Texas Legislative Update

26 Jun Texas Legislative Update

Posted at 08:02h in Compliance Alerts by

As you may know, the Texas legislature adjourned June 1.  Some legislation affecting mortgage lending was enacted.  The legislature enacted the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 which will be addressed in this memorandum due to its effective date of June 19, 2009.  However, please note the Implementation discussion below.  Also effective June 19 was legislation related to federal servicemembers. Other relevant Texas legislation will be addressed in a future memorandum.  If you have any questions regarding this Distribution Memorandum, please contact Laura LaRaia.

 

TEXAS HOUSE BILL 10 (effective June 19, 2009)

 

The Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 (the “Act”) amends the Finance Code to implement and comply with the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “S.A.F.E. Act”).

 

Definitions

“Clerical or support duties,” following the receipt of an application from a consumer, includes:

  • The receipt, collection, distribution, and analysis of information related to the processing or underwriting of a residential mortgage loan; and
  • Communication with a consumer to obtain the information necessary to process or underwrite a loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms.

 

“Credit union” means a state or federal credit union operating in Texas.

 

“Credit union subsidiary organization” means an agency, association, or company wholly or partly owned by a credit union that is designed primarily to serve or otherwise assist credit operations.

 

“Depository institution” means any bank or savings institution, including any credit union but does not include a credit union subsidiary organization.

 

“Dwelling” means a residential structure or mobile home, which contains one to four family housing units, or individual units of condominiums or cooperatives.

 

“Federal banking agency” means the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.

 

“Finance Commission” means the Finance Commission of Texas.

 

“Immediate family member” means a spouse, child, sibling, parent, grandparent, grandchild, stepparent, stepchild, stepsibling, and adoptive relationships.

 

“Individual” means a natural person.

 

“License” means a license issued under the laws of Texas to an individual acting as or engaged in the business of a residential mortgage loan originator.

 

“Loan processor or underwriter” means an individual who performs clerical or support duties as an employee at the direction of and subject to the supervision and instruction of an individual licensed as a residential mortgage loan originator or exempt from licensing.

 

“Nationwide Mortgage Licensing System and Registry” or “NMLSR” means a mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators for the licensing and registration of state residential mortgage loan originators.

 

“Nontraditional mortgage product” means a mortgage product other than a 30-year fixed rate mortgage.

 

“Person” means an individual, corporation, company, limited liability company, partnership, or association.

 

“Real estate brokerage activity” means an activity that involves offering or providing real estate brokerage services to the public, including:

  • Acting as a real estate broker or salesperson for a buyer, seller, lessor, or lessee of real property;
  • Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;
  • Negotiating, on a party’s behalf, any provision of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than a negotiation conducted in connection with providing financing with respect to such a transaction;
  • Engaging in an activity for which a person is required to be registered or licensed by Texas as a real estate broker or salesperson; and
  • Offering to engage in an activity or to act in the same capacity described above.

 

“Registered mortgage loan originator” means an individual who is registered with, and maintains a unique identifier through the NMLSR, who meets the definition of mortgage loan originator, and who is an employee of one of the following:

  • A depository institution;
  • A subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency; or
  • An institution regulated by the Farm Credit Administration.

 

“Regulatory official” means either the Banking Commissioner of Texas, the Savings and Mortgage Lending Commissioner, the Consumer Credit Commissioner, or the Credit Union Commissioner.

 

“Residential mortgage loan” means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate.

 

“Residential mortgage loan originator” means an individual who for compensation or gain or in the expectation of compensation or gain takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan.  The term does not include:

  • An individual who performs solely administrative or clerical tasks on behalf of an individual licensed as a residential mortgage loan originator or exempt from licensure;
  • An individual who performs only real estate brokerage activities and is licensed or registered by Texas as a real estate broker or salesperson, unless the individual is compensated by a lender, mortgage broker, or other residential mortgage loan originator or any agent of these;
  • An individual licensed under the Occupations Code, unless the individual is directly compensated for arranging financing for activities under the Occupations Code by a lender, mortgage broker, or other residential mortgage loan originator or any agent of these;
  • An individual who receives the same benefits from a financed transaction as the individual would receive if the transaction were a cash transaction; or
  • An individual who is involved solely in providing extensions of credit relating to timeshare plans.

 

“Residential real estate” means any real property located in Texas on which a dwelling is constructed or intended to be constructed.

 

“Rulemaking authority” means the Finance Commission or with respect to credit unions, the Credit Union Commission.

 

“Unique identifier” means a number or other identifier assigned by protocols established by the NMLSR.

 

Exemption

The following persons are exempt from the Act:

  • A registered mortgage loan originator when acting for a depository institution, a subsidiary that is owned and controlled by a depository institution and regulated by a Federal Banking Agency, or an institution regulated by the Farm Credit Administration;
  • An individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual;
  • A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney’s representation of the client, unless the attorney takes a residential mortgage loan application and offers or negotiates the terms of a residential mortgage loan;
  • An individual who:
    • Is an exclusive agent of a registered financial services company;
    • Is exempt from regulation as an agent of a registered financial services company under a written agreement prohibiting the individual from soliciting, processing, negotiating, or placing a mortgage loan with a person other than a registered financial services company or an affiliate of the company; and
    • Is individually enrolled as a mortgage loan originator with the NMLSR.
  • An individual who offers or negotiates terms of a residential mortgage loan originator that is secured by a dwelling that serves as the individual’s residence; and
  • A nonprofit organization providing self-help housing that originates zero interest residential mortgage loans for borrowers who have provided part of the labor to construct the dwelling securing the loan.

 

Administrative Authority and Rulemaking

A regulatory official has broad authority to administer, interpret, and enforce the Act.  The Finance Commission may implement rules necessary to comply with the Act and as required to carry out the intentions of the S.A.F.E. Act.  The Act does not limit the authority of a regulatory official to take disciplinary action against a license holder for a violation of the Act or the rules adopted by the regulatory official under the Act.  A regulatory official has broad authority to investigate, revoke a license, and inform the property authority when fraudulent conduct or a violation of the Act occurs.

 

Licensing and Registration

Unless exempt under the Act, an individual may not engage in business as a residential mortgage loan originator with respect to a dwelling located in Texas unless the individual is licensed and complies with the requirements of the Act.

 

A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless the independent contractor obtains and maintains the appropriate residential mortgage loan originator license and complies with the requirements of the Act

 

An individual must renew the license annually to be considered licensed under the Act.  The regulatory official will provide for annual renewal of licenses for individuals seeking to engage in residential mortgage loan origination activities.

 

NMLSR

A licensed residential mortgage loan originator must enroll with and maintain a valid unique identifier issued by the NMLSR.  A non-federally insured credit union that employs loan originators, as defined by the S.A.F.E. Act, must register those employees with the NMLSR by furnishing the information relating to the employees’ identity.  Each independent contractor loan processor or underwriter licensed as a residential mortgage loan originator must have and maintain a valid unique identifier issued by the NMLSR.

 

The regulatory official who administers the law under which a residential mortgage loan originator is licensed will require the residential mortgage loan originator to be enrolled with the NMLSR.  For purposes of implementing the Act, the regulatory official may participate in the NMLSR.

 

Application Form

A regulatory official will prescribe application forms for a license as a residential mortgage loan originator.  A regulatory official may change or update an application form as necessary to carry out the purposes of the Act.

 

Criminal and Background Checks

In connection with an application for a license as a residential mortgage loan originator, the applicant must, at a minimum, furnish in the form and manner prescribed by the regulatory official and acceptable to the NMLSR information concerning the applicant’s identity, including:

  • Fingerprints for submission to the FBI and any governmental agency or entity authorized to receive such information to conduct a state, national, and international criminal history background check; and
  • Personal history and experience in a form prescribed by the NMLSR, including the submission of authorization for the NMLSR and the appropriate regulatory official to obtain:
    • An independent credit report obtained from a consumer reporting agency, except that information on a credit report may not be used as the sole basis for the denial of a mortgage loan originator license; and
    • Information related to any administrative, civil, or criminal findings by any governmental jurisdiction.

 

Issuance of License

The regulatory official will not issue a residential mortgage loan originator license to an individual unless the regulatory official determines, at a minimum, that the applicant:

  • Has not had a residential mortgage loan originator license revoked in any governmental jurisdiction;
  • Has not been convicted of or pled guilty or no contest to, a felony in a domestic, foreign, or military court:
    • During the 7-year period preceding the date of the application; or
    • At any time preceding the date of application, if the felony involved an act of fraud, dishonesty, or breach of trust, or money laundering;
      • A conviction for which a full pardon has been granted may not be considered a conviction.
  • Demonstrates financial responsibility, character, and general fitness so as to command the confidence of the community and to warrant a determination that the individual will operate honestly, fairly, and efficiently as a residential mortgage loan originator.  An individual is considered not to be financially responsible if the individual has shown a lack of regard in managing the individual’s own financial affairs or condition.  A determination that an individual has not shown financial responsibility may include:
    • An outstanding judgment against the individual, other than a judgment imposed solely as a result of medical expenses;
    • An outstanding tax lien or other governmental liens and filings;
    • A foreclosure during the 3-year period preceding the date of the license application; and
    • A pattern of seriously delinquent accounts during the 3-year period preceding the date of the application.
  • Provides satisfactory evidence that the applicant has completed pre-licensing education course;
  • Provides satisfactory evidence of having passed a written test; and
  • Has paid a recovery fund fee or obtained a surety bond as required.

 

Education and Testing Requirements

An applicant for a residential mortgage loan origination license must complete at least 20 hours of education courses reviewed and approved by the NMLSR, which must include at least:

  • 3 hours of federal law and regulations;
  • 3 hours of ethics, which must include instruction on fraud, consumer protection, and fair lending issues; and
  • 2 hours of training related to lending standards for the nontraditional mortgage product marketplace.

 

Pre-licensing education courses that are approved by the NMLSR may be provided by the applicant’s employer, an entity affiliated with the applicant by an agency contract, or by any subsidiary or affiliate of such employer or entity.  The pre-licensing education may be completed in a classroom, online, or by any other means approved by the NMLSR.  The pre-licensing education requirements approved by the NMLSR for any state will be accepted as credit toward completion of pre-licensing education requirements in Texas.  An applicant who has previously held a residential mortgage loan originator license that meets the requirements of the Act and other appropriate regulatory law, before being issued a new original license, must demonstrate to the appropriate regulatory official that the applicant has completed all continuing education requirements for the calendar year in which the license was last held by the applicant.

 

If the appropriate federal regulators and the NMLSR establish educational requirements for licensed educational requirements for licensed residential mortgage loan originators, the rulemaking authority will adopt necessary rules to implement the changes to the educational requirements of the Act.

 

An applicant for a residential mortgage loan origination must pass a qualified written test, developed by the NMLSR and administered by a test provider approved by the NMLSR, whichadequately measures the applicant’s knowledge and comprehension in appropriate subject areas, including:

  • Ethics;
  • Federal and state law and regulations pertaining to mortgage origination; and
  • Federal and state law and regulations, including instruction on fraud, consumer protection, the nontraditional mortgage product marketplace, and fair lending issues.

 

In order to pass a qualified written test, an individual must receive a score of at least 75%. An individual may retake a qualified written test 3 times with each test occurring at least 30 days after the preceding test.  If an individual does not achieve a passing score on a qualified written test after the third retake, the individual must wait at least 6 months before retaking the test.  An individual who fails to maintain a residential mortgage loan originator license for at least 5 consecutive years or longer must retake the test.

 

A written test may be administered at the applicant’s place of employment, at the location of any subsidiary or affiliate of the applicant’s employer, or at the location of any entity with which the applicant holds an exclusive arrangement to conduct the business of a residential mortgage loan originator.

 

A license to act as a residential mortgage loan originator may be renewed on or before its expiration date if the license holder:

  • Continues to meet the minimum requirements for license issuance;
  • Pays all required fees for the renewal license; and
  • Provides satisfactory evidence that the license holder has completed the continuing education requirements.

 

To renew a residential mortgage loan originator license, a license holder must annually complete at least 8 hours of education, which must include at least:

  • 3 hours of federal law and regulations;
  • 2 hours of ethics, which must include instruction on fraud, consumer protection, and fair lending issues; and
  • 2 hours of training related to lending standards for the nontraditional mortgage product marketplace.

 

A license holder must also meet any additional requirements established by the regulatory official.

 

All continuing education courses and course providers will be reviewed and approved by the NMLSR based on reasonable standards.  Nothing precludes any approved education course that is provided by the mortgage loan originator’s employer or an entity that is affiliated with the mortgage loan originator or by an agency contract or any subsidiary or affiliate of the employer or entity.

 

A licensed mortgage loan originator who is an approved instructor may receive credit toward his or her required annual continuing education hours at the rate of 2 hours of credit for every 1 hour taught.

 

An individual who has completed the above continuing education requirements for any state will be awarded credit toward completion of continuing education requirements in Texas.

 

Recovery Fee Fund or Surety Bond Requirement

A regulatory official may not issue a residential mortgage loan originator license unless the official determines that the applicant meets the surety bond requirement or has paid a recovery fund fee, as applicable.

 

Each regulatory official will adopt rules requiring an individual licensed as a residential mortgage loan originator to obtain a surety bond or pay a recovery fund fee as the official determines appropriate to comply with the S.A.F.E. Act.

 

Rulemaking Authority

A rulemaking authority may adopt rules establishing requirements as necessary for:

  • Conducting background checks by obtaining:
    • Criminal history through fingerprint or other databases;
    • Civil or administrative records;
    • Credit history information; or
    • Any other information as deemed necessary by the NMLSR;
  • Payment of fees to apply for or renew licenses through the NMLSR;
  • Setting or resetting as necessary, license renewal dates or reporting periods;
  • Amending or surrendering a license;
  • Any other such activities as a regulatory official considers necessary for participation in the NMLSR; and
  • Investigation and examination authority for purposes of investigating a violation or complaint arising under the Act or for purposes of examining, reviewing, or investigating any license holder or individual subject to the Act.

 

Confidentiality

A requirement under federal or state law regarding the privacy or confidentiality of information or material provided to the NMLSR, and a privilege arising under federal or state law, or under the rules of any federal or state court, continue to apply to the information or material, after the information or material has been disclosed to the NMLSR.  The information and material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or confidentiality protections provided by federal or state laws.

 

Information or material that is subject to a privilege or confidentiality is not subject to:

  • Disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or Texas; or
  • Subpoena or discovery, or admission into evidence, in a private civil action or administrative process.

 

A person who is the subject of information or material in the NMLSR may waive, wholly or partly, any privilege held by the NMLSR with respect to the information or material.

 

A regulatory official may enter into an agreement or sharing arrangement with another governmental agency, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, or other associations representing governmental agencies as established by rule of the rulemaking authority or order issued by the regulatory official.  The confidentiality and privilege protections also apply to information and material shared under an agreement or sharing arrangement entered into.

 

The above privilege and confidentiality requirements do not apply to information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against a residential mortgage loan originator who is included in the NMLSR for access to the public.

 

Mortgage Call Reports

Each licensed residential mortgage loan originator must submit to the NMLSR a report of condition that is in the form and contains the information required by the NMLSR.

 

Report of Violations and Enforcement Actions

Subject to the confidentiality requirements under the Act, a regulatory official will report to the NMLSR on a regular basis regarding violations of, enforcement actions under, or information relevant to the Act or the S.A.F.E. Act under the regulatory official’s licensure, regulation, or examination of a licensed residential mortgage loan originator or person registered under the S.A.F.E. Act.

 

The applicable rulemaking authority will by rule establish a process by which licensed residential mortgage loan originators may dispute information submitted by the regulatory official to the NMLSR.

 

Unique Identifier

The unique identifier of a person originating a residential mortgage loan must be clearly shown on each residential mortgage loan application form, solicitation, or advertisement, including business cards, websites, and any other document required by rule of the rulemaking authority.

 

Representations

An individual who is engaged exclusively in loan processor or underwriter activities may not represent to the public, through the use of advertising, business cards, stationery, brochures, signs, rate lists, or other means, that the individual can or will perform any activities of a mortgage loan originator unless the individual is licensed as a residential mortgage loan originator.

 

Prohibited Acts and Practices

An individual or other person subject to regulation under the Act may not:

  • Directly or indirectly employ a scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud a person;
  • Engage in any unfair or deceptive practice;
  • Obtain property by fraud or misrepresentation;
  • Solicit or enter into a contract with a borrower that provides in substance that the person or individual subject to the Act may earn a fee or commission through “best efforts” to obtain a loan, even though no loan is actually obtained for the borrower;
  • Solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at that time;
  • Conduct any business regulated by the Act without holding a license;
  • Assist, aide, and abet an individual in the conduct of business without a valid license;
  • Fail to make required disclosures;
  • Fail to comply with the Act or rules adopted under the Act;
  • Fail to comply with any other state or federal law, including rules or regulations adopted under that law, applicable to a business or activity regulated by the Act;
  • Make, in any manner, a false or deceptive statement or representation;
  • Negligently make a false statement or knowingly or willfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the NMLSR or in connection with any investigation conducted by the regulatory official or another governmental agency;
  • Make a payment, threat, or promise, directly or indirectly, to a person for purposes of influencing the person’s independent judgment in connection with a residential mortgage loan, or make a payment, threat, or promise, directly or indirectly, to an appraiser of a property, for purposes of influencing the appraiser’s independent judgment with respect to the property’s value;
  • Collect, charge, attempt to collect or charge, or use or propose an agreement purporting to collect or charge any prohibited fee;
  • Cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer; or
  • Fail to truthfully account for money belonging to a party to a residential mortgage transaction.

 

Enforcement and Penalties

To ensure the effective supervision and enforcement of the Act, a regulatory official may:

  • Deny, suspend, revoke, condition, or decline to renew a license for a violation of the Act, a rule adopted under the Act, or an order or a directive entered under the Act;
  • Deny, suspend, revoke, condition, or decline to renew a license if an applicant or license holder fails to meet the requirements of the Act or withholds information or makes a material misstatement in an application for a license or a renewal of a license;
  • Order restitution against a person subject to regulation under the Act for a violation of the Act;
  • Impose an administrative penalty on a person subject to regulation under the Act; or
  • Issue orders or directives as follows:
    • Order or direct a person subject to regulation under the Act to cease and desist from conducting business, including issuing an immediate temporary order to cease and desist from conducting business;
    • Order or a direct person subject to regulation under the Act to cease a violation of the Act or a harmful activity, including issuing an immediate temporary order to cease and desist;
    • Enter immediate temporary orders against a person subject to regulation under the Act to cease engaging in business under a license if the regulatory official determines that the license was erroneously granted or the license holder is committing a violation of the Act; and
    • Order or direct other affirmative action as the regulatory official considers necessary.

 

A regulatory official may impose an administrative penalty on a residential mortgage loan originator or other person subject to regulation under the Act, if the official, after notice and opportunity for hearing, determines that the residential mortgage loan originator or other person subject to regulation under the Act has violated or failed to comply with:

  • The Act;
  • A rule adopted under the Act; or
  • An order issued under the Act.

 

The penalty may not exceed $25,000 for each violation.  The amount of the penalty will be based on:

  • The seriousness of the violation, including the nature, circumstances, extent, and gravity of the violation;
  • The economic harm to property caused by the violation;
  • The history of previous violations;
  • The amount necessary to deter a future violation;
  • Efforts to correct the violation; and
  • Any other matter that justice may require.

 

Duties of Regulatory Officials

The Savings and Mortgage Lending Commissioner will administer and enforce the Act with respect to individuals licensed as mortgage brokers or registered as mortgage bankers.

 

The Credit Union Commissioner will:

  • Examine, inspect, or investigate employees of credit union subsidiary organizations who are licensed to act as residential mortgage loan originators; and
  • Enforce compliance by employees of credit union subsidiary organizations with the applicable requirements of the mortgage broker law, the Act, and any applicable rules adopted.

 

The Consumer Credit Commissioner will administer and enforce the Act with respect to individuals holding licenses under laws regulating consumer loans, manufactured home credit transactions, motor vehicle installment sales, or tax refund anticipation loans.

 

To the extent permitted or required by the Act and as reasonably necessary for the implementation and enforcement of the S.A.F.E. Act, the Banking Commissioner of Texas (the “Commissioner”) may administer and enforce this Act with respect to a person otherwise under the Commissioner’s jurisdiction.

 

To fulfill the purposes of the act, a regulatory official may establish a relationship with or contract with the NMLSR or an entity designated by the NMLSR to collect and maintain records and process transaction fees or other fees related to licensed residential mortgage loan originators or other persons subject to registration under the Act.

 

Credit Unions, Mortgage Brokers, Financial Services Companies, and Mortgage Bankers

 

The Credit Union Commission may adopt and enforce rules necessary for the Credit Union Commissioner to:

  • Examine, inspect, or investigate employees of credit union subsidiary organizations who are licensed to act as residential mortgage loan originators; and
  • Enforce compliance by employees of credit union subsidiary organizations with the applicable requirements under laws regulating mortgage brokers and residential mortgage loan originators.

 

The Credit Union Commissioner will perform all duties relating to the issuance and renewal of licenses for employees of credit union subsidiary organizations who act as residential mortgage loan originators.  The Credit Union Commissioner is responsible for the:

  • Examination, inspection, or investigation of employees of credit union subsidiary organizations who are licensed to act as residential mortgage loan originators; and
  • Enforcement of compliance by employees of credit union subsidiary organizations with applicable requirements.

 

The Finance Commission may adopt and enforce rules necessary for the intent of or to ensure compliance with the mortgage broker laws, except with respect to employees of credit union subsidiary organizations.

 

An individual required to be licensed under the mortgage broker laws may not as a residential mortgage loan originator unless:

  • The individual’s license otherwise authorizes the individual to act as residential mortgage loan originator;
  • The individual is enrolled with the NMLSR; and
  • The individual complies with the requirements of the Act and rules adopted under the Act.

 

An employee of a credit union subsidiary organization may not act as a residential mortgage loan originator unless the employee:

  • Is licensed under the mortgage broker laws;
  • Is enrolled with the NMLSR; and
  • Complies with other applicable requirements under the Act and rules adopted under the Act.

 

Prior to permitting an exclusive agent to solicit, process, negotiate, or place a mortgage loan, a registered financial services company must submit to the Savings and Mortgage Lending Commissioner such information as the Finance Commissioner may require relating to the exclusive agent.  The exclusive agent must have enrolled with the NMLSR as a registered residential mortgage loan originator and provided to the Finance Commissioner the exclusive agent’s unique identifier.

 

An employee of a mortgage banker may not act in the capacity of a residential mortgage loan originator unless the employee:

  • Is licensed under the mortgage banker laws
  • Is enrolled with the NMLSR; and
  • Complies with other applicable requirements of the Act and rules adopted by the Finance Commission under the Act.

 

To be eligible to be licensed as a residential mortgage loan originator, an employee of a mortgage banker must also:

  • Satisfy the Finance Commissioner as to the employee’s good moral character, including the employee’s honesty, trustworthiness, and integrity;
  • Not be in violation of the mortgage banker laws or a rule adopted under the mortgage banker laws; and
  • Provide the Savings and Mortgage Lending Commissioner with satisfactory evidence that the employee meets the qualifications provided by the Act.

 

The Finance Commission may adopt rules as required to carry out the intentions of the S.A.F.E. Act.

 

State-Licensed Residential Mortgage Loan Originator Recovery Fund

 

“Fund” means the state-licensed residential mortgage loan originator recovery fund.

 

The Banking Commissioner will establish, administer, and maintain a state-licensed residential mortgage loan originator recovery fund as provided by the Act.  The Banking Commissioner will hold amounts received by him or her for deposit in the Fund in trust for carrying out the purposes of the Fund.

 

The Fund will be used to reimburse residential mortgage loan applicants for actual damages incurred because of acts committed by a state-licensed residential mortgage loan originator when the act was committed.  The use of the Fund is limited to reimbursement for out-of-pocket losses caused by an act that constitutes a violation of the Act.  Payments from the Fund may not be made to a lender who makes a residential mortgage loan originated by the state-licensed residential mortgage loan originator or who acquires a residential mortgage loan originated by the state-licensed residential mortgage loan originator.

 

An applicant for an original residential mortgage loan originator license or for renewal of a residential mortgage loan originator license who is licensed under the laws regulating consumer loans, manufactured home credit transactions, motor vehicle installment sales, or tax refund anticipation loans must, in addition to paying the original application fee or renewal fee, pay a fee in an amount determined by the Banking Commissioner.  The fee will be deposited in the Fund.

 

If the balance remaining in the Fund at the end of a calendar year is more than $2.5 million, the amount of money in excess of that amount will be available to the Banking Commissioner to offset the expenses of participating in and sharing information with the NMLSR.

 

A person entitled to receive payment out of the Fund is entitled to receive reimbursement of actual, out-of-pocket damages.  A payment from the Fund for claims:

  • Arising out of the same transaction, including interest, is limited in the aggregate to $25,000, regardless of the number of claimants; and
  • Against a single person licensed as a residential mortgage loan originator licensed under the laws regulating consumer loans, manufactured home credit transactions, motor vehicle installment sales, or tax refund anticipation loans is limited in the aggregate to $50,000 until the Fund has been reimbursed for all amounts paid.

 

If there are concurrent claims that exceed the amounts available under the Fund, the Banking Commissioner will prorate recovery based on the amount of damage suffered by each claimant.

 

The Banking Commissioner may revoke a residential mortgage loan originator license on proof that the Banking Commissioner has made a payment from the Fund of any amount toward satisfaction of a claim against a state-licensed residential mortgage loan originator.  The Banking Commissioner may seek to collect from a state-licensed residential mortgage loan originator the amount paid from the Fund on behalf of the originator and any costs associated with investigating and processing the claim against the Fund or with collection of reimbursement for payments from the Fund, plus interest at the current legal rate until the amount has been repaid in full.  Any amount, including interest, recovered by the Banking Commissioner will be deposited to the credit of the Fund.  The Banking Commissioner may probate an order revoking a license.

 

A state-licensed residential mortgage loan originator on whose behalf payment was made from the Fund is not eligible to receive a new license until the originator has repaid in full, plus interest at the current legal rate, the amount paid from the Fund on the originator’s behalf, and any costs associated with investigating and processing the claim against the Fund or with collection of reimbursement from the Fund.

 

The Banking Commissioner may still take disciplinary action against a state-licensed residential mortgage loan originator for a violation of the Act or other licensing laws or rules adopted under the laws.  The repayment in full to the Fund of all obligations of a state-licensed residential mortgage loan originator does not nullify or modify the effect of any other disciplinary proceeding.

 

The Finance Commission may adopt rules on the Banking Commissioner’s recommendation to promote a fair and orderly administration of the Fund.

 

Consumer Loans

 

Unless exempt under the Act, an individual who acts as a residential mortgage loan originator in the making, transacting, or negotiating of a loan subject to the consumer loan laws must:

  • Be individually licensed to engage in the making, transacting, or negotiating of a loan;
  • Be enrolled with the NMLSR; and
  • Comply with other applicable requirements of the Act and rules adopted under the Act.

 

The Finance Commission will adopt rules establishing procedures for issuing, renewing, and enforcing an individual license.  In adopting rules, the Finance Commission will ensure that:

  • The minimum eligibility requirements for issuance and renewal of an individual license are the same as the requirements under the Act; and
  • The applicant pays:
    • An investigation fee in a reasonable amount determined by the Commissioner; and
    • An annual license fee determined by the Finance Commission.

 

The Finance Commission may adopt rules under the consumer loan laws to carry out the intentions of the S.A.F.E. Act.

 

The Consumer Credit Commissioner may suspend or revoke a license if the Consumer Credit Commissioner finds that the license holder has failed to ensure an individual acting as a mortgage loan originator in the making, transacting, or negotiating of a loan regulated by the consumer loan laws is licensed.

 

Manufactured Home Credit Transactions

 

A registered creditor that engages in the activity of originating a residential mortgage loan must meet the surety bond or recovery fund fee requirement, as applicable, of the creditor’s residential mortgage loan originator.

 

Unless exempt under the Act, an individual in the making, transacting, or negotiating of an extension of credit subject to the laws on manufactured home credit transactions must:

  • Be individually licensed to engage in the making, transacting, or negotiating of an extension of credit;
  • Be enrolled with the NMLSR; and
  • Comply with other applicable requirements of the Act and rules adopted under the Act.

 

The Finance Commission will adopt rules establishing procedures for issuing, renewing, and enforcing an individual license.  In adopting rules, the Finance Commission will ensure that:

  • The minimum eligibility requirements for issuance and renewal of an individual license are the same as the requirements under the Act; and
  • The applicant pays:
    • An investigation fee in a reasonable amount determined by the Consumer Credit Commissioner; and
    • An annual license fee determined by the Finance Commission.

 

The Finance Commission may adopt rules under the consumer loan laws to carry out the intentions of the S.A.F.E. Act.

 

Motor Vehicle Installment Sales

 

A license holder under the laws on motor vehicle installment sales who engages in the sale of a motor vehicle to be used as a principal dwelling must meet the surety bond or recovery fee fund requirements, as applicable, of the holder’s residential mortgage loan originator.

 

Unless exempt, an individual who acts as a residential mortgage loan originator in the sale of a motor vehicle to be used as a principal dwelling must:

  • Be licensed to act as a residential mortgage loan originator in the sale of a motor vehicle to be used as a principal dwelling;
  • Be enrolled with the NMLSR; and
  • Comply with other applicable requirements of the Act and rules adopted under the Act.

 

The Finance Commission will adopt rules establishing procedures for issuing, renewing, and enforcing a license.  In adopting rules, the Finance Commission will ensure that:

  • The minimum eligibility requirements for issuance and renewal of an individual license are the same as the requirements under the Act; and
  • The applicant pays:
    • An investigation fee in a reasonable amount determined by the Consumer Credit Commissioner; and
    • An annual license fee determined by the Finance Commission.

 

The Finance Commission may adopt rules under the consumer loan laws to carry out the intentions of the S.A.F.E. Act.

 

Tax Refund Anticipation Loans

 

Unless exempt under the Act, an individual who acts as a residential mortgage loan originator in the making, transacting, or negotiating of a property tax loan for a principal dwelling must:

  • Be individually licensed to engage in the making, transacting, or negotiating of a property tax loan;
  • Be enrolled with the NMLSR; and
  • Comply with other applicable requirements of the Act and rules adopted under the Act.

 

The Finance Commission will adopt rules establishing procedures for issuing, renewing, and enforcing an individual license.  In adopting rules, the Finance Commission will ensure that:

  • The minimum eligibility requirements for issuance and renewal of an individual license are the same as the requirements under the Act; and
  • The applicant pays:
    • An investigation fee in a reasonable amount determined by the Consumer Credit Commissioner; and
    • An annual license fee determined by the Finance Commission.

 

The Finance Commission may adopt rules under the consumer loan laws to carry out the intentions of the S.A.F.E. Act.

 

A license holder under the laws for tax refund anticipation loans who engages in the making, transacting, or negotiating of a property tax loan for a principal dwelling must meet the surety bond or recovery fund fee requirements, as applicable, of the holder’s residential mortgage loan originator under the Act.

 

The Consumer Credit Commissioner may suspend or revoke a license if the Consumer Credit Commissioner finds that the license holder has failed to ensure an individual acting as a mortgage loan originator in the making, transacting, or negotiating of a property tax loan for a principal dwelling is licensed.

 

Implementation

 

For purposes of implementing an orderly and efficient process for licensing and registering residential mortgage loan originators that meets the requirements of the S.A.F.E. Act, the Act, and the amendments to the Finance Code, the Finance Commission, as soon as practicable, may adopt rules and establish interim procedures for licensing individuals engaging in or conducting the business of a residential mortgage loan originator in Texas and for the approval or denial of applications for licenses authorizing individuals to engage in business as a residential mortgage loan originator.  For individuals authorized by state law to engage in residential mortgage loan origination activities immediately before June 19, 2009, the Finance Commission may establish expedited review and licensing procedures.

 

On application by a person for a license, registration, and unique identifier as a residential mortgage loan originator with the NMLSR, the regulatory official may determine that the applicant meets the pre-licensing education courses and written test requirements of the Act, if the applicant, on June 19, 2009, is acting as a state-licensed residential mortgage loan originator in Texas under the mortgage broker laws.  The applicant must be in good standing with the regulatory official to obtain an exemption.  The regulatory official may determine an exemption by rule of the Finance Commission.  A residential mortgage loan originator who receives an exemption must still meet the continuing education requirements prescribed the regulatory official and the S.A.F.E. Act.

 

An individual who is not authorized to engage in residential mortgage loan origination activities in Texas as of July 31, 2009, must comply with the Act and the amendments to the Finance Code by the later of:

  • July 31, 2010; or
  • A subsequent date that is approved by the United State Department of HUD (“HUD”) under the authority granted under the S.A.F.E. Act.

 

An individual authorized to engage in residential mortgage loan origination activities in Texasof July 31, 2009, must comply with the Act and the amendments to the Finance Code by the later of:

  • July 31, 2011; or
  • A subsequent date that is approved by HUD under the authority granted under the S.A.F.E. Act.

 

 

 

 

TEXAS HOUSE BILL 3857 (effective June 19, 2009)

 

This Bill relates to foreclosure of liens on real property and certain personal property owned by members of the military or their dependents.  It applies only to a sale, foreclosure, or seizure of property under a judgment in an action filed on or after June 19, 2009 or with respect to which a notice of default is given on or after June 19, 2009.  A sale, foreclosure, or seizure under a judgment in an action filed before June 19, 2009 or with respect to which notice of default is given before June 19, 2009, is governed by the law in effect immediately before June 19, 2009.

 

“Active duty military service” means:

  • Service as a member of the United States armed forces; and
  • With respect to a member of the Texas National Guard, the National Guard of another state, or a member of a reserve component of the United States armed forces, active duty under an order of the President of the United States.

 

“Dwelling” means a residential structure or manufactured home that contains one-to-four family housing units.

 

“Military servicemember” means:

  • A member of the United States armed forces;
  • A member of the Texas National Guard or the National Guard of another state serving on active duty under an order of the President of the United States; or
  • A member of a reserve component of the United States armed forces who is on active duty under an order of the President of the United States.

 

“Person” includes a corporation, organization, government, or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity.

 

The Bill applies only to an obligation:

  • That is secured by a mortgage, deed of trust, or other contract lien on real property or personal property that is a dwelling owned by a military servicemember;
  • That originates before the date on which the servicemember’s active duty military service commences; and
  • For which the servicemember is still obligated.

 

In an action filed during a military servicemember’s period of active duty military service or during the 9 months after the date on which that service period concludes to foreclose a lien or otherwise enforce an obligation described above, the court may, after a hearing and on the court’s own motion, will on the application by a servicemember whose ability to comply with the obligations of the contract secured by the lien is materially affected by the servicemember’s military service:

  • Stay the proceedings for a period of time as justice and equity require; or
  • Adjust the obligations of the contract secured by the lien to preserve the interests of all parties.

 

A sale, foreclosure, or seizure of property under a mortgage, deed of trust, or other contract lien may not be conducted during the military servicemember’s period of active duty military service or during the 9 months after the date on which that service period concludes, unless the sale, foreclosure, or seizure is conducted under:

  • A court order issued before the sale, foreclosure, or seizure; or
  • An agreement that complies with the requirements provided below.

 

A military servicemember may waive the servicemember’s rights.  The waiver must be:

  • In writing in at least 12-point type;
  • Executed as an instrument separate from the obligation to which the waiver applies; and
  • Made under a written agreement:
    • Executed during or after the servicemember’s period of active duty military service; and
    • Specifying the legal instrument to which the waiver applies and, if the servicemember is not a party to the instrument, the servicemember concerned.

 

A person commits a Class A misdemeanor if the person knowingly makes or causes to be made a sale, foreclosure, or seizure of property that is prohibited under the Bill.

 

On application to a court, a dependent of a military servicemember is entitled to the protections if the dependent’s ability to comply with an obligation that is secured by a mortgage, deed of trust, or other contract lien on real property or personal property that is a dwelling is materially affected by the servicemember’s military service.

 

If a surety, guarantor, endorser, accommodation maker, comaker, or other person primarily or secondarily liable on an obligation executes a waiver and then enters active duty military service, the waiver is not valid after the beginning of the period of the active duty military service unless the waiver was executed by the individual or a dependent during the period beginning on date of receipt of the order for induction.