Regulatory Update Heidi Junge August 15, 2019 1 Have a question? - - PowerPoint PPT Presentation

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Welcome to today’s webinar!

Regulatory Update

Heidi Junge

August 15, 2019

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Have a question?

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Regulatory Update 2019

Heidi E. Junge

Assistant Vice President Underwriting Counsel Senior Underwriter

SW Regional Underwriting Office Stewart Title Guaranty Company

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Texas Commissioner of Insurance – Official Order

The Texas Commissioner of Insurance issued an Official Order making changes to rates and rate rules that will take effect September 1, 2019. You may review the Order online.

https://www.tdi.texas.gov/orders/documents/20195980.pdf#2019-5980

There are also changes to R-5, R-8, and R-20 which you can view in their entirety via the links below:

R-5—https://www.tlta.com/documents/Exhibit_B_R- 5.pdf?utm_source=Real%20Magnet&utm_medium=email&utm_campaign=142603169 R-8—https://www.tlta.com/documents/Exhibit_C_R- 8.pdf?utm_source=Real%20Magnet&utm_medium=email&utm_campaign=142603170 R-20—https://www.tlta.com/documents/Exhibit_D_R- 20.pdf?utm_source=Real%20Magnet&utm_medium=email&utm_campaign=142603171

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Rate Decrease of 4.9% to the Basic Premium Rate effective September 1, 2019

Why a decrease? How did we get here? – Periodic Hearings (approximately every 5 years) unless requested – Actuaries and economics recommended the rate indication based

• n income and expenses of all underwriters and title insurance

agents and a reasonable profit. – Income and expenses as derived from TDI’s statistical report

*TEX. INS. CODE § 2501.002: the purpose of the Texas Title Insurance Act is to protect consumers and to provide adequate and reasonable rates of return for title insurance companies and title insurance agents.

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Practical Tips for Preparing for the Decrease

• Start talking internally about the practical effects of the

change:

– What amount to provide for Loan Estimates (LEs) based on the anticipated Closing Date – How to calculate the new premium rates when providing estimates for LEs or preparing Closing Disclosures (CDs), etc.

• Talk with your software providers if you have any questions

about their implementing the change

• Be prepared to do some manual calculations prior to 9/1/19
• Prepare your customers for the change!

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Change to Base Rate Tier

• The base rate tier for policies will now start at $25,000

(increased from the previous $10,000).

• This change effectively increases the minimum basic

premium rate (MBPR) from $238 to $328.

Chart will be available on Texas Department of Insurance website after the effective date.

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Stewart Rate Cards

Contact Stewart Marketing or your Agency Service Manager:

– Printed Rate Cards available NOW

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New STAT Codes?

• Texas Department of Insurance (TDI) is in the process of

creating new STAT codes as will be needed and should be available before 9/1/2019

• Most STAT codes will remain the same
• What STAT code you will use will be dependent upon when

you issue

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What you need to know:

• A number of the rate rules call for the minimum basic

premium rate while other rate rules call for a computed rate that is less than the minimum basic premium rate that is charged (that feature is called “some” below).

– Transaction codes affected by these changes:

• R-5c Code 3280
• R-5d Code 3280
• R-8 Codes 4001,4002,4003,4004,4005,4006,4007
• R-9 Code 0010
• R-18 some Code 3011
• R-20 some Code 1190
• R-21 some Code 1250
• R-22 some Code 1350

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PASSWORD BREAK

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Where else does MBPR come up?

• R-9 Charge for Additional Chains of Title

– Code 0010 – Remember, you only get to charge once because now you have put the chains together

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Where else does MBPR come up?

• Assignment of Lien Endorsement (T-3)

– Code 0211 R-11a

• a. Endorsement issued as provided in Rules P-9b(1) and P-

9b(2)--The minimum Basic Premium Rate shall be charged for each T-3 Endorsement (Assignment of Mortgage) issued after the date of the original policy. In no event, however, shall such premium exceed 50% of the premium applicable to the original Loan Policy under the Schedule of Basic Rates.

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Where else does the MBPR come up?

• R-20 Owner’s Policy After Construction

– History of rule: 20+ years ago, industry got tired of issuing binders and the end of construction a new insurer would get the big premium (R-20 designed to prevent the new insurer from “stealing” perm loan deals) – OTP bought upfront (per P-8A) $5,000,000 or more – New OTP after construction at MBPR for the whole deal with improvements – If below $5,000,000, no credit, pay full premium

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Change to Large Policy Rate Tier

Policy Range Subtract Multiply by Add [$100,001 - $1,000,000] 100,000 0.00527 832 [$1,000,001 - $5,000,000] 1,000,000 0.00433 5,575 [$5,000,001 - $15,000,000] 5,000,000 0.00357 22,895 [$15,000,001 - $25,000,000] 15,000,000 0.00254 58,595 [$25,000,001 - $50,000,000] 25,000,000 0.00152 83,995 [$50,000,001 - $100,000,000] 50,000,000 0.00138 121,995 [Greater than $100,000,000] 100,000,000 0.00124 190,995

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Changes to the Rate Rules – Plain Language

• Commissioner requiring changes in Plain Language (Plain

English?)

• Basic Manual Taskforce (TDI and TLTA) to reorganize and

now REWRITE the Basic Manual

• Goal is to make the rules easier to read but the meaning

and substance of the rules cannot be changed

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R-5 Simultaneous Issuance of Owner’s and Loan Policies (Hold Open)

For loan policies of $5,000,000 or more when the ownership has not changed since issuance of the owner’s policy, the simultaneous issue premium can apply if the loan is issued within 90 days of the owner’s policy when covering identical property.

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R-5 OLD versus New

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R-5 Simultaneous Issuance of Owner’s and Loan Policies

• F. When an Owner’s Policy is issued with a policy amount of

$5,000,000.00 or more and bears the date and time of recording of the insured instrument:

• 1. the premium for each Loan Policy must be $100.00, if:

a. the Loan Policy(ies) is issued within 90 days after the date

• f the Owner’s Policy;

b. the Loan Policy(ies) covers the same land—or part of the land—covered by the Owner’s Policy and covers no other land; c.

• wnership of the property has not changed; and

d. the amount of the Loan Policy(ies) does not exceed the amount of the Owners Policy, and

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R-5 Simultaneous Issuance of Owner’s and Loan Policies

• 2. if the conditions in paragraphs F.1.a, F.1.b, and F.1.c are

met, but the amount of the Loan Policy(ies) exceeds the amount of the Owner’s Policy, the premium charged for the Loan Policy(ies) must be:

a. the Basic Rate for the combined Loan Policy amounts; minus b. the Basic Rate for the Owner’s Policy; plus c. $100.00 for each Loan Policy

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R-5 Simultaneous Issuance of Owner’s and Loan Policies

THIS RULE MAY NOT BE APPLIED in connection with the issuance of a series of Loan Policies issued by reason of notes being apportioned to individual units in connection with a master policy covering the aggregate indebtedness, including improvements. Except as otherwise provided in this rule, individual Loan Policies must be issued at the Basic Rate.

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Practical Application of R-5 When can my customer take advantage of the change?

Any loan policy issued after the September 1, 2019 effective date of the rate change could be issued at the SI.

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What is NOT included in R-5(f)

• All policies must be issued SI
• All must have the same date
• OTP shows liens insured by each LTP as exception
• (#1,2,4) If these things happen, then the file can be held
• pen for 90 days and the loan policies and OTP can be

issued for the SI rate.

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PASSWORD BREAK

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R-8 Mortgagee Policy, on a Loan to Take Up, Renew, Extend or Satisfy an Existing Lien(s) aka “Texas Refinance Credit”

The credit tiers have been simplified and adjusted such that there is now:

– 50% credit within the first four years; and – 25% credit between four and eight years.

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Comparison of Current R-8 and New R-8

R-8. Mortgagee Policy, on a Loan to Take Up, Renew, Extend or Satisfy an Existing Lien(s)

On a Mortgagee Policy, issued on a loan to fully take up, renew, extend or satisfy an old mortgage(s) that is already insured by a Mortgagee Policy(ies), the new policy being in the amount of the note of the new mortgage, the premium for the new policy shall be at the Basic Rate, but a credit shall reduce the premium by the following amount:

• A. 40% of the premium calculated at the current rate on the written payoff balance of the old mortgage, such renewal
• ccurring within two (2) years from the date of the Mortgagee Policy insuring the old mortgage;

B. 35% of the premium calculated at the current rate on the written payoff balance of the old mortgage, such renewal

• ccurring more than two (2) years but less than three (3) years from the date of the Mortgagee Policy insuring the old

mortgage;

• C. 30% of the premium calculated at the current rate on the written payoff balance of the old mortgage, such renewal
• ccurring more than three (3) years but less than four (4) years from the date of the Mortgagee Policy insuring the old

mortgage;

• D. 25% of the premium calculated at the current rate on the written payoff balance of the old mortgage, such renewal
• ccurring more than four (4) years but less than five (5) years from the date of the Mortgagee Policy insuring the old

mortgage;

• E. 20% of the premium calculated at the current rate on the written payoff balance of the old mortgage, such renewal
• ccurring more than five (5) years but less than six (6) years from the date of the Mortgagee Policy insuring the old

mortgage; F. 15% of the premium calculated at the current rate on the written payoff balance of the old mortgage, such renewal

• ccurring more than six (6) years but less than seven (7) years from the date of the Mortgagee Policy insuring the old

mortgage.

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Comparison of Current R-8 and New R-8

After the lapse of seven (7) years from the date of the Mortgagee Policy insuring the old mortgage, the Basic Rate shall apply. Where more than one chain of title, as the term "chain of title" is from time to time defined by the Commissioner, was involved in the issuance of the original policy(ies), and the new policy includes one or more of such additional chains of title involved in the issuance of the original policy(ies), an additional premium charge as established by the Commissioner shall be added for each additional chain of title involved. (See Rule R-9 for definition of "additional chain.") On Mortgagee Policies, issued on multiple loans to fully take up, renew, extend or satisfy an old mortgage insured by a single Mortgagee Policy, the new policies being in the amount of the new mortgages, the premium for the larger Mortgagee Title Policy shall be at the Basic Rate, but a credit shall be allowed upon the premium as set forth previously in this rule. The premium for the remaining new Mortgagee Title Policy(ies) shall be at the Basic Rate. A credit shall still be allowed upon the premium as set forth in this rule even if not all of the new loans are insured or if only one of the new loans is insured. The reduction in rate as herein prescribed shall not apply to any case where any additional property not covered by the original policy(ies) is included in the policy to be issued. In the calculation of the credit, the amount from the written payoff balance shall not exceed 100% of the original amount of the old mortgage. In no event shall the premium collected be less than the regular minimum promulgated rate for a Mortgagee Policy. THIS RULE MAY NOT BE APPLIED in connection with the issuance of a series of Mortgagee Policies issued by reason of notes being apportioned to individual units in connection with a master policy covering the aggregate indebtedness, including

• improvements. Individual Mortgagee Policies must be issued at the Basic Rate.

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Comparison of Current R-8 and New R-8

R-8. Loan Policy on a Loan to Take Up, Renew, Extend, or Satisfy an Existing Lien(s) When a Loan Policy is issued on a loan that fully takes up, renews, extends, or satisfies one or more existing liens that are already insured by one or more existing Loan Policies, the new Loan Policy must be in the amount of the note of the new loan. The premium for the new Loan Policy is reduced by a credit. The credit is calculated as follows: A. Calculate the Basic Premium on the written payoff balance of the existing loan or the original amount of that loan, whichever is less; and B. Multiply by the percentage below for the time from the existing Loan Policy date to the new Loan Policy date: 1. 50% when four years or less; 2. 25% when more than four years but less than eight years; or After eight years from the date of the Loan Policy insuring the existing loan, the Basic Rate must apply. The premium for the new Loan Policy is the Basic Premium less the credit; but not less than the minimum Basic Premium. The credit does not apply if any property not covered in the existing Loan Policy(ies) is included in the new Loan Policy. When the existing Loan Policy(ies) included more than one chain of title, and the new Loan Policy also includes one or more of the

• riginal chains of title, the minimum Basic Premium must be charged for each additional chain of title. (See Rate Rule R-9 for the definition
• f “additional chain.”)

When two or more new Loan Policies are issued on multiple loans to fully take up, renew, extend, or satisfy an existing lien insured by a single Loan Policy, the premium for each new Loan Policy, is the Basic Premium. The credit calculated above must be applied to the premium for the largest Loan Policy. A credit must be given even if not all of the new loans are insured or if only one of the new loans is insured. THIS RULE MAY NOT BE APPLIED in connection with the issuance of a series of Loan Policies issued by reason of notes being apportioned to individual units in connection with a master policy covering the aggregate indebtedness, including improvements. Except as otherwise provided in this rule, individual Loan Policies must be issued at the Basic Rate.

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R-20 Owner’s Policy After Construction Period

Extends the time in which to get an owner’s policy after construction on deals of $5,000,000 or more at the basic minimum premium rate from one year to two years with a simultaneous issue rate for the loan policy. The loan policy issued at the minimum basic premium rate unless the loan policy exceeds the owner policy, in which case 8b applies within the rule.

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New R-20

R-20. Owner’s Policy After Construction Period A. When a new Owners Policy is being issued by the Company that issued the existing Owner’s Policy, and:

• 1. the existing Owner’s Policy amount was $5,000,000.00 or more;
• 2. the existing Owner’s Policy was issued as provided in Procedural Rule P-8.A;
• 3. the premium for the existing Owner’s Policy is paid in full;
• 4. the improvements have been completed;
• 5. the owners have accepted the improvements;
• 6. the Company has received satisfactory evidence that all bills for labor and materials have been

paid in full;

• 7. the new Owner’s Policy is issued within two years after the completion of improvements; and
• 8. the new Owner’s Policy covers the same land—or a part of the land—covered by the existing

Owner’s Policy and covers no other land; then a new Owner’s Policy must be issued at the following rates:

• a. the minimum Basic Premium; or
• b. if the amount of the new Owner’s Policy exceeds the amount of the existing Owner’s Policy,

the premium for the new Owner’s Policy must be:

• i. the Basic Rate; plus
• ii. the minimum Basic Premium; minus
• iii. the premium for the existing Owner’s Policy, or if the existing Owner’s Policy was issued

for a simultaneous issue rate under Rate Rule R-5.E, the current premium for the Loan Policy referred to in Rate Rule R-5.E.

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New R-20

B. If a new Owner’s Policy is issued as provided in this rule, the premium for each Loan Policy must be $100, if:

• 1. all policies are issued simultaneously;
• 2. all policies bear the same date;
• 3. each Loan Policy covers the same land—or part of the land—covered by the new Owner’s

Policy and covers no other land;

• 4. the new Owner’s Policy shows the lien(s) insured by each Loan Policy as an exception; and
• 5. the amount of the Loan Policy(ies) does not exceed the amount of the new Owner’s Policy.

C. When the amount of the Loan Policy(ies) exceeds the amount of the new Owner’s Policy and:

• 1. all policies are issued simultaneously;
• 2. all policies bear the same date;
• 3. each Loan Policy covers the same land—or part of the land—covered by the new Owner’s

Policy and covers no other land; and

• 4. the new Owner’s Policy shows the lien(s) insured by each Loan Policy as an exception; then
• a. the Basic Rate must be charged for the new Owner’s Policy; and
• b. the premium charged for the Loan Policy(ies) must be:
• i. the Basic Rate for the combined Loan Policy amounts; minus
• ii. the Basic Rate for the new Owner’s Policy; plus
• iii. $100.00 for each Loan Policy.

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New R-20

THIS RULE MAY NOT BE APPLIED in connection with the issuance of a series of Loan Policies issued by reason of notes being apportioned to individual units in connection with a master policy covering the aggregate indebtedness, including improvements. Except as otherwise provided in this rule, individual Loan Policies must be issued at the Basic Rate.

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PASSWORD BREAK

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What you need to know:

• The rate decrease applies only to the premium charged for

policies, loan and owner’s policies.

• The effective date (policy date) controls what premium rate

should be charged. If you anticipate the policy being dated September 1, 2019 or later, you should show the premium at the new amount.

• If you are unsure of the closing date, you should show both

with one having a closing date of before September 1, 2019 and the other showing the closing date of on or after September 1, 2019.

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What you need to know:

• If you accidentally charge too much, you should refund the
• verage promptly.
• TDI MAY provide a “grace period” for interpretation or

mistakes, but don’t count on it – address any questions with the TDI as they come up.

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Q: What rate do I apply? A: Depends on the Closing Date/Date of Policy Before or on August 31, 2019 = Current Rate After or on September 1, 2019 = New Rate But, remember that September 1st is a SUNDAY and September 2nd is LABOR DAY, so practically speaking coming back into work September 3rd, all transactions will be at the new rate.

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Correcting Rumors – What Has NOT Changed

• We still do NOT have a rate for T-36.1 (Commercial

Environmental Protection Lien Endorsement Form)

• No rate means you CANNOT issue
• There are no changes to P-24 Agreements

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How does this affect your business?

• Residential
• Commercial

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Contact Information

Heidi E. Junge Assistant Vice President Underwriting Counsel Senior Underwriter

Stewart Title Guaranty Company San Antonio, Texas

210.590.1981 heidi.junge@stewart.com

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September 19, 2019

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