| (a) The Amy Young Barrier Removal Program is excluded
from this section, to the extent funded with the Texas HTF.
(b) Title Insurance Requirements. A "Mortgagee's Title
Insurance Policy" is required for all Department Mortgage Loans, exclusive
of subordinate lien Mortgage Loans for down payment assistance and
closing costs.
(1) The title insurance policy shall be issued by an
entity that is licensed and in good standing with the Texas Department
of Insurance.
(2) The policy must be in the amount of the Mortgage
Loan. The mortgagee named shall be: "Texas Department of Housing and
Community Affairs."
(3) The policy must include survey deletion coverage.
(c) Title Reports.
(1) Title reports are acceptable only for grants.
(2) Title reports must disclose the current ownership,
easements, restrictions, and liens relating to the property, and include
a search for judgements, mortgages or liens, affidavits, deed restrictions,
building setback and easements, and any other factors which may impair
the good and marketable title to the property.
(3) The preliminary title report may not be older than
six months from the date of submission of the Activity to the Department.
(d) Builder's Risk. Builder's Risk (non-reporting form
only) is required when the Department provides construction funds
for a Single Family Housing Unit. At the end of the construction period,
the binder must be endorsed to remove the "pending disbursements"
clause.
(e) Hazard Insurance. If Department funds are provided
in an amount that exceeds $20,000, then:
(1) The Department requires property insurance for
fire and extended coverage;
(2) Homeowner's policies or package policies that provide
property and liability coverage are acceptable. All risk policies
are acceptable;
(3) The amount of hazard insurance coverage should
be no less than 100% of the current insurable value of improvements
as of the date of Mortgage Loan closing or effective date of the grant
agreement; and
(4) The Department must be named as a loss payee and
mortgagee on the hazard insurance policy for any Activity receiving
a Mortgage Loan from the Department.
(f) Flood Insurance. Flood insurance must be maintained
for all structures located in special flood hazard areas as determined
by the U.S. Federal Emergency Management Agency (FEMA).
(1) A Household may elect to obtain flood insurance
even though flood insurance is not required. However, the Household
may not be coerced or required to obtain flood insurance unless it
is required in accordance with this section.
(2) Evidence of insurance, as required in this chapter,
must be obtained prior to Mortgage Loan funding for acquisition only
projects. For activities involving construction, evidence of hazard
insurance must be submitted prior to Mortgage Loan funding, and evidence
of flood insurance, if required, must be provided prior to payment
of retainage. A one year insurance policy must be paid. For Amortizing
Mortgage Loans, a minimum of two months of reserves must be collected
at the closing of the Mortgage Loan. The Department must be named
as the loss payee on the policy.
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