Texas 2017 - 85th Regular

Texas Senate Bill SB1994 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	By: Zaffirini, ~~et al.~~ S.B. No. 1994
2		-	~~(Ortega)~~
	1	+	By: Zaffirini, Rodríguez S.B. No. 1994
	2	+	Watson
3	3
4	4
5	5		A BILL TO BE ENTITLED
6	6		AN ACT
7	7		relating to residential mortgage loans, including the financing of
8	8		residential real estate purchases by means of a wrap mortgage loan;
9	9		providing licensing requirements; authorizing an administrative
10	10		penalty.
11	11		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12		SECTION 1. Section 156.202, Finance Code, is amended by
13	13		amending Subsection (a-1) and adding Subsection (b) to read as
14	14		follows:
15	15		(a-1) The following entities are exempt from this chapter:
16	16		(1) a nonprofit organization:
17	17		(A) providing self-help housing that originates
18	18		zero interest residential mortgage loans for borrowers who have
19	19		provided part of the labor to construct the dwelling securing the
20	20		loan; or
21	21		(B) that has designation as a Section 501(c)(3)
22	22		organization by the Internal Revenue Service and originates
23	23		residential mortgage loans for borrowers who, through a self-help
24	24		program, have provided at least 200 labor hours or 65 percent of the
25	25		labor to construct the dwelling securing the loan;
26	26		(2) a mortgage banker registered under Chapter 157;
27	27		(3) subject to Subsection (b), any owner of
28	28		residential real estate who in any 12-consecutive-month period
29	29		makes no more than five residential mortgage loans to purchasers of
30	30		the property for all or part of the purchase price of the
31	31		residential real estate against which the mortgage is secured; and
32	32		(4) an entity that is:
33	33		(A) a depository institution;
34	34		(B) a subsidiary of a depository institution that
35	35		is:
36	36		(i) owned and controlled by the depository
37	37		institution; and
38	38		(ii) regulated by a federal banking agency;
39	39		or
40	40		(C) an institution regulated by the Farm Credit
41	41		Administration.
42	42		(b) In determining eligibility for an exemption under
43	43		Subsection (a-1)(3), two or more owners of residential real estate
44	44		are considered a single owner for the purpose of computing the
45	45		number of mortgage loans made within the period specified by that
46	46		subdivision if any of the owners are affiliates, as defined by
47	47		Section 1.002(1), Business Organizations Code, or if any of the
48	48		owners have substantially common ownership, as determined by the
49	49		commissioner.
50	50		SECTION 2. Section 157.0121, Finance Code, is amended by
51	51		amending Subsection (c) and adding Subsection (f) to read as
52	52		follows:
53	53		(c) Employees of the following entities, when acting for the
54	54		benefit of those entities, are exempt from the licensing and other
55	55		requirements of this chapter applicable to residential mortgage
56	56		loan originators:
57	57		(1) a nonprofit organization:
58	58		(A) providing self-help housing that originates
59	59		zero interest residential mortgage loans for borrowers who have
60	60		provided part of the labor to construct the dwelling securing the
61	61		loan; or
62	62		(B) that has designation as a Section 501(c)(3)
63	63		organization by the Internal Revenue Service and originates
64	64		residential mortgage loans for borrowers who, through a self-help
65	65		program, have provided at least 200 labor hours or 65 percent of the
66	66		labor to construct the dwelling securing the loan;
67	67		(2) subject to Subsection (f), any owner of
68	68		residential real estate who in any 12-consecutive-month period
69	69		makes no more than five residential mortgage loans to purchasers of
70	70		the property for all or part of the purchase price of the
71	71		residential real estate against which the mortgage is secured; and
72	72		(3) an entity that is:
73	73		(A) a depository institution;
74	74		(B) a subsidiary of a depository institution that
75	75		is:
76	76		(i) owned and controlled by the depository
77	77		institution; and
78	78		(ii) regulated by a federal banking agency;
79	79		or
80	80		(C) an institution regulated by the Farm Credit
81	81		Administration.
82	82		(f) In determining eligibility for an exemption under
83	83		Subsection (c)(2), two or more owners of residential real estate
84	84		are considered a single owner for the purpose of computing the
85	85		number of mortgage loans made within the period specified by that
86	86		subdivision if any of the owners are affiliates, as defined by
87	87		Section 1.002(1), Business Organizations Code, or if any of the
88	88		owners have substantially common ownership, as determined by the
89	89		commissioner.
90	90		SECTION 3. Subtitle E, Title 3, Finance Code, is amended by
91	91		adding Chapter 159 to read as follows:
92	92		CHAPTER 159. WRAP MORTGAGE LOAN FINANCING
93	93		SUBCHAPTER A. GENERAL PROVISIONS
94	94		Sec. 159.001. DEFINITIONS. In this chapter:
95	95		(1) "Commissioner" means the savings and mortgage
96	96		lending commissioner.
97	97		(2) "Finance commission" means the Finance Commission
98	98		of Texas.
99	99		(3) "Residential mortgage loan" has the meaning
100	100		assigned by Section 180.002.
101	101		(4) "Residential real estate" has the meaning assigned
102	102		by Section 180.002.
103	103		(5) "Wrap borrower" means a person obligated to pay a
104	104		wrap mortgage loan.
105	105		(6) "Wrap lender" means:
106	106		(A) a person who makes a wrap mortgage loan; or
107	107		(B) an owner of residential real estate who
108	108		contracts with another person to make a wrap mortgage loan to a wrap
109	109		borrower on the owner's behalf to finance the purchase of the
110	110		owner's residential real estate.
111	111		(7) "Wrap mortgage loan" means a residential mortgage
112	112		loan:
113	113		(A) made to finance the purchase of residential
114	114		real estate that will continue to be subject to an unreleased lien
115	115		that:
116	116		(i) attached to the residential real estate
117	117		before the loan was made; and
118	118		(ii) secures a debt incurred by a person
119	119		other than the wrap borrower that was not paid off at the time the
120	120		loan was made; and
121	121		(B) obligating the wrap borrower to the wrap
122	122		lender for payment of a debt the principal amount of which includes:
123	123		(i) the outstanding balance of the debt
124	124		described by Paragraph (A)(ii); and
125	125		(ii) any remaining amount of the purchase
126	126		price financed by the wrap lender.
127	127		Sec. 159.002. INAPPLICABILITY OF CHAPTER. (a) In this
128	128		section, "unimproved residential real estate" means residential
129	129		real estate on which a dwelling has not been constructed.
130	130		(b) Notwithstanding any other provision of this chapter,
131	131		this chapter does not apply to a wrap mortgage loan made by or on
132	132		behalf of an owner of unimproved residential real estate to a
133	133		purchaser of that residential real estate if:
134	134		(1) the residential real estate purchased will not
135	135		continue to be subject to any unreleased lien described by Section
136	136		159.001(7)(A) that secures a debt that is subject to a due-on-sale
137	137		clause in connection with which the lienholder may foreclose the
138	138		lien; or
139	139		(2) the residential real estate purchased will
140	140		continue to be subject to an unreleased lien described by
141	141		Subdivision (1) and the holder of that unreleased lien has
142	142		consented to the sale of the residential real estate.
143	143		Sec. 159.003. EXEMPTIONS. (a) The following persons are
144	144		exempt from this chapter:
145	145		(1) a federally insured bank, savings bank, savings
146	146		and loan association, Farm Credit System Institution, or credit
147	147		union;
148	148		(2) a subsidiary of a federally insured bank, savings
149	149		bank, savings and loan association, Farm Credit System Institution,
150	150		or credit union;
151	151		(3) an authorized lender licensed under Chapter 342;
152	152		(4) the state or a governmental agency, political
153	153		subdivision, or other instrumentality of the state, or an employee
154	154		of the state or a governmental agency, political subdivision, or
155	155		instrumentality of the state who is acting within the scope of the
156	156		person's employment; or
157	157		(5) subject to Subsection (b), an owner of residential
158	158		real estate if the owner does not in any 12-consecutive-month
159	159		period make, or contract with another person to make, more than five
160	160		wrap mortgage loans to purchasers of the property for all or part of
161	161		the purchase price of the residential real estate against which the
162	162		mortgage is secured.
163	163		(b) In determining eligibility for an exemption under
164	164		Subsection (a)(5), two or more owners of residential real estate
165	165		are considered a single owner for the purpose of computing the
166	166		number of wrap mortgage loans made within the period specified by
167	167		that subdivision if any of the owners are affiliates, as defined by
168	168		Section 1.002(1), Business Organizations Code, or if any of the
169	169		owners have substantially common ownership, as determined by the
170	170		commissioner.
171	171		SUBCHAPTER B. LICENSING
172	172		Sec. 159.051. LICENSE REQUIRED. (a) A person may not
173	173		originate or make a wrap mortgage loan unless the person is licensed
174	174		to originate or make residential mortgage loans under Chapter 156
175	175		or 157 or is exempt from licensing as provided under an applicable
176	176		provision of those chapters.
177	177		(b) The requirement to hold a license under Subsection (a)
178	178		applies to a person originating or making a wrap mortgage loan
179	179		regardless of whether the person engages in a specific activity for
180	180		which a license is required under Chapter 156 or 157 in connection
181	181		with the originating or making of the loan.
182	182		SUBCHAPTER C. TRANSACTION REQUIREMENTS; REMEDIES
183	183		Sec. 159.101. DISCLOSURE STATEMENT. (a) A wrap lender not
184	184		otherwise required to provide a written disclosure statement to the
185	185		wrap borrower under Section 5.016, Property Code, must, on or
186	186		before the seventh day before the wrap mortgage loan agreement is
187	187		entered into, provide to the wrap borrower a separate written
188	188		disclosure statement in at least 12-point type that contains the
189	189		information required for a written disclosure statement under
190	190		Section 5.016, Property Code.
191	191		(b) Regardless of whether the wrap lender provides a written
192	192		disclosure statement under Subsection (a) or under Section 5.016,
193	193		Property Code, the wrap lender's disclosure statement to the wrap
194	194		borrower must include a statement in a form substantially similar
195	195		to the following:
196	196		NOTICE REGARDING PROPERTY INSURANCE: ANY INSURANCE MAINTAINED BY A
197	197		SELLER, LENDER, OR OTHER PERSON WHO IS NOT THE BUYER OF THIS
198	198		PROPERTY MAY NOT PROVIDE COVERAGE TO THE BUYER IF THE BUYER SUFFERS
199	199		A LOSS OR INCURS LIABILITY IN CONNECTION WITH THE PROPERTY. TO
200	200		ENSURE THE BUYER'S INTERESTS ARE PROTECTED, THE BUYER SHOULD
201	201		PURCHASE THE BUYER'S OWN PROPERTY INSURANCE. BEFORE PURCHASING
202	202		THIS PROPERTY, YOU MAY WISH TO CONSULT AN INSURANCE AGENT REGARDING
203	203		THE INSURANCE COVERAGE AVAILABLE TO YOU AS A BUYER OF THE PROPERTY.
204	204		Sec. 159.102. FOREIGN LANGUAGE REQUIREMENT. Regardless of
205	205		whether the wrap lender provides a written disclosure statement
206	206		under Section 159.101 or under Section 5.016, Property Code, if the
207	207		negotiations that precede the execution of the wrap mortgage loan
208	208		agreement are conducted primarily in a language other than English,
209	209		the wrap lender shall provide a copy of the required disclosure
210	210		statement in that language to the wrap borrower.
211	211		Sec. 159.103. FAILURE TO PROVIDE DISCLOSURE: TOLLING OF
212	212		LIMITATIONS. If a wrap lender fails to provide the disclosure
213	213		statement as required by Section 159.101 or fails to provide the
214	214		disclosure statement in the language required by Section 159.102,
215	215		the limitations period applicable to any cause of action of the wrap
216	216		borrower against the wrap lender arising out of the wrap lender's
217	217		violation of a law of this state in connection with the wrap
218	218		mortgage loan transaction is tolled until the 120th day after the
219	219		date the required disclosure statement is provided.
220	220		Sec. 159.104. ENFORCEABILITY OF WRAP LIEN. A lien securing
221	221		a wrap mortgage loan is void unless:
222	222		(1) the residential real estate was conveyed to the
223	223		purchaser with the written consent of each holder of an unreleased
224	224		lien described by Section 159.001(7)(A) and a copy of each
225	225		lienholder's written consent is attached to the recorded instrument
226	226		conveying the residential real estate; and
227	227		(2) the wrap mortgage loan and the conveyance of the
228	228		residential real estate securing the loan are closed by an attorney
229	229		or a title company and an affidavit of a person knowledgeable of the
230	230		facts regarding the closing location that confirms the closing
231	231		location is attached to the recorded instrument conveying the
232	232		residential real estate.
233	233		Sec. 159.105. BORROWER'S RIGHT OF ACTION. (a) A wrap
234	234		borrower may bring an action to:
235	235		(1) obtain declaratory or injunctive relief to enforce
236	236		this subchapter;
237	237		(2) recover any actual damages suffered by the wrap
238	238		borrower as a result of a violation of this subchapter; or
239	239		(3) obtain other remedies available in an action under
240	240		Section 17.50, Business & Commerce Code, as otherwise authorized
241	241		under this subchapter.
242	242		(b) A wrap borrower who prevails in an action under this
243	243		section may recover court costs and reasonable attorney's fees.
244	244		Sec. 159.106. WAIVER OR AVOIDANCE PROHIBITED. (a) Any
245	245		purported waiver of a right of a wrap borrower under this subchapter
246	246		or purported exemption of a person from liability for a violation of
247	247		this subchapter is void.
248	248		(b) A person who is a party to a residential real estate
249	249		transaction may not evade the application of this subchapter by any
250	250		device, subterfuge, or pretense, and any attempt to do so is void
251	251		and a deceptive trade practice under Subchapter E, Chapter 17,
252	252		Business & Commerce Code, and is actionable under that subchapter.
253	253		Sec. 159.107. RULEMAKING AUTHORITY. The finance commission
254	254		may adopt and enforce rules necessary for the intent of or to ensure
255	255		compliance with this subchapter.
256	256		SUBCHAPTER D. DUTIES OWED TO WRAP BORROWER
257	257		Sec. 159.151. MONEY HELD IN TRUST. A person who collects or
258	258		receives a payment from a wrap borrower under the terms of a wrap
259	259		mortgage loan holds the money in trust for the benefit of the
260	260		borrower.
261	261		Sec. 159.152. FIDUCIARY DUTY. A person who collects or
262	262		receives a payment from a wrap borrower under the terms of or in
263	263		connection with a wrap mortgage loan owes a fiduciary duty to the
264	264		wrap borrower to use the payment to satisfy the wrap lender's
265	265		obligations under each debt described by Section 159.001(7)(A)(ii)
266	266		and any other obligation affecting the residential real estate for
267	267		which the wrap lender is responsible.
268	268		SUBCHAPTER E. WRAP BORROWER'S RIGHTS
269	269		Sec. 159.201. APPLICABILITY OF SUBCHAPTER. (a) Subject to
270	270		Subsection (b), this subchapter applies only to a wrap mortgage
271	271		loan for a purchase of residential real estate to be used as the
272	272		wrap borrower's residence.
273	273		(b) This subchapter does not apply to a wrap mortgage loan
274	274		for a sale of residential real estate that is the wrap lender's
275	275		homestead.
276	276		Sec. 159.202. WRAP BORROWER'S RIGHT TO DEDUCT. The wrap
277	277		borrower, without taking judicial action, may deduct from any
278	278		amount owed to the wrap lender under the terms of the wrap mortgage
279	279		loan:
280	280		(1) the amount of any payment made by the wrap borrower
281	281		to an obligee of a debt described by Section 159.001(7)(A)(ii) to
282	282		cure a default by the wrap lender caused by the lender's failure to
283	283		make payments for which the lender is responsible under the terms of
284	284		the wrap mortgage loan; or
285	285		(2) any other amount for which the wrap lender is
286	286		liable to the wrap borrower under the terms of the wrap mortgage
287	287		loan.
288	288		SUBCHAPTER F. ENFORCEMENT OF CERTAIN REGISTRATION REQUIREMENTS
289	289		Sec. 159.251. APPLICABILITY OF SUBCHAPTER. This subchapter
290	290		applies only to a wrap lender who is required to register as a
291	291		residential mortgage loan servicer under Chapter 158.
292	292		Sec. 159.252. INSPECTION; INVESTIGATION. (a) The
293	293		commissioner may conduct an inspection of a wrap lender registered
294	294		under Chapter 158 as the commissioner determines necessary to
295	295		determine whether the wrap lender is complying with that chapter
296	296		and applicable rules. The inspection may include an inspection of
297	297		the books, records, documents, operations, and facilities of the
298	298		wrap lender. The commissioner may share evidence of criminal
299	299		activity gathered during an inspection or investigation with any
300	300		state or federal law enforcement agency.
301	301		(b) For reasonable cause, the commissioner at any time may
302	302		investigate a wrap lender registered under Chapter 158 to determine
303	303		whether the lender is complying with that chapter and applicable
304	304		rules.
305	305		(c) The commissioner may conduct an undercover or covert
306	306		investigation only if the commissioner, after due consideration of
307	307		the circumstances, determines that the investigation is necessary
308	308		to prevent immediate harm and to carry out the purposes of Chapter
309	309		158.
310	310		(d) The finance commission by rule shall provide guidelines
311	311		to govern an inspection or investigation under this section,
312	312		including rules to:
313	313		(1) determine the information and records of the wrap
314	314		lender to which the commissioner may demand access during an
315	315		inspection or investigation; and
316	316		(2) establish what constitutes reasonable cause for an
317	317		investigation.
318	318		(e) Information obtained by the commissioner during an
319	319		inspection or investigation under this section is confidential
320	320		unless disclosure of the information is permitted or required by
321	321		other law.
322	322		(f) The commissioner may share information gathered during
323	323		an investigation under this section with a state or federal agency.
324	324		The commissioner may share information gathered during an
325	325		inspection with a state or federal agency only if the commissioner
326	326		determines there is a valid reason for the sharing.
327	327		(g) The commissioner may require reimbursement of expenses
328	328		for each examiner for an on-site examination or inspection of a
329	329		registered wrap lender under this section if records are located
330	330		out of state and are not made available for examination or
331	331		inspection by the examiner in this state. The finance commission by
332	332		rule shall set the maximum amount for the reimbursement of expenses
333	333		authorized under this subsection.
334	334		Sec. 159.253. ISSUANCE AND ENFORCEMENT OF SUBPOENA.
335	335		(a) During an investigation conducted under this subchapter, the
336	336		commissioner may issue a subpoena that is addressed to a peace
337	337		officer of this state or other person authorized by law to serve
338	338		citation or perfect service. The subpoena may require a person to
339	339		give a deposition, produce documents, or both.
340	340		(b) If a person disobeys a subpoena or if a person appearing
341	341		in a deposition in connection with the investigation refuses to
342	342		testify, the commissioner may petition a district court in Travis
343	343		County to issue an order requiring the person to obey the subpoena,
344	344		testify, or produce documents relating to the matter. The court
345	345		shall promptly set an application to enforce a subpoena issued
346	346		under Subsection (a) for hearing and shall cause notice of the
347	347		application and the hearing to be served on the person to whom the
348	348		subpoena is directed.
349	349		SUBCHAPTER G. ENFORCEMENT OF CHAPTER
350	350		Sec. 159.301. CEASE AND DESIST ORDER. (a) The
351	351		commissioner, if the commissioner has reasonable cause to believe
352	352		that a wrap lender or wrap mortgage loan originator to whom this
353	353		chapter applies has violated or is about to violate this chapter,
354	354		may issue without notice and hearing an order to cease and desist
355	355		from continuing a particular action or an order to take affirmative
356	356		action, or both, to enforce compliance with this chapter.
357	357		(b) An order issued under Subsection (a) must contain a
358	358		reasonably detailed statement of the facts on which the order is
359	359		made. If a person against whom the order is made requests a
360	360		hearing, the commissioner shall set and give notice of a hearing
361	361		before the commissioner or a hearings officer. The hearing shall be
362	362		governed by Chapter 2001, Government Code. Based on the findings of
363	363		fact, conclusions of law, and recommendations of the hearings
364	364		officer, the commissioner by order may find a violation has
365	365		occurred or not occurred.
366	366		(c) If a hearing is not requested under Subsection (b) not
367	367		later than the 30th day after the date on which an order is made, the
368	368		order is considered final and not appealable.
369	369		(d) The commissioner, after giving notice and an
370	370		opportunity for hearing, may impose against a person who violates a
371	371		cease and desist order an administrative penalty in an amount not to
372	372		exceed $1,000 for each day of the violation. In addition to any
373	373		other remedy provided by law, the commissioner may institute in
374	374		district court a suit for injunctive relief and to collect the
375	375		administrative penalty. A bond is not required of the commissioner
376	376		with respect to injunctive relief granted under this subsection.
377	377		SECTION 4. Section 180.003, Finance Code, is amended by
378	378		amending Subsection (a) and adding Subsection (d) to read as
379	379		follows:
380	380		(a) The following persons are exempt from this chapter:
381	381		(1) a registered mortgage loan originator when acting
382	382		for an entity described by Section 180.002(16)(A)(i), (ii), or
383	383		(iii);
384	384		(2) an individual who offers or negotiates terms of a
385	385		residential mortgage loan with or on behalf of an immediate family
386	386		member of the individual;
387	387		(3) a licensed attorney who negotiates the terms of a
388	388		residential mortgage loan on behalf of a client as an ancillary
389	389		matter to the attorney's representation of the client, unless the
390	390		attorney:
391	391		(A) takes a residential mortgage loan
392	392		application; and
393	393		(B) offers or negotiates the terms of a
394	394		residential mortgage loan;
395	395		(4) an individual who offers or negotiates terms of a
396	396		residential mortgage loan secured by a dwelling that serves as the
397	397		individual's residence;
398	398		(5) subject to Subsection (d), an owner of residential
399	399		real estate who in any 12-consecutive-month period makes no more
400	400		than five residential mortgage loans to purchasers of the property
401	401		for all or part of the purchase price of the residential real estate
402	402		against which the mortgage is secured; and
403	403		(6) subject to Subsection (d), an owner of a dwelling
404	404		who in any 12-consecutive-month period makes no more than five
405	405		residential mortgage loans to purchasers of the property for all or
406	406		part of the purchase price of the dwelling against which the
407	407		mortgage or security interest is secured.
408	408		(d) In determining eligibility for an exemption under
409	409		Subsection (a)(5) or (6), two or more owners of residential real
410	410		estate or a dwelling, as applicable, are considered a single owner
411	411		for the purpose of computing the number of mortgage loans made
412	412		within the period specified by those subdivisions if any of the
413	413		owners are affiliates, as defined by Section 1.002(1), Business
414	414		Organizations Code, or if any of the owners have substantially
415	415		common ownership, as determined by the savings and mortgage lending
416	416		commissioner.
417	417		SECTION 5. This Act takes effect September 1, 2017.