82R1281 JE-D
By: Ellis S.B. No. 767
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of certain residential mortgage
foreclosure consulting services; providing a criminal 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. REGULATION OF CERTAIN RESIDENTIAL FORECLOSURE
CONSULTING SERVICES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 21.001. DEFINITIONS. (a) In this chapter:
(1) "Foreclosure consultant" means a person who makes
a solicitation, representation, or offer to a homeowner to perform
for compensation, or who for compensation performs, a service that
the person represents will do any of the following:
(A) prevent or postpone a foreclosure sale;
(B) obtain a forbearance from:
(i) a mortgagee;
(ii) a beneficiary of a deed of trust; or
(iii) another person who holds a lien
secured by the residence in foreclosure;
(C) assist the homeowner:
(i) to cure the default giving rise to the
foreclosure action; or
(ii) to exercise the right of reinstatement
of the homeowner's obligation secured by the residence in
foreclosure;
(D) obtain an extension of the period within
which the homeowner may reinstate the homeowner's obligation
secured by the residence in foreclosure;
(E) obtain a waiver of an acceleration clause
contained in a promissory note or contract secured by a deed of
trust or mortgage on a residence in foreclosure or contained in the
deed of trust or mortgage;
(F) assist the homeowner to obtain a loan or
advance of funds to prevent foreclosure;
(G) avoid or ameliorate the impairment of the
homeowner's credit resulting from the recording of a notice of
default or the conduct of a foreclosure sale;
(H) save the homeowner's residence from
foreclosure; or
(I) assist the homeowner in obtaining excess
proceeds from a foreclosure sale of the homeowner's residence.
(2) "Homeowner" means a person that holds record title
to a residence in foreclosure at the time the foreclosure action has
been commenced.
(3) "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 property owner's
principal place of residence, and against which a foreclosure
action has been commenced.
(b) For purposes of Subsections (a)(2) and (3), a
foreclosure action has been commenced if:
(1) notice of sale has been filed under Section
51.002(b), Property Code; or
(2) a judicial foreclosure action has been commenced.
Sec. 21.002. EXCEPTION FROM APPLICABILITY OF CHAPTER. (a)
Except as provided by Subsection (b), this chapter does not apply to
the following persons that 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 that 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 mortgage servicer, as defined by Section
51.0001, Property Code, of an obligation secured by a lien on a
residence in foreclosure if the servicer performs those services in
connection with the obligation or lien;
(4) 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;
(5) an affiliate of a person described by Subdivision
(4) if the affiliate performs those services as part of the
affiliate's normal business activities;
(6) 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, 5.066, 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;
(7) 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;
(8) a licensed real estate broker or real estate
salesperson if the person is engaging in an activity for which the
person is licensed;
(9) 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
(10) 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) This chapter applies 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.
Sec. 21.003. CONFLICT WITH OTHER LAW. To the extent of a
conflict between this chapter and Chapter 393, Finance Code, this
chapter controls.
[Sections 21.004-21.050 reserved for expansion]
SUBCHAPTER B. CONTRACT FOR SERVICES
Sec. 21.051. FORM AND TERMS OF CONTRACT. 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.
Sec. 21.052. REQUIRED DISCLOSURE. Before entering into a
contract with a homeowner of a residence in foreclosure for the
purchase of the services of a foreclosure consultant, the
foreclosure consultant shall provide the homeowner written notice
stating the following, in at least 14-point boldfaced type:
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.
You may, at any time, cancel or rescind this contract, without
penalty of any kind.
If you want to cancel this contract, mail or deliver a signed and
dated copy of this notice of cancellation or rescission, or any
other written notice, indicating your intent to cancel or rescind
to _________________ (Name and address of foreclosure consultant)
at ________________________ (Address of foreclosure consultant,
including facsimile and electronic mail address).
As part of any cancellation or rescission, you (the homeowner) must
repay any money spent on your behalf by _____________________ (Name
of foreclosure consultant) prior to receipt of this notice and as a
result of this agreement, within 60 days, along with interest
calculated at the rate of eight percent per year.
[Sections 21.053-21.100 reserved for expansion]
SUBCHAPTER C. LIMITATIONS, PROHIBITIONS, AND DUTIES REGARDING
SERVICES
Sec. 21.101. RESTRICTIONS ON CHARGE OR RECEIPT OF
CONSIDERATION. A foreclosure consultant may not:
(1) charge or receive compensation until the
foreclosure consultant has fully performed each service the
foreclosure consultant has contracted to perform or has represented
the foreclosure consultant can or will perform unless the
foreclosure consultant has obtained a surety bond or established
and maintained a surety account for each location at which the
foreclosure consultant conducts business in the manner that
Subchapter E, Chapter 393, Finance Code, provides for credit
services organizations; or
(2) 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) take any power of attorney from a homeowner for any
purpose other than to inspect documents;
(2) for purposes of securing payment of compensation,
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; or
(3) take an assignment of wages to secure payment of
compensation.
Sec. 21.103. RETENTION OF RECORDS. (a) A foreclosure
consultant shall keep each record and document, including the
foreclosure consultant contract, related to foreclosure consulting
services performed on behalf of a homeowner.
(b) A foreclosure consultant shall retain the records
described by Subsection (a) until at least the third anniversary of
the day the foreclosure consultant contract entered into by the
consultant and the homeowner was terminated or concluded.
[Sections 21.104-21.150 reserved for expansion]
SUBCHAPTER D. ENFORCEMENT
Sec. 21.151. CRIMINAL PENALTY. (a) A person commits an
offense if the person violates this chapter.
(b) An offense under this chapter is a Class C misdemeanor.
Sec. 21.152. 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 only 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, 2011.