Texas 2009 - 81st Regular

Texas House Bill HB3589 Compare Versions

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1	1	81R11141 UM-D
2	2	By: Olivo H.B. No. 3589
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to requiring foreclosure deferment and reset notification
8	8	on certain residential mortgages.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Subtitle B, Title 5, Property Code, is amended by
11	11	adding Chapter 51A to read as follows:
12	12	CHAPTER 51A. FORECLOSURE DEFERMENT AND RESET NOTIFICATION
13	13	FOR CERTAIN RESIDENTIAL MORTGAGES
14	14	SUBCHAPTER A. GENERAL PROVISIONS
15	15	Sec. 51A.001. DEFINITIONS. (a) In this chapter:
16	16	(1) "Deferment period trigger date" means:
17	17	(A) for a subprime mortgage, the earlier of:
18	18	(i) the date of any adjustment or reset of
19	19	the interest rate on the mortgage; or
20	20	(ii) the 60th day after the date on which
21	21	the debtor is first delinquent on a mortgage payment; and
22	22	(B) for a negative amortization mortgage, the
23	23	date on which the first increase in the minimum monthly payment due
24	24	under the mortgage occurs.
25	25	(2) "Eligible deferred foreclosure mortgage" means a
26	26	subprime mortgage or a negative amortization mortgage that
27	27	originated before January 1, 2009, and for which the deferment
28	28	period trigger date has been reached.
29	29	(3) "Finance commission" means the Finance Commission
30	30	of Texas.
31	31	(4) "Home loan" has the meaning assigned by Section
32	32	343.001, Finance Code.
33	33	(5) "Mortgage servicer," "mortgagee," and "mortgagor"
34	34	have the meanings assigned by Section 51.0001.
35	35	(6) "Negative amortization mortgage" means a home loan
36	36	with the potential for negative amortization of the outstanding
37	37	principal balance and under which the minimum monthly payment of
38	38	principal and interest required increases after the date of
39	39	origination.
40	40	(7) "Subprime mortgage" means a home loan in which:
41	41	(A) the difference between the annual percentage
42	42	rate for the home loan at its inception and the yield on United
43	43	States Treasury securities having comparable periods of maturity to
44	44	the home loan is three percentage points or more if the loan is a
45	45	first-lien loan, or is more than five percentage points if the loan
46	46	is a second-lien loan; or
47	47	(B) the difference between the annual percentage
48	48	rate for the home loan at its inception and the annual yield on
49	49	conventional mortgages published by the Board of Governors of the
50	50	Federal Reserve System is 1.75 percentage points or more if the loan
51	51	is a first-lien loan, or is more than 3.75 percentage points if the
52	52	loan is a second-lien loan.
53	53	(b) For purposes of Subsection (a)(7)(A), the same
54	54	procedures and calculation methods applicable to loans that are
55	55	subject to reporting requirements under the Home Mortgage
56	56	Disclosure Act of 1975 (12 U.S.C. Section 2801 et seq.) shall be
57	57	used to determine the difference between the annual percentage rate
58	58	of a subprime home loan and the treasury yield.
59	59	[Sections 51A.002-51A.050 reserved for expansion]
60	60	SUBCHAPTER B. REQUIRED FORECLOSURE DEFERMENT
61	61	Sec. 51A.051. DEBTOR ELIGIBILITY. A person is eligible for
62	62	foreclosure deferment under this chapter if the person:
63	63	(1) is a debtor obligated under an eligible deferred
64	64	foreclosure mortgage;
65	65	(2) has resided at the residential real property
66	66	securing the mortgage loan since the loan was closed and intends to
67	67	reside at the property at least until the end of the foreclosure
68	68	deferment period;
69	69	(3) has a current monthly income that, when multiplied
70	70	by 12, is less than 200 percent of the median annual income for the
71	71	relevant family size in the area of the state in which the property
72	72	is located; and
73	73	(4) during the foreclosure deferment period, responds
74	74	to reasonable inquiries from a mortgage servicer or mortgagee with
75	75	respect to the mortgage.
76	76	Sec. 51A.052. RIGHT TO FORECLOSURE DEFERMENT. (a) An
77	77	eligible person may defer the initiation of a proceeding to
78	78	foreclose an eligible deferred foreclosure mortgage, whether
79	79	judicial or nonjudicial, or any action in connection with
80	80	proceedings already initiated to foreclose an eligible deferred
81	81	foreclosure mortgage, including a foreclosure sale under Section
82	82	51.002, until the end of the foreclosure deferment period, in
83	83	accordance with this chapter.
84	84	(b) A debtor who complies with this chapter may defend
85	85	against a foreclosure action or bring an action for injunctive
86	86	relief to compel compliance with the debtor's rights under this
87	87	chapter regarding an eligible deferred foreclosure mortgage.
88	88	Sec. 51A.053. FORECLOSURE DEFERMENT RIGHTS NOTICE
89	89	REQUIRED. (a) Not later than the 30th day before the date on which a
90	90	mortgagee or mortgage servicer initiates a foreclosure proceeding
91	91	on an eligible deferred foreclosure mortgage, the mortgagee or
92	92	mortgage servicer shall notify the debtor, by personal service, of
93	93	the debtor's right to defer foreclosure under this chapter.
94	94	(b) A mortgagee or mortgage servicer that provides notice in
95	95	accordance with Subsection (a) shall provide an additional notice
96	96	on the 30th day after the date on which each immediately preceding
97	97	notice was provided until:
98	98	(1) the debtor institutes a foreclosure deferment
99	99	under this chapter; or
100	100	(2) the foreclosure becomes final.
101	101	(c) The finance commission by rule shall provide the content
102	102	and format of a notice required by this section. The rules must:
103	103	(1) ensure that the notice is provided in a manner that
104	104	maximizes the likelihood that a debtor will obtain and understand
105	105	all of the information necessary to exercise the right to defer a
106	106	foreclosure under this chapter; and
107	107	(2) specify:
108	108	(A) instructions and procedures for obtaining a
109	109	foreclosure deferment, including a sample foreclosure deferment
110	110	initiation notice form, a property and debtor identification form,
111	111	and a certification form required to initiate a foreclosure
112	112	deferment;
113	113	(B) contact information for the mortgagee and
114	114	mortgage servicer or any other third party involved in the
115	115	foreclosure proceedings, including state or local officials; and
116	116	(C) contact information for obtaining counseling
117	117	concerning the exercise of foreclosure deferment from a counselor
118	118	approved by the finance commission.
119	119	Sec. 51A.054. PROCEDURES FOR FORECLOSURE DEFERMENT. To
120	120	defer a foreclosure under this chapter, a debtor shall provide to
121	121	the mortgagee or mortgage servicer, by mail or by service, either
122	122	directly or to any agent of the mortgagee or mortgage servicer,
123	123	including at the address of any registered agent:
124	124	(1) notice that the debtor intends to defer the
125	125	foreclosure under this chapter;
126	126	(2) the name of the debtor and information identifying
127	127	the residential real property securing the eligible deferred
128	128	foreclosure mortgage loan; and
129	129	(3) a certification that the residential real property
130	130	is the debtor's primary residence and that the debtor intends to
131	131	reside at the property at least until the end of the foreclosure
132	132	deferment period.
133	133	Sec. 51A.055. FORECLOSURE DEFERMENT PERIOD. (a) The
134	134	foreclosure deferment period under this chapter begins on the date
135	135	a debtor provides a mortgagee or mortgage servicer with the notice
136	136	required by Section 51A.054.
137	137	(b) The foreclosure deferment period ends on the earlier of:
138	138	(1) the 271st day after the date on which the deferment
139	139	period begins;
140	140	(2) the 30th day after any due date of a deferment
141	141	payment in accordance with Section 51A.056, if the deferment
142	142	payment is not paid;
143	143	(3) the date on which the mortgagee or mortgage
144	144	servicer enters into a qualified loan modification or workout plan
145	145	with the debtor under Section 51A.058; or
146	146	(4) the date on which the foreclosure deferment is
147	147	terminated by judicial order.
148	148	Sec. 51A.056. DEFERMENT PAYMENT. (a) During the
149	149	foreclosure deferment period, a debtor must continue to make
150	150	monthly payments on the mortgage in accordance with this section.
151	151	(b) The deferment payment amount for a subprime mortgage is
152	152	the lesser of:
153	153	(1) the minimum monthly payment of principal and
154	154	interest on the date the mortgage was originated; or
155	155	(2) a monthly payment amount based on the outstanding
156	156	loan principal plus a rate of interest calculated at a fixed annual
157	157	percentage rate, in an amount equal to the most recent conventional
158	158	mortgage rate plus a 100 basis point premium for risk, amortized
159	159	over a period of 30 years minus the period of time since the
160	160	origination of the loan.
161	161	(c) The deferment payment amount for a negative
162	162	amortization mortgage is the amount of the first minimum monthly
163	163	payment due under the mortgage.
164	164	(d) The difference between the amount of a monthly payment
165	165	due under the terms of any eligible deferred foreclosure mortgage
166	166	and the deferment payment amount must be amortized over the life of
167	167	the mortgage beginning immediately after the foreclosure deferment
168	168	period ends.
169	169	(e) A mortgagee or mortgage servicer may not impose a late
170	170	fee or another fee or charge during the foreclosure deferment
171	171	period with respect to any eligible deferred foreclosure mortgage
172	172	for which a debtor has initiated foreclosure deferment.
173	173	Sec. 51A.057. MONTHLY PAYMENT NOTICES. Each periodic
174	174	statement of account submitted by a mortgagee or mortgage servicer
175	175	relating to an eligible deferred foreclosure mortgage during the
176	176	foreclosure deferment period must include:
177	177	(1) the due date and amount of the next payment due on
178	178	the mortgage;
179	179	(2) the address and delivery method for the next
180	180	payment;
181	181	(3) the date on which the foreclosure deferment will
182	182	terminate; and
183	183	(4) a notification to the debtor that the failure to
184	184	make the payment in a timely manner will jeopardize the
185	185	continuation of the foreclosure deferment.
186	186	Sec. 51A.058. QUALIFIED LOAN MODIFICATION OR WORKOUT PLAN.
187	187	(a) In order to qualify under this chapter and end the foreclosure
188	188	deferment period, a loan modification or workout plan under this
189	189	chapter must:
190	190	(1) be scheduled to remain in place until the debtor
191	191	sells or refinances the residential real property; and
192	192	(2) be reasonably affordable to a debtor over the life
193	193	of the loan.
194	194	(b) A loan modification or workout plan is not qualified
195	195	under this chapter and does not end the foreclosure deferment
196	196	period if the modification or plan:
197	197	(1) provides a repayment schedule that results in
198	198	negative amortization at any time;
199	199	(2) includes a balloon payment; or
200	200	(3) requires the debtor to pay additional points and
201	201	fees.
202	202	[Sections 51A.059-51A.100 reserved for expansion]
203	203	SUBCHAPTER C. OTHER RIGHTS AND RESTRICTIONS
204	204	Sec. 51A.101. NOTICE OF RESET AND ALTERNATIVES. During the
205	205	one-month period that ends 120 days before the date on which, in the
206	206	case of a subprime mortgage, the interest rate in effect during the
207	207	introductory period of the mortgage adjusts or resets to a variable
208	208	interest rate or, in the case of a negative amortization mortgage,
209	209	the minimum monthly payment of principal and interest required
210	210	first increases from the amount of the first minimum monthly
211	211	payment due under the mortgage, the mortgagee or mortgage servicer
212	212	shall provide a written notice, separate and distinct from all
213	213	other correspondence to the debtor, that includes:
214	214	(1) in the case of a subprime mortgage, the index or
215	215	formula used in determining the annual percentage rate applicable
216	216	as of the effective date of the reset or adjustment;
217	217	(2) in the case of a negative amortization mortgage,
218	218	the index or formula used in making increases in the minimum monthly
219	219	payments due and a source of information about the index or formula;
220	220	(3) in the case of a subprime or negative amortization
221	221	mortgage:
222	222	(A) a good faith estimate, based on accepted
223	223	industry standards and disclosed in a clear and conspicuous manner,
224	224	of the amount of the monthly payment that will apply after the date
225	225	of the adjustment, reset, or increase, as applicable, and the
226	226	assumptions on which this estimate is based;
227	227	(B) a list of alternatives a debtor may pursue
228	228	before the date of the adjustment, reset, or increase, as
229	229	applicable, and descriptions of the actions a debtor must take to
230	230	pursue these alternatives, including:
231	231	(i) refinancing;
232	232	(ii) renegotiation of loan terms;
233	233	(iii) payment forbearances;
234	234	(iv) pre-foreclosure sales; and
235	235	(v) any payment assistance available in the
236	236	area in which the property is located; and
237	237	(C) the names, addresses, telephone numbers, and
238	238	Internet website addresses of counseling agencies or programs
239	239	reasonably available to the debtor that have been certified or
240	240	approved and made publicly available by the finance commission; and
241	241	(4) the address, telephone number, and Internet
242	242	website address for the Office of Consumer Credit Commissioner.
243	243	Sec. 51A.102. DUTY TO MAINTAIN PROPERTY. (a) A debtor who
244	244	has received a foreclosure deferment under this chapter may not
245	245	destroy, damage, impair, allow to deteriorate, or commit waste on
246	246	the residential real property securing the mortgage loan on which
247	247	the debtor receives the deferment.
248	248	(b) A person who violates Subsection (a) is liable to the
249	249	mortgagee or mortgage servicer for the damage to the residential
250	250	real property.
251	251	Sec 51A.103. DECLARATION OF RIGHTS. At any time during the
252	252	foreclosure deferment period, any party to a mortgage may apply to a
253	253	court for an order establishing the rights, duties, and conditions
254	254	imposed on or applicable to the parties to the mortgage, including
255	255	the terms and conditions of a deferment under this chapter.
256	256	SECTION 2. Not later than November 1, 2009, the Finance
257	257	Commission of Texas shall prescribe the form and content of the
258	258	notice required by Section 51A.053, Property Code, as added by this
259	259	Act.
260	260	SECTION 3. This Act takes effect immediately if it receives
261	261	a vote of two-thirds of all the members elected to each house, as
262	262	provided by Section 39, Article III, Texas Constitution. If this
263	263	Act does not receive the vote necessary for immediate effect, this
264	264	Act takes effect September 1, 2009.