BILL ANALYSIS C.S.S.B. 804 By: Harris, Chris (Goodman) May 12, 1995 Committee Report (Substituted) BACKGROUND Presently, out-of-state lenders run huge computerized second lien lending operations without having significant contacts in Texas. Texas consumers have no legal contact to explain their loan documentation or assist with problems and may even be given incorrect information by the out-of-state lenders to induce consumers to sign documentation. Many of these home equity and home improvement operations do not use a title insurance company, but instead have the consumers sign the documentation in front of a notary and return it directly to the lender, who then files it. Thereafter, a consumer's only means of access is to call an out-of-state lender's voice mail. It is already the law in Texas that an attorney should prepare legal instruments affecting title to real property when a charge is made directly or indirectly. Out-of-state lenders are not regulated by Texas law; attorneys are regulated by a Texas agency which can supervise their actions and monitor potential abuse. PURPOSE As proposed, C.S.S.B. 804 provides for the preparation of certain secondary mortgage loan documents by or under the direction of an attorney licensed under the laws of the State of Texas. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Article 5069-5.01 et seq., V.T.C.S., by adding Article 5.04A, as follows: Art. 5.04A. DOCUMENT PREPARATION BY AN ATTORNEY. (a) Authorizes a document that is prepared in connection with a secondary mortgage loan and that affects title to real property to be prepared only by or under the direction of an attorney who is licensed in the State of Texas. (b) Requires a deed of trust or other security instrument prepared in connection with a secondary mortgage loan to contain a notice of the attorney or law firm that prepared the document. Sets forth required language for the notice. (c) Requires a deed of trust or other security instrument that does not contain the notice required by this article to be deemed to be in violation of the provisions of Article 5069.5.01 et seq., V.T.C.S., and subject to the consequences of such violation. SECTION 2. Makes application of this Act prospective. SECTION 3. Effective date: September 1, 1995. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute adds in language to allow documents to be prepared by or under the direction of an attorney licensed by the State of Texas. SUMMARY OF COMMITTEE ACTION The committee considered SB 804 in a formal meeting on May 12, 1995. The committee considered a complete committee substitute for the bill which was adopted without objection. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed, by a record vote of: 6 Ayes, 0 Nays, 0 PNV, 3 Absent.