Texas Senate Bill SB1993

Texas 2017 - 85th Regular

Caption

Relating to the licensing and other regulation of wrap lenders.

Impact

The introduction of SB1993 is expected to streamline the regulation surrounding wrap lending by defining specific terms and outlining exemptions for various entities, including nonprofit organizations and certain mortgage bankers. By clarifying who qualifies as a wrap lender and the obligations involved, this bill will potentially lower the risks associated with wrap mortgage loans and enhance consumer protections. Additionally, the bill addresses concerns surrounding the responsibilities of wrap lenders when servicing these loans, fostering a clearer understanding of compliance obligations within the housing finance landscape.

Summary

SB1993 aims to amend the Texas Finance Code to provide a regulatory framework for wrap lenders who engage in wrap mortgage loans. These loans are defined as residential mortgage loans that finance the purchase of real estate while continuing to be subject to an unreleased lien from a previous obligation. The bill seeks to clearly delineate the roles and responsibilities of wrap lenders, specifically identifying who qualifies as such and establishing the necessary licensing and regulatory requirements for their operations. This legislative measure is essential in addressing the growing need for more structured regulation within the mortgage lending sector, particularly in markets experiencing increased popularity of wrap mortgages.

Contention

While SB1993 is primarily aimed at enhancing regulatory oversight, some stakeholders may raise concerns regarding the provisions that exempt certain entities from compliance, such as small-scale lenders and nonprofit organizations. Detractors might argue that these exemptions could contribute to inconsistencies in the enforcement of mortgage lending regulations, thereby undermining the protection of consumers who enter into wrap mortgage agreements. Furthermore, the balanced approach of regulating wrap lenders while delineating exempt entities reflects an effort to cater to diverse lending practices, though debates may persist on the adequacy of these definitions and exemptions.