74R10397 DWS-F
By Combs H.B. No. 725
Substitute the following for H.B. No. 725:
By Marchant C.S.H.B. No. 725
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the transfer of servicing of certain residential real
1-3 estate loans; providing a penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 132, Revised Statutes, is amended by adding
1-6 Article 9029 to read as follows:
1-7 Art. 9029. TRANSFER OF SERVICING OF REAL ESTATE LOAN
1-8 Sec. 1. DEFINITIONS. In this article:
1-9 (1) "Effective date of transfer" means the date on
1-10 which the mortgage payment of a borrower is first due to the
1-11 transferee servicer of a loan pursuant to the transfer of the
1-12 servicing of the loan.
1-13 (2) "Person" means an individual, firm, corporation,
1-14 or other legal entity.
1-15 (3) "Servicer" means the person responsible for
1-16 servicing of a loan, including the person who makes or holds a loan
1-17 if the person also services the loan. The term does not include:
1-18 (A) the Federal Deposit Insurance Corporation or
1-19 the Resolution Trust Corporation, in connection with assets
1-20 acquired, assigned, sold, or transferred under 12 U.S.C. Section
1-21 1823(c), as amended, or as receiver or conservator of an insured
1-22 depository institution; and
1-23 (B) the Government National Mortgage
1-24 Association, the Federal National Mortgage Association, the Federal
2-1 Home Loan Mortgage Corporation, the Resolution Trust Corporation,
2-2 or the Federal Deposit Insurance Corporation, if the transfer of
2-3 the servicing of the loan is preceded by:
2-4 (i) termination of the contract for
2-5 servicing the loan for cause;
2-6 (ii) commencement of proceedings for
2-7 bankruptcy of the servicer; or
2-8 (iii) commencement of proceedings by the
2-9 Federal Deposit Insurance Corporation or the Resolution Trust
2-10 Corporation for conservatorship or receivership of the servicer or
2-11 an entity by which the servicer is owned or controlled.
2-12 (4) "Servicing" means receiving scheduled periodic
2-13 payments from a borrower under the terms of a loan, including
2-14 amounts for escrow accounts, and making the payments of principal
2-15 and interest and other payments with respect to the amounts
2-16 received from the borrower as may be required under the terms of
2-17 the loan.
2-18 Sec. 2. APPLICATION. This article applies only to a loan
2-19 that is:
2-20 (1) secured by residential real property; and
2-21 (2) not subject to 12 U.S.C. Section 2605, as amended.
2-22 Sec. 3. NOTICE BY TRANSFEROR OF LOAN SERVICING AT TIME OF
2-23 TRANSFER. (a) Each servicer of a loan shall notify the borrower
2-24 in writing of any transfer of the servicing of the loan to any
2-25 other person.
2-26 (b) Except as provided by Subsections (c) and (d), the
2-27 notice required under Subsection (a) must be made to the borrower
3-1 not later than the 15th day before the effective date of transfer
3-2 of the servicing of the loan with respect to which the notice is
3-3 made.
3-4 (c) The notice required under Subsection (a) must be made to
3-5 the borrower not later than the 30th day after the effective date
3-6 of transfer of the servicing of the loan with respect to which the
3-7 notice is made if the transfer of the servicing of the loan is
3-8 preceded by:
3-9 (1) termination of the contract for servicing the loan
3-10 for cause;
3-11 (2) commencement of proceedings for bankruptcy of the
3-12 servicer; or
3-13 (3) commencement of proceedings by the Federal Deposit
3-14 Insurance Corporation or the Resolution Trust Corporation for
3-15 conservatorship or receivership of the servicer or an entity by
3-16 which the servicer is owned or controlled.
3-17 (d) Subsections (b) and (c) do not apply to a transfer of
3-18 the servicing of a loan if the person who makes the loan provides
3-19 to the borrower, at settlement with respect to the property for
3-20 which the loan is made, written notice of the transfer.
3-21 (e) The notice must include:
3-22 (1) the effective date of transfer of the servicing;
3-23 (2) the name, address, and toll-free or collect call
3-24 telephone number of the transferee servicer;
3-25 (3) a toll-free or collect call telephone number for:
3-26 (A) an individual employed by the transferor
3-27 servicer; or
4-1 (B) the department of the transferor servicer
4-2 that can be contacted by the borrower to answer inquiries relating
4-3 to the transfer of servicing;
4-4 (4) the name and toll-free or collect call telephone
4-5 number of:
4-6 (A) an individual employed by the transferee
4-7 servicer; or
4-8 (B) the department of the transferee servicer
4-9 that can be contacted by the borrower to answer inquiries relating
4-10 to the transfer of servicing;
4-11 (5) the date on which the transferor servicer who is
4-12 servicing the loan before the transfer will cease to accept
4-13 payments relating to the loan and the date on which the transferee
4-14 servicer will begin to accept the payments;
4-15 (6) information concerning the effect the transfer may
4-16 have, if any, on the terms of or the continued availability of
4-17 mortgage life or disability insurance or any other type of optional
4-18 insurance and the action, if any, the borrower must take to
4-19 maintain coverage; and
4-20 (7) a statement that the transfer of the servicing of
4-21 the loan does not affect any term or condition of the security
4-22 instruments other than terms directly related to the servicing of
4-23 the loan.
4-24 Sec. 4. NOTICE BY TRANSFEREE OF LOAN SERVICING AT TIME OF
4-25 TRANSFER. (a) Each transferee servicer to whom the servicing of a
4-26 loan is transferred shall notify the borrower of the transfer.
4-27 (b) Except as provided by Subsections (c) and (d), the
5-1 notice required under Subsection (a) must be made to the borrower
5-2 not later than the 15th day after the effective date of transfer of
5-3 the servicing of the loan with respect to which the notice is made.
5-4 (c) The notice required under Subsection (a) must be made to
5-5 the borrower not later than the 30th day after the effective date
5-6 of transfer of the servicing of the loan with respect to which the
5-7 notice is made if the transfer of the servicing of the loan is
5-8 preceded by:
5-9 (1) termination of the contract for servicing the loan
5-10 for cause;
5-11 (2) commencement of proceedings for bankruptcy of the
5-12 servicer; or
5-13 (3) commencement of proceedings by the Federal Deposit
5-14 Insurance Corporation or the Resolution Trust Corporation for
5-15 conservatorship or receivership of the servicer or an entity by
5-16 which the servicer is owned or controlled.
5-17 (d) Subsections (b) and (c) do not apply to a transfer of
5-18 the servicing of a loan if the person who makes the loan provides
5-19 to the borrower, at settlement with respect to the property for
5-20 which the loan is made, written notice of the transfer.
5-21 (e) The notice must include the information described by
5-22 Section 3(e).
5-23 Sec. 5. TREATMENT OF LOAN PAYMENTS DURING TRANSFER PERIOD.
5-24 During the 60-day period beginning on the effective date of
5-25 transfer of the servicing of a loan, a late fee may not be imposed
5-26 on the borrower with respect to a payment on the loan, and a
5-27 payment may not be treated as late for any other purposes, if the
6-1 payment is received by the transferor servicer before the due date
6-2 applicable to the payment.
6-3 Sec. 6. NOTE EVIDENCING LOAN. (a) This article applies
6-4 only to the transfer of the servicing of a loan and does not
6-5 require a person to give notice of the transfer of a note
6-6 evidencing the loan to another holder.
6-7 (b) On request of the borrower, a servicer shall notify the
6-8 borrower of the name and address of the person who is holder of the
6-9 note that evidences the loan. The servicer shall give the notice
6-10 not later than the 10th day after the date the borrower makes the
6-11 request.
6-12 Sec. 7. OFFENSE. (a) A person who violates this article
6-13 commits an offense.
6-14 (b) An offense under this section is punishable by a fine
6-15 not to exceed $1,000.
6-16 SECTION 2. This Act takes effect September 1, 1995, and
6-17 applies only to a transfer of servicing of a loan occurring on or
6-18 after that date.
6-19 SECTION 3. The importance of this legislation and the
6-20 crowded condition of the calendars in both houses create an
6-21 emergency and an imperative public necessity that the
6-22 constitutional rule requiring bills to be read on three several
6-23 days in each house be suspended, and this rule is hereby suspended.