By: Raymond H.B. No. 3181
A BILL TO BE ENTITLED
AN ACT
relating to prohibiting the non-judicial foreclosure of a loan for
the purchase of certain residential property during a loan
modification process; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 343, Finance Code, is amended by adding
Subchapter D to read as follows:
SUBCHAPTER D. REQUIREMENTS FOR MORTGAGE SERVICERS OF HOME LOANS
Sec. 343.301. DEFINITIONS. In this subchapter:
(1) "Foreclosure prevention alternative" means a loan
modification or other alternative to foreclosure offered by or
through a mortgage servicer.
(2) "Mortgage servicer" has the meaning assigned by
Section 51.0001, Property Code.
Sec. 343.302. DUAL-TRACKING NON-JUDICIAL FORECLOSURE
PROHIBITED. (a) This section applies only to a home loan that is a
federally related mortgage loan, as defined by 12 U.S.C. Section
2602, secured by a deed of trust or other contract lien on real
property used as the borrower's residence.
(b) If a borrower submits a complete application for a loan
modification offered by or through the borrower's mortgage
servicer, the mortgage servicer or trustee may not serve a notice of
default or notice of sale or exercise a power of sale under Section
51.002, Property Code, while the application is pending and before
the borrower has been provided with a written determination by the
mortgage servicer regarding the borrower's eligibility for the
requested loan modification.
(c) If a foreclosure prevention alternative is approved in
writing before the service of a notice of default under Section
51.002(d), Property Code, the mortgage servicer or trustee may not
serve a notice of default if:
(1) the borrower is in compliance with the written
terms of a trial or permanent loan modification, forbearance, or
repayment plan; or
(2) a foreclosure prevention alternative has been
approved in writing by all parties, including, for example, the
holder of the note, junior lienholder, and mortgage insurer, as
applicable, and proof of funds or financing has been provided to the
mortgage servicer.
(d) If a foreclosure prevention alternative is approved in
writing after the service of a notice of default under Section
51.002(d), Property Code, a mortgage servicer or trustee may not
serve a notice of sale or exercise a power of sale under Section
51.002, Property Code, if:
(1) the borrower is in compliance with the written
terms of a trial or permanent loan modification, forbearance, or
repayment plan; or
(2) a foreclosure prevention alternative has been
approved in writing by all parties, including, for example, the
holder of the note, junior lienholder, and mortgage insurer, as
applicable, and proof of funds or financing has been provided to the
mortgage servicer.
(e) For purposes of this section, an application is
considered complete when a borrower has supplied the mortgage
servicer with all documents required by the mortgage servicer for
the application within a reasonable time specified by the mortgage
servicer.
Sec. 343.303. FORECLOSURE PREVENTION ALTERNATIVE SURVIVES
TRANSFER. If a borrower has been approved in writing for a loan
modification or other foreclosure prevention alternative and the
borrower's loan is transferred or sold, the subsequent mortgage
servicer shall continue to honor any previously approved loan
modification or other foreclosure prevention alternative and is
subject to Section 343.302 to the same extent as the previous
mortgage servicer.
Sec. 343.304. LIABILITY. (a) A person who violates Section
343.302 or 343.303 is liable to the borrower for:
(1) any actual damages to the borrower as a result of
the violation; or
(2) if the court finds that the violation was the
result of reckless conduct or intentional or wilful misconduct, the
greater of:
(A) three times the borrower's actual damages; or
(B) $50,000.
(b) In addition to the amounts awarded under Subsection (a),
a person who is liable under this section is liable for court costs
and reasonable attorney's fees incurred in connection with the
action.
SECTION 2. Subchapter D, Chapter 343, Finance Code, as
added by this Act, applies only to a sale of residential real
property for which notice of default under Section 51.002(d),
Property Code, is provided on or after the effective date of this
Act. A sale in which notice of default is provided before the
effective date of this Act is subject to the law in effect
immediately before that date, and that law is continued in effect
for that purpose.
SECTION 3. This Act takes effect September 1, 2013.