Form 8-9

Additional Clauses for Deeds of Trust

Mechanic’s Lien Clause

Clause 8-9-1

The Note secured by this deed of trust is given in part payment for improvements on the Property that Lender has agreed to make for Grantor under a mechanic’s lien contract of even date between Grantor as owner and Lender as contractor creating a lien against the Property to secure the Note. Grantor acknowledges that the lien created by the mechanic’s lien contract is valid, that it subsists against the Property, and that by this deed of trust it is renewed and extended in full force and effect until the Note is fully paid.

Homestead Disclaimer and Designation

Clause 8-9-2

Grantor represents to Lender that no part of the Property is exempt as homestead from forced sale under the Texas Constitution or other laws.

All real estate constituting Grantor’s homestead exempt from forced sale under the Texas Constitution or other laws consists of the following: [include legal description of homestead].

Clause 8-9-3

Grantor represents to Lender that no part of the Property is either the residential or business homestead of Grantor and that Grantor neither resides nor intends to reside in nor conducts nor intends to conduct business on the Property. Grantor renounces all present and future rights to a homestead exemption for the Property. Grantor’s homestead and residence is property in [county] County, Texas, known as [address], [city], Texas. Grantor acknowl­edges that Lender relies on the truth of representations in this paragraph in making the loan secured by this deed of trust.

Tax and Insurance Reserve or Escrow Account

Clause 8-9-4

Grantor agrees to make an initial deposit in a reasonable amount to be determined by Lender and then make monthly payments to a fund for taxes and insurance premiums on the Property. Monthly payments will be made on the payment dates specified in the Note, and each payment will be one-twelfth of the amount that Lender estimates will be required annually for payment of taxes and insurance premiums. The fund will accrue no interest, and Lender will hold it without bond in escrow and use it to pay the taxes and insurance premiums. If Grantor has complied with the requirements of this paragraph, Lender must pay taxes before [the end of the calendar year/delinquency]. Grantor agrees to make additional deposits on demand if the fund is ever insuf­ficient for its purpose. If an excess accumulates in the fund, Lender may either credit it to future monthly deposits until the excess is exhausted or refund it to Grantor. When Grantor makes the final payment on the Note, Lender will credit to that payment the whole amount then in the fund [include if applicable: or, at Lender’s option, refund it after the Note is paid]. If this deed of trust is foreclosed, any balance in the fund over that needed to pay taxes, including taxes accruing but not yet payable, and to pay insurance premiums will be paid under section C, “Trustee’s Rights and Duties.” [Include if applicable: If the Property is transferred, any balance then in the fund will still be subject to the provisions of this paragraph and will inure to the benefit of the transferee.] Deposits to the fund described in this paragraph are in addition to the [include if applicable: monthly] payments provided for in the Note.

Assignment of Insurance Policies and Unearned Premiums

Clause 8-9-5

If the Property is transferred by foreclosure, the transferee will acquire title to all insurance policies on the Property, including all paid but unearned premiums.

Evidence of Payment of Taxes

Clause 8-9-6

Grantor agrees to furnish on Lender’s request evidence satisfactory to Lender that all taxes and assessments on the Property have been paid when due.

Evidence of Payment of Taxes and Insurance

Clause 8-9-7

Grantor will furnish to Lender or other holder of the Note annually, before taxes become delinquent, copies of tax receipts showing that all taxes on the Property have been paid. Grantor will annually furnish to Lender or other holder of the Note evidence of current paid-up insurance naming Lender or other holder of the Note as an insured.

Inspection of Collateral

Clause 8-9-8

Grantor agrees to allow Lender or Lender’s agents to enter the Property at reasonable times and inspect it and any personal property in which Lender is granted a security interest by this deed of trust.

Consumer Credit Insurance Notice

Clause 8-9-9

Grantor may furnish any insurance required by this deed of trust either through existing policies owned or controlled by Grantor or through equivalent coverage from any insurance com­pany authorized to transact business in Texas.

Deed of Trust as a Security Agreement

Clause 8-9-10

In addition to creating a deed-of-trust lien on all the real and other prop­erty described above, Grantor also grants to Lender a security interest in all of the above-described personal property pursuant to and to the extent permitted by the Texas Uniform Commercial Code.

In the event of a foreclosure sale under this deed of trust, Grantor agrees that all the Property may be sold as a whole at Lender’s option and that the Property need not be present at the place of sale.

Wraparound Lien

Clause 8-9-11

The lien created by this deed of trust is subordinate to the lien securing the unpaid balance of a prior promissory note in the original principal amount of [amount] DOLLARS ($[amount]), which is described in and secured by a deed of trust recorded in [recording data] of the real property records of [county] County, Texas. Grantor has not assumed payment of the prior note, but Lender is obligated to pay it according to its terms. Lender agrees to timely pay all installment payments due on the prior note and to deliver to Grantor a good and sufficient release of the prior deed of trust at or before the time Grantor pays the Note secured by this deed of trust to Lender. The warranty deed with vendor’s lien referred to above provides that in the event of default in payment of the prior note, Grantor will have the right to cure any such default as long as Grantor is not in default in payment of the Note secured by this deed of trust or in default in performance of the covenants of this deed of trust. If Grantor cures a default in payment of the prior note, Grantor may receive credit on the Note secured by this deed of trust for all amounts so paid as of the date of the payment, in accordance with the terms of the Note.

If Lender fails to make when due any deposit to the tax and insurance reserve fund provided for under the deed of trust securing payment of the prior note, Grantor will have the right to make the deposit to the tax and insurance reserve fund as long as Grantor is not in default in payment of the Note secured by this deed of trust or in performance of the covenants of this deed of trust. If Grantor makes such a deposit, Grantor will receive credit on the tax and insur­ance reserve fund provided for in this deed of trust for all amounts so depos­ited, as of the date of the deposit.

For Deed of Trust for Construction Loan

Clause 8-9-12

, together with the following personal property:

All fixtures, supplies, building materials, and other goods of every nature now or hereafter located, used, or intended to be located or used on the Property;

All plans and specifications for development of or construction of improvements on the Property;

All contracts and subcontracts relating to the construction of improve­ments on the Property;

All accounts, contract rights, instruments, documents, general intangi­bles, and chattel paper arising from or by virtue of any transactions relating to the Property;

All permits, licenses, franchises, certificates, and other rights and privi­leges obtained in connection with the Property;

All proceeds payable or to be payable under each policy of insurance relating to the Property; and

All products and proceeds of the foregoing.

Notwithstanding any other provision in this deed of trust, the term “Property” does not include personal effects used primarily for personal, fam­ily, or household purposes.

Clause 8-9-13

E.         Construction Loan Mortgage

1.This deed of trust is a “construction mortgage” within the meaning of section 9.334 of the Texas Business and Commerce Code. The liens and security interests created and granted by this deed of trust secure an obligation incurred for the construction of improvements on land [include if applicable: , including the acquisition cost of the land].

2.Grantor agrees to comply with the covenants and conditions of the construction loan agreement, if any, executed in connection with the Note and this deed of trust. All advances made by Lender under the construction loan agreement will be indebtedness of Grantor secured by the liens created by this deed of trust, and such advances are conditioned as provided in the construc­tion loan agreement.

3.All amounts disbursed by Lender before completion of the improvements to protect the security of this deed of trust up to the principal amount of the Note will be treated as disbursements under the construction loan agreement. All such amounts will bear interest from the date of disburse­ment at the rate stated in the Note, unless collections from Grantor of interest at that rate would be contrary to applicable law, in which event such amounts will bear interest at the rate stated in the Note for matured, unpaid amounts and will be payable on notice from Lender to Grantor requesting payment.

4.From time to time as Lender deems necessary to protect Lender’s interests, Grantor will, on request of Lender, execute and deliver to Lender, in such form as Lender directs, assignments of any and all rights or claims that relate to the construction of improvements on the Property.

5.In case of breach by Grantor of the covenants and conditions of the construction loan agreement, Lender, at its option, with or without entry on the Property, may (a) invoke any of the rights or remedies provided in the con­struction loan agreement, (b) accelerate the amounts secured by this deed of trust and invoke the remedies provided in this deed of trust, or (c) do both.

6.If, after commencement of amortization of the Note, the Note and this deed of trust are sold by Lender, after the sale the construction loan agree­ment will cease to be a part of this deed of trust, and Grantor will not assert any right of setoff, counterclaim, or other claim or defense arising out of or in con­nection with the construction loan agreement against the obligations of the Note and this deed of trust.

Important notice: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. Know your rights and duties under the law.

Recordkeeping

Clause 8-9-14

Grantor agrees to (1) keep at Grantor’s address, or such other place as Lender may approve, accounts and records reflecting the operation of the Prop­erty and copies of all written contracts, leases, and other instruments that affect the Property; (2) prepare financial accounting records in compliance with [generally accepted/sound/cash basis federal income tax] accounting principles consistently applied; and (3), at Lender’s request from time to time, permit Lender to examine and make copies of such books, records, contracts, leases, and other instruments at any reasonable time.

Financial Statements

Clause 8-9-15

Grantor agrees to deliver to Lender, at Lender’s request from time to time, [audited/reviewed/compiled/internally prepared] financial statements of Grantor and each guarantor of the Note prepared in accordance with [generally accepted/sound/cash basis federal income tax] accounting principles consis­tently applied, in detail reasonably satisfactory to Lender and certified to be true and correct by [include if applicable: the chief financial officer of] Grantor [include if applicable: and accompanied by an opinion of an independent certi­fied public accountant].

Appraisals

Clause 8-9-16

16

If Lender orders an appraisal of the Property while a default exists or to comply with legal requirements affecting Lender, Grantor, at Lender’s request, agrees to reimburse Lender for the cost of any such appraisal. [Include if appli­cable: Lender agrees to deliver to Grantor a copy of any such appraisal within ten days of receipt of Grantor’s reimbursement]. If Grantor fails to reimburse Lender for any such appraisal within ten days of Lender’s request, that failure is a default under this deed of trust.

Further Assurances

Clause 8-9-17

Grantor agrees to execute, acknowledge, and deliver to Lender any doc­ument requested by Lender, at Lender’s request from time to time, to (1) cor­rect any defect, error, omission, or ambiguity in this deed of trust or in any other document executed in connection with the Note or this deed of trust; (2) comply with Grantor’s obligations under this deed of trust and other docu­ments; (3) subject to and perfect the liens and security interests of this deed of trust and other documents any property intended to be covered thereby; and (4) protect, perfect, or preserve the liens and the security interests of this deed of trust and other documents against third persons or make any recordings, file any notices, or obtain any consents requested by Lender in connection there­with. Grantor agrees to pay all costs of the foregoing.

Insurance

Clause 8-9-18

18

B.1.Grantor agrees to maintain, at Grantor’s expense, the following insurance plus such other insurance policies with other coverages or increased coverages as Lender may require from time to time (“Required Insurance Cov­erages”):

B.1.a.Liability Insurance Policies

i.commercial general liability insurance on Insurance Ser­vices Office (“ISO”) standard occurrence-based form, cov­ering Grantor and Grantor’s operations on the Property and containing contractual liability coverage for broad-form indemnities [./, and/;]

ii.business automobile liability insurance covering owned, nonowned, or rented automobiles [./; [and]]

iii.workers’ compensation insurance and employer’s liability insurance covering Grantor [./; [and]]

iv.for any third party-manager or lessee of the Property (a) commercial general liability insurance equivalent to the ISO standard occurrence-based form, covering the manager or lessee and its operations on the Property and containing contractual liability coverage for broad-form indemnities, (b) business automobile liability insurance covering owned, nonowned, or rented automobiles, and (c) workers’ com­pensation insurance and employer’s liability insurance cov­ering the manager or lessee [./; [and]]

v.for all contractors and subcontractors performing construc­tion at the Property, (a) commercial general liability insur­ance equivalent to the ISO standard occurrence-based form, covering the contractor or subcontractor and its operations on the Property and containing contractual liability cover­age for broad-form indemnities, (b) business automobile liability insurance covering owned, nonowned, or rented automobiles, and (c) workers’ compensation insurance and employer’s liability insurance covering the contractor or subcontractor [./; [and]]

vi.for all engineers, architects, and other design professionals performing work with respect to the Property, (a) profes­sional liability insurance, [include the following if the design professional will be performing part of its duties at the prop­erty: (b) commercial general liability insurance equivalent to the ISO standard occurrence-based form, covering the design professional and its operations on the Property and containing contractual liability coverage for broad-form indemnities,] [(b)/(c)] business automobile liability insur­ance covering owned, nonowned, or rented automobiles, and [(c)/(d)] workers’ compensation insurance and employer’s liability insurance covering the design profes­sional.

Each commercial general and business automobile liability insurance policy will name Lender as an additional insured on an additional insured endorsement acceptable to Lender.

B.1.b.Property Insurance Policies

i.commercial property insurance using ISO form CP 00 10, “Building and Personal Property Coverage Form,” and CP 10 30, “Causes of Loss—Special Form,” insuring against all direct physical loss or damage to the Property except for exclusions or limitations acceptable to Lender, including optional coverages for agreed value and replacement cost (without deduction for depreciation), and endorsements to cover equipment breakdown (formerly boiler and machin­ery), higher limits for increased costs to comply with an ordinance or law, higher limits for debris removal, business income and rental value (formerly business interruption), [and] terrorism [include the following if the property is in a “Special Flood Hazard Area” as defined in the National Flood Insurance Program and flood insurance in excess of the National Flood Insurance Program limits is desired: , and flood coverage] [./; [and]]

ii.flood insurance policy covering the Property issued pursu­ant to the National Flood Insurance Program [./; [and]]

iii.a builder’s risk property insurance policy written on a com­pleted value, nonreporting form and on an all-risks basis, with no exclusions unacceptable to Lender, with coverage extensions, if necessary, to eliminate coinsurance and to cover collapse, debris removal, soft costs such as loan inter­est, real estate taxes, and additional legal, architectural, and engineering costs, [include the following if the property is in a “Special Flood Hazard Area” as defined in the National Flood Insurance Program: floods,] loss of rents, testing of mechanical equipment, and increased costs due to ordi­nance or law [./; [and]]

iv.for third-party property managers and lessees, commercial property insurance using CP 10 30, “Causes of Loss—Spe­cial Form,” insuring against all direct physical loss or dam­age to the furniture fixtures, equipment, and other business personal property of the property manager or lessee. In addition, lessees’ commercial property insurance policies will cover any leasehold improvements or betterments con­structed by or for the lessee.

Any commercial general or builder’s risk policy carried by Grantor will contain standard mortgagee or lender loss payable clauses providing that (i) the insurer will pay the loss or damage directly to Lender, (ii) Lender will have the right to receive payment under the policy even if the insurance company has denied Grantor’s claim or Grantor has failed to comply with the terms of the policy, (iii) the insurer will give written notice to Lender of cancellation ten days before its cancellation for nonpayment or thirty days before cancellation for any other reason, and (iv) the insurer will give written notice to Lender if the policy has not been renewed ten days before its expiration.

B.2.General Insurance Policy Requirements

Any reference to an ISO form in this deed of trust is to the most recent edition of the form or equivalent.

The Required Insurance Coverages will (a) be issued by companies rea­sonably acceptable to Lender, (b) be in a form and with exclusions, endorse­ments, and amendments acceptable to Lender, and (c) have limits, deductibles, and self-insured retention acceptable to Lender.

Grantor will deliver evidence of the Required Insurance Coverages in a form acceptable to Lender at least ten days before the expiration of the Required Insurance Coverages; the original of each policy, coincident with the execution of this deed of trust; and the original of each renewal policy, not less than ten days before the expiration of the initial policy or each immediately preceding renewal policy. In case of Grantor’s failure to keep the Property insured or to provide evidence that the Property is insured, as required herein, Lender, after notice to Grantor, at its option may acquire the Required Insur­ance Coverages at Grantor’s sole expense.

Subordinate Liens

Clause 8-9-19

Grantor agrees not to grant any lien or security interest in the Property or to permit any junior encumbrance to be recorded or any claim to otherwise become an encumbrance against the Property. If an involuntary encumbrance is filed against the Property, Grantor agrees, within thirty days, to either remove the involuntary encumbrance or provide a bond acceptable to Lender against the involuntary encumbrance.

Business Use

Clause 8-9-20

Grantor warrants to Lender and agrees that the proceeds of the Note will be used primarily for business or commercial purposes and not primarily for personal, family, or household purposes.

Due on Transfer—Nonresidential Property

Clause 8-9-21

Lender may declare the debt secured by this deed of trust immediately payable and invoke any remedies provided in this deed of trust for default if Grantor transfers any of the Property to a person who is not a permitted trans­feree without Lender’s consent or, if Grantor is not a natural person, if any per­son owning a direct or indirect interest in Grantor transfers such interest to a person that is not a “permitted transferee” without Lender’s consent. “Permit­ted transferee” for a natural person means that person’s spouse or children, any trust for that person’s benefit or the benefit of the person’s spouse or children, or any corporation, partnership, or limited liability company in which the direct and beneficial owner of all the equity interest is a natural person or that person’s spouse or children or any trust for the benefit of them; and the heirs, beneficiaries, executors, administrators, or personal representatives of a natural person on the death of that person or on the incompetency or disability of that person for purposes of the protection and management of that person’s assets; and for a person that is not a natural person, any other person controlling, con­trolled by, or under common control with that person.

Clause 8-9-22

If all or any part of the Property is sold, transferred, or conveyed without the prior written consent of Lender or other holder of the Note, Lender or other holder of the Note may, at its sole option, declare the outstanding principal bal­ance of the Note plus accrued interest immediately due and payable.  Lender or other holder of the Note has no obligation to consent to any such sale or con­veyance of the Property, and Lender or other holder of the Note is entitled to condition any consent on a change in the interest rate that will thereafter apply to the Note and any other change in the terms of the Note or Deed of Trust that Lender or other holder of the Note in its sole discretion deems appropriate. A lease for a period longer than three years, a lease with an option to purchase, or a contract for deed will be deemed to be a sale, transfer, or conveyance of the Property for purposes of this provision. Any deed under threat or order of con­demnation, any conveyance solely between makers, and the passage of title by reason of death of a maker or by operation of law will not be construed as a sale or conveyance of the Property. The creation of a subordinate lien without the consent of Lender or other holder of the Note will be construed as a sale or conveyance of the Property, but any subsequent sale under a subordinate lien to which Lender or other holder of the Note has consented will not be con­strued as a sale or conveyance of the Property.

Due-on-Sale Clause (Residential)

Clause 8-9-23

If Grantor transfers any part of the Property without Lender’s prior writ­ten consent, Lender may declare the debt secured by this deed of trust immedi­ately payable and invoke any remedies provided in this deed of trust for default. If the Property is residential real property containing fewer than five dwelling units or a residential manufactured home occupied by Grantor, excep­tions to this provision are limited to (1) a subordinate lien or encumbrance that does not transfer rights of occupancy of the Property; (2) creation of a purchase-money security interest for household appliances; (3) transfer by devise, descent, or operation of law on the death of a co-Grantor; (4) grant of a leasehold interest of three years or less without an option to purchase;
(5) transfer to a spouse or children of Grantor or between co-Grantors;
(6) transfer to a relative of Grantor on Grantor’s death; and (7) transfer to an inter vivos trust in which Grantor is and remains a beneficiary and occupant of the Property.

Office of Consumer Credit Commissioner

Clause 8-9-24

Lender is subject to regulation by the Office of Consumer Credit Com­missioner of the state of Texas. The name, mailing address, and telephone numbers of the office are:

Office of Consumer Credit Commissioner
2601 North Lamar Boulevard
Austin, TX 78705-4207
512-936-7600
800-538-1579

No Recourse

Clause 8-9-25

Grantor will not have any recourse liability for repayment of the princi­pal and interest of the Note or the performance of any covenants and agree­ments of Grantor in this Deed of Trust. The sole remedy of Lender or other holder of the Note in the event of a default by Grantor under the Note or this Deed of Trust will be to foreclose the liens and security interests granted in this Deed of Trust, and Lender or other holder of the Note will not be entitled to any personal judgment against Grantor.

Partial Recourse

Clause 8-9-26

Grantor has no personal liability for the obligations under this deed of trust or under the Note, and no personal judgment may be taken and no claim for personal liability may be made against Grantor. Lender’s sole remedy for default under the Note or this deed of trust is the foreclosure of the liens and security interests created hereunder. Exceptions to the foregoing provisions are limited to, and Grantor is liable for, the following: taxes, assessments, and charges for labor, materials, or other amounts that if unpaid may create an encumbrance against the Property; unpaid premiums for insurance required hereunder; damage to the Property if any insurance required hereunder is not maintained; all rents, issues, profits, and income derived from the Property after a default occurs and not expended for operating expenses of the Property; tenant security deposits for leases of the Property; any condemnation or insur­ance proceeds not paid or applied as required hereunder; [include if applicable: damage to and depreciation of the Property beyond normal wear and tear caused by the negligence of Grantor or the failure of Grantor to keep the Prop­erty in good repair and condition; the return of or reimbursement for all per­sonal property taken from the Property by or on behalf of Grantor;] damages resulting from any fraud or misrepresentation by Grantor; damages resulting from any breach of any warranty of title; interest on the Note from the date of default through foreclosure, payment, or settlement of the debt; all interest on the Note during any bankruptcy proceeding of Grantor and all reasonable attor­ney’s fees and expenses incurred as a result of Grantor’s bankruptcy; and all attorney’s fees and expenses incurred by Lender to collect any of the foregoing amounts.

Full Recourse

Clause 8-9-27

Grantor will have full recourse liability for repayment of the principal and interest of the Note and the performance of all covenants and agreements of Grantor in this Deed of Trust.

Assumption without Consent

Clause 8-9-28

The Property may be sold, transferred, or conveyed without the consent of Lender or other holder of the Note, provided any subsequent buyer or trans­feree assumes in writing for the benefit of Lender or other holder of the Note the obligation to pay the Note and to perform the covenants and agreements in this Deed of Trust in accordance with the terms of those instruments. No such assumption will release Grantor from any liabilities or obligations arising under the Note or Deed of Trust. Neither the creation of a subordinate lien nor a sale thereunder will be construed as a sale or conveyance of the Property.

Assumption with Consent

Clause 8-9-29

The Property may be sold, transferred, or conveyed provided that
(1) any subsequent buyer assumes in writing for the benefit of Lender or other holder of the Note the obligation to pay the Note and to perform the covenants and agreements in this Deed of Trust in accordance with the terms of those instruments and (2) Grantor or the subsequent buyer obtains prior written con­sent to the sale from Lender or other holder of the Note. Consent will be based on the subsequent buyer’s credit history, with no change in interest rate or terms, and may not be unreasonably withheld, conditioned, or delayed. No such assumption will release Grantor from any liabilities or obligations arising under the Note or Deed of Trust. If all or any part of the Property is sold, con­veyed, leased for a period longer than three years, leased with an option to pur­chase, otherwise sold (including by contract for deed), or otherwise transferred or conveyed without prior written consent of Lender or other holder of the Note, Lender or other holder of the Note may, at its sole option, declare the outstanding principal balance of the Note plus accrued interest immediately due and payable. Any deed under threat or order of condemnation, any convey­ance solely between Grantors, and the passage of title by reason of death of a Grantor or by operation of law will not be construed as a sale or conveyance of the Property. [Select one of the following: Neither the creation of a subordinate lien nor a sale thereunder will be construed as a sale or conveyance of the Property./The creation of a subordinate lien without the consent of Lender will be construed as a sale or conveyance of the Property, but any subsequent sale under a subordinate lien to which Lender or other holder of the Note has con­sented will not be construed as a sale or conveyance of the Property.]

With Escrow

Clause 8-9-30

Grantor will deposit with Lender or other holder of the Note, in addition to the principal and interest installments, a pro rata part of the estimated annual ad valorem taxes on the Property and a pro rata part of the estimated annual insurance premiums for the improvements on the Property. These tax and insurance deposits are only estimates and may be insufficient to pay total taxes and insurance premiums. Grantor must pay any deficiency within thirty days after notice from Lender or other holder of the Note. Grantor’s failure to pay the deficiency will constitute a default under the Deed of Trust. If any superior lienholder on the Property is collecting escrow payments for taxes and insur­ance, this paragraph will be inoperative as long as payments are being made to the superior lienholder.

Cross-Default

Clause 8-9-31

Any act or occurrence that would constitute default under the terms of any lien superior to the lien securing the Note will constitute a default under this Deed of Trust securing the Note.