By: Gutierrez H.B. No. 3718
A BILL TO BE ENTITLED
AN ACT
Relating to the sale of real property.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 34 of the Finance Code, is amended by
adding Subchapter E to read as follows:
34.401. DEFINITIONS. (a) The definitions provided by
Section 31.002 apply to this chapter.
(b) For the purposes of this Chapter, a short sale or
discounted sale or proposed short sale or proposed discounted sale
is defined as a sale or proposed sale of real property wherein the
net proceeds of the sale are less than the amount the borrower owes
to the bank(s) or lending institution(s) which have a secured lien
against said real property.
34.402. No bank or lending institution operating within the
State of Texas may, in the process of considering a discounted or
short sale, disallow a cost incurred by the borrower which is
charged by an attorney licensed by the Supreme Court of Texas and
regulated by the State Bar of Texas, for services rendered to the
borrower, assisting with the negotiation of the terms of the
discounted or short sale approval if:
a) the amount of offer submitted for approval by the
borrower, or their realtor or agent, to the lending
institution or bank is at least 90% of the total outstanding
balance of principal, interest and penalties owed on the note
which is secured by a deed of trust on the property,
calculated pursuant to the exact terms of the note and
respective deed of trust; and
b) The amount of said legal fees incurred by the
borrower to be paid at the time of closing of the proposed
short sale does not exceed the lessor of $2,500.00 or 1% of
the total purchase price of the purchase contract for sale
submitted to the banking or lending institution for approval
as a discounted or short sale.
34.403. In any situation where a debtor is more than 60 days
delinquent on a mortgage which is secured by a deed of trust owed to
a lender or bank doing business in the State of Texas, and upon the
borrower receiving a notice of acceleration from the bank or lender
in relation to enforcement of a note, and/or the notice of proposed
foreclosure on the property through the deed of trust used as
collateral or security on the note securing the debt owed by the
borrower to the bank or lending institution, the borrower shall
have the absolute right to, within 10 days from receiving the said
notice, request the "broker price opinion" or informal or formal
appraisal, which the bank or lending institution has prepared or
has had prepared on its behalf, in relation to the acceleration of
the note and/or the proposed foreclosure and sale of the property
for enforcement of the note and deed of trust on the property. Upon
receipt of the request by the borrower, sent by certified mail,
return receipt requested, the bank or lending institution shall
have, from the date of receiving said request, a maximum of 10 days
to send, by certified mail, return receipt requested, to the
borrower, a full and complete copy of the broker price opinion
and/or formal or informal appraisal being relied upon by the bank
for the purpose of establishing the appropriate market value of the
house for consideration and approval or disapproval of the short
sale offers and/or the foreclosure proceeding. Upon receipt of the
broker price opinion and/or formal or informal appraisal from the
bank or lending institution, the borrower may not disclose the
information contained in the broker price opinion or formal or
informal appraisal to any third parties other than the borrower's
licensed real estate broker or agent, who has been employed by the
borrower to assist in obtaining offers and negotiating the
discounted or short sale, and/or an attorney licensed by the
Supreme Court of Texas and regulated by the State Bar of Texas, who
has been employed to assist in negotiations with the bank and
providing legal advice and consultation to avoid deficiencies and
acquire offers which will be the highest and best offers for
avoiding a deficiency in the amount owed to the bank or lending
institution by the borrower as a result of any potential discounted
or short sale or foreclosure proceeding. The allowable disclosure
by the borrower under this subsection includes disclosure to any
employees, agents, escrow officers, paraprofessionals, or other
contracted individuals by the broker, agent, or licensed attorney,
provided however that the confidentiality required of the borrower,
shall extend to said third parties as a condition of disclosure of
the confidential information received by the borrower from the bank
or lending institution in response to their request.
34.404. Upon approval and closing of a discounted or short
sale transaction, or finalization of the foreclosure proceeding and
transfer of title thereunder, the borrower, as well as any
recipient of information from the borrower shall no longer be
subject to the confidentiality requirement of this subsection with
regard to the broker price opinion or formal or informal appraisal
received hereunder.
34.405. Upon receipt of an offer for a discounted or short
sale which is submitted by a borrower or a licensed real estate
broker or agent, or licensed attorney acting on behalf of the
borrower, a bank or lending institution doing business in the State
of Texas holding the note which has been the subject of notice of
acceleration and/or notice of pending foreclosure, shall have only
10 days to respond to said offer, and said response must be in
writing and shall include an approval of the discounted or short
sale, or if denied, specific and exact reasons why the discounted or
short sale is not being approved. Upon receipt of a denial of a
proposed discounted or short sale, a borrower shall have 15 days to
accumulate additional information or cure any defects in an offer,
or accumulate additional offers at higher prices or better terms,
and submit said offers to the bank or lending institution. Upon
receipt of subsequent offers from a borrower, broker, agent or
attorney representing the borrower, the bank or lending institution
shall provide its response on approval or disapproval, as required
above, to the borrower within 10 days from receipt of the
supplemental offer.
34.406. In the event a bank or lending institution refusing
to approve a discounted or short sale offer from a borrower or
borrower's representative under this section, and a foreclosure
occurs, the bank or lending institution shall be liable for any
deficiency by the borrower in the event the amount received at
foreclosure of the property is equal to or less than 5% more than
the highest and best discounted or short sale offer that was denied
by the bank or lending institution prior to the foreclosure
proceeding. In the event of such liability by the bank or lending
institution, the bank or lending institution shall be required to
write off any said deficiencies and pay a penalty of $2,000.00 to
the borrower upon receipt and acceptance of the foreclosure offer
and transfer of the property subject thereto.
SECTION 2. 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, 2011.