Texas Title Insurance Problem - Any Title Insurance Underwriters?

Question

First just want to say thanks to everybody for such a great resource. I rarely have to post because so many topics are already discussed, but I think I finally came up with a Dooley.

Background is that I relocated from Dallas TX to Chicago, IL for my job and decided to rent my personal residence back in Dallas. I am now trying to do a cash out refinance of the house as its increased significantly value. My loan went the lender approval alright but now one day before closing the title insurance underwriter won't insure title for my property as an investment property. They are requiring it be insured as a homestead property. This presents the problem of increasing my title insurance by more than $300 and even more of a deal breaker us that you have to be present in Texas to sign docs.

The Dallas house is my only real estate, since I decided to rent in Chicago. So the underwriter is saying that due to thus being my only house it Kurt be considered a homestead. Can the underwriter require this? Seems that they are being overly conservative just feel more comfortable. It likely doesn't matter, but I always intended this to become a rental and if I can get this cash out, I intend to purchase a other rental.  So the property is definitely an investment property.

Any suggestions on how to resolve this would be appreciated or if anybody knows of a title company that would do remote close as an investment property I'd love to hear.

Thanks all ahead of time

Bryan Hancock · Answer

Who is the underwriter for the title policy?  Most policies are underwritten by Fidelity National in Texas from my understanding.  If you end up having to switch title companies you need to make sure that who you switch to doesn't use the same underwriter.

Since you have a refinance and things are not time sensitive I would honestly tell them to pound sand and that you're changing title companies.  The request for you to be in Texas to sign the documents is especially punitive.  Hopefully they have backed off of that ridiculous request.

It may be worth it just to pay the small amount extra for the riders they're requesting if they will agree to let you sign remotely.  Your time is worth something; hopefully a lot if you're posting on BP.

Luke Stone · Answer

I don't believe the title insurance is more expensive. It's the T42 rider and endorsement that is insuring the additional fees. Based on speaking with my loan officer they are OK. They have loan as an investment property. The loan officer asked me to call the title company bc he didn't fully understand the issue. When I spoke with the title company they said their underwriter was considering the property a homestead property due to me only owning one home.

I'm definitely going to float the non-homestead affidavit.

Guy Gimenez · Answer

@Greg  H. is absolutely correct...some facts are missing.

The premium won't be different on an investment property vs. a homestead of the same price in Texas since premiums are regulated. Certainly the house could be considered a homestead because homesteading is based on an owner's "intent" to claim it as such and that would impact the ability of most creditors to satisfy a judgment and many other involuntary liens. Will the title company not allow you to sign a Non-Homestead Affidavit...they're used all the time in Texas.

Based solely on the information provided, I would say the issue is more likely with the lender than the title company.

Luke Stone · Answer

Sounds like I should try switching title companies?

Luke Stone · Answer

The title insurance company is requiring a Home Equity T-42 rider and T42.1 endorsement. I guess the issue is the difficulty foreclosing on a homestead property is why they want the additional rider/endorsement.

Greg H. · Answer

Something is amiss here as title insurance premiums are regulated in Texas and the premium is based on the sales price only. Meaning a property is sold for $xxx the premium is $x. Could it be your refi is as an owner occupant loan and not an investor loan ?

Luke Stone · Answer

The only lien is the current mortgage, which is an FHA mortgage, but will be paid off. Speaking with title, their primary argument was that since I don't own a second property, I could potentially move back into this one. From what I can tell this is not a regulatory thing, just a conservative underwriter, but the title person I spoke with said she spoke with several title insurance underwriters and they all said it would have to be considered homestead.

Wayne Brooks · Answer

Newvr heard of this, it makes no sense, unless......is there possibly some personal lien/judgment/debt you have hanging out there?  A general judgment may not be able to attach to a homestead property in Texas, whereas it could to an investment property.  Only thing I can think of.