81R11141 UM-D
By: Olivo H.B. No. 3589
A BILL TO BE ENTITLED
AN ACT
relating to requiring foreclosure deferment and reset notification
on certain residential mortgages.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle B, Title 5, Property Code, is amended by
adding Chapter 51A to read as follows:
CHAPTER 51A. FORECLOSURE DEFERMENT AND RESET NOTIFICATION
FOR CERTAIN RESIDENTIAL MORTGAGES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 51A.001. DEFINITIONS. (a) In this chapter:
(1) "Deferment period trigger date" means:
(A) for a subprime mortgage, the earlier of:
(i) the date of any adjustment or reset of
the interest rate on the mortgage; or
(ii) the 60th day after the date on which
the debtor is first delinquent on a mortgage payment; and
(B) for a negative amortization mortgage, the
date on which the first increase in the minimum monthly payment due
under the mortgage occurs.
(2) "Eligible deferred foreclosure mortgage" means a
subprime mortgage or a negative amortization mortgage that
originated before January 1, 2009, and for which the deferment
period trigger date has been reached.
(3) "Finance commission" means the Finance Commission
of Texas.
(4) "Home loan" has the meaning assigned by Section
343.001, Finance Code.
(5) "Mortgage servicer," "mortgagee," and "mortgagor"
have the meanings assigned by Section 51.0001.
(6) "Negative amortization mortgage" means a home loan
with the potential for negative amortization of the outstanding
principal balance and under which the minimum monthly payment of
principal and interest required increases after the date of
origination.
(7) "Subprime mortgage" means a home loan in which:
(A) the difference between the annual percentage
rate for the home loan at its inception and the yield on United
States Treasury securities having comparable periods of maturity to
the home loan is three percentage points or more if the loan is a
first-lien loan, or is more than five percentage points if the loan
is a second-lien loan; or
(B) the difference between the annual percentage
rate for the home loan at its inception and the annual yield on
conventional mortgages published by the Board of Governors of the
Federal Reserve System is 1.75 percentage points or more if the loan
is a first-lien loan, or is more than 3.75 percentage points if the
loan is a second-lien loan.
(b) For purposes of Subsection (a)(7)(A), the same
procedures and calculation methods applicable to loans that are
subject to reporting requirements under the Home Mortgage
Disclosure Act of 1975 (12 U.S.C. Section 2801 et seq.) shall be
used to determine the difference between the annual percentage rate
of a subprime home loan and the treasury yield.
[Sections 51A.002-51A.050 reserved for expansion]
SUBCHAPTER B. REQUIRED FORECLOSURE DEFERMENT
Sec. 51A.051. DEBTOR ELIGIBILITY. A person is eligible for
foreclosure deferment under this chapter if the person:
(1) is a debtor obligated under an eligible deferred
foreclosure mortgage;
(2) has resided at the residential real property
securing the mortgage loan since the loan was closed and intends to
reside at the property at least until the end of the foreclosure
deferment period;
(3) has a current monthly income that, when multiplied
by 12, is less than 200 percent of the median annual income for the
relevant family size in the area of the state in which the property
is located; and
(4) during the foreclosure deferment period, responds
to reasonable inquiries from a mortgage servicer or mortgagee with
respect to the mortgage.
Sec. 51A.052. RIGHT TO FORECLOSURE DEFERMENT. (a) An
eligible person may defer the initiation of a proceeding to
foreclose an eligible deferred foreclosure mortgage, whether
judicial or nonjudicial, or any action in connection with
proceedings already initiated to foreclose an eligible deferred
foreclosure mortgage, including a foreclosure sale under Section
51.002, until the end of the foreclosure deferment period, in
accordance with this chapter.
(b) A debtor who complies with this chapter may defend
against a foreclosure action or bring an action for injunctive
relief to compel compliance with the debtor's rights under this
chapter regarding an eligible deferred foreclosure mortgage.
Sec. 51A.053. FORECLOSURE DEFERMENT RIGHTS NOTICE
REQUIRED. (a) Not later than the 30th day before the date on which a
mortgagee or mortgage servicer initiates a foreclosure proceeding
on an eligible deferred foreclosure mortgage, the mortgagee or
mortgage servicer shall notify the debtor, by personal service, of
the debtor's right to defer foreclosure under this chapter.
(b) A mortgagee or mortgage servicer that provides notice in
accordance with Subsection (a) shall provide an additional notice
on the 30th day after the date on which each immediately preceding
notice was provided until:
(1) the debtor institutes a foreclosure deferment
under this chapter; or
(2) the foreclosure becomes final.
(c) The finance commission by rule shall provide the content
and format of a notice required by this section. The rules must:
(1) ensure that the notice is provided in a manner that
maximizes the likelihood that a debtor will obtain and understand
all of the information necessary to exercise the right to defer a
foreclosure under this chapter; and
(2) specify:
(A) instructions and procedures for obtaining a
foreclosure deferment, including a sample foreclosure deferment
initiation notice form, a property and debtor identification form,
and a certification form required to initiate a foreclosure
deferment;
(B) contact information for the mortgagee and
mortgage servicer or any other third party involved in the
foreclosure proceedings, including state or local officials; and
(C) contact information for obtaining counseling
concerning the exercise of foreclosure deferment from a counselor
approved by the finance commission.
Sec. 51A.054. PROCEDURES FOR FORECLOSURE DEFERMENT. To
defer a foreclosure under this chapter, a debtor shall provide to
the mortgagee or mortgage servicer, by mail or by service, either
directly or to any agent of the mortgagee or mortgage servicer,
including at the address of any registered agent:
(1) notice that the debtor intends to defer the
foreclosure under this chapter;
(2) the name of the debtor and information identifying
the residential real property securing the eligible deferred
foreclosure mortgage loan; and
(3) a certification that the residential real property
is the debtor's primary residence and that the debtor intends to
reside at the property at least until the end of the foreclosure
deferment period.
Sec. 51A.055. FORECLOSURE DEFERMENT PERIOD. (a) The
foreclosure deferment period under this chapter begins on the date
a debtor provides a mortgagee or mortgage servicer with the notice
required by Section 51A.054.
(b) The foreclosure deferment period ends on the earlier of:
(1) the 271st day after the date on which the deferment
period begins;
(2) the 30th day after any due date of a deferment
payment in accordance with Section 51A.056, if the deferment
payment is not paid;
(3) the date on which the mortgagee or mortgage
servicer enters into a qualified loan modification or workout plan
with the debtor under Section 51A.058; or
(4) the date on which the foreclosure deferment is
terminated by judicial order.
Sec. 51A.056. DEFERMENT PAYMENT. (a) During the
foreclosure deferment period, a debtor must continue to make
monthly payments on the mortgage in accordance with this section.
(b) The deferment payment amount for a subprime mortgage is
the lesser of:
(1) the minimum monthly payment of principal and
interest on the date the mortgage was originated; or
(2) a monthly payment amount based on the outstanding
loan principal plus a rate of interest calculated at a fixed annual
percentage rate, in an amount equal to the most recent conventional
mortgage rate plus a 100 basis point premium for risk, amortized
over a period of 30 years minus the period of time since the
origination of the loan.
(c) The deferment payment amount for a negative
amortization mortgage is the amount of the first minimum monthly
payment due under the mortgage.
(d) The difference between the amount of a monthly payment
due under the terms of any eligible deferred foreclosure mortgage
and the deferment payment amount must be amortized over the life of
the mortgage beginning immediately after the foreclosure deferment
period ends.
(e) A mortgagee or mortgage servicer may not impose a late
fee or another fee or charge during the foreclosure deferment
period with respect to any eligible deferred foreclosure mortgage
for which a debtor has initiated foreclosure deferment.
Sec. 51A.057. MONTHLY PAYMENT NOTICES. Each periodic
statement of account submitted by a mortgagee or mortgage servicer
relating to an eligible deferred foreclosure mortgage during the
foreclosure deferment period must include:
(1) the due date and amount of the next payment due on
the mortgage;
(2) the address and delivery method for the next
payment;
(3) the date on which the foreclosure deferment will
terminate; and
(4) a notification to the debtor that the failure to
make the payment in a timely manner will jeopardize the
continuation of the foreclosure deferment.
Sec. 51A.058. QUALIFIED LOAN MODIFICATION OR WORKOUT PLAN.
(a) In order to qualify under this chapter and end the foreclosure
deferment period, a loan modification or workout plan under this
chapter must:
(1) be scheduled to remain in place until the debtor
sells or refinances the residential real property; and
(2) be reasonably affordable to a debtor over the life
of the loan.
(b) A loan modification or workout plan is not qualified
under this chapter and does not end the foreclosure deferment
period if the modification or plan:
(1) provides a repayment schedule that results in
negative amortization at any time;
(2) includes a balloon payment; or
(3) requires the debtor to pay additional points and
fees.
[Sections 51A.059-51A.100 reserved for expansion]
SUBCHAPTER C. OTHER RIGHTS AND RESTRICTIONS
Sec. 51A.101. NOTICE OF RESET AND ALTERNATIVES. During the
one-month period that ends 120 days before the date on which, in the
case of a subprime mortgage, the interest rate in effect during the
introductory period of the mortgage adjusts or resets to a variable
interest rate or, in the case of a negative amortization mortgage,
the minimum monthly payment of principal and interest required
first increases from the amount of the first minimum monthly
payment due under the mortgage, the mortgagee or mortgage servicer
shall provide a written notice, separate and distinct from all
other correspondence to the debtor, that includes:
(1) in the case of a subprime mortgage, the index or
formula used in determining the annual percentage rate applicable
as of the effective date of the reset or adjustment;
(2) in the case of a negative amortization mortgage,
the index or formula used in making increases in the minimum monthly
payments due and a source of information about the index or formula;
(3) in the case of a subprime or negative amortization
mortgage:
(A) a good faith estimate, based on accepted
industry standards and disclosed in a clear and conspicuous manner,
of the amount of the monthly payment that will apply after the date
of the adjustment, reset, or increase, as applicable, and the
assumptions on which this estimate is based;
(B) a list of alternatives a debtor may pursue
before the date of the adjustment, reset, or increase, as
applicable, and descriptions of the actions a debtor must take to
pursue these alternatives, including:
(i) refinancing;
(ii) renegotiation of loan terms;
(iii) payment forbearances;
(iv) pre-foreclosure sales; and
(v) any payment assistance available in the
area in which the property is located; and
(C) the names, addresses, telephone numbers, and
Internet website addresses of counseling agencies or programs
reasonably available to the debtor that have been certified or
approved and made publicly available by the finance commission; and
(4) the address, telephone number, and Internet
website address for the Office of Consumer Credit Commissioner.
Sec. 51A.102. DUTY TO MAINTAIN PROPERTY. (a) A debtor who
has received a foreclosure deferment under this chapter may not
destroy, damage, impair, allow to deteriorate, or commit waste on
the residential real property securing the mortgage loan on which
the debtor receives the deferment.
(b) A person who violates Subsection (a) is liable to the
mortgagee or mortgage servicer for the damage to the residential
real property.
Sec 51A.103. DECLARATION OF RIGHTS. At any time during the
foreclosure deferment period, any party to a mortgage may apply to a
court for an order establishing the rights, duties, and conditions
imposed on or applicable to the parties to the mortgage, including
the terms and conditions of a deferment under this chapter.
SECTION 2. Not later than November 1, 2009, the Finance
Commission of Texas shall prescribe the form and content of the
notice required by Section 51A.053, Property Code, as added by this
Act.
SECTION 3. 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.