81R5932 AJA-F
By: Lucio S.B. No. 979
A BILL TO BE ENTITLED
AN ACT
relating to foreclosure sales of residential real property;
providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 402, Government Code, is
amended by adding Section 402.035 to read as follows:
Sec. 402.035. RESIDENTIAL PROPERTY FORECLOSURE NOTICE. (a)
The attorney general, in consultation with interested stakeholders
as the attorney general considers appropriate, shall prescribe the
form and content of the written notice that must be sent by a
mortgage servicer to a debtor under Sections 51.002 and 51.0022,
Property Code.
(b) The notice must:
(1) be written in plain language in English and
Spanish;
(2) be entitled "Rights of Homeowners or Tenants of
Homeowners Facing Foreclosure" or the Spanish equivalent of that
title, as applicable; and
(3) include:
(A) an explanation of foreclosure, including a
description of the various processes of foreclosure of a mortgage
lien on residential property as applicable to each type of mortgage
lien;
(B) a statement that state law requires that the
debtor in default under a residential mortgage lien be given at
least 45 days to cure the default;
(C) a description of the handling of payments
made after the time for cure has expired;
(D) the debtor's right to the return of payments
in certain circumstances;
(E) a statement that the debtor and the public
must be given at least 21 days' notice of the foreclosure sale and
that a foreclosure sale may occur only on the first Tuesday of a
month;
(F) a description of the options available to the
debtor in default to prevent the foreclosure;
(G) a description of and warning against typical
activities that may be encountered by the debtor in connection with
the foreclosure, including any unconscionable actions or courses of
action under Subchapter E, Chapter 17, Business & Commerce Code;
(H) a description of the rights and remedies of a
tenant whose landlord loses the property to foreclosure, including
a tenant's right to credit a security deposit toward rent under
certain circumstances and to withhold rent from a landlord during
and after the foreclosure process; and
(I) a description of and contact information for
resources available to the debtor to assist in preventing the
foreclosure or in filing an action concerning the foreclosure
process or the lien being foreclosed, including local bar
associations, the State Bar of Texas, and nonprofit legal
assistance programs.
(c) The attorney general shall update the notice prescribed
under this section at least annually and maintain the most current
version of the notice on the attorney general's Internet website.
SECTION 2. Section 24.005(b), Property Code, is amended to
read as follows:
(b) If the occupant is a tenant at will or by sufferance, the
landlord must give the tenant at least three days' written notice to
vacate before the landlord files a forcible detainer suit unless
the parties have contracted for a shorter or longer notice period in
a written lease or agreement. If a building is purchased at a tax
foreclosure sale or a trustee's foreclosure sale under a lien
superior to the tenant's lease and the tenant timely pays rent and
is not otherwise in default under the tenant's lease after
foreclosure, the purchaser must give a residential tenant of the
building at least 90 [30] days' written notice to vacate and must
otherwise comply with Section 51.011 [if the purchaser chooses not
to continue the lease. The tenant is considered to timely pay the
rent under this subsection if, during the month of the foreclosure
sale, the tenant pays the rent for that month to the landlord before
receiving any notice that a foreclosure sale is scheduled during
the month or pays the rent for that month to the foreclosing
lienholder or the purchaser at foreclosure not later than the fifth
day after the date of receipt of a written notice of the name and
address of the purchaser that requests payment. Before a
foreclosure sale, a foreclosing lienholder may give written notice
to a tenant stating that a foreclosure notice has been given to the
landlord or owner of the property and specifying the date of the
foreclosure].
SECTION 3. Section 51.002, Property Code, is amended by
amending Subsection (d) and adding Subsections (d-1) and (d-2) to
read as follows:
(d) Notwithstanding any agreement to the contrary, the
mortgage servicer of the debt shall serve a debtor in default under
a deed of trust or other contract lien on residential real property
[used as the debtor's residence] with written notice by certified
mail, and first class regular mail, addressed to the debtor at the
debtor's last known address stating that the debtor is in default
under the deed of trust or other contract lien and giving the debtor
at least 45 [20] days to cure the default before notice of sale can
be given under Subsection (b). The entire calendar day on which the
notice required by this subsection is given, regardless of the time
of day at which the notice is given, is included in computing the
45-day [20-day] notice period required by this subsection, and the
entire calendar day on which notice of sale is given under
Subsection (b) is excluded in computing the 45-day [20-day] notice
period.
(d-1) In addition to the notice of sale sent by certified
mail under Subsection (b)(3), the mortgage servicer must send the
notice of sale by first class regular mail addressed to the debtor
at the debtor's last known address and by first class regular mail
sent to the property's physical address and addressed to
"Occupant."
(d-2) The mortgage servicer must include with each notice
sent by regular or certified mail under Subsection (b)(3), (d), or
(d-1) a copy of the notice prescribed by the attorney general under
Section 402.035, Government Code.
SECTION 4. Chapter 51, Property Code, is amended by adding
Sections 51.0022, 51.010, 51.011, and 51.012 to read as follows:
Sec. 51.0022. RETURN OF CERTAIN PAYMENTS; PROVISION OF
CERTAIN NOTICE. (a) Before giving a notice of sale under Section
51.002(b), a mortgage servicer must return to the debtor any
payments received from the debtor after the last notice of default
was sent to the debtor under Section 51.002(d).
(b) If the mortgage servicer receives a payment from the
debtor after giving notice of sale under Section 51.002(b), and the
foreclosure sale occurs on the date in the notice of sale, the
mortgage servicer shall return those payments on or before the 10th
day after the date of the sale.
(c) A payment returned under this section by mail must
include a copy of the notice prescribed by the attorney general
under Section 402.035, Government Code. If a payment is returned
under this section by electronic means, the mortgage servicer shall
mail a notice of the payment's return to the debtor by first class
regular mail with a copy of the notice prescribed by the attorney
general under Section 402.035, Government Code.
(d) This section applies only to a lien on residential real
property occupied by the debtor as the debtor's homestead.
Sec. 51.010. JUDICIAL FORECLOSURE REQUIRED FOR CERTAIN
DEBTS. (a) A deed of trust or other contract lien on residential
real property occupied by the debtor as the debtor's homestead may
not be foreclosed and a power of sale under the contract may not be
exercised without a court judgment foreclosing the lien and
ordering the sale of the property by a sheriff or constable if the
debt in default:
(1) had an annual percentage rate, as defined by the
federal Truth in Lending Act (15 U.S.C. Section 1601 et seq.), that
was at least three percentage points more than the prime rate as
published by the Wall Street Journal two weeks before the date the
debt was incurred;
(2) allows the contract interest rate to increase:
(A) by more than two percentage points in any
one-year period; or
(B) more often than once a year;
(3) has a universal default provision that allows for
a change in the interest rate when there is:
(A) a default by the debtor on any obligation to
the lender or any other lender; or
(B) a decrease in the debtor's credit score;
(4) has a prepayment penalty;
(5) allows negative amortization;
(6) provides for a scheduled payment that is more than
twice as large as the average of earlier scheduled monthly
payments; or
(7) allows for the payment of interest only.
(b) This section does not apply to an interim construction
loan.
Sec. 51.011. TENANT'S TIME TO VACATE; PAYMENT OF RENT. (a)
A person who purchases residential real property at a foreclosure
sale under this chapter and gives a notice to vacate under Section
24.005 to a tenant who occupies the property at the time of the
foreclosure sale under a lease agreement entered into after the
date the lien that was the subject of the foreclosure sale attached
to the property may not require the tenant to vacate the property
before the 90th day after the date the notice is sent.
(b) Except as provided by Subsection (c), on a written
demand by the purchaser, a tenant described by Subsection (a) must
pay rent to the purchaser of the property as required by the lease
agreement that applied to the tenant on the date of the foreclosure
sale and otherwise comply with the terms of that lease.
(c) A tenant who, before the foreclosure sale, has paid rent
for a rental period that includes the date of the foreclosure sale
is not required to pay rent to the purchaser until rent for the
first rental period commencing after the foreclosure sale is due.
(d) Unless the purchaser acknowledges and delivers in
writing a statement that the new owner is responsible for the
tenant's security deposit and specifying the exact dollar amount of
the deposit, the tenant is entitled to credit the security deposit
toward the rent owed the purchaser without the necessity of
judicial action.
Sec. 51.012. WAIVER. A provision of a contract, agreement,
or other document that purports to waive a right of a debtor or
exempt a mortgage servicer, mortgagee, trustee, substitute
trustee, or government official from a duty under this chapter is
void.
SECTION 5. Subchapter A, Chapter 92, Property Code, is
amended by adding Section 92.021 to read as follows:
Sec. 92.021. WITHHOLDING OF RENT ON NOTICE OF FORECLOSURE.
(a) Notwithstanding any other law or a provision of a lease
agreement, if a tenant receives written notice that the leased
premises are subject to a foreclosure sale, the tenant is
authorized to withhold the payment of rent without any adverse
action, penalty, fee, or charge until:
(1) the property is purchased at a foreclosure sale;
or
(2) the default giving rise to the foreclosure sale
has been cured, the sale has been canceled, the tenant has been
given at least 10 days' notice and proof of the cure and
cancellation, and the tenant has been provided a method to confirm
the facts directly with the lienholder who initiated the
foreclosure sale.
(b) A landlord who violates this section or threatens to
violate this section is liable to the tenant for:
(1) actual damages;
(2) a civil penalty of three times the monthly rent;
and
(3) reasonable attorney's fees.
(c) A landlord who violates this section or threatens to
violate this section commits an offense. An offense under this
subsection is a Class A misdemeanor.
SECTION 6. (a) Not later than November 1, 2009, the attorney
general shall prescribe the form and content of the notice under
Section 402.035, Government Code, as added by this Act.
(b) Section 24.005(b), Property Code, as amended by this
Act, and Section 51.011, Property Code, as added by this Act, apply
only to a notice to vacate residential real property purchased at a
foreclosure sale on or after the effective date of this Act. Notice
to vacate residential real property purchased at a foreclosure sale
before the effective date of this Act is governed by the law in
effect immediately before the effective date of this Act, and that
law is continued in effect for that purpose.
(c) Except as provided by this section, Chapter 51, Property
Code, as amended by this Act, applies only to a sale of residential
real property in which notice of default under Section 51.002,
Property Code, is provided on or after December 1, 2009. A sale in
which notice of default is provided before December 1, 2009, is
subject to the law in effect immediately before the effective date
of this Act, and that law is continued in effect for that purpose.
(d) Section 92.021, Property Code, as added by this Act,
applies only to a lease agreement entered into or renewed on or
after the effective date of this Act. A lease agreement entered
into or renewed before the effective date of this Act is governed by
the law in effect immediately before the effective date of this Act,
and that law is continued in effect for that purpose.
SECTION 7. This Act takes effect September 1, 2009.