Endorsements can significantly increase the cost of basic title insurance coverage. They should be assessed carefully. The available endorsements to the Loan Policy are:
•General Endorsement (T-3) A T-3 endorsement can be used for a variety of purposes including to amend exceptions and extend expiration dates. The most common uses of T-3 are the following:
− Assignment of Lien Endorsement (T-3) This endorsement insures the assignment and downdates the policy. The endorsement may be issued only on 1-4 family residential property if the assignee is Fannie Mae, Ginnie Mae, VA, or HUD. The endorsement may be issued to conventional lenders on commercial property or vacant subdivision acreage if the land is not one to four family property. There is a premium for this endorsement.
− Completion of Improvements Endorsement (T-3) This endorsement downdates the mechanic’s lien coverage and removes the mechanic’s lien exception and pending disbursement clause from a Loan Policy after completion of improvements where there is satisfactory evidence that all work has been completed, accepted and all sub-contractors/material men have been paid. There is no additional charge for this endorsement.
− Correction Endorsement (T-3) This endorsement corrects errors in the Loan Policy or Binder caused by the title company. There is no additional charge for this endorsement.
− Downdate Endorsement (T-3) This endorsement downdates a Loan Policy insuring a construction loan mortgage. This endorsement extends the Policy only as to recorded matters. Since the Loan Policy insuring a construction loan mortgage is required by Texas Procedural Rules to except to unrecorded mechanic’s liens, neither this endorsement nor the Loan Policy insuring a construction loan mortgage insures priority over mechanics’ liens recorded after the Date of Policy. There is a premium for this endorsement.
− Leasehold Loan Policy Endorsement (T-5) This endorsement defines the leasehold estate, and states the manner of computing loss and additional damages. This endorsement must be attached to the Loan Policy insuring a leasehold estate. There is no additional charge for this endorsement.
− First Loss (T-14) This endorsement allows recovery under a loan policy without requiring acceleration or recourse against other collateral. There is a premium for this endorsement.
− Aggregation Loan Policy (T-16) This endorsement is available in a loan policy only. If more than one property is being insured simultaneous the policies may be aggregated into one if they secure the same indebtedness or loan. There is a premium for this endorsement.
− Planned Unit Development (T-17) Some subdivisions are designated by HUD and Fannie Mae as planned unit developments. These subdivisions are generally those that have common elements such as parks, tennis courts, swimming pools and recreation centers that are jointly owned by the homeowners rather than a homeowners association. To issue the endorsement, the title company will need to search and examine the restrictions. This endorsement may be attached to loan policies on Residential one to four family real property.
− Restrictions, Encroachments & Minerals (T-19) This endorsement protects the insured against loss resulting from existing restrictions, encroachments and mineral interests. The endorsement either insures that there are no present violations of enforceable covenants, conditions, restrictions, encroachments or against invalidity, loss of priority or unenforceability or forced removal. It also insures against damage to existing and future improvements due to the extraction or development of minerals. The term “improvement” also includes landscaping, lawn shrubbery and threes. The title company may delete a coverage if it does not consider the risk acceptable. There is a premium for this endorsement.
− Restrictions Encroachments & Minerals (T-19-1) This endorsement is available for owner policies. It also protects against loss sustained by reason of damage to existing or not-yet-built improvements on property due to mineral development, but excludes lawn, shrubbery and trees from the definition of “improvements. There is a premium for this endorsement.
− Restrictions Encroachments & Minerals (T-19-2) This endorsement is available for (1) property of one acre or less that is either improved or intended to be improved for one-to-four family residential use, or (2) property that is improved or intended to be improved for office, industrial, retail, mixed use residential/retail or multifamily purposes. This endorsement insures against damage to existing improvements as well as improvements added to the property in the future, but excludes lawns, shrubbery and trees. Additionally, any mineral interest that results in the damage to the improvements must exist on the date of the policy, so future grants or conveyances of mineral interest would be excluded. There is a premium for this endorsement.
− Restrictions Encroachments & Minerals (T-19-3) This endorsement is for property that does not meet the requirements for a T-19-2 endorsement. Its coverage is generally the same as T-19-2, except for one notable difference: the T-19-3 only insures against damage to “permanent buildings”, not “improvements. Any improvement that is not a permanent building would not receive protection under T-19-3. There is a premium for this endorsement.
− Access Endorsement (T-23) This endorsement insures vehicular and pedestrian access to one particular street, road or highway which is physically open. It is required that the insured tract about the street. There is a premium for this endorsement.
− Non-Imputation and Mezzanine Endorsements (T-24) This endorsement may be given when there is not an actual conveyance of the property, but rather when there is a change in the ownership interest of the business entity holding title to real property. This endorsement gives the new member or partner assurance that any knowledge from the existing partners, shareholders or members that would cause a denial of a claim will not be imputed to the incoming new partners, shareholders or members. The underwriting guidelines for this endorsement require the existing owners execute an affidavit and indemnity agreement with the Title Company. There is a premium for this endorsement.
− Contiguity (T-25) This endorsement insures that separate parcels described in the endorsement are contiguous with no strips, gaps or gores. There is a premium for this endorsement.
− Contiguity (T-25.1) This endorsement is issued only for a minimum of four parcels or irregularly shaped parcels. May only be issued on non-residential property. There is a premium for this endorsement.
− Assignment of Rents and Leases (T-27) This endorsement insures against a defect in the execution of the document and that there is not a prior assignment shown by the public records, unless excepted to. There is a premium for this endorsement.
− Condominium (T-28) This endorsement insures that the condominium has been properly formed, there are no restriction violations, encroachments will not be removed and assessment liens are subordinate to the mortgage. There is a premium for this endorsement.
− Tax Exception Deletion for Rollback Taxes (T-30) This endorsement deletes the portion of the tax exception for roll back taxes which may arise due to the land being assessed at a reduced rate for agricultural or other purposes. There is a premium for this endorsement.
− Manufactured Housing Endorsement (T-31) This endorsement includes the identified manufactured housing unit in the definition of the insured land. This endorsement may be issued if the unit is affixed to the land as part of the real property. There is a premium for this endorsement and additional charges for survey and inspection may be made.
− Supplemental Coverage Manufactured Housing (T-31.1) This endorsement insures expanded coverage as to the lien on a manufactured housing unit. There is a premium for this endorsement.
− Variable Rate Mortgage Loan Endorsement and Variable Rate Negative Amortization (T-33 and T-33.1) These endorsements insure against loss of priority because of adjustments in the interest rate. There is a premium for these endorsements.
− Future Advance/Revolving Credit Endorsement (T-35) This endorsement insures the priority of future advances under a revolving credit loan secured by the mortgage. Many title companies will issue this endorsement if the mortgage secures future advances, even if the mortgage does not contain a revolving credit (readvance after repayment) feature. This endorsement is not applicable to loans on homestead, since revolving credit loans are not authorized on homestead. There is a premium for this endorsement.
− Environmental Protection Lien Endorsement (T-36) This endorsement is available only if the land is used primarily for residential purposes and insures against recorded environmental protection liens and against priority of environmental protection liens recorded after Date of Policy. Fannie Mae allows exception in paragraph (b) of the endorsement to “Tex. Health & Safety Code Section 361.194; Tex. Health & Safety Code Sections 342.007, 342.008; Tex. Local Gov’t Code Sections 241.0015(b), (d), and (e), 214.001; Tex. Nat.Res. Code Section 134.150, if applicable.” There is a premium for this endorsement.
− Modification Endorsement (Loan Policy of Title Insurance P-9.b(3) Endorsement Form - Partial Release, Release of Additional Collateral, Modification Agreement, Reinstatement Agreement or Release from Personal Liability) (T-38) This endorsement acknowledges that the Loan Policy coverage is not terminated or reduced by filing/recording of the modification agreement. The endorsement does not downdate the policy or insure the modification agreement. The endorsement is not available if the modification grants a new lien or power of sale, if the debt is evidenced by a new promissory note, if new principal debt other than accrued interest or advances pursuant to the original mortgage is created, or if the modification adds new collateral or if additional land is added as security for the loan. There is a premium for this endorsement plus a per annum fee for each 12-month period after the first year after the issuance of the Loan Policy.
− Balloon Mortgage Endorsement (T-39) This endorsement insures against invalidity, unenforceability or loss of priority because of a Conditional Right to Refinance. The endorsement may be issued if the mortgage covers, 1-4 family residential real property. The premium for the endorsement is minimal, if issued at the time of issuance of the Loan Policy. It increases if issued after issuance of the Loan Policy.
− Home Equity Endorsement (Equity Loan Mortgage Endorsement) (T-42) This Endorsement may insure against invalidity of the Home Equity Mortgage because of lack of consent of the owners and spouses, agricultural tax designation, prior Home Equity Mortgages on the land closed within 12 months, other outstanding Home Equity Mortgages, failure of the insured mortgage to disclose that it is a Home Equity Mortgage, and failure to close at the title company. The endorsement excepts to other violations of the requirements for Home Equity Mortgages. The title company may delete a coverage if it does not consider the risk acceptable. The endorsement must be attached to a Loan Policy insuring a Home Equity Mortgage. The premium for this endorsement is 10% of the Basic Premium Rate for the Loan Policy.
− Home Equity Endorsement (Supplemental Coverage Equity Loan Mortgage Endorsement) (T-42.1) This endorsement may insure against invalidity of the Home Equity Mortgage because of (1) signature before specified date, (2) loan proceeds disbursement by title company before 4th day after closing, (3) early execution of election not to rescind, (4) failure to provide document copies, (5) fees not shown on settlement statement sent to lender before closing, (6) blanks in instruments, (7) failure to attach appraisal or evaluation to written acknowledgment of fair market value, (8) failure of owner to sign acknowledgment of fair market value, (9) land in excess of homestead allotment, (10) other land with a Home Equity Mortgage, or (11) other land with a Home Equity Mortgage closed in last 12 months. The title company may delete a coverage if it does not consider the risk acceptable. The endorsement may be attached to a Loan Policy insuring a Home Equity Mortgage if the lender requests the endorsement. Fannie Mae and Freddie Mac currently require that loans sold to them have a Loan Policy with this endorsement and without any deletions. The title company is not required by regulation to secure a survey certifying the acreage before it may insure that there is no land in excess of the homestead allotment. If the land is in a city which is located in more than one county (such as Houston or Dallas), the title company may add “or in an adjoining county” to the coverage of paragraphs 10) and l(k) relating to Home Equity Mortgages on other land. The premium for this endorsement is 15% of the Basic Premium Rate.
− Reverse Mortgage (T-43) This endorsement insures the priority of future advances under the reverse mortgage on homestead, and insures that the owners and spouses consented to the mortgage, and excepts to other requirements for a reverse mortgage. The endorsement must be attached to a Loan Policy insuring a reverse mortgage. There is no premium charge for this endorsement.
− Co-Insurance (T-48) This endorsement is issued where two or more title insurers cover a portion of the risk. This endorsement sets forth the portion of loss for which each insurer may become liable. The endorsement by each co-insurer is attached to and becomes a part of the policy of the primary or lead insurer’s policy. If the total risk insured is in excess of $15,000,000.00 (fifteen million dollars) the premium is the same as for a non co-insurance policy of the same liability. If the total risk insured is less then $15,000,000.00 (fifteen million dollars) the premium is calculated as if separate policies for separate liability are issued.