Texas House Bill HB216

Texas 2021 - 87th Regular

Caption

Relating to residential mortgage loans, including the financing of residential real estate purchases by means of a wrap mortgage loan; providing licensing and registration requirements; authorizing an administrative penalty.

Impact

The enactment of HB 216 will amend the Texas Finance Code by adding Chapter 159, which will establish detailed regulations governing the issuance and management of wrap mortgage loans. Key provisions include strict requirements for disclosures to borrowers, the establishment of fiduciary duties owed by lenders to their borrowers, and the conditions under which a borrower may rescind a mortgage loan agreement. By clarifying the legal framework surrounding wrap mortgage loans, the bill aims to enhance consumer protection and ensure that financing methods in the residential real estate market remain transparent and accountable.

Summary

House Bill 216 aims to regulate residential mortgage loans, including specific provisions for 'wrap mortgage loans.' A wrap mortgage loan is defined as a type of financing that allows a borrower to purchase residential real estate while keeping an existing loan that may not be paid off at the time of the new transaction. This bill introduces licensing and registration requirements for lenders and sets forth specific criteria regarding exemptions for certain entities, including nonprofit organizations and smaller property owners who issue limited mortgages.

Sentiment

The sentiment surrounding HB 216 appears to be cautiously optimistic, with supporters emphasizing the need for regulation in a complex mortgage landscape. Proponents argue that the bill will protect consumers from potential exploitation by requiring transparency and accountability in mortgage transactions. However, there are concerns from some sectors about how these regulations might impact the availability and flexibility of mortgage options for potential homebuyers. Overall, there seems to be broad recognition of the need for more regulation in this area, albeit with a desire to balance consumer protection against the accessibility of mortgage options.

Contention

Notable points of contention about the bill relate to the potential burden that licensing and registration requirements may place on smaller lenders or individual property owners who occasionally engage in lending. Critics raise concerns that the stringent regulations could discourage participation in the market, particularly for those who do not regularly issue residential loans but may have been offering wrap mortgage loans in limited circumstances. Throughout the discussions, there remains a crucial dialogue on finding an appropriate balance between regulation for consumer safety and maintaining flexibility for lenders.