By: Estes S.B. No. 354
A BILL TO BE ENTITLED
AN ACT
relating to transactions involving residential mortgage
foreclosures; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 2, Business & Commerce Code, is amended by
adding Chapter 21 to read as follows:
CHAPTER 21. HOMEOWNER PROTECTION FROM CERTAIN FORECLOSURE-RELATED
TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 21.001. DEFINITIONS. In this chapter:
(1) "Equity purchase contract" means a contract
between an equity purchaser and the homeowner of a residence in
foreclosure.
(2) "Equity purchaser" means a person who, in the
course of the person's business, vocation, or occupation, acquires
title to a residence in foreclosure. The term does not include a
person who acquires the title:
(A) for purposes of using the property as the
person's residence for at least one year;
(B) by a deed in lieu of foreclosure to the holder
of a voluntary lien or encumbrance of record;
(C) by a deed from the officer charged with
selling property under Chapter 34, Tax Code;
(D) at a sale of real property authorized by
statute;
(E) by court order or judgment; or
(F) from the person's spouse or a relative of the
person related by consanguinity or affinity.
(3) "Foreclosure consultant" means a person who
performs, or represents that the person can or will perform, for
compensation services in connection with the prevention or
postponement of foreclosure proceedings against a homeowner's
residential property or other services related to the foreclosure
of the property.
(4) "Residence in foreclosure" means residential real
property consisting of not more than four single-family dwelling
units, at least one of which is occupied as the homeowner's
principal place of residence, and against which a foreclosure
action has been commenced.
Sec. 21.002. EXCEPTION FROM APPLICABILITY OF CERTAIN
SUBCHAPTERS. (a) Except as provided by Subsection (b),
Subchapters B and C do not apply to the following persons who
perform foreclosure consulting services:
(1) an attorney admitted to practice in this state who
performs those services in relation to the attorney's
attorney-client relationship with a homeowner or the beneficiary of
the lien being foreclosed;
(2) a person who holds or is owed an obligation secured
by a lien on a residence in foreclosure if the person performs those
services in connection with the obligation or lien;
(3) a person that regulates banks, trust companies,
savings and loan associations, credit unions, or insurance
companies under the laws of this state or the United States if the
person performs those services as part of the person's normal
business activities;
(4) an affiliate of a person described by Subdivision
(3) if the affiliate performs those services as part of the
affiliate's normal business activities;
(5) a judgment creditor of the homeowner of the
residence in foreclosure, if:
(A) the legal action giving rise to the judgment
was commenced before the notice of default required under Section
5.064 or 51.002(d), Property Code; and
(B) the judgment is recorded in the real property
records of the clerk of the county where the residence in
foreclosure is located;
(6) a licensed title insurer, title insurance agent,
or escrow officer authorized to transact business in this state if
the person is performing those services in conjunction with title
insurance or settlement services;
(7) a licensed real estate broker or real estate
salesperson if the person is engaging in an activity for which the
person is licensed;
(8) a mortgage broker or loan officer licensed under
Chapter 156, Finance Code, if the person is engaging in an activity
for which the person is licensed; or
(9) a nonprofit organization that provides solely
counseling or advice to homeowners who have a residence in
foreclosure or have defaulted on their home loans, unless the
organization is an associate of the foreclosure consultant.
(b) Subchapters B and C apply to a person described by
Subsection (a) if the person is providing foreclosure consulting
services designed or intended to transfer title, directly or
indirectly, to a residence in foreclosure to that person or the
person's associate.
[Sections 21.003-21.050 reserved for expansion]
SUBCHAPTER B. CONTRACT FOR FORECLOSURE CONSULTING SERVICES
Sec. 21.051. FORM AND TERMS OF CONTRACT. (a) Each
contract for the purchase of the services of a foreclosure
consultant by a homeowner of a residence in foreclosure must be in
writing, dated, and signed by each homeowner and the foreclosure
consultant.
(b) In addition to the notice required by Section 21.052,
the contract must:
(1) fully describe the services the foreclosure
consultant is to perform for the homeowner; and
(2) contain the payment terms, including the total
payments to be made to the foreclosure consultant or the
foreclosure consultant's associate.
Sec. 21.052. REQUIRED DISCLOSURE. The contract must state
the following, in at least 14-point boldfaced type, in immediate
proximity to the space reserved for the homeowner's signature:
NOTICE REQUIRED BY TEXAS LAW
_______ (Name) or an associate of _________ (Name) cannot ask you to
sign or have you sign any document that transfers any interest in
your home or property to __________ (Name) or ___________ (Name's)
associate.
_______ (Name) or ________ (Name's) associate cannot guarantee you
that they will be able to refinance your home or arrange for you to
keep your home.
This is an important legal contract and could result in the loss of
your home. You should consider contacting an attorney or a housing
counselor approved by the United States Department of Housing and
Urban Development before signing.
[Sections 21.053-21.100 reserved for expansion]
SUBCHAPTER C. PROHIBITIONS AND RESTRICTIONS REGARDING FORECLOSURE
CONSULTING SERVICES
Sec. 21.101. NOTICE OF CHARGE OR RECEIPT OF CONSIDERATION.
A foreclosure consultant may not receive any consideration from a
third party in connection with foreclosure consulting services
provided to the homeowner of a residence in foreclosure unless the
consideration is fully disclosed in writing to the homeowner.
Sec. 21.102. PROHIBITED CONDUCT. A foreclosure consultant
may not:
(1) charge, collect, or receive interest or
compensation for a loan made by the foreclosure consultant to the
homeowner of a residence in foreclosure that exceeds eight percent
a year; or
(2) acquire an interest, directly or indirectly, in
the real or personal property of the homeowner of a residence in
foreclosure with whom the foreclosure consultant has contracted to
perform services.
[Sections 21.103-21.150 reserved for expansion]
SUBCHAPTER D. EQUITY PURCHASE CONTRACTS
Sec. 21.151. FORM AND TERMS OF CONTRACT. (a) Each equity
purchase contract must be in writing, dated, and signed by each
selling owner of the residence in foreclosure and the equity
purchaser before the execution of any instrument quit-claiming,
assigning, transferring, conveying, or encumbering an interest in
the residence in foreclosure.
(b) In addition to the notice required by Section 21.152,
the contract must contain:
(1) the name, business address, and telephone number
of the equity purchaser;
(2) the total consideration to be paid by the equity
purchaser in connection with or incident to the equity purchaser's
acquisition, which in no event may be less than 82 percent of the
property's fair market value;
(3) the payment terms or the terms of other
consideration for services the equity purchaser represents will be
performed for the selling homeowner before or after the sale; and
(4) the following notice:
"NOTICE REQUIRED BY TEXAS LAW
Until your right to cancel this contract has ended, ____________
(Name) or anyone working for __________ (Name) CANNOT ask you to
sign or have you sign any deed or any other document."
Sec. 21.152. NOTICE OF CANCELLATION. (a) The contract
must conspicuously state the following as the last provision before
the space reserved for the selling homeowner's signature:
"You may cancel this contract for the sale of your house without any
penalty or obligation at any time before _________________(Date and
time of day). See the attached notice of cancellation form for an
explanation of this right."
(b) The contract must have attached two easily detachable
copies of a cancellation notice. The notice must be in the
following form:
"NOTICE OF CANCELLATION
______ (Date contract signed)
You may cancel this contract for the sale of your house, without any
penalty or obligation, at any time before
_________________________ (Date and time of day). To cancel this
transaction, personally deliver a signed and dated copy of this
Notice of Cancellation by United States mail, postage prepaid, to
__________________, (Name of purchaser) at
_______________________(Street address of purchaser's place of
business) NOT LATER THAN __________________(Date and time of day).
I hereby cancel this transaction.
_______________________________ (Date)
________________________________ (Seller's signature)"
[Sections 21.153-21.200 reserved for expansion]
SUBCHAPTER E. PROHIBITIONS AND RESTRICTIONS REGARDING EQUITY
PURCHASE CONTRACTS
Sec. 21.201. ACTIONS BEFORE CANCELLATION PERIOD EXPIRES.
An equity purchaser may not do any of the following before the
period within which the homeowner may cancel the transaction has
elapsed:
(1) accept from the homeowner an execution of, or
induce the homeowner to execute, an instrument of conveyance of an
interest in the residence in foreclosure;
(2) transfer or encumber or purport to transfer or
encumber an interest in the residence in foreclosure to a third
party; or
(3) pay any consideration to the homeowner.
Sec. 21.202. FALSE OR MISLEADING REPRESENTATION OR
STATEMENT. (a) An equity purchaser may not make a false or
misleading statement regarding the value of the residence in
foreclosure or the amount of proceeds the homeowner will receive
after a foreclosure sale.
(b) An equity purchaser may not represent, directly or
indirectly, that the equity purchaser is assisting the foreclosed
homeowner:
(1) to "save" the person's home or other words to that
effect; or
(2) in preventing a completed foreclosure if the
result of the transaction is that the foreclosed homeowner will not
repurchase the property.
[Sections 21.203-21.250 reserved for expansion]
SUBCHAPTER F. CIVIL REMEDIES
Sec. 21.251. DECEPTIVE TRADE PRACTICE. A violation of this
chapter is a false, misleading, or deceptive act or practice
actionable under Subchapter E, Chapter 17.
SECTION 2. The changes in law made by this Act apply to a
contract entered into on or after the effective date of this Act. A
contract entered into before the effective date of this Act is
governed by the law in effect on the date the contract was entered
into, and the former law is continued in effect for that purpose.
SECTION 3. This Act takes effect September 1, 2009.