Ancillary Loan Documents
§ 10.1General Considerations for Transfer of Note and Lien
The transfer of note and lien, form 10-1 in this chapter, is used to transfer ownership of a note or other obligation and the lien securing it to another party. This type of transfer is a real property transaction not subject to the Uniform Commercial Code provisions governing secured transactions. The transfer instrument must be acknowledged and filed in the real property records of the county in which the land is located, or, like other documents concerning the conveyance of real property, it is void as to a creditor or subsequent purchaser for valuable consideration without notice. Tex. Prop. Code § 13.001(a).
The holder of the note must endorse it in favor of the transferee and deliver both the transfer instrument and the note to the transferee. Any special terms included in the transfer instrument, such as a negation of recourse or of representations or warranties, should also be noted in the endorsement on the note. An allonge may be used to reflect the endorsement. See form 10-25.
If the note and lien are being pledged as collateral, the transaction is subject to the Texas Uniform Commercial Code. The proper procedure for effecting a security interest is outlined in chapter 9 in this manual.
§ 10.1:1Cautions for Transfer of Lien
The borrower must receive actual notice of the transfer of the note and lien. If the borrower continues to make payments to the prior holder and has not received actual notice, the transferee has no recourse against the borrower. Accordingly, the transferee should either notify the borrower of the transfer or make certain that the prior holder informs the borrower of the transfer.
§ 10.1:2Instructions for Completing Transfer of Lien
Form 10-1 in this chapter is drafted with the assumption that the parties will not wish to show the actual consideration for the transfer. However, a description of the consideration could be added at any suitable place.
The note is frequently secured by two liens, such as a vendor’s lien and a deed-of-trust lien. All liens should be listed, even if the attorney for the note holder making the transfer has access only to the recording information for the deed of trust. If recording information for all documents is available, it should be included, but a simple notation of a lien other than the one described by recording information is adequate.
For information about the property description, see section 3.7 in this manual.
§ 10.1:3Additional Clauses: Negation of Recourse and Representations and Warranties
If the holder is being paid in full, the holder has the option to sign a release. The transferee, however, will most likely want a transfer instrument. In that case, the holder will not want to incur any liability beyond that which the holder would incur by signing a release. To do so, the holder will make the transfer without recourse. Merely making the transfer without recourse does not negate the transfer warranties of Texas Business and Commerce Code section 3.416. See Tex. Bus. & Com. Code § 3.416 cmt. 3. To negate the transfer warranties, the words without warranties or other specific reference must be included in the transfer instrument. See Tex. Bus. & Com. Code § 3.416 cmt. 5. The words without recourse against or without representation or warranty by should be added to the endorsement of the note and a statement added to the transfer of note and lien to accomplish this purpose. There are some representations that the holder can make that will not result in liability beyond that of signing a release. First, the holder is the correct person to make the transfer, that is, the holder is the person entitled to enforce the note. Second, the payoff amount, the outstanding principal and interest, is correctly stated. Third, if true, the note is not overdue. This last representation helps the transferee obtain holder-in-due-course status. See Tex. Bus. & Com. Code § 3.302(a)(2)(C).
The note transferred should be endorsed and dated, and if the transfer is without recourse against or representation or warranty by the holder, except as stated, that fact should be noted:
[Date of transfer]
Pay to the order of [name] [without recourse against [and/or] without representation or warranty by, except as stated in a separate transfer of note and lien, [name of holder]].
[Signature of holder]
Alternatively, the holder of the note may endorse the note in favor of the transferee by use of an allonge, form 10-25 in this chapter. As described in section 10.1 above, any special terms included in the transfer instrument, such as a negation of recourse or of representations or warranties, should also be noted in the allonge used to endorse the note. The holder of the note should affix the allonge to the note and deliver the transfer instrument together with the note and allonge to the transferee.
§ 10.1:5Confidentiality Notice
Instruments transferring an interest in real property to or from an individual must contain the confidentiality notice required by Tex. Prop. Code § 11.008. An instrument is defined as “a deed, deed of trust, or any other record recorded by a county clerk related to real property, including a mineral lease, a mechanic’s lien, and the release of a mechanic’s lien.” Tex. Prop. Code § 11.008(a). See section 3.16 in this manual.
§ 10.2General Considerations for Release of Lien and Partial Release of Lien
Although payment of a debt extinguishes the liens that secure it even without a formal release, the lienholder has a duty to provide a written release. After paying the debt, the borrower may bring suit against a lienholder who refuses to provide a release and may recover actual damages incurred because of the refusal. Bayless v. Strahan, 182 S.W.2d 262 (Tex. App.—Amarillo 1944, writ ref’d w.o.m.).
The release should be filed in the real property records of the county in which the lien is recorded.
§ 10.2:1Cautions for Partial Release
Only the portion of the property to be released from the lien should be described in the partial release, form 10-3 in this chapter.
If the lien instrument does not authorize partial releases, the lienholder is not required to grant a partial release. If the lienholder nevertheless agrees to a partial release, obtaining the written consent of any junior lienholder may be considered, although obtaining a junior lienholder’s consent is not general practice.
If the note secured by the lien has makers or guarantors who are not grantors in the lien instrument, their written consent to the partial release is probably necessary unless the note or guaranty provides for their continuing liability after a partial release.
If the lien is insured by a mortgagee’s title policy, an endorsement of the policy should be obtained. Title companies may require a premium for endorsement. Procedural Rule P-9.b(3), Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas.
§ 10.2:2Instructions for Completing Release
Notes are frequently secured by more than one lien, such as a vendor’s lien and deed-of-trust lien, and all of them should be included in the release. If recording information for all documents is available, it should be included under the heading “Note and Lien Are Described in the Following Documents.” Even if some recording information is not available, all lien documents should be described as fully as possible.
For information about the property description, see section 3.7 in this manual.
§ 10.2:3Instructions for Completing Partial Release
A partial release should include a description of all liens securing the note. If recording information for all documents is available, it should be included under the heading “Note and Lien Are Described in the Following Documents.” Even if some recording information is not available, all lien documents should be described as fully as possible.
§ 10.2:4Additional Clauses for Use with Partial Release
A partial release clause in a lien instrument or a prepayment clause in a note should state how any allowable prepayment will be applied. If those clauses do not adequately explain the application of a prepayment, a clause serving that purpose should be added to form 10-3 in this chapter after the sentence releasing the lien. The prepayment clauses suggested in form 6-3 in this manual may serve as appropriate models for drafting this type of clause.
§ 10.3General Considerations for Modification and Extension Agreement
Form 10-4 in this chapter is appropriate for extending the time or manner of payment of a note secured by a deed-of-trust lien on property or for modifying the terms of the note. If instead the parties want to reinstate a note and pay it as originally written, they should use a different form. See the suggested reinstatement agreement at form 14-6 in this manual.
The legality of extensions and their effect on the statute of limitations are governed by Tex. Civ. Prac. & Rem. Code §§ 16.035–.037. The form expressly requires the obligor to assume payment of the note, even if the obligor was not the original borrower. This requirement accords with section 16.036, which provides that the extension of a note likewise extends the statute of limitations for foreclosure of a lien only if the extension is executed by the “party or parties primarily liable for a debt.” Therefore a party who buys the property subject to the lien without assuming the note should not execute this extension form, for the party would become liable for payment of the note.
Many attorneys advise their clients to obtain written consent from all junior or inferior lien claimants and holders before agreeing to an extension. Numerous cases, however, have held that junior lienholders who acquire their liens while the first lien and first-lien note are intact are bound by the terms of a valid extension agreement. See Yates v. Darby, 131 S.W.2d 95, 101 (Tex. 1939).
§ 10.3:1Cautions for Modification and Extension Agreement
If a loan policy covers the interest of the note holder, it should be examined carefully. Policies written before March 1, 1983, limit the policy protection to the final maturity date of the note as originally written plus the applicable limitations period. There is also no loan policy endorsement available for increased value.
§ 10.3:2Instructions for Completing Modification and Extension Agreement
The property description should match that on the note, if any, and the deed of trust.
The period of extension must be definite, or the extension will not be enforceable.
After being acknowledged, the form must be recorded in the county in which the land is located to provide notice to third parties.
If a party to a modification or extension agreement is an individual, the practitioner must include the confidentiality notice required by Tex. Prop. Code § 11.008. See section 3.16 in this manual.
Texas has adopted an assignment of rents act. See Tex. Prop. Code ch. 64. Under the act, an enforceable security instrument (meaning a deed of trust, mortgage, or other contract lien on an interest in real property) creates an assignment of rents arising from the real property, unless the security instrument provides otherwise or an assignment of rents is governed by article XVI, § 50(a)(6), (a)(7), or (a)(8), of the Texas Constitution (Texas home equity, reverse mortgage, or conversion of manufactured home liens). The assignment of rents is a security interest in all accrued and unaccrued rents, regardless of the form of the document creating the assignment of rents. Tex. Prop. Code § 64.051. The security interest is perfected upon recording the security instrument in the real property records of the county where any part of the real property is located. Tex. Prop. Code § 64.052.
The assignee may enforce an assignment of rents by giving notice to the assignor demanding that all rents accrued but not paid and unaccrued rents be sent to the assignee when collected by the assignor. An assignee may not enforce an assignment of rents by notice to the assignor if the property is a one-to-four-family residence that is the assignor’s homestead on the date the security instrument was signed and the date of prospective enforcement. Tex. Prop. Code § 64.054. The assignee may also enforce an assignment of rents by giving notice, a form of which is included in the statute, to the tenant that all rents accrued but not paid and unaccrued rents be paid to the assignee when rent payments are due. After a tenant receives notice from an assignee to pay rents to the assignee, the tenant’s obligation to pay rents is discharged by paying rents to the assignee. If a tenant is occupying the premises as his primary residence, the tenant’s obligation to pay rents is also discharged by continuing to pay rents to the assignor/landlord. For other tenants, the obligation to pay rents is not discharged by continuing to pay rents to the assignor/landlord after receipt of the notice from the assignee. Tex. Prop. Code §§ 64.055, 64.056.
Unless otherwise agreed, an assignee that collects rents must apply the collected rents in a stipulated order. Tex. Prop. Code § 64.058. The order of application for collected rents is different than the order of application of foreclosure proceeds under the Texas Property Code. Unless otherwise agreed, a subordinate creditor that enforces its assignment of rents and collects rents before receipt of a turnover notice from an assignee with priority is not obligated to turn over to the assignee with priority rents collected before receipt of the turnover demand. Tex. Prop. Code § 64.060. If an assignee’s security interest in rents is perfected, the assignee’s security interest attaches to identifiable proceeds and is perfected as to identifiable cash proceeds. Tex. Prop. Code § 64.061.
Form 10-6 in this chapter provides examples of resolutions authorizing an entity to guarantee a loan or borrow funds and mortgage real property as security for the loan. These resolutions may be incorporated into one of the certificates of resolutions included in chapter 26, forms 26-9 through 26-14, in this manual. The requirements for meeting and voting for for-profit corporations are found in chapter 21 of the Texas Business Organizations Code. See Tex. Bus. Orgs. Code §§ 21.411–.416. The requirements for meeting and voting for limited liability companies are found in chapter 101 of the Code. See Tex. Bus. Orgs. Code §§ 101.353–.358.
§ 10.6Collection and Payment Agreement
Form 10-7 in this chapter may be used in wraparound loan transactions. See section 8.3 in this manual for commentary on wraparound loan transactions.
Forms 10-8 and 10-9 in this chapter designate property as a rural homestead or urban homestead. Constitutional and statutory prohibitions against mortgaging or encumbering the homestead (except for purchase money, taxes, owelty of partition, refinance, improvements, home equity loans, reverse mortgages, or conversion of a manufactured home) and against one spouse’s selling or abandoning the homestead without the consent of the other may limit the ability to borrow against or transfer the property. The voluntary designation of homestead in the real property records may free property that is not claimed as homestead from these limitations. A purchaser or lender for value without actual knowledge is entitled to conclusively rely on an affidavit that disclaims property as homestead or designates other property as the homestead of the affiant. Tex. Const. art. XVI, § 50(d). Both spouses should join in the designation of a homestead. Form 10-8 may be used by a lender making a loan to be secured by the borrower’s nonhomestead property. See clauses 8-9-2 and 8-9-3 in this manual for homestead disclaimer and designation clauses suggested for use in a deed of trust. Form 10-9 is an example of an affidavit appropriate for loans to be secured by the borrower’s homestead.
§ 10.8Lender’s Estoppel Certificate
A lender considering a loan to be secured by a subordinate lien on real property already encumbered by a prior lien often will require, as a condition to making the loan, that the borrower obtain an estoppel certificate from the prior lienholder. Form 10-10 in this chapter requires the prior lienholder to confirm important information regarding the prior lienholder’s note and deed of trust. Some of the provisions of this form may have to be modified or deleted to obtain the prior lienholder’s agreement to execute this form.
§ 10.9Lienholder’s Subordination to Oil, Gas, and Mineral Lease
Form 10-11 in this chapter is used if an oil, gas, and mineral lease is given on real property already encumbered by a deed-of-trust lien or other lien. This form provides that the lease will not be affected by foreclosure of the lien if the lease is maintained according to its terms.
§ 10.10Notice from Lender’s Attorney to Borrower
Form 10-12 in this chapter is an example of a written disclosure confirming that the lender’s attorney does not represent the borrower. As with all forms, this letter should be modified to reflect the specific details of the loan transaction. See section 1.6:4 in this manual for commentary regarding an attorney’s communica-tions with unrepresented parties.
Form 10-13 in this chapter is used if a new deed-of-trust lien is made superior to an existing deed-of-trust lien. The new lender typically requires the subordination of existing liens to the newly created lien.
§ 10.12Notice of Final Agreement
Loans made by banks, savings and loan associations, and credit unions in excess of $50,000 must be in writing and be signed by the party to be bound or by that party’s authorized representative. Tex. Bus. & Com. Code § 26.02(b). Written loan documents evidencing loans in excess of $50,000 may not be varied by oral agreements if the financial institution gives the obligor, on or before execution of the loan documents, a written notice stating substantially the following:
This written loan agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.
The notice may be in a separate document signed by the obligor or incorporated into one or more of the loan documents and must be conspicuous. Form 10-14 in this chapter may be used by financial institutions to satisfy the requirements of section 26.02 of the Texas Business and Commerce Code.
§ 10.13General Considerations for Guaranty
Form 10-15 in this chapter is an unconditional guaranty of payment. It allows the lender to pursue the guarantor without first pursuing the principal obligor on the default of the principal obligor. This form should be distinguished from a guaranty of collection, which requires the lender to use reasonable diligence to compel payment by the principal obligor before pursuing the guarantor. This form may be modified to become a limited guaranty by describing the guaranteed indebtedness as limited to a specific dollar amount or a specific percentage of the borrower’s debt to the lender. Although this form contains several waivers by the guarantor of various defenses to the enforcement of a guaranty, many attorneys recommend that the guarantor’s written consent be obtained at the time of any modification of the guaranteed indebtedness. If the guarantor is a corporation, the lender should require a specific resolution of the corporation’s board of directors authorizing the execution of the guaranty and declaring that the guaranty may reasonably be expected to benefit the corporation. See Tex. Bus. Orgs. Code § 2.104(c).
In Moayedi v. Interstate 35/Chisam Road, L.P., 438 S.W.3d 1, 6 (Tex. 2014), the Texas Supreme Court held that a guarantor may waive his right to offset under section 51.003 of the Texas Property Code.
“Home loan” is defined as a loan that is made to one or more individuals for personal, family, or household purposes and secured in whole or part by either a manufactured home (as defined by Texas Finance Code section 347.002), used or to be used as a borrower’s principal residence, or real property improved by a dwelling designed for occupancy by four or fewer families and used or to be used as a borrower’s principal residence. Tex. Fin. Code § 343.001(2). A lender, mortgage banker, or licensed mortgage broker must provide each applicant for a home loan with a notice of penalties for making false or misleading written statements. Tex. Fin. Code § 343.105. Form 10-19 in this chapter may be used to provide the statutorily required notice. As used in chapter 343 of the Finance Code, a home loan excludes a reverse mortgage or an “open-end account” as defined by Finance Code section 301.002. Tex. Fin. Code § 343.002(b). Two types of home loans are addressed in the statute: low-rate home loans and high-cost home loans.
A low-rate home loan is a home loan that at its inception carries an interest rate two percentage points or more below the yield on treasury securities having comparable periods of maturity to the loan maturity, except that if the loan’s interest rate is a discounted introductory rate or a rate that automatically steps up over time, the fully indexed rate or the fully stepped-up rate, as appropriate, is used instead of the rate at the loan’s inception to determine if the loan is a low-rate home loan. Tex. Fin. Code § 343.101(a). A lender may not replace or consolidate a low-rate home loan directly made by a governmental or nonprofit lender before the seventh anniversary of the date of the loan unless the new or consolidated loan has a lower interest rate and requires payment of a lesser amount of points and fees than the original loan or is a restructure to avoid foreclosure. Tex. Fin. Code § 343.101(b). A restructure is defined as a change in the payment schedule or other terms of a home loan as a result of the borrower’s default. Tex. Fin. Code § 343.001(3).
A high-cost home loan is a home loan that (1) is made to one or more individuals for personal, family, or household purposes; (2) is secured in whole or part by (a) a manufactured home (as defined by Tex. Fin. Code § 347.002) used or to be used as the borrower’s principal residence or (b) real property improved by a dwelling designed for occupancy by four or fewer families and used or to be used as the borrower’s principal residence; (3) has a principal amount equal to or less than one-half of the maximum conventional loan amount for first mortgages as established and adjusted by the Federal National Mortgage Association; (4) is not a reverse mortgage or an “open-end account” as defined by Tex. Fin. Code § 301.002; and (5) is a credit transaction described by 12 C.F.R. § 1026.32, except that the term includes a residential mortgage transaction, as defined by 12 C.F.R. § 1026.2, if the total loan amount is $20,000 or more and (a) the annual percentage rate exceeds the rate indicated in 12 C.F.R. § 1026.32(a)(1)(i) or (b) the total points and fees payable by the consumer at or before the loan closing will exceed the amount indicated in 12 C.F.R. § 1026.32(a)(1)(ii). Tex. Fin. Code § 343.201(1). Points and fees have the meaning assigned by 12 C.F.R. § 1026.32(b). Tex. Fin. Code § 343.201(2).
A high-cost home loan may not contain a provision for a scheduled payment that is more than twice as large as the average of earlier scheduled monthly payments unless the balloon payment becomes due not less than sixty months after the date of the loan. This prohibition does not apply if the payment schedule is adjusted to account for the seasonal or otherwise irregular income of the borrower or if the loan is a bridge loan in connection with the acquisition or construction of a dwelling intended to become the borrower’s principal dwelling. Tex. Fin. Code § 343.202.
A high-cost home loan may not provide for a payment schedule with regular periodic payments that cause the principal balance to increase except for any negative amortization as a consequence of a temporary forbearance, bridge loan, or restructure sought by the borrower. Tex. Fin. Code § 343.203. A high-cost home loan also may not contain a provision for a prepayment penalty. Tex. Fin. Code § 343.205.
A bridge loan under Finance Code chapter 343 refers to temporary or short-term financing that requires payment of only interest until the entire unpaid balance is due. Tex. Fin. Code § 343.001(1).
A high-cost home loan lender may also not engage in a pattern or practice of extending consumer credit based on the consumer’s collateral without regard to an obligor’s repayment ability, including an obligor’s current and expected income, current obligations, employment status, and other financial resources, other than an obligor’s equity in the dwelling that secures repayment of the loan. Tex. Fin. Code § 343.204(b). The term obligor as used in section 343.204(b) refers to all persons obligated to pay a high-cost home loan, including borrowers, cosigners, and guarantors. Tex. Fin. Code § 343.204(a).
§ 10.14:3Credit Life, Disability, or Unemployment Insurance
Lenders must provide a statutory insurance disclosure to each home loan applicant, which must be made by hand delivery or mail not later than the third business day after the date the lender receives a home loan application. Tex. Fin. Code § 343.104. Form 10-16 in this chapter may be used to provide the statutorily required insurance disclosure.
A person other than a beneficiary is not required to inquire into the extent of the trustee’s powers or the propriety of the exercise of those powers if the person deals with the trustee in good faith and obtains a certification of trust. See Tex. Prop. Code § 114.081(b). Instead of providing a copy of a trust instrument to a third party, the trustee may provide a certification of trust that contains, among other things, representations about the power of the trustee to take actions on behalf of the trust. Any party without actual knowledge to the contrary may rely on the representations in the certification of trust in dealing with the trustee. A person who in good faith enters into a transaction relying on a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification of trust are correct. A mortgage loan made to a revocable living trust that holds title to a person’s residence may be subject to Fannie Mae requirements for approval. Any certification of trust provided to Fannie Mae for review must (1) identify the settlor, trustee, and primary beneficiaries of the trust; (2) confirm whether the trust is revocable during the settlor’s lifetime; and (3) verify whether the trustee’s powers include the ability to mortgage trust property. If a certification of trust does not contain that information, a mortgage lender will request a copy of the trust instrument to review for compliance with Fannie Mae requirements. Form 10-29 of this manual includes a checklist for reviewing revocable trusts.
Form 10-20 in this chapter provides an example of a certification of trust. The statute allows a recipient of a certification of trust to require the trustee to furnish copies of the excerpts from the original trust instrument and later amendments to the trust instrument that designate the trustee and confer on the trustee the power to act in the pending transaction. See Tex. Prop. Code § 114.086(e). The statute does not provide protection to parties with knowledge contrary to the contents of the certification.
A person making a demand for the trust instrument in addition to a certification of trust or excerpts as provided by the statute is liable for damages if the court determines that the person did not act in good faith in making the demand. Tex. Prop. Code § 114.086(i).
§ 10.16Subordination, Nondisturbance, and Attornment Agreement
A subordination, nondisturbance, and attornment agreement (SNDA) deals with the issues of existing commercial tenants’ and lienholders’ rights as they relate to present and future financing. This agreement is an acknowledgment by a landlord, tenant, and lienholder of their respective rights and obligations, and it provides assurance to the parties that present rights and obligations will be preserved should the landlord default on its loan and the lender foreclose. The tenant agrees to continue to be a tenant of the landlord or purchaser on foreclosure, and the lienholder agrees not to foreclose the rights of the tenant on foreclosure of the lien. Form 25-16 in this manual provides an example of a simple SNDA. Language also may be incorporated in the lease agreement if the situation warrants its incorporation. When drafting an SNDA, the attorney may also need to address various other issues applicable to the different types of commercial properties.
Form 10-22 in this chapter is an example of an assumption agreement used to document a third party’s assumption of an obligation to pay an indebtedness secured by a vendor’s lien or deed-of-trust lien on real property. Alternative paragraphs are included to distinguish between an assumption of debt where the original borrower is released or not released from liability to pay the assumed indebtedness. If the original borrower is not released from liability to pay the assumed indebtedness, a practitioner should review sections 8.6 and 8.7 in this manual concerning the use and effect of a deed of trust to secure assumption.
§ 10.18Lender’s Rescission and Waiver of Acceleration of Indebtedness Secured by Lien on Real Property
A lender may use forms 10-23 and 10-24 in this chapter to rescind and waive the acceleration of an indebtedness secured by a lien on real property before the limitations period expires, fol-lowing the requirements of section 16.038 of the Texas Civil Practice and Remedies Code, and to document the lender’s compliance with the written notice requirement to the borrower.
§ 10.19Assignment of Architect’s Contract and Consent; Assignment of Construction Contract and Consent
Commercial construction lenders typically require an assignment of the borrower’s rights in contracts for the completion of the project, such as contracts with architects, engineers, and contractors. These assignments and the related consents are intended to give lenders the ability to complete the project upon a borrower’s default by using the services of these professionals. Some lenders include an assignment of these contracts in the deed of trust, while others use a stand-alone collateral assignment. Form 10-26 in this chapter is a short-form collateral assignment of an architect’s contract, and form 10-27 is a short-form collateral assignment of a construction contract. Each could be modified for use with other building professionals. Such assignments are technically security agreements under the Uniform Commercial Code that would be perfected in the same manner as any other security interest in a general intangible. See chapter 9 in this manual.
In the “Basic Information” section of form 10-26, the “Architect’s Agreement” would identify the contract between the architect and the borrower (such as by date, project number, or other details assigned by the architect and the borrower). “Plans” would identify the plans drawn by the architect, such as by date, number of pages, or other identifying information. “Project” would identify the construction project as the architect and the borrower have designated it, such as “Mixed-Use Development on Washington Avenue, Houston” or “West End Shopping Center, Dallas, Texas.” The form assumes that the borrower and lender will execute a construction loan agreement. Form 10-18 includes representative terms that may be included in a construction loan agreement. The alternative sections E.1. and E.2. in form 10-26 address the obligation of the lender to reimburse the architect for certain amounts due to the architect and are typically a subject of negotiation between the lender and the architect. Similarly, in the “Basic Information” section of form 10-27, the “Construction Contract” would identify the construction contract between the contractor and the borrower (such as by date, project number, or other details assigned by the contractor and the borrower). As in the case of alternative sections E.1. and E.2. in form 10-26, the obligation of the lender to reimburse the contractor for certain amounts due the contractor is typically a subject of negotiation between the lender and the contractor. Sections E.1. and E.2. in form 10-27 are examples of the types of clauses that the lender and contractor might use.
For other forms in this manual related to loan transactions, see the following:
•mechanic’s lien contract and related forms—chapter 20;
•reinstatement agreement—form 14-6; and
•closing instructions letters—forms 26-15 through 26-18.
Barton, J. Cary. “Negotiating Guaranty Agreements from the Guarantor’s Perspective.” In Advanced Real Estate Drafting Course, 2016. Austin: State Bar of Texas, 2016.
Conoly, David Z. “Collateral Transfer of a Promissory Note.” In Advanced Real Estate Drafting Course, 2020. Austin: State Bar of Texas, 2020.
———. “Foreclosure on a Collateral Transfer of Note & Lien.” In Advanced Real Estate Law Course, 2020. Austin: State Bar of Texas, 2020.
Crow, Richard A. “Collateral Transfer of a Promissory Note.” In Advanced Real Estate Drafting Course, 2021. Austin: State Bar of Texas, 2021.
Erwin, K. Gregory. “Texas Annotated Guaranty.” In Advanced Real Estate Strategies Course, 2015. Austin: State Bar of Texas, 2015.