Texas Housing Insight – August 2020

Here is the August 2020 Summary from Texas A&M Real Estate Center.


Total Texas housing sales declined 4.1 percent in August from an all-time high the previous month as pent-up demand from the economic shutdown normalized. Nevertheless, sales were up 3.1 percent YTD compared with activity during the first eight months of 2019. Strong demand for housing supported permit issuance, which increased for the fourth straight month to record-breaking levels. Current inventory, however, extended a year-long fall, particularly at the bottom of the price spectrum. That shortage contributed to the shift in the distribution of sales toward higher-priced homes and pushed the median home price up 8.4 percent annually. The Real Estate Center’s Repeat Sales Home Price Index, however, suggested more moderate home-price appreciation while single-family housing sales in September are expected to recover fully from August’s backslide.

Supply

The Texas Residential Construction Cycle (Coincident) Index, which measures current construction levels, increased for the third consecutive month as industry employment, wages, and construction values inched up. The Residential Construction Leading Index also accelerated amid rising permit issuance, suggesting ongoing activity in the coming months. Conversely, the major metros’ leading indexes declined, with the exception of Houston, as multifamily building permits and housing starts dropped. A modest uptick in the real rate of the ten-year Treasury bill also pulled down the leading indexes.

Single-family construction permits increased 6.6 percent, a moderate improvement compared with the previous three months but still reached a record-breaking 14,000 permits. Texas remained the national leader, contributing 16 percent of the national total. All of Texas’ major metros issued post-Great Recession highs after accounting for seasonality, except for San Antonio, where the metric recorded 920 nonseasonally adjusted permits. Houston and Dallas posted 4,768 and 3,906 permits, respectively, while Austin issued 1,854. On the other hand, Texas’ multifamily permits dropped 28.4 percent, with the year-to-date (YTD) sum running 4 percent behind the total during the same period last year.

Total Texas housing starts fell 24.5 percent in August, normalizing to their two-year average as lumber prices accelerated for the fourth straight month. Single-family private construction values also slowed, although growth was still positive at 2.9 percent. The improvement was largely due to Austin values skyrocketing 30.4 percent to a record high. The metric increased modestly in North Texas and decreased slightly in San Antonio, while Houston values backtracked 14.6 percent.

The number of new listings hitting the market has failed to keep pace with sales, pulling Texas’ months of inventory (MOI) down to a record 2.4 months. A total MOI around six months is considered a balanced housing market. Inventory for homes priced less than $300,000 was even more constrained, sliding to less than 1.8 months. The MOI for luxury homes (homes priced more than $500,000), although elevated at 6.3 months, decreased for the third straight month.

Inventory was even more limited in the major metros, falling to 1.2 months in Austin as the MOI for homes priced from $200,000-$400,000 plummeted below one month. In North Texas, the MOI dropped to 1.9 and 1.7 months in Dallas and Fort Worth, respectively. San Antonio’s metric sank to 2.3 months, while Houston’s MOI slipped to 2.7 months.

Demand

Total housing sales decreased 4.1 percent in August from an all-time high the prior month as pent-up demand from the economic shutdown waned. The trend, however, remained on an upward trajectory as low mortgage rates stimulated activity. Every price cohort less than $400,000 registered a decline in sales; on the other hand, a record-breaking 4,000 luxury homes were sold. The number of Texas’ sales transactions so far in 2020 outpaced last year’s eight-month sum by 3.1 percent. National YTD sales fell half a percent relative to the same period in 2019.

Sales also declined at the metropolitan level, most notably in Houston, which registered a 7.9 percent monthly drop. Most of the pullback in activity was due to a reduction in sales for homes priced less than $400,000. The metric in Dallas and Fort Worth decreased 5.2 and 4.1 percent, respectively, while San Antonio sales fell 2.9 percent. Austin was the exception, although the increase in sales was modest. Nevertheless, the metric posted a record-breaking 3,622 sales as the share of luxury homes sold exceeded one-fifth for the first time ever.   

Texas’ average days on market (DOM) slid below year-ago levels to 57 days, corroborating robust demand despite the pandemic-induced recession. The average home in all four major metros sold faster than during August 2019, with the Dallas and Fort Worth metric decreasing to 48 and 44 days, respectively. Austin’s DOM shaved almost two weeks off its reading from last year, falling to 49 days. At 58 days, the DOM in Houston and San Antonio, however, was slightly higher than the statewide average.  

Persistent economic uncertainty surrounding the pandemic kept interest rates at historically low levels. The ten-year U.S. Treasury bond yield inched up slightly but stayed below 0.7 percent*, while the Federal Home Loan Mortgage Corporation’s 30-year fixed-rate was less than 3 percent for the first time in series history (starting in 1971). Mortgage rates extended a year-and-a-half-long slide within Texas during July, falling to 3.18 and 3.21 percent for non-GSE and GSE loans, respectively. The slide in rates pushed home-purchase applications up 15.1 percent YTD in August. Refinance activity continued to normalize after spiking at the onset of the pandemic but still remained 40 percent above year-end levels. (For more information, see Finding a Representative Interest Rate for the Typical Texas Mortgagee.)

In July, the median loan-to-value ratio (LTV) and debt-to-income ratio (DTI) constituting the “typical” Texas conventional-loan Texas mortgage decreased for the second straight month from 86.5 and 35.1 to 82.3 and 33.6, respectively. Meanwhile, the median credit score ticked up from 751 to 758, its highest reading in almost three decades. The median LTV (86.0) and DTI (35.5) of the typical Texas borrower who obtained a loan from a government-sponsored enterprise (GSE) also declined, albeit less drastically than the corresponding components of the typical conventional loan (from 86.7 and 35.6, respectively). The improved credit profiles may reflect tightening lending standards as economic uncertainty looms heading into autumn.

Prices

The Texas median home price flattened at $261,300 in August but climbed 8.4 percent year over year (YOY). The annual growth rate in Central Texas and Dallas surpassed the state average, pushing the median price to $347,800 and $251,000 in Austin and San Antonio, respectively, and $319,800 in Dallas. On the other hand, YOY growth slowed to around 6.5 percent in both Fort Worth and Houston for a median price of $260,700 in the former and $260,600 in the latter. The growth rate in median sale price reflects the relative strength of demand for higher-priced homes as the lower-end of the market has been more vulnerable to recent employment shocks and constrained inventory.

The Texas Repeat Sales Home Price Index accounts for such compositional effects and provides a better measure of changes in single-family home values. The index suggested more moderate home-price appreciation than the change in the median price, but it still accelerated 5.4 percent annually in August compared with 4.2 percent the month prior. Austin’s metric rose at the fastest clip, jumping 8.3 percent and pushing the statewide rate above 5 percent for the first time in three years. The index climbed 5.7 percent in Fort Worth and 5.1 percent in San Antonio. The metric increased more moderately in Dallas and Houston, posting 4.6 percent and 4.1 percent YOY growth, respectively.  

Single-Family Forecast

The Real Estate Center projected single-family housing sales using monthly pending listings from the preceding period (see table). Only one month in advance was projected due to the uncertainty surrounding the COVID-19 pandemic and the availability of reliable and timely data. Texas sales are expected to rebound 13.7 percent in September after decreasing by more than a tenth in August. The desire to capitalize on historically low interest rates is driving home sales with activity in Central Texas and Houston predicted to accelerate around 16 percent, while DFW sales are projected to increase 13.1 percent. Texas’ housing market remains a pillar of the state’s economic recovery.

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* Bond and mortgage interest rates are nonseasonally adjusted. Loan-to-value ratios, debt-to-income ratios, and the credit score component are also nonseasonally adjusted.

Source – James P. Gaines, Luis B. Torres, Wesley Miller, Paige Silva, and Griffin Carter (October 13, 2020)

https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight

eClosing 101: Hybrid, In-Person and Remote Online

Broadly speaking, eClosings fall along a continuum that include three basic types – hybrid, in-person, and remote online. These methods incorporate varying amounts of the eClosing elements. In today’s blog, Dennis Pospisil, Senior Vice President/Digital Settlement and Signing Services, breaks down the different types of eClosings.

Hybrid eClosing “Hybrid” (“procedural” documents only closing) – At the low-end of the spectrum is the Hybrid or procedural documents only eClosing. This “entry-level” eClosing only involves electronic documents that do not need to be notarized or recorded, such as loan disclosures and settlement statements. The remainder of the closing takes place in a traditional manner.

All parties appear in person at the closing table, but some documents are signed electronically and some, typically collateral, notarized, and witnessed loan documents are wet signed. For documents that are electronically signed, generally one electronic signature is applied across all documents. Hybrid eClosings are the most popular and most widely used type of eClosing.

In-Person eClosing In-person – The middle-tier approach to eClosing involves electronically recording electronic documents with electronic signatures and electronic notarizations.  The closing takes place in-person utilizing a shared computer or tablet.

All parties appear in person either at the settlement agent’s office or in the presence of a mobile notary, and all documents are both signed and notarized electronically. Very few closings are full eClosings because a large percentage of lenders are not ready to have the note electronically signed.

Remote Online eClosing Remote Online eClosing (“RON”) is a new, technology-driven notarial process that allows the signer to appear before the notary over a live audio-video feed when executing digital documents.

Click here if you would like more information on our digital settlement services.

The FAQs of Title Insurance for Homebuyers

For most of us, a home is the largest investment we’ll make in our lives. To buy with confidence, get owner’s title insurance. It’s the smart way to protect your property from legal claims. To help you understand how owner’s title insurance works, here are answers to common questions.

What is title?

Title is your right to own or use your property. Title also establishes any limitations on those rights.

What is a title search?

A title search is an early step in the homebuying process to uncover issues that could limit your rights to the property. After the title search is complete, the title company can provide a title insurance commitment and then, after any requirements are met and closing occurs, a title policy.

What is title insurance?

If you’re buying a home, title insurance is a policy that protects your investment and property rights.

There are two different types of title insurance: an owner’s policy and a lender’s policy.

  1. An owner’s policy is the best way to protect your property rights. Either the buyer or seller may pay for this policy. Ask your title professional how it’s handled in your area.
  2. A lender’s policy is usually required by the lender and only protects the lender’s financial interests. The buyer typically pays for this policy, but that varies depending on geography. Ask your title professional how it’s handled in your area.

Why should I purchase owner’s title insurance?

Owner’s title insurance protects your investment in your property from certain future legal claims regarding ownership of, or liens on, your property. For a one-time fee, you and your heirs* receive coverage for as long as you own your home. The owner’s policy also covers potential legal fees and court costs for settling claims covered by your policy.

What does owner’s title insurance cover?

Sometimes undiscoverable defects can come up after the title search. Under an owner’s title insurance policy, you are protected against certain undiscovered errors in the title.

Title issues include unknown:

  • Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes
  • Pending legal action against the property that could affect you
  • Unknown heir of a previous owner who is claiming ownership of the property

Unforeseeable title claims include:

  • Forgery: making a false document
    • For example, the seller misrepresents the identity of the person who sold the property.
  • Fraud: deception to achieve unfair gain
    • For example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and walks away with the money.
  • Clerical error: inconsistent paperwork and historical records
    • For example, an unforeseeable discrepancy in the property or fence line can cause confusion in ownership rights.

What does owner’s title insurance cost?

The one-time payment for owner’s title insurance is low relative to the value of your home. In Texas, rates are based on the sales price of the property and are set by the Texas Department of Insurance. You can calculate title insurance premium rates using the insurance calculator found on our website.

How long am I covered?

Your owner’s insurance policy lasts for as long as you or your heirs* own your property. Your life will change over time, but your protection never will.

What happens at closing?

Closing is the final step in executing the homebuying transaction and involves signing the documents that allows the creation of your new loan (if applicable), and transfer of ownership to occur. Upon completion of the closing and funding process, you get the keys to your home!

 

*This offers a brief description of insurance coverages, products and services and is meant for informational purposes only. Actual coverages may vary by state, company or locality. You may not be eligible for all of the insurance products, coverages or services described in this advertising. For exact terms, conditions, exclusions, and limitations, please contact a title insurance company authorized to do business in your location.

August 2020 DFW Area Real Estate Stats

The August 2020 DFW area real estate statistics are in and we’ve got the numbers! Take a look at our stats infographics, separated by county, with MLS area stats on each county report as well! These infographics and video are perfect for social sharing so feel free to post them!

To see past month’s reports, please visit our resources section here.

For the full report from the Texas A&M Real Estate Research Center, click here. For NTREIS County reports click here.

Texas Housing Insight – July 2020

Here is the July 2020 Summary from Texas A&M Real Estate Center.


Total Texas housing sales rose 17.1 percent in July, exceeding pre-pandemic levels with a record-breaking 36,165 sales amid historically low interest rates and steady demand. Supply-side activity bounced back with large increases in building permits and housing starts. Inventory levels, however, continued to trend downward, falling to an all-time low of 2.6 months. Strong demand and a dwindling number of listings contributed to accelerated home-price appreciation, but the pace ran below the seven-year averages in Texas’ major Metropolitan Statistical Areas (MSAs), except in Austin. Although the Real Estate Center’s single-family housing sales projection suggests activity took a step back in August from July’s high, the outlook remains overall positive.

Supply1

The Texas Residential Construction Cycle (Coincident) Index, which measures current construction levels, increased to its highest level this year as industry employment ticked up. Moreover, the Residential Construction Leading Index posted an all-time high due to record-low interest rates and rising building permits and housing starts, indicating strong activity in the coming months. The major metros’ leading indexes posted solid gains except for the San Antonio metric, which flattened as multifamily starts slowed.

Single-family construction permits rebounded completely from pandemic-related decreases in March and April, accelerating 21.8 percent to a post-crisis high to start the third quarter. Texas remained the national leader, contributing 16 percent of the national total. Houston and Dallas-Fort Worth (DFW) issued 4,952 and 3,750 nonseasonally adjusted permits, respectively, also peak levels since the Great Recession after accounting for seasonality. Permits increased to 2,077 in Austin and 1,002 in San Antonio. Texas’ multifamily sector improved as well, with permits rising 28.2 percent.

Total Texas housing starts continued to recover from coronavirus-related uncertainty, accelerating 39.8 percent to start the second half of the year just 2 percent below the post-Great Recession high reached in February 2020. Single-family private construction values, however, dipped 1.3 percent in July after two monthly increases. Most of the decrease was due to San Antonio’s 18.2 percent decline, offsetting Houston’s third straight improvement. DFW values ticked down, but the metric in Austin made up for a contraction the previous month.

Extended decreases in the supply of active listings and record sales pulled Texas’ months of inventory (MOI) down to an all-time low of 2.6 months. A total MOI of around six months is considered a balanced housing market. Inventory for homes priced less than $300,000 was even more constrained, sliding to less than 2.1 months. The MOI for luxury homes (homes priced more than $500,000) remained higher at 6.7 months despite dropping for the second straight month.

Inventory reached historical lows in all the major MSAs except for Houston, although the metro’s MOI ticked down to 2.8 months, its scarcest level in six years. The metric in Austin fell to 1.5 months while North Texas inventory slid to 2.1 and 1.9 months in Dallas and Fort Worth, respectively. San Antonio’s MOI inched down to 2.5 months.

Demand

Total housing sales reached a record-breaking 36,165 after climbing 17.1 percent in July, although the rate of increase moderated relative to the prior month. For the first time ever, sales for homes priced more than $400,000 accounted for more than 20 percent of total transactions while the share of sales of homes priced less than $200,000 sank to one-fourth.

Every major metro posted a historical number of sales, rebounding fully from sluggish activity earlier this year amid coronavirus concerns. While economic uncertainty is still prevalent, low mortgage rates and stable employment in the income bracket more likely to buy than rent supported the recovery. DFW led with 10,500 sales, but Houston and Austin registered the largest growth in percentage terms, with sales in each area increasing by one-fifth. Sales rose 12.9 percent in San Antonio, where the YTD sum outpaced transactions during the first seven months of last year by 4.3 percent.

Texas’ average days on market (DOM) stabilized at 64 days, suggesting the fluctuations from the economic shutdown in April have weakened. Similarly, upward momentum slowed to a halt at the metropolitan level. Demand was strongest in Fort Worth with a metric of 51 days. The DOM in Houston and San Antonio flattened to 65 and 66 days, respectively. Austin and Dallas’ DOMs posted solid declines, falling below year-ago readings to 54 days each.

During widespread local and federal eviction moratoria, the national and Texas foreclosure inventories fell to 0.7 and 0.5 percent, respectively, in 2Q2020. A recent extension of the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s foreclosure moratorium (which prevents the lender or loan servicer from foreclosing on the home) for federally backed mortgages through the end of 2020 will help keep inventories from rising as much as they would under the previous expiration date of August 31. Under the CARES Act, borrowers have the right of up to 12 months of mortgage forbearance (an agreement to suspend payments without penalties).

Persistent economic uncertainty surrounding the pandemic kept interest rates at historically low levels. The ten-year U.S. Treasury bond yield moved above 0.7 percent2, but the Federal Home Loan Mortgage Corporation’s 30-year fixed-rate reached 3.0 percent for the first time in series history (starting in 1971). Mortgage rates extended a year-and-a-half-long slide within Texas, falling to 3.28 and 3.34 percent for nonGSE and GSE loans, respectively, pushing home-purchase applications up 8.3 percent YTD. Refinance activity slowly normalized after spiking at the onset of the pandemic. (For more information, see Finding a Representative Interest Rate for the Typical Texas Mortgagee.)

In June, there was a decrease in the median loan-to-value ratio (LTV) and debt-to-income ratio (DTI) constituting the “typical” Texas conventional-loan mortgage. Meanwhile, the median credit score shot up to an all-time high. The improved credit profile may reflect tightening lending standards as economic uncertainty looms heading into autumn. In contrast, both the median LTV and DTI of the typical Texas borrower who obtained a loan from a government-sponsored enterprise (GSE) increased for the fourth straight month.

Prices

Amid compositional changes in sales, the Texas median home price surged to $261,600 in July, climbing 9.3 percent YOY. Austin led with the greatest median home price of $347,200, followed by Dallas at $313,500. Houston’s metric surpassed the statewide average at $261,800, while the Fort Worth and San Antonio median prices were slightly lower at $257,200 and $252,300, respectively. The growth rate in median sale price, however, reflects the relative strength of demand for higher-priced homes as the lower-end of the market has been more vulnerable to recent employment shocks.

The Texas Repeat Sales Home Price Index accounts for such compositional effects and provides a better measure of changes in single-family home values. The index suggested more moderate home-price appreciation, rising 4.1 percent annually. Fort Worth’s metric tied the state’s in YOY growth, with the San Antonio index close behind, increasing 4 percent. In Dallas and Houston, the index rose 3.0 and 2.8 percent, respectively. On the other hand, price appreciation in Austin accelerated 7.2 percent, driving the statewide increase.

Single-Family Forecast

The Real Estate Center projected single-family housing sales using monthly pending listings from the preceding period (see table). Only one month in advance was projected due to the uncertainty surrounding the COVID-19 pandemic and the availability of reliable and timely data. Texas sales are expected to retreat 12.5 percent in August from July as the rush to capitalize on exceptionally low interest rates wanes and dwindling inventory inhibits activity. The downshift is not surprising given the unsustainable pace set in June and July fueled by pent-up demand from the economic shutdown. Nonetheless, overall monthly sales hover at high levels while the YTD sum through August 2020 is predicted to be greater than the sum of single-family sales in the first eight months of 2019. The estimated decline in the number of transactions from July to August 2020 is expected to be steepest in Houston, with sales projected to fall 16.4 percent. Dallas and San Antonio single-family sales are projected to decrease around 13 percent each, while Austin’s metric is projected to drop just 8.3 percent. Despite the slowdown, Texas’ housing market remains a pillar of the state’s economic recovery.

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1 All measurements are calculated using seasonally adjusted data, and percentage changes are calculated month over month, unless stated otherwise.

2 Bond and mortgage interest rates are nonseasonally adjusted.

Source – James P. Gaines, Luis B. Torres, Wesley Miller, Paige Silva, and Griffin Carter (September 14, 2020)

https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight

What You Should Know About Earnest Money

Hello, Sheri Groom with Republic Title and I’m here with Wade Bogdan, Residential Counsel and we wanted to visit a little bit today about earnest money and the purpose of that with a contract.  So can you help talk a little bit about that?

Yes.  Traditionally earnest money was put in place so that people knew that you were going to try to purchase a property in earnest so basically you’re showing someone that you are serious about purchasing their property.

I like that so earnest and then earnest money. That’s great.  So if there’s no earnest money given does that mean there’s not a valid contract?

So actually that’s a common misnomer. So currently now in common day, you do not need earnest money to have a proper contract.  However, the contract does have a section for earnest money and actually most importantly now the contract was just changed to add a three day time limit for getting your earnest money in after execution of the contract which is pretty much the most important thing that’s going on with earnest money currently.

That’s good information because we would get asked that a lot.  Like do we have to have it? Is it still a valid contract?

So if you have any additional questions, please go to our website and look for our complete list of attorneys or reach out to your favorite business development rep  or your favorite closer.

 

REALTOR® Safety Tips

September is REALTOR Safety Month and there are tons of helpful safety tips to consider while showing real estate. Whether it be a safety strategy, safety apps, or hosting an open house, we hope that you find these tips useful.

Preview the Neighborhood
Preview the neighborhood and home before you show the home. Check for cell reception and familiarize yourself with entry and exit points in the home. If you cannot preview the home before showing it, at least review the floorplan so you know escape points.

Open House Safety
Don’t assume that everyone has left the premises at the end of an open house. Check all of the rooms and the backyard prior to locking the doors. Be prepared to defend yourself, if necessary.

Charged Cell Phone
Make sure your cell phone is fully charged when you are out showing.

Hide Personal Information
Tell your sellers: DON’T leave personal information like mail or bills out in the open where anyone can see it. Lock down computers and lock up laptops and any other expensive, easy-to-pocket electronics before your showing.

Nothing Personal
When talking to clients and prospects, be friendly but still keep your personal information private. This means avoiding mention of where you live, your after-work or vacation plans, and similar details.

Carry Less
If you carry a purse, lock it in your car trunk before arriving at an appointment. Carry only non-valuable business items (except for your cell phone), and do not wear expensive jewelry or watches, or appear to be carrying large sums of money.

Have an Excuse Ready
Having an excuse in mind can help you out of an uncomfortable situation. For example, you have to return an important missed call.

Take a Self Defense Class
Check with your broker to see if they would be willing to host a self-defense class at your office or call your local police department for additional class resources.

Download Safety Apps
There are dozens of safety apps for your phone that are specifically designed with REALTORS in mind. The majority of these apps provide GPS locating to your broker or emergency contacts when you’re out showing and let you enter in information about who you are meeting. The Nationals Association of REALTORs has a great list of safety apps on their website.

Make sure to check with your brokerage for any security measures that they have put into place.

For more real estate safety tips, visit nar.realtor/safety

Source: nvar.com, nar.realtor

What Is An eClosing And How Does It Work?

An eClosing involves using some combination of electronic documents, electronic signatures, electronic notarization, and electronic recording.

  • An electronic document is a “native digital” document, as opposed to a scanned-in image of a paper document.
  • An electronic signature is a sound, symbol, or process applied by the signer to an electronic document in place of a wet-ink signature. eSignatures can take many forms, but the three most common versions are holographic (aka hand-drawn with a mouse, finger, or stylus), cursive typeface, and standard typeface.
  • An electronic notarization is the process of applying the notary’s electronic signature and notarial stamp or seal to an electronic document.
  • And lastly, electronic recording is the process of recording the electronic document in the county records in its original digital form without breaking the document’s tamper seal. This is different than the form of electronic recording that exists in many jurisdictions today which simply involves uploading a scanned-in image of a paper document.

An eClosing is the electronic execution of some or all real estate closing documents in a secure digital environment.  eClosings allow for a more efficient and streamlined closing experience for sellers, borrowers, lenders, and third parties.

eClosings can occur in several different variations ranging from Hybrid eClosing to In-Person eClosing to Remote Online eClosing.  Key documents such as the promissory note and security instrument can be printed to paper and wet-signed, while other documents are signed electronically. Our website can provide you more information on the different types of eClosings.

eClosing real estate will provide many benefits including:

  • Electronic access to documents prior to the closing
  • Faster closings
  • Fast commission check for the real estate agent, typically

In an eClosing, whether hybrid, full or remote online, you will need an online platform to house documents electronically and to enable electronic signatures and electronic notarizations. These types of platforms are typically referred to as online collaboration platforms or digital closing platforms.

For more information on eClosing, please contact our eVolve team.

Knowledge of ALTA Endorsements Necessary For Texas Lawyers

Attorney’s clients don’t just do business in Texas or even regionally anymore, it seems everyone is buying, selling and developing real estate all over the country.  A Texas attorney may know the title insurance regulations and Basic Manual inside-out, but when they move to work in states that issue American Land Title Association (“ALTA”) forms, it can be a whole new ball game.

Texas attorneys know what types of coverage are available in Texas, but may get intimidated when looking at all of the coverages available in many ALTA states.  There are 107 ALTA approved Endorsement forms, many with variations for specific transactions.  Further, not all endorsements are available in every state issuing ALTA policies, so the task can be daunting.

The easiest way for a Texas attorney to understand many of the endorsements is to relate them to the coverages available in Texas, for example:

  • Texas Access Endorsement (Form T-23) insures unimpeded vehicular and pedestrian access to a parcel of real estate. The ALTA 17-06 Access and Entry Endorsement provides basically the same coverage, but ALTA sometimes takes it further, they also have an ALTA 17.1-06 which insures vehicular and pedestrian access through an indirect manner (i.e. an insured easement estate), and a 17.2-06 which insures what utilities are available to the property.  So, where Texas has 1 endorsement, there are 3 ALTA variations.
  • The Texas Form T-19, Restrictions, Encroachments and Minerals Endorsement provides the same coverage on a Loan Policy as the ALTA 9-06 endorsement. However, where Texas can modify or delete language from the T-19 that the underwriter is not willing to provide, ALTA has additional endorsements that provide lesser coverage or modified coverage;
  • Texas form T-19.1 Restrictions, Encroachments and Minerals provides similar coverage to the T-19 on an Owner Policy, but in ALTA, those coverages are all in separate endorsements, the Restrictions are covered in the ALTA 9.1 or 9.2, Encroachments in the ALTA 28 series of endorsements and Minerals in the ALTA 35 series of endorsements.
  • Texas T-38 Endorsement is used when Mortgages are being modified, ALTA has 3 versions of a modification endorsement, the ALTA 11-06 insures against loss by reason of invalidity or enforceability as a result of the modification and priority over intervening matters, while the ALTA 11.1-06 provides the same coverage as the ALTA 11 but also includes a statement as to specific subordinate items and the ALTA 11.2-06 provides the same coverage as the ALTA 11 but also increases the amount of the policy arising out of the modification.
  • Texas T-3 Assignment of Lien Endorsement insures the assignment document and down dates the policy to the recording of the assignment, the ALTA 10 insures the effectiveness of the assignment but does not down date the policy, while the ALTA 10.1 insures the effectiveness of the assignment and down dates the policy as to taxes, assessments, intervening defects, liens or encumbrances, recorded federal tax liens and bankruptcies.

However, ALTA has many more endorsements than Texas, and they get revised periodically, and several states modify the ALTA endorsements to comply with their state laws.  It’s impossible to keep up on all of the ins and outs of ALTA coverages and endorsements, so it’s important to have good resources to tap as you represent your clients.

One of the best ways you can do that is to have a good relationship with a national title insurance company which handles closings all over the country and are very familiar with the idiosyncrasies of the available coverages in other states.  Another great resource is a current ALTA Endorsement Manual.  First American Title Insurance Company and many other underwriters publish them annually.  You can access First American’s current manual through the Republic Title website. This guide will provide each endorsement form and give a brief explanation of its uses and the requirements for the issuance of each.

While the endorsement manual is very handy, attorneys need to understand that the forms can be modified in many states, either to comply with each state’s laws or to limit coverage as determined by their state title insurance associations or regulations.   There are also states that don’t use the ALTA forms (i.e. Texas, Pennsylvania, New York to name a few) but have produced their own forms.  In those instances, it’s great to have a National Underwriting Attorney or National Underwriter in your contacts that you can call to discuss the variations and availability in the state or region your client is working.

Expediting eClosing and RON in the Current Environment

There is no question that the current pandemic has significantly reshaped every aspect of our daily lives. When it comes to real estate closings, there is also no question that the need for contactless, virtual mortgage closings is real and urgent.  Before COVID-19, eClosings were growing at a modest pace as the industry collaborated on solutions to facilitate broader adoption, including acceptance of Remote Online Notarization (RON). Then everyone was told to stay home, and industry collaboration ignited with a new and passionate purpose.

As Harry Gardner, Executive Vice President of eStrategies for Docutech™, a First American® Company, pointed out in a recent HousingWire webinar, coronavirus has shifted the digital mortgage closing from a “nice-to-have” into a “must-have.” The number of settlement services providers offering digital mortgages has nearly doubled during the pandemic. The current environment has changed the RON eClosing debate from “Why should we do this?” to “How can we do this now?”

In response to the need to facilitate contactless real estate closings, governmental agencies, the GSEs, lenders, and settlement services are all moving with a new sense of urgency to enable borrowers to close on the home of their dreams easily via digital connections.

Fannie Mae and Freddie Mac announced expanded acceptance of RON-closed eNotes, now in 45 states plus the District of Columbia. A number of state governors signed executive orders permitting forms of RON, and pending RON legislation at the Federal level could make remote notarizations legal everywhere. More county clerks are getting on board with the idea that remotely notarized Deeds of Trust are legally valid and should be accepted for eRecording, a very significant step toward nationwide RON acceptance. This kind of progress on the state and local level is what we have been waiting for to truly achieve a paperless mortgage.

Perpetually focused on customer experience, Docutech offers RON capabilities within Solex eClosing.   Now, notaries can eSign and eNotarize documents remotely while the borrower benefits from the same streamlined experience application through closing. No need to meet in-person, secure and convenient.

One of the most important considerations for moving RON eClosing into mainstream operations is the concept of eEligibility. Mark Ladd, Vice President of Regulatory and Industry Affairs at Simplifile, explained the nuances of eEligibility, referencing the “three legs of the stool” as Recordability, Insurability, and Marketability. Understanding your recordability, knowing if the underwriter will insure the transaction, and, if you’re connected with Fannie Mae and Freddie Mac, knowing if they will accept that eNote in the secondary market. Understanding how “e” each transaction can be, as early in the process as possible, provides lenders with support for the three legs of the stool.

 Source:  https://blog.docutech.com/expediting-eclosing-and-ron-in-the-current-environment-what-you-need-to-know-now

Expediting eClosing and RON in the Current Environment – What You Need to Know Now