Legislative Changes to Texas Title Insurance: Title Insurance Company Affidavit As Release of Lien

The Texas Legislature passed a law allowing Texas title companies to execute an affidavit confirming that a mortgage on a one- to four- family residence has been paid in full and released. This affidavit, in effect, constitutes a release of lien. Albeit, this new power of a title company does not relieve a mortgagee (the releasing mortgage company) from any obligation it may have to execute and deliver its own release.

This new power given to title companies should allow them to speed up the lien-clearing process. In the past, as required by Procedural Rule P-11, a title company could not clear a lien unless it received the mortgage company’s release of lien or the appropriate Master Indemnity Agreement. The new law gives the Texas title company another option to use to help their customer when, say, the mortgage company no longer exists or was subsumed by a larger lender and no one knows who has authority to sign for the old mortgage company.

Do not expect all title agencies or direct operation title insurance companies to immediately begin to use this new tool. With so much power placed in the title insurance company’s hands to clear title liens, expect them to be careful using it—else open themselves up to an unnecessary liability they did not have before. Title companies probably will restrict the authority to sign such affidavits to a limited few of their officers or legal counsel—and not to any and all of their escrow officers. To read the new statute allowing this affidavit, see Tex. Prop. Code § 12.017 at http://bit.ly/viXUM.