81R14099 T
By: Truitt H.B. No. 2774
A BILL TO BE ENTITLED
AN ACT
relating to the licensing and regulation of certain persons
involved in mortgage lending; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 156.101, Finance Code is amended by
adding Subsection (d) to read as follows:
(d) The commissioner shall participate in the Nationwide
Mortgage Licensing System and Registration as set forth in the
Texas Secure and Fair Enforcement for Mortgage Licensing Act,
Chapter 180, Finance Code.
SECTION 2. Section 156.102, Finance Code, is amended by
adding Subsection (a-1) to read as follows:
(a-1) The finance commission, for the purpose of enabling
Texas to participate in the Nationwide Mortgage Licensing System
and Registration and comply with the Secure and Fair Enforcement
for Mortgage Licensing Act of 2008, by rule, may waive or modify, in
whole or in part, any requirement of this chapter and establish
requirements under this chapter that are reasonably necessary to
accomplish that purpose.
SECTION 3. The heading to Section 156.104, Finance Code,
and Sections 156.104(a) and (b), Finance Code, are amended to read
as follows:
Sec. 156.104. MORTGAGE INDUSTRY [BROKER] ADVISORY
COMMITTEE.
(a) The mortgage industry [broker] advisory committee is
created to advise and assist the commissioner.
(b) The advisory committee is composed of six members to be
appointed as follows:
(1) the commissioner shall appoint the [four] members,
each of whom must be:
(A) under the regulatory authority of the
department [must hold a mortgage broker license];
(B) [is] actively engaged in the business of
originating, brokering, or funding residential mortgage loans at
the time of appointment; and
(C) [has been] primarily engaged in the business
of originating, brokering, or funding residential mortgage loans
for at least two years before the member's appointment.
(2) [the Texas Real Estate Commission shall appoint
two members, each of whom must hold a real estate broker or
salesperson license] The committee shall include two mortgage
brokers, two mortgage bankers, and two active Texas real estate
licensees who are also licensed as a mortgage broker or registered
as a mortgage banker.
SECTION 4. Sections 156.104(h)(1)(D) and 156.104(h)(1)(E),
Finance Code, are repealed.
SECTION 5. Section 156.203, Finance Code, is amended by
adding subsection (e) to read as follows:
(e) In addition to the disciplinary action by the
commissioner authorized under Section 156.303(a)(7), the
commissioner may collect a maximum $50 fee for any returned check or
credit card charge back.
SECTION 6. Section 156.204(a)(4)(B), Finance Code, is
amended to read as follows:
(B) the person is licensed in this state as:
(i) an active real estate broker under
Chapter 1101, Occupations Code;
(ii) an active attorney; or
(iii) an active general lines insurance
agent, a limited lines insurance agent, or holds an equivalent
insurance license under the Texas Insurance Code [a local recording
agent or insurance solicitor or agent for a legal reserve life
insurance company under Chapter 21, Insurance Code, or holds an
equivalent license under Chapter 21, Insurance Code]; or
SECTION 7. Section 156.204(c)(4), Finance Code, is amended
to read as follows:
(4) provide the commissioner with satisfactory
evidence that the applicant satisfies one of the following:
(A) the person [meets one of the requirements
described by Subsection (a)(4) and] has successfully completed at
least 60 [classroom] hours of education courses approved by the
commissioner under this section; or
(B) the person [has 18 months of experience as a
loan officer as evidenced by documentary proof of full time
employment as a loan officer with a person exempt under Section
156.202 and] has successfully completed 30 [classroom] hours of
education courses approved by the commissioner under this section
if the applicant:
(i) has 18 months or more of experience as a
mortgage loan officer as evidenced by documentary proof of full
time employment as a mortgage loan officer with a person exempt
under Section 156.202; or
(ii) is a person who meets the
qualifications under Section 156.204(4)(B)
[(C) for applications received prior to January 1,
2000, the mortgage broker that will sponsor the applicant provides
a certification under oath that the applicant has been provided
necessary and appropriate education and training regarding all
applicable state and federal law and regulations relating to
mortgage loans];
SECTION 8. Section 156.205, Finance Code, is amended to
read as follows:
Section 156.205. FINANCIAL REQUIREMENTS [FOR A MORTGAGE
BROKER]. Financial requirements for holding a mortgage broker or
loan officer license shall be met through participation in the
recovery fund.
SECTION 9. Subsections 156.205(a) through 156.205(c),
Finance Code, are repealed.
SECTION 10. Sections 156.208(a) and (b), Finance Code, are
amended to read as follows:
(a) A mortgage broker license issued under this chapter is
valid for a maximum of two years and may be renewed on or before its
expiration date if the mortgage broker:
(1) pays to the commissioner a renewal fee in an amount
determined by the commissioner not to exceed $375 and a recovery
fund fee provided by Section 156.502;
(2) has not been convicted of a criminal offense the
commissioner determines is directly related to the occupation of a
mortgage broker as provided by Chapter 53, Occupations Code; and
(3) provides the commissioner with satisfactory
evidence that the mortgage broker:
(A) has attended, during the term of the current
license, 15 hours of continuing education courses that the
commissioner, in accordance with the rules adopted by the finance
commission under this section, has approved as continuing education
courses; or
(B) maintains an active license in this state as:
(i) a real estate broker;
(ii) a real estate salesperson;
(iii) an attorney; or
(iv) an active general lines insurance
agent, a limited lines insurance agent, or holds an equivalent
insurance license under the Texas Insurance Code [a local recording
agent or insurance solicitor or agent for a legal reserve life
insurance company under Chapter 21, Insurance Code, or an
equivalent license under Chapter 21, Insurance Code].
(b) A loan officer license issued under this chapter is
valid for a maximum of two years and may be renewed on or before its
expiration date if the loan officer:
(1) pays to the commissioner a renewal fee in an amount
determined by the commissioner not to exceed $275 [$175] and a
recovery fund fee provided by Section 156.502;
(2) has not been convicted of a criminal offense the
commissioner determines is directly related to the occupation of a
loan officer as provided by Chapter 53, Occupations Code; and
(3) provides the commissioner with satisfactory
evidence that the loan officer:
(A) has attended, during the term of the current
license, 15 hours of continuing education courses that the
commissioner, in accordance with the rules adopted by the finance
commission under this section, has approved as continuing education
courses, including courses provided by or through the licensed
mortgage broker with whom the loan officer is associated after
submission to and approval by the commission; or
(B) maintains an active license in this state as:
(i) a real estate broker;
(ii) a real estate salesperson;
(iii) an attorney; or
(iv) an active general lines insurance
agent, a limited lines insurance agent, or holds an equivalent
insurance license under the Texas Insurance Code [a local recording
agent or insurance solicitor or agent for a legal reserve life
insurance company under Chapter 21, Insurance Code, or an
equivalent license under Chapter 21, Insurance Code].
SECTION 11. Section 156.208, Finance Code, is amended by
adding subsection (j)(4) and subsection (k) to read as follows:
(j) The commissioner may deny the renewal of a mortgage
broker license or a loan officer license if:
(1) the mortgage broker or loan officer is in
violation of this chapter, a rule adopted under this chapter, or any
order previously issued to the individual by the commissioner;
(2) the mortgage broker or loan officer is in default
in the payment of any administrative penalty, fee, charge, or other
indebtedness owed under this title; [or]
(3) during the current term of the license, the
commissioner becomes aware of any fact that would have been grounds
for denial of an original license if the fact had been known by the
commissioner on the date the license was granted; or[.]
(4) the mortgage broker or loan officer is in default
on a student loan administered by the Texas Guaranteed Student Loan
Corporation, pursuant to Section 57.492 of the Texas Education
Code.
(k) In addition to the disciplinary action by the
commissioner authorized under Section 156.303(a)(7) the
commissioner may collect a maximum $50 fee for any returned check or
credit card charge back.
SECTION 12. The heading of Section 156.212, Finance Code,
is amended to read as follows:
Section 156.212. MAINTENANCE AND LOCATION OF OFFICES[;
DISPLAY OF LICENSE CERTIFICATES].
SECTION 13. Subsections 156.212 (c)and(d), Finance Code,
are repealed.
SECTION 14. Section 156.214(b)(4), Finance Code, is amended
to read as follows:
(4) pay an annual registration fee of [the lesser of:
[(A)] one-half of the license fee for a loan
officer under Section 156.203(c)(1), multiplied by the number of
exclusive agents under contract to act for the person in this state;
[or
[(B) $200,000]; and
SECTION 15. Section 156.301, Finance Code, is amended to
add subsection (h) to read as follows:
(h) The commissioner may require reimbursement not to
exceed $325 per examiner per day for onsite examination or
investigation of a mortgage broker where records are located out of
state or where the review is deemed necessary beyond the routine
examination process.
SECTION 16. Section 156.302(a), Finance Code, is amended to
read as follows:
(a) The commissioner, after notice and opportunity for
hearing, may impose an administrative penalty on a person licensed
under this chapter who violates this chapter or a rule or order
adopted under this chapter.
SECTION 17. Section 156.303(a), Finance Code, is amended to
read as follows:
(a) The commissioner may order disciplinary action against
a licensed mortgage broker or a licensed loan officer when the
commissioner, after notice and opportunity for a hearing, has
determined that the person:
SECTION 18. Section 156.303(a), Finance Code, is amended to
add subsection (19) as follows:
(17) disregarded or violated this chapter, a rule
adopted by the finance commission under this chapter, or an order
issued by the commissioner under this chapter; [or]
(18) provided false information to the commissioner
during the course of an investigation or inspection; or
(19) during the current term of the license, the
commissioner becomes aware of any fact that would have been grounds
for denial of any original license if the fact had been known by the
commissioner on the date the license was granted.
SECTION 19. Section 156.303(e), Finance Code, is amended to
read as follows:
(e) The commissioner, after giving notice and opportunity
for hearing, may impose against a person who violates a cease and
desist order an administrative penalty in an amount not to exceed
$1,000 for each day of the violation. In addition to any other
remedy provided by law, the commissioner may institute in district
court a suit for injunctive relief and to collect the
administrative penalty. A bond is not required of the commissioner
with respect to injunctive relief granted under this subsection. [A
penalty collected under this subsection shall be deposited in the
fund.]
SECTION 20. Section 156.303(g), Finance Code, is amended to
read as follows:
(g) If a person fails to pay an administrative penalty that
has become final or fails to comply with an order of the
commissioner that has become final, in addition to any other remedy
provided under law the commissioner, on not less than 10 days'
notice to the person, may without a prior hearing suspend the
person's mortgage broker license or loan officer license. The
suspension shall continue until the person has complied with the
[cease and desist] order or paid the administrative penalty. During
the period of suspension, the person may not originate a mortgage
loan and all compensation received by the person during the period
of suspension is subject to forfeiture as provided by Section
156.406(b).
SECTION 21. Section 156.303(h), Finance Code, is amended to
read as follows:
(h) An order of suspension under Subsection (g) may be
appealed. An appeal is a contested case governed by Chapter 2001,
Government Code. A hearing of an appeal of an order of suspension
issued under Subsection (g) shall be held not later than the 30th
[15th] day after the date of receipt of the notice of appeal. The
appellant shall be provided at least three days' notice of the time
and place of the hearing.
SECTION 22. Subsection 156.303(j), Finance Code, is amended
to read as follows:
(j) [On notice and opportunity for hearing, the] The
commissioner may, on not less than 10 days' notice to the person,
suspend a person's license without a prior hearing under this
chapter if an indictment or information is filed or returned
alleging that the person committed a criminal offense involving
fraud, theft, or dishonesty. The suspension continues until the
criminal case is dismissed or the person is acquitted. A person may
appeal the suspension in accordance with the provisions of Section
156.303(h).
SECTION 23. Section 156.401(a), Finance Code, is amended to
read as follows:
(a) The commissioner may employ an enforcement staff to
investigate and prosecute complaints made against persons licensed
under this chapter. The commissioner may employ a hearings officer
to conduct hearings under this section. The commissioner may
collect and deposit any court courts collected pursuant to a final
order.
SECTION 24. Subchapter F, Finance Code, is amended to read
as follows:
Sec. 156.501. MORTGAGE BROKER RECOVERY FUND.
(a) The commissioner shall establish, administer, and
maintain a mortgage broker recovery fund as provided by this
subchapter. The amounts received by the commissioner for deposit in
the fund shall be held by the commissioner in trust for carrying out
the purposes of the fund. The finance commission may prescribe
rules on the commissioner's recommendation to promote a fair and
orderly administration of the fund consistent with the purposes of
this subchapter.
(b) The fund shall be used to reimburse residential mortgage
loan applicants actual damages because of acts committed by
[aggrieved persons to whom a court awards actual damages because of
certain acts committed by] a mortgage broker or loan officer who was
licensed under this chapter when the act was committed. The use of
the fund is limited to reimbursement for out of pocket losses caused
by an act by a mortgage broker or loan officer that constitutes a
violation of Section 156.303(a)(2), (3), (5), (6), (8), (9), (10),
(11), (12), (13), or (16) or 156.304. Payments from the fund may
not be made to a lender who makes a mortgage loan originated by the
mortgage broker or loan officer or who acquires a mortgage loan
originated by the mortgage broker or loan officer. Payments from
the fund shall be reduced by the amount of any recovery from the
mortgage broker or loan officer or from any surety, insurer or other
person or entity making restitution to the applicant on behalf of
the mortgage broker or loan officer.
(c) Amounts in the fund may be invested and reinvested in
the same manner as funds of the Texas State Employees Retirement
System, and the interest from these investments shall be deposited
to the credit of the fund. An investment may not be made under this
subsection if the investment will impair the necessary liquidity
required to satisfy judgment payments awarded under this
subchapter.
(d) The fund may be used at the discretion of the
commissioner to reimburse expenses incurred to secure and destroy
residential mortgage loan documents that have been abandoned by a
current or former individual or entity under the regulatory
authority of the department.
(e) The commissioner, as manager of the fund, is entitled to
reimbursement for reasonable and necessary costs and expenses for
management of the fund, including costs and expenses incurred with
regard to applications pursuant to Section 156.504.
Section 156.502. FUNDING.
(a) On an application for an original license or for renewal
of a license issued under this chapter, the applicant, in addition
to paying the original application fee or renewal fee, shall pay a
fee in an amount determined by the commissioner, not to exceed $20
[fee]. The fee shall be deposited in the recovery fund.
(b) If the balance remaining in the recovery fund at the end
of the calendar year is more than $3.5 million, the amount of money
in excess of $3.5 million shall be available to the commissioner to
offset the expenses of participating in and sharing information
with the Nationwide Mortgage Licensing System and Registry if
participation is adopted. This provision shall be effective
retroactive to December 31, 2008. [If the balance remaining in the
fund at the end of a calendar year after 2010 is less than $500,000,
each mortgage broker and loan officer licensed under this chapter,
on the next renewal of the license, shall pay, in addition to any
other required fees, the lesser of a $10 fee or a pro rata share of
the amount necessary to bring the fund to $1 million. The fee shall
be deposited in the fund.
[(c) If the balance remaining in the mortgage broker
recovery fund at the end of a calendar year is more than the greater
of $3.5 million or the total amount of claims paid from the fund
during the previous four fiscal years, the amount of money in excess
of the greater amount shall be transferred to the general revenue
fund.]
Section 156.503. STATUTE OF LIMITATIONS. An application
for the recovery of actual damages from the fund may not be
instituted after the second anniversary of the date of the alleged
act or omission causing the actual damages or the date the act or
omission should reasonably have been discovered. This statute of
limitations shall not apply to subrogation claims brought by the
commissioner for recovery of money paid out of the fund. [An action
for a judgment that subsequently results in an order for collection
from the fund may not be instituted after the second anniversary of
the date on which the cause of action accrues.]
Section 156.504. PROCEDURE FOR RECOVERY.
(a) To recover from the recovery fund, a residential
mortgage loan applicant must file a written sworn application with
the commissioner in the form required by the commissioner, subject
to Section 156.503. A person who knowingly makes a false statement
in connection with applying for money out of the recovery fund may
be subject to criminal prosecution under Section 37.10, Penal Code.
(b) The residential mortgage loan applicant is required to
show:
(1) that the claim is based on facts allowing recovery
under Section 156.501;
(2) that the applicant is not a spouse, child, parent,
grandchild, grandparent, or sibling, including relationships by
adoption, of the mortgage broker or loan officer, or a person
sharing living quarters with the mortgage broker or loan officer or
a current or former employer, employee, or associate of the
mortgage broker or loan officer, or a person who has aided, abetted,
or participated other than as a victim with the licensed mortgage
broker or loan officer in any activity which is illegal under
Section 156.303(a)(2), (3), (5), (6), (8), (9), (10), (11), (12),
(13), or (16) or Section 156.304 or the personal representative of
such a person, and that the applicant is not licensed as a mortgage
broker or loan officer under this chapter who is seeking to recover
any compensation in the transaction or transactions for which the
application for payment is made;
(c) On receipt of the verified application, the
commissioner's staff shall:
(1) notify each appropriate license holder and the
issuer of any surety bond issued in connection with their licenses;
and
(2) investigate the application and issue a
preliminary determination, giving the applicant, the licensee, and
any surety an opportunity to resolve the matter by agreement or to
dispute the preliminary determination.
(d) If the preliminary determination is not otherwise
resolved by agreement and is not disputed by written notice to the
commissioner before the 31st day after the notification date, the
preliminary determination shall automatically become final and the
commissioner shall make payment from the fund, subject to the
limits under Section 156.505.
(e) If the preliminary determination is disputed by the
applicant, licensee, or surety by written notice to the
commissioner before the 31st day after the notification date, the
matter shall be set for a hearing governed by Chapter 2001,
Government Code, and the hearing rules of the finance commission.
[(a) An aggrieved person who recovers against a mortgage
broker or loan officer licensed under this chapter a valid court
judgment for conduct described by Section 156.501 that occurred on
or after January 1, 2000, after final judgment has been entered,
execution returned nulla bona, and a judgment lien perfected, may
file a verified claim in the court in which the judgment was entered
and, on 20 days' written notice to the commissioner and to the
judgment debtor, may apply to the court for an order directing
payment from the fund of any unpaid judgment amount, subject to
Section 156.503.
[(b) On the hearing on the application, the aggrieved person
is required to show:
[(1) that the judgment is based on facts allowing
recovery under Section 156.501;
[(2) that the person is not a spouse of the debtor, or
the personal representative of the spouse, and that the person is
not licensed as a mortgage broker or loan officer under this chapter
who is seeking to recover any compensation in the transaction or
transactions for which the application for payment is made;
[(3) that based on the best available information, the
judgment debtor lacks sufficient attachable assets in this state or
any other state to satisfy the judgment and the surety bond required
by Section 156.205 is not sufficient to satisfy the judgment; and
[(4) the amount that may be realized from the sale of
property or other assets liable to be sold or applied in
satisfaction of the judgment and the balance remaining due on the
judgment after application of the amount that may be realized.
[(c) A recovery on the judgment against a single defendant
made before payment from the fund shall be applied first by the
creditor to actual damages.
[(d) The court shall make an order directed to the
commissioner requiring payment from the fund of the amount the
court finds to be payable on the claim, pursuant to and in
accordance with the limitations contained in this subchapter, if
the court is satisfied, on the hearing, of the truth of all matters
required to be shown by the aggrieved person under Subsection (b)
and that the aggrieved person has satisfied all of the requirements
of this section.
[(e) When the commissioner receives notice of entry of a
final judgment and a hearing is scheduled under this section, the
commissioner may notify the attorney general of the commissioner's
desire to enter an appearance, file a response, appear at the court
hearing, defend the action, or to take any other appropriate
action. In taking any action described by this subsection, the
commissioner and the attorney general shall act only to protect the
fund from spurious or unjust claims or to ensure compliance with the
requirements for recovery under this subchapter.
[(f) The commissioner may relitigate any issue material and
relevant in the hearing on the application that was determined in
the underlying action on which the judgment in favor of the
applicant was based.
[(g) If the court finds that the aggregate amount of claims
against a licensed mortgage broker or loan officer exceeds the
limits contained in Section 156.505, the court shall reduce
proportionately the amount the court finds payable on the claim.]
Sec. 156.505. RECOVERY LIMITS.
(a) A person entitled to receive payment out of the fund is
entitled to receive reimbursement of actual, out-of-pocket
damages[, reasonable attorney's fees, and court costs as determined
by the court] as provided by this section.
(b) A payment from the fund may be made [only pursuant to a
court order] as provided by Section 156.504. A payment for claims:
(1) arising out of the same transaction, including
[attorney's fees,] interest, [and court costs] is limited in the
aggregate to $25,000, regardless of the number of claimants; and
(2) [based on judgments] against a single person
licensed as a mortgage broker or loan officer under this chapter
arising out of separate transactions, including interest, is
limited in the aggregate to $50,000 until the fund has been
reimbursed for all amounts paid.
(c) In the event there are concurrent claims that exceed the
amounts available under subsections (b)(1) and (b)(2) above, the
commissioner shall prorate recovery based on the amount of damage
suffered by each claimant.
Sec. 156.506. REVOCATION OF LICENSE FOR PAYMENT FROM FUND.
(a) The commissioner may revoke a license issued under this chapter
on proof that the commissioner has made a payment from the fund of
any amount toward satisfaction of a claim against a mortgage broker
or loan officer under this chapter. The commissioner may seek to
collect from the mortgage broker or loan officer the amount paid
from the fund on behalf of the mortgage broker or loan officer and
any costs associated with investigating and processing the claim
against the recovery fund or with collection of reimbursement for
payments from the fund, plus interest at the current legal rate
until the amount has been repaid in full. Any amount, including
interest, recovered by the commissioner shall be deposited to the
credit of the fund. [The commissioner may revoke a license issued
under this chapter on proof that the commissioner has made a payment
from the fund of any amount toward satisfaction of a judgment
against a person licensed as a mortgage broker or loan officer under
this chapter.]
(b) The commissioner may probate an order revoking a license
under this section.
(c) A person on whose behalf payment was made from the fund
is not eligible to receive a new license under this chapter until
the person has repaid in full, plus interest at the current legal
rate, the amount paid from the fund on the person's behalf and any
costs associated with investigating and processing the claim
against the recovery fund or with collection of reimbursement for
payments from the fund.
(d) This section does not limit the authority of the
commissioner to take disciplinary action against a mortgage broker
or loan officer for a violation of this chapter or the rules adopted
by the finance commission under this chapter. The repayment in full
to the fund of all obligations of a mortgage broker or loan officer
does not nullify or modify the effect of any other disciplinary
proceeding brought under this chapter.
Sec. 156.507. SUBROGATION. When the commissioner has paid
an applicant [a judgment creditor] an amount from the fund pursuant
to Section 156.504 [as directed by the court], the commissioner is
subrogated to all of the rights of the applicant [judgment
creditor] to the extent of the amount paid. The applicant [judgment
creditor] shall assign all of the applicant's [creditor's] right,
title, and interest in any subsequent judgment against the licensee
[the judgment] up to the amount paid by the commissioner[, and that
amount has priority for repayment in the event of any subsequent
recovery on the judgment]. Any amount, including interest,
recovered by the commissioner on the assignment [judgment] shall be
deposited to the credit of the fund.
Sec. 156.508. FAILURE TO COMPLY WITH SUBCHAPTER OR RULE
ADOPTED BY THE FINANCE COMMISSION. The failure of an applicant for
reimbursement [aggrieved person] to comply with a provision of this
subchapter or with a rule adopted by the finance commission
relating to the fund constitutes a waiver of any rights under this
subchapter.
SECTION 25. EFFECTIVE DATE. This Act takes effect
immediately if it receives a vote of two-thirds of all the members
elected to each house, as provided by Section 39, Article III, Texas
Constitution. If this Act does not receive the vote necessary for
immediate effect, this Act takes effect September 1, 2009.