1. (a) Title Insurance Requirements. A "Mortgagee's Title Insurance Policy" is required for all Department Mortgage Loans Program Rule, exclusive of subordinate lien mortgage loans for down payment assistance and closing costs. 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 Mortgage 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 commitments only for grants when 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 Rule.
   3. (3) Liens, or any other restriction or encumbrances that impair good and marketable title must be cleared on or before closing of the Department's Mortgage Loan transaction.
3. (c) Builder's Risk. Builder's Risk (non-reporting form only) is required where construction funds in excess of $20,000.00 for a Single Family Housing Unit is being financed and/or advanced by the Department. 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 Mortgage 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 one hundred percent (100%) 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. 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. (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. (2) Evidence of insurance, as required in this Chapter, must be obtained prior to Mortgage Loan funding. A one year insurance policy must be paid and up to two (2) months of reserves may be collected at the closing of the Mortgage Loan. The Department must be named as loss payee on the policy.

Source Note:The provisions of this §20.12 adopted to be effective August 24, 2017, 42 TexReg 4124.