1. (a) Title Insurance requirements. A Mortgagee's Title Insurance Policy is required for all non-conforming Department mortgage loans as required by the Program Rules or NOFA, exclusive of loans financed with mortgage revenue bonds or through the Taxable Mortgage Program. The title insurance must be written by a title insurer licensed or authorized to do business in the jurisdiction where the Single Family Housing Unit is located. The policy must be in the amount of the loan. The Mortgagee named shall be: "Texas Department of Housing and Community Affairs."

2. (b) Title Reports.

   1. (1) Title reports may be provided in lieu of title insurance only for grants if title insurance is not available. Title reports shall be required when the grant funds exceed $20,000.
   2. (2) The preliminary title report may not be older than allowed by the Program Rules or NOFA.
   3. (3) Liens, or any other restriction or encumbrances that impair the good and marketable nature of the title must be cleared on or before closing of the Department's transaction.
3. (c) Builder's Risk (non-reporting form only) is required where construction of the Single Family Housing Unit is being financed by the Department in an amount not less than the cost of construction. At the end of the construction period, the binder must be endorsed to remove the "pending disbursements" clause.

4. (d) Hazard Insurance.

   1. (1) The hazard insurance provisions are not applicable to HOME Program activities unless required in the Program Rule.

   2. (2) If Department funds are provided in the form of a loan, then:

      1. (A) the Department requires property insurance for fire and extended coverage;
      2. (B) Homeowner's policies or package policies that provide property and liability coverage are acceptable. All risk policies are acceptable;
      3. (C) the amount of hazard insurance coverage at the time the mortgage loan is funded should be no less than 100 percent of the current insurable value of improvements; and
      4. (D) the Department should be named as a loss payee and mortgagee on the hazard insurance policy.

5. (e) Flood insurance must be maintained for all structures located in special flood hazard areas where the U.S. Federal Emergency Management Agency (FEMA) has mandated flood insurance coverage.

   1. (1) A Household may elect to obtain flood insurance even though flood insurance is not required. However, the Household may not be coerced into obtaining flood insurance unless it is required in accordance with this section.
   2. (2) Evidence of insurance, as required in this chapter, must be obtained prior to mortgage loan funding. Insurance premiums for at least twelve (12) months and up to two (2) months of reserves may be collected at loan closing. The Department must be named as loss payee on the policy.

Source Note:The provisions of this §20.12 adopted to be effective November 1, 2012, 37 TexReg 8470.