75R11801 CLG-F
By Marchant H.B. No. 2352
Substitute the following for H.B. No. 2352:
By Solomons C.S.H.B. No. 2352
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the registration of mortgage brokers.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 20, Title 132, Revised Statutes, is
1-5 amended by adding Article 9001 to read as follows:
1-6 Art. 9001. MORTGAGE BROKER REGISTRATION
1-7 Sec. 1. DEFINITIONS. In this article:
1-8 (1) "Commissioner" means the consumer credit
1-9 commissioner.
1-10 (2) "Mortgage" means a lien interest against real
1-11 estate created by a deed of trust, security deed, or other
1-12 instrument for debt.
1-13 (3) "Mortgage applicant" means a person who is
1-14 solicited to purchase or who purchases the services of a mortgage
1-15 broker.
1-16 (4) "Mortgage banker" means any person who makes,
1-17 services, or buys and sells mortgage loans with the person's own
1-18 funds.
1-19 (5) "Mortgage broker" means a person who, for
1-20 compensation, obtains or sells for another person a one-to-four
1-21 family residential mortgage or a person who, for compensation,
1-22 receives for another person an application from a prospective
1-23 borrower and places or attempts to place the application with a
1-24 mortgage banker or other lender for purposes of making a
2-1 one-to-four family residential mortgage. The term does not include
2-2 a person who delivers an application and other loan information for
2-3 a mortgage loan to a mortgage broker either on behalf of or at the
2-4 instruction of the prospective borrower.
2-5 (6) "Registrant" means a person who has been issued a
2-6 certificate of registration under this article.
2-7 Sec. 2. CERTIFICATE OF REGISTRATION REQUIREMENT. (a) A
2-8 person may not act as a mortgage broker without first having
2-9 obtained a certificate of registration from the commissioner for
2-10 the person's main office and for each other office to be maintained
2-11 by the person for the transaction of business as a mortgage broker
2-12 in this state.
2-13 (b) An employee of a registrant is not required to obtain a
2-14 certificate of registration.
2-15 (c) A certificate of registration is not required for:
2-16 (1) a bank, savings bank, or savings and loan
2-17 association, or a subsidiary or an affiliate of a bank, savings
2-18 bank, or savings and loan association;
2-19 (2) a state or federal credit union;
2-20 (3) a lender approved by the secretary of housing and
2-21 urban development for participation in a mortgage insurance program
2-22 under the National Housing Act, as amended (12 U.S.C. Section 1701
2-23 et seq.);
2-24 (4) a mortgage banker; or
2-25 (5) a person licensed under Chapter 3, Title 79,
2-26 Revised Statutes (Article 5069-3.01 et seq., Vernon's Texas Civil
2-27 Statutes), who makes, negotiates, or arranges a secondary mortgage
3-1 loan.
3-2 Sec. 3. APPLICATION FOR CERTIFICATE OF REGISTRATION. (a)
3-3 An application for a certificate of registration as a mortgage
3-4 broker must be in writing, under oath, and in the form prescribed
3-5 by the commissioner. The application must be accompanied by an
3-6 application fee of $150 for each office location to be maintained
3-7 by the applicant.
3-8 (b) The application fee is not refundable.
3-9 (c) If the applicant is a corporation or partnership, one of
3-10 the shareholders or partners, as appropriate, must be named in the
3-11 application as the person responsible for managing the operations
3-12 of the location or locations where business is to be transacted.
3-13 Sec. 4. QUALIFICATIONS. To be eligible for a certificate of
3-14 registration, a mortgage broker must:
3-15 (1) have at least one of the following minimum levels
3-16 of education, certification, or experience:
3-17 (A) an associate's degree in an area relating to
3-18 finance, banking, or business administration from an accredited
3-19 college or university, including an accredited community technical
3-20 college;
3-21 (B) the residential mortgage lender or certified
3-22 mortgage consultant certification, issued by the National
3-23 Association of Mortgage Brokers, or other certification similar in
3-24 scope and relevance;
3-25 (C) a real estate broker or salesman license
3-26 under The Real Estate License Act (Article 6573a, Vernon's Texas
3-27 Civil Statutes);
4-1 (D) an attorney licensed in this state;
4-2 (E) a certified public accountant licensed in
4-3 this state; or
4-4 (F) three years of experience:
4-5 (i) in the mortgage and lending field,
4-6 which may include employment with or as a mortgage broker or with a
4-7 financial institution, mortgage lending institution, or other
4-8 lending institution; or
4-9 (ii) that the commissioner determines
4-10 meets a minimum comparable standard for education and experience;
4-11 (2) demonstrate evidence of compliance with the
4-12 financial requirements of this article; and
4-13 (3) have the financial responsibility, experience,
4-14 character, and general fitness to command the confidence of the
4-15 public and warrant the belief that the business will be operated
4-16 honestly and fairly in compliance with the purposes of this
4-17 article.
4-18 Sec. 5. MINIMUM NET ASSETS. (a) A registrant that conducts
4-19 business as a mortgage broker shall maintain net assets of at least
4-20 $25,000 and a surety bond in the amount of at least $25,000 or a
4-21 surety bond in the amount of at least $50,000. The term of the
4-22 surety bond must coincide with the term of the certificate of
4-23 registration.
4-24 (b) This section does not apply to a registrant who is
4-25 licensed to practice law in this state.
4-26 (c) In this section, "net assets" means the difference
4-27 between total assets and total indebtedness, as determined by
5-1 generally accepted accounting principles, except that assets of
5-2 doubtful or uncertain value are disallowed.
5-3 Sec. 6. CRIMINAL HISTORY RECORD INFORMATION. (a) On the
5-4 filing of the application and payment of the application fee by the
5-5 applicant, the commissioner is entitled to obtain from the
5-6 Department of Public Safety criminal history record information
5-7 maintained by the department that relates to a person who is an
5-8 applicant for a certificate of registration.
5-9 (b) Criminal history record information obtained under this
5-10 section is confidential and may not be released or disclosed to any
5-11 person except on court order or with the consent of the person who
5-12 is the subject of the criminal history record information.
5-13 Sec. 7. ISSUANCE OF CERTIFICATE OF REGISTRATION. (a) The
5-14 commissioner shall issue a certificate of registration to a person
5-15 who applies for the certificate not later than the 30th day after
5-16 the date of receipt of a completed application unless the
5-17 commissioner has reason to believe that the eligibility
5-18 requirements of this article are not satisfied or the applicant's
5-19 financial responsibility, experience, character, and general
5-20 fitness do not command the confidence of the public and warrant the
5-21 belief that the business will be operated honestly and fairly in
5-22 compliance with the purposes of this article.
5-23 (b) The commissioner shall notify an applicant in writing if
5-24 the application is denied. An applicant may appeal the decision by
5-25 submitting a written request for a hearing not later than the 30th
5-26 day after the date of the decision.
5-27 (c) A certificate of registration issued under this article
6-1 may be renewed annually on or before its expiration date by payment
6-2 of a renewal fee of $150 for each location of an office to be
6-3 maintained by the applicant and a finding by the commissioner that
6-4 the applicant meets the conditions set forth by Subsection (a) of
6-5 this section and that the applicant's certificate of registration
6-6 is not subject to an order of suspension or revocation by the
6-7 commissioner. If a renewal fee is submitted to the commissioner
6-8 after the registration expires but before the 181st day after the
6-9 expiration date of the registration, the fee must be accompanied by
6-10 a late renewal fee of $100 for each location of an office
6-11 maintained by the applicant for which the renewal fee is late.
6-12 (d) Before the 30th day preceding the effective date of an
6-13 address change, a registrant shall notify the commissioner in
6-14 writing of the new address. If a registrant intends to move the
6-15 business to a location outside the municipality in which it is
6-16 located, a new application must be filed accompanied by the
6-17 application fee and a relocation fee of $15 and a new certificate
6-18 must be obtained before conducting business at the new location.
6-19 (e) An application, renewal, late renewal, or relocation fee
6-20 may not be refunded after a certificate of registration has been
6-21 issued or renewed.
6-22 (f) A certificate of registration issued under this article
6-23 is not transferable and may not be assigned. Ownership or control
6-24 of a registrant may not change without the approval of the
6-25 commissioner.
6-26 Sec. 8. INVESTIGATION AND INSPECTION OF RECORDS. (a) On
6-27 receipt of a written complaint or other probable cause to believe
7-1 that a person is violating a provision of state law to which this
7-2 article applies, the commissioner may request the person to furnish
7-3 information and records relating to a transaction or business
7-4 practice alleged to be in violation of the law. If a person fails
7-5 to comply with a request, the commissioner may conduct an
7-6 investigation to determine whether a violation has occurred.
7-7 (b) All information obtained by the commissioner or an
7-8 employee or other agent of the commissioner by reason of the
7-9 person's official position, including information obtained in the
7-10 course of inspecting or investigating an applicant for a
7-11 certificate of registration, is confidential. That information
7-12 remains confidential for all purposes except for lawful use by the
7-13 commissioner regarding the affairs of the registrant or in
7-14 connection with criminal proceedings.
7-15 Sec. 9. PROHIBITIONS. A registrant or applicant for a
7-16 certificate of registration under this article may not:
7-17 (1) obtain a certificate of registration through a
7-18 false or fraudulent representation or make a substantial
7-19 misrepresentation in a registration application;
7-20 (2) publish or cause to be published an advertisement
7-21 that is misleading, is likely to deceive the public, or in any
7-22 manner tends to create a misleading impression because it fails to
7-23 identify as a registrant the person causing the advertisement to be
7-24 published;
7-25 (3) engage in conduct that constitutes improper,
7-26 fraudulent, or dishonest dealings;
7-27 (4) fail to notify the commissioner if the registrant
8-1 or applicant, in a court of competent jurisdiction of this state or
8-2 another state or in a federal court, is convicted of or enters a
8-3 plea of guilty or nolo contendere to a felony or a criminal offense
8-4 involving fraud;
8-5 (5) fail to use fees collected in advance of closing
8-6 for the purposes for which the fees were paid; or
8-7 (6) charge or receive, directly or indirectly, a fee
8-8 for assisting a mortgage applicant in obtaining a mortgage until
8-9 all of the services that the registrant has agreed to perform for
8-10 the mortgage applicant are completed, and the proceeds of the
8-11 mortgage loan have been disbursed to or on behalf of the mortgage
8-12 applicant except as provided by Section 10 of this article.
8-13 Sec. 10. FEE ASSESSMENT AND DISCLOSURE. (a) Before
8-14 completion of all services, a registrant may charge and receive,
8-15 unless prohibited by law, the following fees for services in
8-16 assisting a mortgage applicant to obtain a mortgage:
8-17 (1) a fee to obtain a credit report;
8-18 (2) a fee for the appraisal of the real estate;
8-19 (3) a fee paid directly by the mortgage applicant to a
8-20 state or federal governmental agency or instrumentality for
8-21 processing a mortgage application relating to a
8-22 government-sponsored or guaranteed mortgage program; or
8-23 (4) subject to Subsection (b) of this section, fees
8-24 for locking in an interest rate, issuing a commitment letter, and
8-25 processing a loan or a loan application in connection with
8-26 obtaining or refinancing a mortgage loan.
8-27 (b) A registrant may not charge and receive a fee for
9-1 locking in an interest rate, issuing a commitment letter, or
9-2 processing a loan or a loan application unless there is a written
9-3 agreement signed by the mortgage applicant and registrant that
9-4 contains:
9-5 (1) the expiration date of the locked-in interest
9-6 rate;
9-7 (2) the principal amount of the mortgage loan;
9-8 (3) the term of the mortgage loan;
9-9 (4) an identification of the property;
9-10 (5) the initial interest rate;
9-11 (6) the discount or points to be paid;
9-12 (7) the amounts and payment terms of the fee for the
9-13 locked-in interest rate and commitment fee;
9-14 (8) a statement of whether a fee described by
9-15 Subdivision (7) of this subsection is refundable and, if so, the
9-16 terms and conditions necessary to obtain the refund; and
9-17 (9) sources and amount or computation of amount to be
9-18 paid to a mortgage broker by a person other than the mortgage
9-19 applicant.
9-20 (c) If a fee is paid by a mortgage applicant for the
9-21 performance of the service described by Subsection (a)(2) of this
9-22 section and the registrant is unable to assist in obtaining a
9-23 mortgage for the mortgage applicant, the registrant shall return to
9-24 the mortgage applicant the original documents prepared by the bona
9-25 fide third party at the time that the request for the mortgage is
9-26 refused or denied.
9-27 (d) For purposes of this section, "bona fide third party"
10-1 means a person who is not an employee of, related to, or affiliated
10-2 with the registrant and who is not used for the purpose of
10-3 circumvention or evasion of this section.
10-4 Sec. 11. SUSPENSION, REVOCATION, OR REFUSAL OF LICENSE;
10-5 INVESTIGATIONS; CEASE AND DESIST ORDERS. (a) After notice and
10-6 opportunity for a hearing, the commissioner may suspend, revoke, or
10-7 refuse to issue or renew a certificate of registration if the
10-8 commissioner finds:
10-9 (1) the registrant has failed to pay a fee or charge
10-10 properly imposed by the commissioner under this article;
10-11 (2) the registrant, knowingly or without the exercise
10-12 of due care, has violated a provision of this article or a rule or
10-13 order made under this article;
10-14 (3) the existence of a fact or condition that clearly
10-15 would have justified the commissioner in refusing to issue the
10-16 certificate of registration, if the fact or condition existed at
10-17 the time the original application for the certificate of
10-18 registration was made;
10-19 (4) the registrant has aided, abetted, or conspired
10-20 with a person to circumvent the requirements of this article;
10-21 (5) the financial responsibility, experience,
10-22 character, or general fitness of the registrant or the registrant's
10-23 owners and managers does not command the confidence of the public
10-24 or warrant the belief that the business will be operated lawfully,
10-25 fairly, and within the purposes of this article; or
10-26 (6) the registrant has failed to maintain the minimum
10-27 financial requirements of this article.
11-1 (b) The commissioner may investigate alleged violations of
11-2 this article, or the rules adopted under this article, and
11-3 complaints concerning those alleged violations. The commissioner
11-4 may make application to any state district court for an order
11-5 enjoining such a violation and, on a showing by the commissioner
11-6 that a person has committed or is about to commit such a violation,
11-7 the court shall grant an injunction, restraining order, or other
11-8 appropriate relief.
11-9 (c) In the course of an investigation, the commissioner by
11-10 subpoena may compel the attendance and testimony of witnesses and
11-11 the production of any book, record, or other document. The
11-12 commissioner is entitled to examine the book, record, or other
11-13 document at the registrant's office or place of business and to
11-14 require that copies of the book, record, or other document relating
11-15 to the matter in question be made as considered necessary. The
11-16 copies must be verified by affidavit of the person or an officer of
11-17 the person who is the subject of the document. When certified by
11-18 the commissioner, the copies may be admissible in evidence in an
11-19 investigation or hearing under this article or other law to which
11-20 this article applies or an appeal to district court. For this
11-21 purpose, the commissioner may sign subpoenas, administer oaths and
11-22 affirmations, examine witnesses, and receive evidence.
11-23 (d) If a person fails to obey a subpoena, the district court
11-24 that has jurisdiction over the witness, on application by the
11-25 commissioner, may issue an order compelling a person to obey the
11-26 subpoena or to testify or produce any book, record, or other
11-27 document relating to the matter. The filing of an application to
12-1 enforce a subpoena shall be treated by the district court in the
12-2 same manner as a motion filed in a civil suit pending in the court.
12-3 The district court shall set the application for hearing and notice
12-4 of the filing of the application, and the hearing shall be served
12-5 on the person to whom the subpoena is directed.
12-6 (e) If the commissioner determines that a person is engaged
12-7 in, or is believed to be engaged in, activities that may constitute
12-8 a violation of this article, the commissioner, after notice and a
12-9 hearing, may issue a cease and desist order.
12-10 Sec. 12. CIVIL ACTIONS; INJUNCTIVE RELIEF; CRIMINAL
12-11 PROSECUTIONS. (a) A mortgage applicant injured by a violation of
12-12 this article may bring an action for recovery of damages and
12-13 reasonable attorney's fees and court costs.
12-14 (b) The commissioner, the attorney general, or a mortgage
12-15 applicant may bring an action to enjoin a violation of this
12-16 article.
12-17 (c) The remedies provided by this section are in addition to
12-18 any other remedy provided by law.
12-19 (d) In a proceeding or action brought under this article the
12-20 burden of proving an exemption is on the person claiming the
12-21 benefit of the exemption.
12-22 (e) A person does not violate this article with respect to
12-23 an act taken or omission made in reliance on a written notice,
12-24 written interpretation, or written report from the commissioner,
12-25 unless a subsequent amendment to the article or rules adopted under
12-26 the article affect the commissioner's notice, interpretation, or
12-27 report.
13-1 (f) On disbursement of mortgage proceeds to or on behalf of
13-2 the mortgage applicant, the registrant that assisted the mortgage
13-3 applicant to obtain the mortgage is considered to have completed
13-4 the performance of the registrant's services for the mortgage
13-5 applicant and owes no additional duties or obligations to the
13-6 mortgage applicant with respect to the mortgage. This subsection
13-7 does not limit or preclude the liability of a registrant for
13-8 failing to comply with this article or a rule adopted under this
13-9 article, for failing to comply with a provision of or duty arising
13-10 under an agreement with a mortgage applicant or lender under this
13-11 article, or for violating any other state or federal law.
13-12 Sec. 13. RULEMAKING POWERS. (a) The commissioner may adopt
13-13 rules consistent with and necessary to accomplish the purposes of
13-14 this article, including rules relating to:
13-15 (1) improper or fraudulent business practices or other
13-16 acts harmful to consumers in this state; and
13-17 (2) the interpretation, implementation, and
13-18 enforcement of this article.
13-19 (b) The commissioner may adopt rules to prohibit false,
13-20 misleading, or deceptive practices by registrants but may not adopt
13-21 any other rules restricting competitive bidding or advertising by
13-22 registrants. In adopting rules to prohibit false, misleading, or
13-23 deceptive practices by registrants, the commissioner may not
13-24 restrict:
13-25 (1) the use of any medium for advertising;
13-26 (2) the personal appearance of or voice of a person in
13-27 an advertisement;
14-1 (3) the size or duration of an advertisement; or
14-2 (4) the registrant's advertisement under a trade name.
14-3 (c) The commissioner by rule shall provide for proportionate
14-4 recovery from registrants of the cost of applications, renewals,
14-5 and investigation.
14-6 Sec. 14. ACCOUNT. (a) The commissioner shall deliver all
14-7 money received under this article to the comptroller for deposit in
14-8 a special account in the general revenue fund.
14-9 (b) Money in the account may be used only to administer this
14-10 article.
14-11 Sec. 15. EFFECT ON TEXAS CREDIT SERVICES ORGANIZATIONS ACT.
14-12 A registrant is exempt from the requirements of Chapter 18,
14-13 Business & Commerce Code, to the extent that the registrant does
14-14 not charge a fee for any service regulated under that chapter.
14-15 Sec. 16. SECONDARY MARKET TRANSACTIONS. This article does
14-16 not prohibit a mortgage broker from receiving compensation from a
14-17 party other than the mortgage applicant for the sale, transfer,
14-18 assignment, or release of rights on the closing of a mortgage
14-19 transaction, provided that the compensation is disclosed in writing
14-20 to the mortgage applicant.
14-21 SECTION 2. (a) This Act takes effect September 1, 1997.
14-22 (b) A person is not required to be registered under Article
14-23 9001, Revised Statutes, as added by this Act, before January 1,
14-24 1998.
14-25 SECTION 3. The importance of this legislation and the
14-26 crowded condition of the calendars in both houses create an
14-27 emergency and an imperative public necessity that the
15-1 constitutional rule requiring bills to be read on three several
15-2 days in each house be suspended, and this rule is hereby suspended.