By Carona S.B. No. 1074
76R8965 CLG-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the licensing of mortgage brokers; providing civil and
1-3 administrative penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 113A, Revised Statutes, is amended by
1-6 adding Article 6573d to read as follows:
1-7 Art. 6573d. MORTGAGE BROKERS
1-8 Sec. 1. GENERAL PROVISIONS. (a) This article may be cited
1-9 as the Mortgage Broker License Act.
1-10 (b) An individual may not act in the capacity, engage in the
1-11 business, or advertise or hold that individual out as engaging in
1-12 or conducting the business of a mortgage broker in this state
1-13 without first obtaining a mortgage broker license from the
1-14 commission. An individual may not act or attempt to act as a loan
1-15 officer unless that individual is, at that time, associated with a
1-16 licensed mortgage broker and acting only for that mortgage broker.
1-17 (c) Each mortgage broker licensed under this article is
1-18 responsible to the commission and members of the public for all
1-19 acts and conduct performed under this article by the mortgage
1-20 broker or loan officer associated with or acting only for that
1-21 mortgage broker.
1-22 Sec. 2. DEFINITIONS. In this article:
1-23 (1) "Commission" means the Texas Real Estate
1-24 Commission.
2-1 (2) "Disciplinary action" means an order by the
2-2 commission that requires one or any combination of the following:
2-3 (A) suspension or revocation of a license issued
2-4 under this article;
2-5 (B) probation of a suspension or revocation of a
2-6 license issued under this article on terms and conditions that the
2-7 commission determines appropriate;
2-8 (C) a reprimand of an individual licensed under
2-9 this article;
2-10 (D) issuance of a cease and desist order under
2-11 this article; or
2-12 (E) a fine imposed on an individual licensed
2-13 under this article in an amount that does not exceed $2,500 for
2-14 each violation of this article.
2-15 (3) "Loan officer" means an individual representing a
2-16 licensed mortgage broker who solicits business for the broker in
2-17 offering one-to-four family residential loans and who is authorized
2-18 to quote rates, terms, and fees. The term does not include an
2-19 individual who performs only clerical functions such as delivering
2-20 an application to a mortgage broker or mortgage banker or gathering
2-21 information related to a mortgage loan application on behalf of the
2-22 prospective borrower, mortgage broker, or loan officer.
2-23 (4) "Mortgage applicant" means an individual who is
2-24 solicited to use or who uses a mortgage broker to obtain a mortgage
2-25 loan.
2-26 (5) "Mortgage banker" means a person who is:
2-27 (A) approved or authorized by the United States
3-1 Department of Housing and Urban Development as a mortgagee with
3-2 direct endorsement underwriting authority;
3-3 (B) an approved seller or servicer of the
3-4 Federal National Mortgage Association;
3-5 (C) an approved seller or servicer of Freddie
3-6 Mac; or
3-7 (D) an approved issuer for the Governmental
3-8 National Mortgage Association.
3-9 (6) "Mortgage broker" means a person who receives an
3-10 application from a prospective borrower for the purposes of making
3-11 a mortgage loan from that person's own funds or from the funds of
3-12 another person. The term does not include an individual who
3-13 performs only clerical functions such as delivering an application
3-14 to a mortgage broker or mortgage banker or gathering information
3-15 related to a mortgage loan application on behalf of the prospective
3-16 borrower, mortgage broker, or loan officer.
3-17 (7) "Mortgage loan" means a debt against real estate
3-18 secured by a first lien security interest against one-to-four
3-19 family residential real estate created by a deed of trust, security
3-20 deed, or other security instrument.
3-21 (8) "Person" means an individual or any other entity.
3-22 Sec. 3. EXEMPTIONS. This article does not apply to:
3-23 (1) an employee of any of the following entities in
3-24 relation to a mortgage loan that is made for the employer and is
3-25 funded from the employer's own funds:
3-26 (A) a bank, bank holding company, savings bank,
3-27 or savings and loan association chartered under the laws of this
4-1 state, any other state, or the United States or a holding company,
4-2 subsidiary, or affiliate of a bank, savings bank, or savings and
4-3 loan association;
4-4 (B) a state or federal credit union;
4-5 (C) a mortgage banker; or
4-6 (D) the holder of a regulated loan license with
4-7 100 or more employees in this state or a net worth in excess of $1
4-8 million;
4-9 (2) an individual who makes a mortgage loan from the
4-10 individual's own funds to a spouse, former spouse, or individuals
4-11 in the lineal line of consanguinity of the individual lending the
4-12 money; or
4-13 (3) an owner of real property who makes a mortgage
4-14 loan to a purchaser of the property for all or part of the purchase
4-15 price of the real estate against which the mortgage is secured.
4-16 Sec. 4. APPLICATION FOR A LICENSE. (a) An application for
4-17 a mortgage broker license must be in writing, under oath, and on
4-18 the form prescribed by the commission. The application must be
4-19 accompanied by an application fee of $130 and a recovery fund fee
4-20 as provided by Section 7(b) of this article.
4-21 (b) An application for a loan officer license must be in
4-22 writing, under oath, and on the form prescribed by the commission.
4-23 The application must be accompanied by an application fee of $80
4-24 and a recovery fund fee as provided by Section 7(b) of this
4-25 article.
4-26 (c) Application fees under this Act are not refundable.
4-27 (d) The commission, on receipt of an application for a
5-1 mortgage broker license or a loan officer license, shall conduct a
5-2 criminal background check of the applicant. The commission shall
5-3 obtain criminal history record information maintained by the Texas
5-4 Department of Public Safety and the Federal Bureau of
5-5 Investigation. The commission may also obtain criminal history
5-6 record information from any court or any local, state, or national
5-7 governmental agency. Unless the information is a public record at
5-8 the time the commission obtains the information under this
5-9 subsection, the information is confidential and the commission may
5-10 not release or disclose the information to any person except under
5-11 order from a court or with the permission of the applicant.
5-12 Sec. 5. QUALIFICATIONS. (a) To be eligible to be licensed
5-13 as a mortgage broker a person must:
5-14 (1) be an individual;
5-15 (2) be a citizen of the United States or a lawfully
5-16 admitted alien;
5-17 (3) be at least 18 years of age;
5-18 (4) maintain a physical office in this state and
5-19 designate that office in the license application;
5-20 (5) provide to the commission satisfactory evidence
5-21 that the person:
5-22 (A) has received a bachelor's degree in an area
5-23 relating to finance, banking, or business administration from an
5-24 accredited college or university and has 18 months experience in
5-25 the mortgage or lending field;
5-26 (B) is currently and actively licensed in this
5-27 state as:
6-1 (i) a real estate broker under The Real
6-2 Estate License Act (Article 6573a, Vernon's Texas Civil Statutes);
6-3 or
6-4 (ii) an attorney; or
6-5 (C) has three years of mortgage lending
6-6 experience evidenced by documentary proof of full-time employment
6-7 with a mortgage broker or a person exempt from this article under
6-8 Section 3(a)(1) of this article;
6-9 (6) demonstrate evidence of compliance with the
6-10 financial requirements of this article; and
6-11 (7) have not been convicted of any criminal offense
6-12 that the commission determines directly relates to the occupation
6-13 of a mortgage broker under Article 6252-13c, Revised Statutes.
6-14 (b) A mortgage broker may conduct business as a corporation,
6-15 partnership, or any other business entity. A mortgage broker must
6-16 notify the commission, in writing, of any corporate name,
6-17 partnership name, assumed name, or any other name under which the
6-18 mortgage broker conducts activities for which a license is required
6-19 under this article.
6-20 (c) To be eligible to be licensed as a loan officer, a
6-21 person must:
6-22 (1) be an individual;
6-23 (2) be a citizen of the United States or a lawfully
6-24 admitted alien;
6-25 (3) be at least 18 years of age;
6-26 (4) designate in the license application the name of
6-27 the mortgage broker under whom the loan officer will be associated;
7-1 (5) provide to the commission satisfactory evidence
7-2 that the applicant:
7-3 (A) satisfies one of the requirements under
7-4 Subsection 5(a)(5) of this section;
7-5 (B) has successfully completed 15 hours of
7-6 education courses approved by the commission under this section; or
7-7 (C) has 18 months experience as a loan officer
7-8 for a mortgage broker or a person exempt from this article under
7-9 Section 3(a)(1) of this article; and
7-10 (6) not have been convicted of any criminal offense
7-11 that the commission determines directly relates to the occupation
7-12 of a loan officer under Article 6252-13c, Revised Statutes.
7-13 Sec. 6. FINANCIAL REQUIREMENTS FOR A MORTGAGE BROKER. (a)
7-14 A mortgage broker shall maintain net assets of not less than
7-15 $25,000 or a surety bond in an amount not less than $50,000. The
7-16 term of the bond must coincide with the term of the current license
7-17 period.
7-18 (b) The commission shall require proof of compliance with
7-19 this section at the time the mortgage broker applies for or renews
7-20 a license.
7-21 (c) In this section, "net assets" means the difference
7-22 between total assets and total liabilities in accordance with
7-23 generally accepted accounting principles.
7-24 Sec. 7. MORTGAGE BROKER RECOVERY FUND. (a) The mortgage
7-25 broker recovery fund is created as a trust fund outside the state
7-26 treasury to be held by the Texas Treasury Safekeeping Trust Company
7-27 and administered by the commission as trustee on behalf of the
8-1 persons licensed under this article. The fund shall be used as
8-2 provided by this section for reimbursing aggrieved individuals who
8-3 suffer actual damages by reason of certain acts committed by a
8-4 person who at the time of the act was a licensed mortgage broker or
8-5 licensed loan officer under this article, but only if the recovery
8-6 is ordered by a court against the mortgage broker or loan officer.
8-7 The use of the fund is limited to a violation of Sections 13(d)(3),
8-8 (5), (6), (8), (9), (10), (11), (12), (13), (14), or (17) or 13(e)
8-9 of this article.
8-10 (b) On application for an original license and on
8-11 application for any renewal of a license issued under this article,
8-12 the applicant shall pay, in addition to the original application
8-13 fee or renewal fee, a fee of $20. The fee shall be deposited to
8-14 the credit of the mortgage broker recovery fund.
8-15 (c) If on December 31, 2011, or any year after 2011, the
8-16 balance in the mortgage broker recovery fund is less than $1
8-17 million, each mortgage broker and loan officer licensed under this
8-18 article, on the next renewal of the license, shall pay, in addition
8-19 to any other required fees, a fee of $10. That fee, or a pro rata
8-20 share of the amount necessary to bring the fund to $1.7 million,
8-21 whichever is less, shall be deposited in the mortgage broker
8-22 recovery fund. If on December 31 of any of those years, the
8-23 balance in the mortgage broker recovery fund is more than the
8-24 greater of $3.5 million or an amount equal to the total amount of
8-25 claims paid from the fund during the preceding four years, the
8-26 excess amount shall be transferred to the general revenue fund.
8-27 (d) For a judgment to qualify for payment from the mortgage
9-1 broker recovery fund, the action resulting in the judgment must be
9-2 started before the second anniversary of the date the cause of
9-3 action accrued.
9-4 (e) If an aggrieved person recovers a valid judgment in a
9-5 court against a mortgage broker or loan officer licensed under this
9-6 article for a violation listed in Subsection (a) of this section,
9-7 the aggrieved person, after final judgment has been entered,
9-8 execution returned nulla bona, and a judgment lien perfected, may
9-9 file a verified claim in the court in which the judgment was
9-10 entered and, on 20 days' written notice to the commission and to
9-11 the judgment debtor, may apply to the court for an order directing
9-12 payment of the amount unpaid on the judgment from the mortgage
9-13 broker recovery fund, subject to the limitations stated in
9-14 Subsection (n) of this section.
9-15 (f) The court shall immediately proceed on the application.
9-16 On the hearing on the application, the aggrieved person is required
9-17 to show that:
9-18 (1) the judgment is based on facts allowing recovery
9-19 under Subsection (a) of this section;
9-20 (2) the person is:
9-21 (A) not a spouse of the debtor or the personal
9-22 representative of the spouse of the debtor; and
9-23 (B) not licensed as a mortgage broker or loan
9-24 officer under this article who is seeking to recover any
9-25 compensation in the transaction or transactions for which the
9-26 application for payment is made;
9-27 (3) based on the best available information, the
10-1 judgment debtor lacks sufficient attachable assets in this or any
10-2 other state to satisfy the judgment and any bond required under
10-3 Section 6 of this article is not sufficient to satisfy the
10-4 judgment; and
10-5 (4) the amount that may be realized from the sale of
10-6 real or personal property or other assets liable to be sold or
10-7 applied in satisfaction of the judgment and the balance remaining
10-8 due on the judgment after application of the amount that may be
10-9 realized.
10-10 (g) A recovery on the judgment against a single defendant
10-11 made before payment from the mortgage broker recovery fund must be
10-12 applied by the creditor first to actual damages.
10-13 (h) The court shall order the commission to pay from the
10-14 mortgage broker recovery fund the amount the court finds to be
10-15 payable on the claim, under this section, if the court is
10-16 satisfied, on the hearing, of the truth of all matters required to
10-17 be shown under Subsection (f) of this section and that the
10-18 aggrieved person has satisfied all of the requirements of
10-19 Subsections (e) and (f) of this section. The commission may
10-20 relitigate any issue material and relevant in the hearing on the
10-21 application that was determined in the underlying action on which
10-22 the judgment in favor of the applicant was based. If the court
10-23 finds that the aggregate amount of claims against a licensed
10-24 mortgage broker or loan officer exceeds the limitations contained
10-25 in this section, the court shall reduce proportionately the amount
10-26 it finds payable on the claim.
10-27 (i) A license granted under this article may be revoked by
11-1 the commission on proof that the commission has made a payment from
11-2 the mortgage broker recovery fund of any amount toward satisfaction
11-3 of a judgment against a person licensed as a mortgage broker or
11-4 loan officer under this article. The commission may probate an
11-5 order revoking a license. No person on whose account payment was
11-6 made from the fund is eligible to receive a new license under this
11-7 article until the person has repaid in full, plus interest at the
11-8 current legal rate, the amount paid from the fund on the person's
11-9 account.
11-10 (j) The amounts received by the commission for deposit in
11-11 the mortgage broker recovery fund shall be held by the commission
11-12 in trust for carrying out the purposes of the mortgage broker
11-13 recovery fund. The funds may be invested and reinvested in the
11-14 same manner as funds of the Employees Retirement System of Texas,
11-15 except that no investment may be made that will impair the
11-16 necessary liquidity required to satisfy judgment payments awarded
11-17 under this section. Interest from the investments shall be
11-18 deposited to the credit of the mortgage broker recovery fund.
11-19 (k) When the commission receives notice of entry of a final
11-20 judgment and a hearing is scheduled under Subsection (h) of this
11-21 section, the commission may notify the attorney general of the
11-22 commission's desire to enter an appearance, file a response, appear
11-23 at the court hearing, defend the action, or take whatever other
11-24 action the commission considers appropriate. In taking such an
11-25 action the commission and the attorney general shall act only to
11-26 protect the mortgage broker recovery fund from spurious or unjust
11-27 claims or to ensure compliance with the requirements for recovery
12-1 under this section.
12-2 (l) When, on the order of the court, the commission has paid
12-3 from the mortgage broker recovery fund any amount to the judgment
12-4 creditor, the commission is subrogated to all of the rights of the
12-5 judgment creditor to the extent of the amount paid. The judgment
12-6 creditor shall assign all of the creditor's right, title, and
12-7 interest in the judgment up to the amount paid by the commission,
12-8 and that amount has priority for repayment from any subsequent
12-9 recovery on the judgment. Any amount and interest recovered by the
12-10 commission on the judgment shall be deposited to the mortgage
12-11 broker recovery fund.
12-12 (m) The failure of an aggrieved person to comply with this
12-13 section relating to the mortgage broker recovery fund constitutes a
12-14 waiver of any rights under this section.
12-15 (n) Notwithstanding any other provision, payments from the
12-16 mortgage broker recovery fund:
12-17 (1) may be made only pursuant to an order of a court,
12-18 as provided by Subsection (e) of this section, and in the manner
12-19 prescribed by this section;
12-20 (2) for claims, including attorney's fees, interest,
12-21 and court costs arising out of the same transaction, are limited in
12-22 the aggregate to $25,000 regardless of the number of claimants; and
12-23 (3) for claims based on judgments against one person
12-24 licensed as a mortgage broker or loan officer under this article,
12-25 may not exceed in the aggregate $50,000 until the fund has been
12-26 reimbursed for all amounts paid.
12-27 (o) This section does not limit the authority of the
13-1 commission to take disciplinary action against a mortgage broker or
13-2 loan officer for a violation of this article or a rule of the
13-3 commission. The repayment in full of all obligations to the
13-4 mortgage broker recovery fund by a mortgage broker or loan officer
13-5 does not nullify or modify the effect of any other disciplinary
13-6 proceeding brought under this article.
13-7 (p) A person who receives payment out of the mortgage broker
13-8 recovery fund under this section is entitled to receive reasonable
13-9 attorney's fees as determined by the court, subject to the
13-10 limitations stated in Subsection (n) of this section.
13-11 Sec. 8. ISSUANCE OF LICENSE CERTIFICATE. (a) When the
13-12 applicant for a mortgage broker license has met all requirements
13-13 and conditions for the license, the commission shall issue a
13-14 license to the applicant. When the applicant for a loan officer
13-15 license has met all requirements and conditions for the license,
13-16 the commission shall issue a license to the mortgage broker
13-17 sponsoring the loan officer.
13-18 (b) The commission may, in accordance with rules the
13-19 commission adopts under this subsection, issue a provisional
13-20 license to an applicant if a significant delay is necessary to
13-21 process the application, review information related to the
13-22 application, or obtain information related to the application. The
13-23 commission may revoke a provisional license issued under this
13-24 subsection on any grounds that the commission would have denied
13-25 issuance of the license on the application.
13-26 Sec. 9. RENEWALS. (a) A mortgage broker license issued
13-27 under this article is valid for a two-year period and may be
14-1 renewed on or before its expiration date if:
14-2 (1) the mortgage broker pays to the commission a
14-3 renewal fee of $130 and a mortgage broker recovery fund fee
14-4 provided by Section 7(b) of this article;
14-5 (2) the mortgage broker has not been convicted of a
14-6 felony that the commission determines is directly related to the
14-7 occupation of a mortgage broker under Article 6252-13c, Revised
14-8 Statutes; and
14-9 (3) the mortgage broker provides the commission with
14-10 satisfactory evidence that the mortgage broker:
14-11 (A) has attended 15 hours of continuing
14-12 education courses approved by the commission during the term of the
14-13 current license; or
14-14 (B) maintains an active license in this state as
14-15 a real estate broker, real estate salesperson, or attorney and has
14-16 satisfied any continuing education requirement necessary to
14-17 maintain that license.
14-18 (b) A loan officer license issued under this article is
14-19 valid for a two-year period and may be renewed on or before its
14-20 expiration date if the loan officer:
14-21 (1) pays to the commission a renewal fee of $80 and
14-22 the mortgage broker recovery fund fee provided by Section 7(b) of
14-23 this article;
14-24 (2) has not been convicted of a felony that the
14-25 commission determines is directly related to the occupation of a
14-26 loan officer under Article 6252-13c, Revised Statutes; and
14-27 (3) provides the commission with satisfactory evidence
15-1 that the loan officer:
15-2 (A) has attended 15 hours of continuing
15-3 education courses approved by the commission during the term of the
15-4 current license; or
15-5 (B) maintains an active license in this state as
15-6 a real estate broker, real estate salesperson, or attorney and has
15-7 satisfied any continuing education requirement necessary to
15-8 maintain that license.
15-9 (c) The commission may require mortgage brokers and loan
15-10 officers to submit requests for renewals on a form prescribed by
15-11 the commission.
15-12 (d) On receipt of a request for a renewal of a license
15-13 issued under this article, the commission may conduct a criminal
15-14 background check that it is authorized to conduct for an original
15-15 license under Section 4(d) of this article.
15-16 (e) A renewal fee for the renewal of a license issued under
15-17 this article is not refundable.
15-18 Sec. 10. DENIAL OF APPLICATIONS AND RENEWALS. If the
15-19 commission fails or refuses to issue a license to an applicant or
15-20 fails or refuses to renew a license, the commission shall promptly
15-21 give written notice of the refusal to the applicant for the license
15-22 or to the applicant requesting the renewal. Before the applicant
15-23 requesting the renewal may appeal to a district court as provided
15-24 by Section 15 of this article, the applicant must file not later
15-25 than the 10th day after the date of receipt of the notice an appeal
15-26 from the ruling, requesting a time and place for a hearing before
15-27 the commission. The commission shall set the time and place for
16-1 the hearing not later than the 30th day after the date of receipt
16-2 of the appeal, giving at least 10 days' notice of the hearing to
16-3 the applicant requesting the renewal. The time of the hearing may
16-4 be continued from time to time with the consent of the applicant
16-5 requesting the renewal. Following the hearing, the commission
16-6 shall enter an order that, in the commission's opinion, is
16-7 appropriate in the matter concerned. If the applicant requesting
16-8 the renewal fails to request a hearing as provided by this section,
16-9 the commission's ruling becomes final on the 11th day after the
16-10 date the applicant receives notice and is not subject to review by
16-11 the courts. The commission may issue a probationary license. The
16-12 commission by rule shall adopt reasonable terms and conditions for
16-13 a probationary license.
16-14 Sec. 11. CHANGE OF ADDRESS; CHANGE OF ASSOCIATION. (a)
16-15 Before the 10th day preceding the effective date of an address
16-16 change, a mortgage broker shall notify the commission in writing of
16-17 the new address accompanied by a change of address fee of $25. The
16-18 mortgage broker must obtain a new license certificate before
16-19 conducting business at the new location.
16-20 (b) A loan officer may act only for the mortgage broker
16-21 under whom the loan officer is associated. A loan officer may be
16-22 associated with only one mortgage broker at a time. When the
16-23 association of a loan officer with the supervising mortgage broker
16-24 is terminated, the loan officer and the mortgage broker shall
16-25 immediately notify the commission and the mortgage broker shall
16-26 return the loan officer license to the commission. On return, the
16-27 loan officer's license becomes inactive. The loan officer license
17-1 may be activated if, before the license expires, a mortgage broker
17-2 files a request, accompanied by a fee of $25, notifying the
17-3 commission that the mortgage broker is associated with the loan
17-4 officer and assumes responsibility for the actions of the loan
17-5 officer as provided by Section 1(c) of this article.
17-6 (c) A fee under this section is not refundable.
17-7 Sec. 12. MAINTENANCE AND LOCATION OF OFFICES; DISPLAY OF
17-8 LICENSE CERTIFICATES. (a) Each mortgage broker licensed under
17-9 this article shall maintain a physical office within this state.
17-10 The address of the office shall be designated on the license.
17-11 (b) If a mortgage broker maintains more than one place of
17-12 business within this state, the mortgage broker shall apply for,
17-13 pay a fee of $50 for, and obtain an additional license, known as a
17-14 branch office license, for each additional office the mortgage
17-15 broker maintains.
17-16 (c) The license of a mortgage broker shall be at all times
17-17 prominently displayed in the mortgage broker's place of business.
17-18 The branch office license shall be at all times prominently
17-19 displayed in the mortgage broker's branch office. A loan officer
17-20 license shall be at all times prominently displayed in the office
17-21 of the mortgage broker at which the loan officer primarily conducts
17-22 business.
17-23 Sec. 13. INVESTIGATION AND INSPECTION OF RECORDS. (a) The
17-24 commission may, and shall on the signed written complaint of any
17-25 person, provided the complaint, or the complaint together with
17-26 evidence, documentary or otherwise, presented in connection with
17-27 the complaint, provides reasonable cause, investigate the actions
18-1 and records of a person licensed under this article. Except for
18-2 investigations authorized under Subsection (b) of this section, the
18-3 commission shall, before beginning an investigation, send to the
18-4 mortgage broker or loan officer who is the subject of the complaint
18-5 written notice of the complaint and of the commission's intention
18-6 to investigate the matter.
18-7 (b) The commission may not conduct an undercover or covert
18-8 investigation and may not investigate or initiate other action
18-9 against a person licensed under this article on the basis of an
18-10 anonymous complaint unless the investigation is expressly
18-11 authorized by the commission after due consideration of the
18-12 circumstances and a determination by the commission that the
18-13 measure is necessary to carry out the purposes of this article.
18-14 (c) The commission may authorize an employee of the
18-15 commission to file a signed written complaint against a person
18-16 licensed under this article and to conduct an investigation if:
18-17 (1) a judgment against the person licensed under this
18-18 article has been paid from the mortgage broker recovery fund
18-19 established under this article;
18-20 (2) the person licensed under this article is
18-21 convicted of a criminal offense that may constitute grounds for the
18-22 suspension or revocation of the license; or
18-23 (3) the person licensed under this article fails to
18-24 make payment on a check issued by the person to the commission.
18-25 (d) The commission may order disciplinary action against a
18-26 licensed mortgage broker or a licensed loan officer at any time if
18-27 the commission determines that the mortgage broker or loan officer:
19-1 (1) obtained a license under this article through a
19-2 false or fraudulent representation or made a material
19-3 misrepresentation in an application for a license under this
19-4 article;
19-5 (2) published or caused to be published an
19-6 advertisement related to the business of a mortgage broker or loan
19-7 officer that:
19-8 (A) is misleading;
19-9 (B) is likely to deceive the public;
19-10 (C) in any manner tends to create a misleading
19-11 impression;
19-12 (D) fails to identify as a mortgage broker or
19-13 loan officer the person causing the advertisement to be published;
19-14 or
19-15 (E) violates federal or state law;
19-16 (3) while performing an act for which a license under
19-17 this article is required, engaged in conduct that constitutes
19-18 improper, fraudulent, or dishonest dealings;
19-19 (4) failed to notify the commission if the mortgage
19-20 broker or loan officer, in a court in this state or another state
19-21 or in a federal court, is convicted of or enters a plea of guilty
19-22 or nolo contendere to a felony or a criminal offense involving
19-23 fraud not later than the 30th day after the date of the final
19-24 conviction;
19-25 (5) failed to use fees collected in advance of closing
19-26 of a mortgage loan for the purposes for which the fees were paid;
19-27 (6) charged or received, directly or indirectly, a fee
20-1 for assisting a mortgage applicant in obtaining a mortgage loan
20-2 until all of the services that the mortgage broker or loan officer
20-3 agreed to perform for the mortgage applicant are completed, and the
20-4 proceeds of the mortgage loan have been disbursed to or on behalf
20-5 of the mortgage applicant except as provided by Section 14 of this
20-6 article;
20-7 (7) failed within a reasonable time to make payment on
20-8 a check issued by the mortgage broker or loan officer to the
20-9 commission after the commission has mailed a request for payment by
20-10 certified mail to the mortgage broker's or loan officer's last
20-11 known business address as reflected by the commission's records;
20-12 (8) paid compensation to anyone who is not licensed or
20-13 exempt under this article for acts for which a license under this
20-14 article is required;
20-15 (9) induced or attempted to induce a party to a
20-16 contract to break that contract so that the mortgage broker or loan
20-17 officer could make a mortgage loan;
20-18 (10) without the advice of counsel, published or
20-19 circulated an unjustified or unwarranted threat of legal
20-20 proceedings in matters related to the mortgage broker's or loan
20-21 officer's actions or services as a mortgage broker or loan officer;
20-22 (11) established an association, by employment or
20-23 otherwise, with a person not licensed or exempt under this article
20-24 who was expected or required to act as a mortgage broker or loan
20-25 officer;
20-26 (12) aided, abetted, or conspired with a person to
20-27 circumvent the requirements of this article;
21-1 (13) acted in the dual capacity of a mortgage broker
21-2 or loan officer and real estate broker, salesperson, or attorney in
21-3 a transaction without the knowledge and consent of the mortgage
21-4 applicant or in violation of applicable requirements under federal
21-5 law;
21-6 (14) discriminated against a prospective borrower on
21-7 the basis of race, color, religion, sex, national origin,
21-8 ancestry, familial status, or a disability;
21-9 (15) failed or refused on demand to produce a
21-10 document, book, or record in the mortgage broker's or loan
21-11 officer's possession or control concerning a mortgage loan
21-12 transaction conducted by the mortgage broker or loan officer for
21-13 inspection by the commission, authorized employees of the
21-14 commission, or a representative of the commission;
21-15 (16) failed within a reasonable time to provide
21-16 information requested by the commission as a result of a formal or
21-17 informal complaint to the commission;
21-18 (17) failed without just cause to surrender, on
21-19 demand, a copy of a document or instrument coming into the mortgage
21-20 broker's or loan officer's possession that was provided to the
21-21 mortgage broker or loan officer by the person making demand or that
21-22 the person making the demand is under law entitled to receive; or
21-23 (18) disregarded or violated this article or a rule
21-24 adopted by the commission under this article.
21-25 (e) Unless prohibited by federal law, this article does not
21-26 prevent affiliated or controlled business arrangements or loan
21-27 origination services by or between mortgage brokers and other
22-1 professionals if the mortgage broker complies with all applicable
22-2 federal law permitting such an arrangement or service.
22-3 (f) A person licensed under this article shall retain each
22-4 record created or obtained in the normal course of business for a
22-5 period of at least 25 months after the date on which the record was
22-6 created or obtained.
22-7 Sec. 14. FEE ASSESSMENT AND DISCLOSURE. (a) Before
22-8 completion of all services, a mortgage broker may charge and
22-9 receive, unless prohibited by law, any of the following fees for
22-10 services in assisting a mortgage applicant to obtain a mortgage:
22-11 (1) a fee to obtain a credit report;
22-12 (2) a fee for the appraisals of the real estate;
22-13 (3) a fee for processing a mortgage application;
22-14 (4) a fee for taking a mortgage application;
22-15 (5) a fee to issue a loan commitment;
22-16 (6) a fee for a courier service;
22-17 (7) a fee for automated underwriting; or
22-18 (8) subject to Subsection (b) of this section, a fee
22-19 for locking in an interest rate.
22-20 (b) A mortgage broker or loan officer may not charge and
22-21 receive a fee for locking in an interest rate unless there is a
22-22 written agreement signed by the mortgage applicant and mortgage
22-23 broker that contains a statement of whether the fee to lock in the
22-24 interest rate is refundable and, if so, the terms and conditions
22-25 necessary to obtain the refund.
22-26 Sec. 15. HEARINGS AND JUDICIAL REVIEW. (a) If the
22-27 commission proposes to suspend or revoke a license issued under
23-1 this article or if the commission refuses to issue or renew a
23-2 license to an applicant for a license or renewal under this
23-3 article, the applicant or person licensed under this article is
23-4 entitled to a hearing before the commission or a hearings officer
23-5 appointed by the commission. The commission shall prescribe
23-6 procedures by which all decisions to suspend, revoke, or refuse a
23-7 license are made by or are appealable to the commission. The
23-8 commission shall prescribe the time and place of the hearing.
23-9 However, if the proceeding involves disciplinary action against a
23-10 licensed mortgage broker or loan officer, the hearing, on request
23-11 of the mortgage broker or loan officer, shall be held in the county
23-12 in which the mortgage broker or loan officer has the mortgage
23-13 broker's or loan officer's principal place of business. The
23-14 hearing is governed by the procedures for a contested case under
23-15 Chapter 2001, Government Code.
23-16 (b) The commission may issue subpoenas for the attendance of
23-17 witnesses and the production of records or documents. Process
23-18 issued by the commission may extend to all parts of the state and
23-19 may be served by any person designated by the commission.
23-20 (c) An individual aggrieved by a ruling, order, or decision
23-21 of the commission has the right to appeal to a district court in
23-22 the county where the hearing was held. Such an appeal is governed
23-23 by the procedures under Chapter 2001, Government Code.
23-24 Sec. 16. CIVIL ACTIONS; INJUNCTIVE RELIEF; CRIMINAL
23-25 PROSECUTIONS. (a) A mortgage applicant injured by a violation of
23-26 this article may bring an action for recovery of actual monetary
23-27 damages and reasonable attorney's fees and court costs.
24-1 (b) The commission, the attorney general, or a mortgage
24-2 applicant may bring an action to enjoin a violation of this
24-3 article.
24-4 (c) The remedies provided by this section are in addition to
24-5 any other remedy provided by law.
24-6 (d) In a proceeding or action brought under this article in
24-7 which a person claims an exemption, the person has the burden of
24-8 proving the exemption.
24-9 (e) A person does not violate this article with respect to
24-10 an act taken or omission made in reliance on a written notice,
24-11 written interpretation, or written report from the commission
24-12 unless a subsequent amendment to this article or rules adopted
24-13 under this article affect the commission's notice, interpretation,
24-14 or report.
24-15 (f) On disbursement of mortgage proceeds to or on behalf of
24-16 the mortgage applicant, the mortgage broker and loan officer that
24-17 assisted the mortgage applicant to obtain the mortgage loan is
24-18 considered to have completed the performance of the mortgage
24-19 broker's and loan officer's services for the mortgage applicant and
24-20 owes no additional duties or obligations to the mortgage applicant
24-21 with respect to the mortgage loan. This subsection does not limit
24-22 or preclude the liability of a mortgage broker or loan officer for:
24-23 (1) failing to comply with this article or a rule
24-24 adopted under this article;
24-25 (2) failing to comply with a provision of or duty
24-26 arising under an agreement with a mortgage applicant or lender
24-27 under this article; or
25-1 (3) violating any other state or federal law.
25-2 (g) A person commits an offense if the person acts as a
25-3 mortgage broker or loan officer without first obtaining the
25-4 appropriate license under this article. An offense under this
25-5 subsection is a Class B misdemeanor, except that if the person has
25-6 been convicted of an offense under this section a subsequent
25-7 offense is a Class A misdemeanor.
25-8 (h) If a person receives money, or the equivalent of money,
25-9 as a fee or profit by or in consequence of a violation of
25-10 Subsection (g) of this section, the person is additionally liable
25-11 to the aggrieved person for not less than the amount received and
25-12 not more than three times the amount received, as determined by the
25-13 court. The penalty may be recovered in a court by the aggrieved
25-14 person.
25-15 (i) If in the judgment of the commission a person has
25-16 engaged, or is about to engage, in an act or practice that is a
25-17 violation of this article, the attorney general or the county
25-18 attorney or district attorney in the county in which the violation
25-19 has occurred or is about to occur or in the county of the
25-20 defendant's residence may maintain an action in the name of this
25-21 state in the district court of that county to abate and temporarily
25-22 and permanently enjoin the act or practice and to enforce
25-23 compliance with this article. The plaintiff in an action under
25-24 this subsection is not required to give a bond, and court costs may
25-25 not be adjudged against the plaintiff.
25-26 (j) If a person violates this article, the commission may
25-27 assess an administrative penalty against the person in an amount
26-1 not to exceed $1,000 for each violation. Each day a person who
26-2 continues to violate this article after the commission has demanded
26-3 that the person cease and desist may be considered a separate
26-4 violation for the purposes of penalty assessment. The commission
26-5 may, after an investigation, determine that a violation has
26-6 occurred and assess the administrative penalty. The commission may
26-7 delegate the commission's authority under this subsection to an
26-8 employee of the commission. If the person against whom the penalty
26-9 is assessed requests a hearing, the commission shall set and give
26-10 notice of hearing. The hearing shall be held by a hearing examiner
26-11 designated by the commission. Based on the findings of fact,
26-12 conclusions of law, and recommendations of the hearing examiner,
26-13 the commission by order may find a violation has occurred and may
26-14 assess a penalty or may find that no violation has occurred. All
26-15 proceedings under this subsection are subject to Chapter 2001,
26-16 Government Code. The commission may authorize the hearing examiner
26-17 to conduct the hearing and enter a final decision. Judicial review
26-18 of a final decision under this subsection is subject to Chapter
26-19 2001, Government Code. A penalty collected under this subsection
26-20 shall be deposited into the mortgage broker recovery fund.
26-21 Sec. 17. TEXAS MORTGAGE BROKER COMMITTEE; RULEMAKING POWERS.
26-22 (a) The Texas Mortgage Broker Committee is created. In addition
26-23 to other powers and duties delegated to it by the commission, the
26-24 committee shall recommend to the commission:
26-25 (1) rules for the licensing of mortgage brokers and
26-26 loan officers in this state in accordance with this article;
26-27 (2) rules relating to the education and experience
27-1 requirements for licensing mortgage brokers and loan officers under
27-2 this article;
27-3 (3) rules regarding the conduct and ethics for
27-4 mortgage brokers and loan officers licensed under this article;
27-5 (4) rules relating to continuing education
27-6 requirements for licensed mortgage brokers and loan officers and
27-7 the types of courses acceptable as continuing education courses
27-8 under this article;
27-9 (5) rules relating to granting or denying an
27-10 application or request for renewal for a mortgage broker license or
27-11 loan officer license under this article;
27-12 (6) the form and format for any applications and forms
27-13 required under this article; and
27-14 (7) the interpretation, implementation, and
27-15 enforcement of this article.
27-16 (b) The Texas Mortgage Broker Committee is composed of nine
27-17 members appointed by the commission. The members of the committee
27-18 hold office for staggered terms of six years, with the terms of two
27-19 members expiring February 1 of each odd-numbered year. Each member
27-20 holds office until the member's successor is appointed.
27-21 Appointments to the committee shall be made without regard to the
27-22 sex, race, color, age, disability, religion, or national origin of
27-23 the appointees. In the event of a vacancy during a term, the
27-24 commission shall appoint a replacement who meets the qualifications
27-25 for appointment under this section to fill the unexpired part of
27-26 the term. Members of the committee must be licensed mortgage
27-27 brokers actively engaged in the business of brokering mortgage
28-1 loans at the time of appointment and must have been primarily
28-2 engaged in the business of brokering mortgage loans for at least
28-3 two years before the member's appointment. Not more than three
28-4 members of the committee may hold a real estate broker or salesman
28-5 license. Each member of the committee is entitled to a per diem
28-6 allowance and to reimbursement of travel expenses necessarily
28-7 incurred in performing functions as a member of the committee,
28-8 subject to any applicable limitation in the General Appropriations
28-9 Act. The committee shall annually elect from its members a
28-10 chairperson, a vice chairperson, and secretary. A quorum of the
28-11 committee consists of five members.
28-12 (c) The commission may remove a Texas Mortgage Broker
28-13 Committee member if the member:
28-14 (1) does not have at the time of appointment the
28-15 qualifications required by Subsection (b) of this section;
28-16 (2) cannot discharge the member's duties for a
28-17 substantial part of the term for which the member is appointed
28-18 because of illness or disability; or
28-19 (3) is absent from more than half of the regularly
28-20 scheduled committee meetings that the member is eligible to attend
28-21 during each calendar year, unless the absence is excused by the
28-22 committee.
28-23 (d) The validity of an action of the Texas Mortgage Broker
28-24 Committee is not affected by the fact that it was taken when a
28-25 ground for removal of a committee member exists.
28-26 (e) If the administrator of the commission has knowledge
28-27 that a potential ground to remove a member of the Texas Mortgage
29-1 Broker Committee exists, the administrator shall notify the
29-2 chairperson of the committee that a potential ground exists.
29-3 (f) The commission shall adopt procedural rules to be used
29-4 by the Texas Mortgage Broker Committee in performing its powers and
29-5 duties.
29-6 (g) The Texas Mortgage Broker Committee is subject to the
29-7 open meetings law (Chapter 551, Government Code), the open records
29-8 law (Chapter 552, Government Code), and the Administrative
29-9 Procedure Act (Chapter 2001, Government Code).
29-10 (h) The Texas Mortgage Broker Committee shall meet
29-11 semiannually and at the call of the commission. The committee may
29-12 also meet at the call of a majority of its members.
29-13 (i) The Texas Mortgage Broker Committee shall act in an
29-14 advisory capacity to develop and recommend to the commission rules
29-15 under this article. The committee shall review rules relating to
29-16 this section and recommend changes in the rules. The commission
29-17 shall submit all proposed rules, all proposed rule changes, and all
29-18 requests for proposed rules or rule changes that relate to the
29-19 regulation and licensing of mortgage brokers and loan officers
29-20 under this article to the committee for development or
29-21 recommendation. The commission may modify the rules developed by
29-22 the committee if the commission finds that the modifications are in
29-23 the public interest. This section does not prohibit the commission
29-24 from developing and adopting rules relating to the regulation and
29-25 licensing of mortgage brokers and loan officers under this article
29-26 if the committee fails to develop or recommend rules under this
29-27 article within a reasonable period after the proposed rules, rule
30-1 changes, or requests for proposed rules or rule changes are
30-2 submitted to the committee. If the committee determines that a
30-3 rule requested by the commission should not be developed or
30-4 recommended for adoption, the committee shall submit a report on
30-5 the matter to the commission and the chairperson of the commission
30-6 and the chairperson of the committee shall appoint three members
30-7 each from their respective bodies to meet as an ad hoc committee to
30-8 consider the report and recommend possible action by the
30-9 commission. The chairperson of the commission or a member of the
30-10 commission designated by the chairperson of the commission shall
30-11 serve as the seventh member of the ad hoc committee. At least one
30-12 member of the ad hoc committee must be a public member of the
30-13 commission.
30-14 (j) Under this section, the Texas Mortgage Broker Committee
30-15 may recommend and the commission may adopt rules to prohibit false,
30-16 misleading, or deceptive practices by mortgage brokers and loan
30-17 officers but may not recommend or adopt any other rules restricting
30-18 competitive bidding or advertising by mortgage brokers and loan
30-19 officers. In recommending and adopting rules to prohibit false,
30-20 misleading, or deceptive practices by mortgage brokers and loan
30-21 officers, the committee and the commission may not restrict:
30-22 (1) the use of any medium for advertising;
30-23 (2) the personal appearance of or voice of an
30-24 individual in an advertisement;
30-25 (3) the size or duration of an advertisement; or
30-26 (4) the mortgage broker's or loan officer's
30-27 advertisement under a trade name.
31-1 Sec. 18. SECONDARY MARKET TRANSACTIONS. This article does
31-2 not prohibit a mortgage broker from receiving compensation from a
31-3 party other than the mortgage applicant for the sale, transfer,
31-4 assignment, or release of rights on the closing of a mortgage
31-5 transaction.
31-6 SECTION 2. Section 393.002(a), Finance Code, is amended to
31-7 read as follows:
31-8 (a) This chapter does not apply to:
31-9 (1) a person:
31-10 (A) authorized to make a loan or grant an
31-11 extension of consumer credit under the laws of this state or the
31-12 United States; and
31-13 (B) subject to regulation and supervision by
31-14 this state or the United States;
31-15 (2) a lender approved by the United States secretary
31-16 of housing and urban development for participation in a mortgage
31-17 insurance program under the National Housing Act (12 U.S.C. Section
31-18 1701 et seq.);
31-19 (3) a bank or savings and loan association the
31-20 deposits or accounts of which are eligible to be insured by the
31-21 Federal Deposit Insurance Corporation or a subsidiary of the bank
31-22 or association;
31-23 (4) a credit union doing business in this state;
31-24 (5) a nonprofit organization exempt from taxation
31-25 under Section 501(c)(3), Internal Revenue Code of 1986 (26 U.S.C.
31-26 Section 501(c)(3));
31-27 (6) a real estate broker or salesman licensed under
32-1 the Real Estate License Act (Article 6573a, Vernon's Texas Civil
32-2 Statutes) who is acting within the course and scope of that
32-3 license;
32-4 (7) an individual licensed to practice law in this
32-5 state who is acting within the course and scope of the individual's
32-6 practice as an attorney;
32-7 (8) a broker-dealer registered with the Securities and
32-8 Exchange Commission or the Commodity Futures Trading Commission
32-9 acting within the course and scope of that regulation;
32-10 (9) a consumer reporting agency; [or]
32-11 (10) a person whose primary business is making loans
32-12 secured by liens on real property; or
32-13 (11) a mortgage broker or loan officer licensed under
32-14 the Mortgage Broker License Act (Article 6573d, Revised Statutes)
32-15 who is acting within the course and scope of that license.
32-16 SECTION 3. (a) This Act takes effect September 1, 1999.
32-17 (b) A person is not required to be licensed under Article
32-18 6573d, Revised Statutes, as added by this Act, before January 1,
32-19 2000.
32-20 SECTION 4. The importance of this legislation and the
32-21 crowded condition of the calendars in both houses create an
32-22 emergency and an imperative public necessity that the
32-23 constitutional rule requiring bills to be read on three several
32-24 days in each house be suspended, and this rule is hereby suspended.