Texas House Bill HB90

Texas 2019 - 86th Regular

Caption

Relating to residential mortgage loans, including the financing of residential real estate purchases by means of a wrap mortgage loan; providing licensing requirements; authorizing an administrative penalty.

Impact

The bill is designed to enhance consumer protection in the residential mortgage sector by ensuring that borrowers have access to essential information before entering into wrap mortgage agreements. It establishes that licensed individuals or entities are required to originate wrap mortgage loans, thus promoting accountability within the lending industry. Additionally, the legislation introduces administrative penalties for violations, which serves as a deterrent against non-compliance. By setting forth clear definitions and requirements, the bill aims to regulate the complexity associated with wrap mortgage loans and minimize potential abuses in lending practices.

Summary

House Bill 90 proposes new regulations regarding residential mortgage loans, specifically addressing the use of wrap mortgage loans for financing residential real estate purchases. A wrap mortgage loan allows a borrower to finance a new mortgage that includes the debt of an existing mortgage, creating a new loan without paying off the original mortgage completely. The bill introduces definitions, licensing requirements, and exemptions pertaining to institutions involved in such transactions. It emphasizes the need for transparency by requiring lenders to provide detailed disclosure statements to borrowers about the terms and risks associated with wrap mortgages.

Contention

Notable points of contention may arise surrounding the implications of these licensing requirements on individual homeowners who might want to make infrequent loans secured by their properties. The bill exempts certain small-scale lenders from licensing if they do not exceed five wrap mortgage loans in a year, but the grouping of owners with common affiliations under a single exemption could provoke debate. Critics may assert that the regulations could deter small-scale lending initiatives while supporters argue that they are necessary to safeguard consumers against predatory lending practices.