Welcome to today’s webinar! Regulatory Update Heidi Junge August 15, 2019 1
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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
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 6
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 on 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. 7
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! 8
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. 9 Chart will be available on Texas Department of Insurance website after the effective date.
Stewart Rate Cards Contact Stewart Marketing or your Agency Service Manager: – Printed Rate Cards available NOW 10
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 11
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 12 • R-22 some Code 1350
PASSWORD BREAK 13
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 14
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. 15
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 16
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 17
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 18
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. 19
R-5 OLD versus New 20
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 of the Owner’s Policy; the Loan Policy(ies) covers the same land — or part of the b. land —covered by the Owner’s Policy and covers no other land; c. ownership 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 21
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 the Basic Rate for the Owner’s Policy; plus b. c. $100.00 for each Loan Policy 22
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. 23
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. 24
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 open for 90 days and the loan policies and OTP can be issued for the SI rate. 25
PASSWORD BREAK 26
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. 27
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