument No.
D911873546, …. against the following described property…
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2
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Draft for the Situation
(pg 2)
“…has released and discharged, and by these
presents hereby releases and discharges the
above-described property from
_________________:
all liens held by the undersigned securing said
indebtedness”
v.
from the above-described lien held by the undersigned
securing said indebtedness”
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Other Applications for Releases of Lien
Deed of Trust lien
Ad valorem tax lien
Mechanic’s lien
Abstract of Judgment
Release usually prepared by lien-holder
Child support lien
State tax lien
Workforce commission
Mowing liens
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Practice Tips
(pgs 1-2)
:
1. Prepare release from the commitment & instrument
2. TFC § 343.108. Effective 9.1.2023. Requires lender to deliver/file a release of
lien within 60 days of the loan payoff, or if written request made within 20 days
from payoff, then delivered/filed within 30 days. But no penalty provision.
3. Record the release: Unrecorded releases serve little value
4. Avoid fraud/forgery: Verify any original release that is brought to you
5. Verify: Independently verify any original, unrecorded release of lien
6. Lien Payoff Affidavit: Payoff letter; copy of release; HUD1 reflecting payoff; copy
of cancelled check
7. Discharge of Mortgage is NOT a Release
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
“Insuring Around”
If you know there is an existing lien of record, and it is not being paid at
closing or moved to schedule B, P-11 gives guidance
Extra-hazardous risk; use caution; requires underwriting approval
Rule carves out specific instances where it is permissible
Not permissible if the seller wants to negotiate the payoff and needs
more time; no response from lender to a payoff request
Probably permissible: existing liability of a current policy; lien barred by
statute of limitations; taxable estate if estate has sufficient funds to pay
Mechanic’s lien affidavit approaching statute of limitations
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Partial
Releases of Lien
(pg 3)
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Deed of Trust Secured by More than One
Tract of Land (pg 3)
Paydown: When debt will be preserved & one or more tracts of land
are collateral for a note, the parties to a deed of trust might agree to
release a portion of the collateral if partial payment is made on the
mortgage debt.
Common with builder tracts, commercial, multi-state, and investor
deals
“Holder of the Note acknowledges its partial payment and
releases from the lien only the property described above.”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Abstract of Judgment (pg 3)
“For value received, Holder of AJ releases only the Property
from the AJ and from all liens held by Holder of AJ, without
regard to how they were created or evidenced”
Non-Homestead Property – paid/negotiated for at
least a partial release
Homestead Property – A subsequently filed AJ does
NOT attach to homestead property so long as the
property remains Debtor’s homestead
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
AJ & Sale of Homestead Property (pg 3)
Effective 9.1.2021:
TPC
§ 51.0012 Affidavit & Certificate of Mailing
gives us another method to release a subsequently filed AJ on a
homestead
Applies to subsequently filed AJ’s, or to homestead purchase; not for
converted property
Only available if the property is/has continuously been homestead property
Not available if Creditor files a contradicting affidavit
Buyer and lender must be bona fide third parties/arms-length transaction
New deed/deed of trust must be recorded within 90 days following the
recordation of Affidavit and Certificate of Mailing
Otherwise, you may not rely on § 51.0012 and must pay/negotiate
for at least a partial release of the AJ
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Child Support Lien-
Not
Homestead Property
Lien must be released as to the insured Property at closing.
If not sufficient funds from closing to pay in full, AG’s office will give a
partial release.
AG’s office will require a minimum payment of $100, even if debtor
receives no proceeds at closing.
AG’s office will not prepare the partial release.
“For value received, Holder of the child support lien releases only the
Property from the child support lien and from all liens held by Holder
of child support lien, without regard to how they were created or
evidenced”
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Child Support Lien- Sale of Homestead Property
Tex. Fam. Code § 157.3171: Procedure to file an affidavit that
effectively releases homestead property from child support liens.
Underwriting requirements:
Statutory procedures followed (affidavit; mailing to claimant’s last
known address; recording)
Certification date must be on or after the 31
st
day after recording of
affidavit/certificate of service
No contradicting affidavit recorded
Must be bona-fide purchaser for value
Property must be homestead property i.e. homestead exemption,
TXDL address etc.
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Releases of Child Support Lien
(pg 1)
SB 870 effective 9.1.2023
Changes to the TFC §§ 157.321 and .322 and TPC §
12.0011(d)
Releases filed by the Atty General’s office do not have to be
verified, or contain an original signature, or be notarized
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Mechanic’s Lien Affidavit (pgs 4-5)
Is the amount owed paid in full?
Lien claimant is obligated to furnish a release to the requesting party
not later than the 10
th
day after receipt of a written request once
indebtedness is paid TPC § 53.152(a)
Foreclosure: Do not rely on foreclosure of a prior deed of trust to
extinguish a mechanic’s lien affidavit (residential or commercial)
Removables
Inception date
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Release to Discharge Mechanic’s Lien
Affidavit
(pg 6)
“Now, therefore, Claimant hereby releases the described Property from
its above referenced mechanic’s lien in consideration for $10.00 and
other valuable consideration…..”
Recordation: The release must be in a recordable format, so
include claimant’s signature with an acknowledgment.
Other means: court order, bond around etc.
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Refinance (pgs 6-7)
Releasing a deed of trust lien that refinances a prior debt
extinguishes both liens
Good drafting to recite both deeds of trust in the release
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Deed of Trust Lien being Refinanced (pgs 6-7)
Not a new debt or lien but instead continues the original obligation
and lien securing the obligation i.e. New lender takes the position
of the existing lender that is being paid off
Holds true even if the mortgaged property was conveyed to
another
*Underwriter Exceptions: Liens in favor of the U.S., criminal restitution
liens, ad valorem tax lien, weed liens etc. . . . These must be released
or subordinated.
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Continuation of the Debt is
not Presumed
R&E Language in New Lien (pg 7):
“Renewal and Extension. The Note hereby secured is given in modification, renewal and
extension (but not in novation or in accord and satisfaction) of the sum left owing under that
certain Promissory Note in the original principal sum of $612,000.00 dated. . .”
Subrogation Language in New Lien (pg 8):
When funds of a new lien are used to payoff an existing lien, the new lender is
subrogated to the rights of the existing mortgagee to the extent of the payoff funds. See
LaSalle Bank Nat'l Ass'n v. White, 246 S.W.3d 616, 618-19 (Tex.
2007)
A savings clause! Underwriters actually require subrogation language to be contained
in the deed of trust in every refinance.
Lenders today refuse to transfer the lien and will only release it; the practice is
acceptable because of the principles of equitable subrogation
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Preserve Subrogation
(pg 8)
—
Follow your minimum accounting standards
—
Document your file
Reflecting the payoff on the HUD1;
Document the payoff of the existing lien;
No new funds are being advanced, but only costs necessary to refi;
Keep a copy of the payoff check;
New deed of trust contains proper R&E language & Subrogation
language
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
HEL (pg 9)
“Seasoned” HELs can be refinanced
Voters approved constitutional change on 11.7.2017
Applies to refinances made on or after 1.1.2018
Effective 1.1.2020, removed the tax code provision that made land securing a
HEL ineligible for AG use.
Requirements:
Equity loan must be over one-year-old;
Must not have funds other than (1) funds to payoff valid lien or (2) actual costs and reserves
required by lender to refinance the debt; AND
Refinance can’t be over 80% of the total appraised value
Subrogation language important
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Releases vs. Assignments on Refi’s (pg 9)
Most lenders refuse to execute an assignment or transfer of lien fearing
lingering liability
Lenders on refinances will prepare/file releases of liens
Do we Care: no with continuation of debt & subrogation language
So, a release of lien doesn’t always mean “released”
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Home Equity Lien Line of Credit (pg 13)
In Texas, owners can obtain a line of credit secured by their homestead
real property. Ceiling cap for advances is 80% of the FMV as
determined on the day the line of credit is established.
Practice Tips:
Close the line of Credit. Most underwriters have a “freeze” letter.
Obtain an updated payoff statement no more than 2 days prior
to paying off the HELOC
Send a second letter with payoff funds and a release of lien.
Confirm the account is closed.
Remind Borrower(s) that the account is closed!
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Schedule “C” Item:
Collateral Assignments (pg 9)
The security instruments (i.e. the deeds of trust) with real
property as the underlying collateral can be bundled
themselves and used as collateral for a new, larger loan.
Caution when Preparing Releases:
Read the collateral assignments carefully. Many of them do not
actually “collaterally assign” the underlying security instruments, but
instead actually assign the individual security instruments to the
new lender
Proper party for execution becomes a bit more difficult to ascertain
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
“Subject to”,
“Assumptions”
&“Wraps”
(pgs 9-13)
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Buyer Takes Real Property
“Subject to Existing Debt”
Seller deeds property to Investor, and Investor “promises to make
payments” on the remaining balance of the existing $100,000
mortgage to Prosperity Bank.
Seller remains obligated on the debt
Docs to prepare
Modify the “Other Exceptions to Conveyance and Warranty”
language in the deed
Both parties should sign
IF there is a Title Commitment
Existing lien will be listed on Schedule B.
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
W Awarded Real Property & Assumes
Existing Debt; W has Bad Credit & Can’t
Qualify for a Loan
Contractual terms of the deed of trust assumed usually requires the consent of
the lender, although, practically, this rarely happens.
No owelty created if no additional consideration to H.
Docs to prepare
Assumption Deed and Assumption Deed of Trust
If additional consideration: note & a second lien deed of trust
Title Commitment
The loan being assumed on Schedule “C” of the Title Commitment will be moved
to Schedule “B” and listed with any new loan
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
THEN….Wife sells the Real Property
A release of the underlying note/DT will release the
assumption DT if State Bar forms used:
“If Grantor performs all the covenants of the Note and Deed
of Trust Assumed and if Beneficiary has not filed a notice of
advancement, a release of the Deed of Trust Assumed will
release this deed of trust to secure assumption and
Beneficiary’s vendor’s lien.”
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
If Wife Doesn’t Pay under the
Assumption Deed of Trust:
and if husband advances funds (so his credit is not damaged):
-
“If Grantor fails to perform any of Grantor’s obligations under the Note
Assumed or Deed of Trust Assumed, Beneficiary may perform those
obligations, advance funds required, and then be reimbursed by Grantor
on demand for any amounts so advanced, including attorney’s fees, plus
interest on those amounts from the dates of payment at the highest legal
rate. The amount to be reimbursed will be secured by this deed of trust to
secure assumption.”
-
“Beneficiary may file a sworn notice of such advancement in the office of
the county clerk in the county in which the Property is located. The notice
will detail the dates, amounts, and purposes of the amounts advanced
and the legal description of the Property.”
-
Could also seek enforcement in family court proceeding.
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
VA/FHA Assumable Loans
If date of loan is before 12.1.1986, probably freely assumable.
If date of loan is after 12.1.1986, lender’s participation is required
Borrower2 must qualify for the loan i.e. credit check to assess risk.
Similar to a typical loan application
Borrower2 will sign a statement agreeing to assume and pay the
debt, usually not an assumption deed of trust
Borrower1 must request a release of liability Approval of Purchaser
and Release of Seller that only the lender can sign. The lender is
required to release all parties from liability when the assuming
borrower is found creditworthy.
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Buyer Purchases Property on a WRAP of an
Existing Lien on Schedule “C” (pgs 11-12)
Property encumbered by a $100,000 mortgage (4.5% interest note). Buyer2
purchases property for $150,000 on a $150,000 note at 10% interest, which includes
the amount owed to Seller-Financier.
Buyer2 makes payments to Seller, and Seller makes payments to Seller-
Financier
Seller remains liable for the original loan
Docs to prepare: Deed of Trust Language
“The lien created by this deed of trust is subordinate to the lien securing the unpaid balance of a
prior promissory note in the original principal amount of ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00), which is described in and secured by a deed of trust recorded
in DOCUMENT NO. D204037969 of the real property records of TARRANT County, Texas.
Grantor has not assumed payment of the prior note, but Lender is obligated to pay it according to
its terms…”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
WRAP
(cont.)
If a Title Commitment issues:
Modify Schedule “B” Exceptions to include the underlying
deed of trust, any “due on sale” provision, along with the
newly created lien
Watch
Some attorneys refuse to prepare wrap financing documents
because of concerns with contractual terms of the existing deed of
trust i.e. the existing deed of trust contains a “due on sale” clause. A
“due on sale” Disclosure and Hold Harmless Document should
satisfy this concern.
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
TPC
§
5.016–
Required Notice
As of 1.1.2008, Seller of residential property must give notice to the
purchaser and every current lienholder if the sale will not pay a recorded
present lien
Notice must be in separate written disclosure in at least 12-point type
that identifies each lienholder and contains specific info outlined by
statute
Failure to give notice does not invalidate the conveyance BUT if no
notice given, purchaser may terminate the contract on or before the 7
th
day after notice received
* Statute includes an exception for an insured transaction
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
FIN
§
159.101– Leg.
Changes effective 1.1.2022
(pg 12)
Must be licensed to make a wrap mortgage
A lien securing a wrap mortgage is VOID if not closed by an
attorney or a title company
Makes the wrap lender a fiduciary
Finance Commissioner has the authority to conduct an
inspection of wrap lenders to ensure compliance
New Required Disclosures (and foreign language requirement):
sml.texas.gov
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
FIN
§
159.101– Leg.
Changes effective 1.1.2022
(pg 12)
Regardless of when the disclosure is made, wrap borrower has
7 days to rescind and receive a return of any earnest money,
escrow amounts, down payment, or other fees or charges paid
in connection with the wrap mortgage loan, the purchase and
any other related transaction.
If closed without notice, wrap borrower may rescind at any time
by providing the wrap lender written notice.
If notice given after closing but before wrap borrower rescinds,
wrap borrower has 21 days to rescind.
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
WRAP Mortgages: Texas Administrative Code
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
FIN
§
159.101– Leg.
Changes effective 1.1.2022
Follow underwriting bulletins before insuring WRAP
financing.
Some Underwriters like Alliant require agents to include
specific requirements in commitments:
“The proposed transaction appears to be ‘wrap transaction’. Please
confirm that the underlying, prior loan is NOT an FHA, Home Equity, or
Reverse Mortgage Loan. DO NOT CLOSE AND INSURE a wrap transaction
if the prior lien is an FHA, Home Equity, of Reverse Mortgage Loan.”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
WRAPS
1990 HUD memo
Warning title companies of
administrative penalties for
insuring alternate financing
when borrowers don’t qualify to
assume loans
Minimum- 1 year suspension
from participation in VA/FHA
programs
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Creation of New
Liens:
Insuring Valid and
Prior
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
A Real Home Run
Take precautions and affirmative steps to make sure
that the lien created is valid and prior.
1.
Read the contract and all addenda: Don’t make
assumptions
2.
Compare the contract to the commitment: Do the
legal descriptions match? Has exhibit “a” to the deed of
trust been attached? Any specific requirements in
special provisions? Etc.
3.
Compare with lender closing instructions: Do the
borrower’s names match?
4.
Timely record documents!
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Permissible Liens Against the Homestead
Texas Constitution permits only a handful of lien claims against
homestead property
Purchase money liens
Liens for improvements
Lien for ad valorem property taxes
Home equity liens
Reverse mortgage
Liens predating the establishment of the homestead
Conversion or refinance of a lien secured by a manufactured home
attached to the homestead
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
The Non-Borrowing Spouse
(pg 15)
On a purchase, if S1 is the only spouse on contract and note, S1
is the only spouse that mjust sign the deed of trust.
On a refinance, if S1 is the spouse vested in title, a new Fannie
rule requires a deed conveying a ½ interest in the property from
S1 to S2 when both spouses will be borrowers to be recorded in
the real property records before the loan app is submitted.
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
HEL or “Cash-Out” Refinance
(pgs 16-17)
The HEL endorsements T-42 and T42.1 insure that specific constitutional
requirements have been met, specifically:
Each owner and spouse has given written consent to the loan
Deed of Trust contains disclosure per Section 50(a)(6), Article XVI, Texas Constitution
Docs must be executed at the officer of lender, attorney, or title company
Funds not disbursed earlier than 4
th
calendar day after closing
Election not to rescind is not signed on or before the date of the note.
There are not fees collected or disbursed that were not shown on the lender approved
HUD.
No blanks in the documents when signed.
Borrowers executed a written acknowledgment as to fair market value That there was
no prior home equity loan on the land closed within one year of the closing.
Final HUD-1 was provided to the borrower(s) at least one calendar day before the day
of execution of the note.
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
HEL or “Cash-Out” Refinance
HEL must be made by a bank, savings & loan, savings bank, or credit
union, and must be against only a Texas homestead.
Law repealed the provision prohibiting the collateral property from being
designated for agricultural use (Tax Code change 2019) Prospective
only. Does not cure past violations.
HEL is not valid unless the mortgage is signed by all persons in title &
spouses, even if not be the homestead of all owners.
POA must be executed at the Texas office of the lender, an attorney at
law, or a title company (IF underwriter permits at all)
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Special Considerations:
Rural Homesteads
If the borrower’s homestead is rural, then the first 200 acres for a
couple are the borrower’s homestead
It’s a rural homestead if its not an urban homestead
TPC § 41.002: It’s an urban homestead if:
it lies within a municipality or ETJ or platted subdivision and
is serviced by police and fire protection (even volunteer) and
at least three of the following services: electric, natural gas, sewer,
storm water and water
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Special Considerations:
Rural Homesteads
TPC § 41.0022: HB 207 effective 9.1.2023
Adds a means for a borrower with a rural homestead (joined
by spouse) to transfer rural property owned by borrower (that
isn’t the residence & not contiguous to the residence property)
to an entity & have the transfer not be a “sham” sale
Deed and affidavit consistent with statute must be of record for
30 days before insuring
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Construction Loans
(pg 19)
A construction loan will not be valid and prior but, instead, will be
inferior if construction begins before the loan is recorded
Date of Commencement
Imperative work does NOT begin until after construction loan is
recorded.
Why? Relation back of all mechanic’s liens to date of
commencement
Inherently difficult to determine the date of commencement of
construction
This includes building a fence
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Construction Loans
Interim Construction Binders
Governed by P-16
In commercial and residential transactions, only available when:
Borrower is the original contractor & property owner
Security document is not in the form of a mechanic’s lien contract
Completion of Improvements Endorsement
Issue at the end of construction to owner’s and loan policy
Removes limitation of liability or pending disbursements clause, removes
the general mechanic’s liens exception; and will provide/update the
survey exception
Cost is $0.00, but requires $50.00 down date endorsement to bring the
effective date of policy forward
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Seller Finance
(pgs 20-24)
Despite Federal and State laws that attempted to quash seller
financing, still seeing a lot of seller financing.
SAFE Act (2009). Sets out who must be licensed, the
process for obtaining a license, and the penalties for
originating loans without a license
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
Escrow Language
(pg 21)
“Grantor shall, at the option of the Lender, create an escrow fund for the
payment of all insurance premiums, taxes and assessments against the
premises by paying to the Lender each month contemporaneously with the
installments due and payable on the Note…”
Due on Sale Clause
(pg 22)
“If Grantor transfers any part of the Property without Lender's prior written
consent, Lender may declare the Obligation immediately payable and invoke
any remedies provided in this deed of trust for default…”
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
Application of Payments (pg 24)
“Payments will be applied first to accrued interest and the remainder to
reduction of the Principal Amount”
“Each payment will be applied first to payment of late charges, then
accrued interest payable on the unpaid principal, and the remainder will
be applied to reduction of principal.”
“Payments will be applied first to the discharge of any charges described
below that Borrower may owe under this Promissory Note or deed of
trust, then to accrued interest and the remainder to reduction of the
Principal Amount.”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
Subordination Language (pg 20)
“The lien created by this deed of trust will be subordinate to the lien securing
payment of a note, and any renewals, extensions, and modifications thereof,
in the original principal amount of TWO HUNDRED FIVE THOUSAND AND
NO/100 DOLLARS ($205,000.00)…”
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COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
Vacancy
“If the Mortgaged Premises consist of buildings or other structures, not to
permit the Mortgaged Premises to be vacant or to do or permit others to
perform any act that would create or result in an increased hazard or risk of
loss to the Mortgaged Premises…”
Duty to Occupy
“Borrower shall occupy, establish, and use the Property as Borrower's
principal residence within 60 days after the execution of this Security
Instrument and shall continue to occupy the Property as Borrower's principal
residence for at least one year after the date of occupancy…”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
PROTECTION OF LENDER’S INTEREST IN THE PROPERTY
AND RIGHTS UNDER THIS SECURITY INSTRUMENT.
FOR EXAMPLE:
“If (a) Borrower fails to perform the covenants and agreements contained in
this Security Instrument…Lender may do what is reasonable or appropriate
to protect Lender’s interest in the Property…including entering the Property
to make repairs, change locks, board up doors and windows, drain water
from pipes….”
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Noteworthy Deeds of Trust Provisions
Insurance
The recent disasters have caused lenders to reexamine their deed of trust
provisions related to insurance. Duty of prompt notice? Can lender
negotiate when borrower abandons?
Preservation, Maintenance, and Protection of the Property;
Inspections
“Keep the property in good repair and condition” vs. “Borrower shall not
destroy, damage or impair the Property, allow the Property to deteriorate or
commit waste on the Property…”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
Marshalling of Assets (pg 22)
“Mortgagor hereby waives all rights of marshalling in the event of
any foreclosure of the liens and security interest hereby created.”
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Noteworthy Deeds of Trust Provisions
Business Purpose:
“Mortgagor warrants that the extension of credit evidenced by the Note
secured hereby is solely for business, commercial or agricultural purposes.
Mortgagor further warrants that the credit transaction evidenced by the Note
is specifically exempted under Section 226.3(a) of Regulation Z issued by
the Board of Governors of the Federal Reserve System and Title 12 (Truth-
in-Lending Act) and Section 1603 of Title 15 (General Provisions) of the
Consumer Credit Protection Act and that no disclosures are required to be
given under such regulations and federal laws in connection with the above
transaction.”
COMMITMENT TO CLOSING TEXAS TITLE INSURANCE REVIEW & DOC PREP
Noteworthy Deeds of Trust Provisions
Homestead Representation:
“Mortgagor acknowledges that Mortgagee relies on the truth of the
representations in this Section in entering into this transaction. Mortgagor
represents and covenants that the Mortgaged Premises form no part of any
property owned, used or claimed by Mortgagor as a homestead, or as
exempt from forced sale under the laws of the State of Texas, and disclaims
and renounces all and every such claim thereto.”
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In Conclusion:
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