By Wise H.B. No. 1493
77R5116 JMG-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of mortgage brokers.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 156.002, Finance Code, is amended to read
1-5 as follows:
1-6 Sec. 156.002. DEFINITIONS. In this chapter:
1-7 (1) "Affiliate" means a business entity that controls,
1-8 is controlled by, or is under common ownership with a license
1-9 holder under this chapter or an entity through which a license
1-10 holder operates under Section 156.204(b), including by directly or
1-11 indirectly:
1-12 (A) holding with the power to vote, owning, or
1-13 holding proxies representing at least 25 percent of the voting
1-14 stock or voting rights of a business entity;
1-15 (B) controlling the election of a majority of
1-16 the directors of a business entity;
1-17 (C) serving as a general partner to a business
1-18 entity; or
1-19 (D) having contributed more than 25 percent of
1-20 the equity capital of the business entity.
1-21 (2) "Commissioner" means the savings and loan
1-22 commissioner.
1-23 (3) [(2)] "Disciplinary action" means an order by the
1-24 commissioner that requires one or more of the following:
2-1 (A) suspension or revocation of a license under
2-2 this chapter;
2-3 (B) probation of a suspension or revocation of a
2-4 license under this chapter on terms and conditions that the
2-5 commissioner determines appropriate;
2-6 (C) a reprimand of a person licensed under this
2-7 chapter; or
2-8 (D) an administrative penalty imposed on a
2-9 person licensed under this chapter under Section 156.302.
2-10 (4) [(3)] "Finance commission" means the Finance
2-11 Commission of Texas.
2-12 (5) [(4)] "Fund" means the mortgage broker recovery
2-13 fund established by the commissioner under Subchapter F.
2-14 (6) [(5)] "Loan officer" means an individual sponsored
2-15 by a licensed mortgage broker for the purposes of performing the
2-16 acts of a mortgage broker. The term does not include:
2-17 (A) an individual who performs only clerical
2-18 functions such as delivering a loan application to a mortgage
2-19 broker or mortgage banker or gathering information related to a
2-20 mortgage loan application on behalf of the prospective borrower,
2-21 mortgage broker, or mortgage banker; or
2-22 (B) an individual who performs functions of a
2-23 loan processor.
2-24 (7) [(6)] "Loan processor" means an individual who
2-25 works under the instruction of a loan officer or mortgage broker
2-26 and performs only clerical functions such as gathering information,
2-27 requesting information, word processing, sending correspondence, or
3-1 assembling files.
3-2 (8) [(7)] "Mortgage applicant" means a person who is
3-3 solicited to use or who uses a mortgage broker to obtain a mortgage
3-4 loan.
3-5 (9) [(8)] "Mortgage banker" means a person who is:
3-6 (A) approved or authorized by the United States
3-7 Department of Housing and Urban Development as a mortgagee with
3-8 direct endorsement underwriting authority;
3-9 (B) an approved seller or servicer of the
3-10 Federal National Mortgage Association;
3-11 (C) an approved seller or servicer of the
3-12 Federal Home Loan Mortgage Association; or
3-13 (D) an approved issuer for the Governmental
3-14 National Mortgage Association.
3-15 (10) [(9)] "Mortgage broker" means a person who
3-16 receives an application from a prospective borrower for the
3-17 purposes of making a mortgage loan from that person's own funds or
3-18 from the funds of another person. The term does not include:
3-19 (A) a person who performs only clerical
3-20 functions such as delivering a loan application to a mortgage
3-21 broker or mortgage banker or gathering information related to a
3-22 mortgage loan application on behalf of the prospective borrower,
3-23 mortgage broker, or mortgage banker; or
3-24 (B) a person who performs functions of a loan
3-25 processor.
3-26 (11) [(10)] "Mortgage loan" means a debt against real
3-27 estate secured by a first-lien security interest against
4-1 one-to-four family residential real estate created by a deed of
4-2 trust, security deed, or other security instrument.
4-3 SECTION 2. Section 156.202, Finance Code, is amended to read
4-4 as follows:
4-5 Sec. 156.202. EXEMPTIONS. This chapter does not apply to:
4-6 (1) any of the following entities or a full-time [an]
4-7 employee of any of the following entities provided the employee is
4-8 acting for the benefit of the employer:
4-9 (A) a bank, savings bank, or savings and loan
4-10 association, or a subsidiary or an affiliate of a bank, savings
4-11 bank, or savings and loan association;
4-12 (B) a state or federal credit union;
4-13 (C) an insurance company licensed or authorized
4-14 to do business in this state under the Insurance Code;
4-15 (D) a mortgage banker; or
4-16 (E) an organization that qualifies for an
4-17 exemption from state franchise and sales tax as a 501(c)(3)
4-18 organization;
4-19 (2) an individual who makes a mortgage loan from the
4-20 individual's own funds to a spouse, former spouse, or persons in
4-21 the lineal line of consanguinity of the individual lending the
4-22 money;
4-23 (3) an owner of real property who makes a mortgage
4-24 loan to a purchaser of the property for all or part of the purchase
4-25 price of the real estate against which the mortgage is secured; or
4-26 (4) an individual who:
4-27 (A) makes a mortgage loan from the individual's
5-1 own funds;
5-2 (B) is not an authorized lender under Chapter
5-3 342, Finance Code; and
5-4 (C) does not regularly engage in the business of
5-5 making or brokering mortgage loans.
5-6 SECTION 3. Section 156.206(b), Finance Code, is amended to
5-7 read as follows:
5-8 (b) The commissioner shall obtain criminal history record
5-9 information on an applicant that is maintained by the Department of
5-10 Public Safety. The [By rule, the] commissioner shall [may] require
5-11 applicants to submit information and fingerprints and shall
5-12 [necessary for the commissioner to] obtain criminal history record
5-13 [background] information maintained by [from] the Federal Bureau of
5-14 Investigation on each applicant. The commissioner may also obtain
5-15 criminal history record information from any court or any local,
5-16 state, or national governmental agency.
5-17 SECTION 4. Section 156.207, Finance Code, is amended by
5-18 adding Subsection (d) to read as follows:
5-19 (d) If an applicant otherwise meets all requirements,
5-20 qualifications, and conditions for a license but the commissioner
5-21 has not received the criminal history record information from the
5-22 Federal Bureau of Investigation required by Section 156.206(b)
5-23 before the 61st day after the date the commissioner requested the
5-24 information, the commissioner shall issue a provisional license to
5-25 the applicant with an expiration date of not later than 60 days
5-26 after the date of issuance. The provisional license may be renewed
5-27 pending receipt of the criminal history record information. If the
6-1 criminal history record information is not received before the
6-2 181st day after the date the commissioner requested the information
6-3 and the applicant otherwise meets all other requirements,
6-4 qualifications, and conditions for a license, the commissioner
6-5 shall issue a license to the applicant under Subsection (a) or
6-6 (b). The commissioner shall adopt rules for the administration of
6-7 this subsection.
6-8 SECTION 5. Subchapter C, Chapter 156, Finance Code, is
6-9 amended by adding Section 156.213 to read as follows:
6-10 Sec. 156.213. ANNUAL REPORT. (a) Each licensed mortgage
6-11 broker shall file an annual report with the commissioner on a form
6-12 prescribed by the commissioner. The report must include:
6-13 (1) data on loan origination in this state for the
6-14 mortgage broker and each loan officer sponsored by the mortgage
6-15 broker; and
6-16 (2) any other information required by the
6-17 commissioner.
6-18 (b) Information contained in the annual report related to
6-19 loan origination volume or other trade information is confidential
6-20 and may not be disclosed by the commissioner or any other employee
6-21 of the Savings and Loan Department.
6-22 SECTION 6. Section 156.301, Finance Code, is amended to read
6-23 as follows:
6-24 Sec. 156.301. COMPLAINTS, [AND] INVESTIGATIONS, AND ROUTINE
6-25 INSPECTIONS. (a) On the signed written complaint of a person, the
6-26 commissioner shall investigate the actions and records of a person
6-27 licensed under this chapter if the complaint, or the complaint and
7-1 documentary or other evidence presented in connection with the
7-2 complaint, provides reasonable cause. The commissioner, before
7-3 commencing an investigation, shall notify a mortgage broker or loan
7-4 officer in writing of the complaint and that the commissioner
7-5 intends to investigate the matter.
7-6 (b) The [Except as provided by Subsection (a), the]
7-7 commissioner may investigate the actions and records of [not
7-8 initiate an investigation or other action against] a person
7-9 licensed under this chapter if the commissioner has reasonable
7-10 cause to believe that a violation of this chapter or any rule or
7-11 order issued under this chapter has occurred or is about to occur
7-12 [on the basis of an anonymous complaint regardless of whether the
7-13 complaint is in writing]. The commissioner may conduct an
7-14 undercover or covert investigation only if the commissioner, after
7-15 due consideration of the circumstances, determines that the
7-16 investigation is necessary to prevent immediate harm and to carry
7-17 out the purposes of this chapter. The commissioner shall adopt
7-18 rules specifying the criteria to be used in determining reasonable
7-19 cause.
7-20 (c) The commissioner may conduct routine on-site inspections
7-21 of licensed mortgage brokers and loan officers as the commissioner
7-22 considers necessary and proper. A routine inspection includes
7-23 inspection of the books, records, documents, operations, and
7-24 facilities of the licensee and access to any documents required
7-25 under rules issued under this chapter. An affiliate of a licensee
7-26 is subject to routine inspections by the commissioner only if
7-27 reports issued in connection with a routine inspection of a license
8-1 holder provide documented evidence of unlawful activity between a
8-2 license holder and the affiliate benefiting, affecting, or deriving
8-3 from activities regulated under this chapter. The commissioner may
8-4 cooperate and share information with or authorize an inspection or
8-5 examination to be conducted by an agency of this state, an agency
8-6 of the federal government, another state, or an agency of another
8-7 state. A license holder or affiliate is responsible for the
8-8 expenses of any inspection conducted under this subsection. The
8-9 commissioner shall adopt rules to implement this section. [The
8-10 commissioner may authorize an employee of the commissioner to file
8-11 a signed written complaint against a person licensed under this
8-12 chapter and to conduct an investigation if:]
8-13 [(1) a judgment against the person has been paid from
8-14 a recovery fund established under this chapter;]
8-15 [(2) the person holds a provisional license issued
8-16 under Section 156.207(c);]
8-17 [(3) the person is convicted of a criminal offense
8-18 that may constitute grounds for the suspension or revocation of the
8-19 license; or]
8-20 [(4) the person fails to honor a check issued to the
8-21 commissioner.]
8-22 SECTION 7. Section 156.302(e), Finance Code, is amended to
8-23 read as follows:
8-24 (e) An appeal of an administrative [A proceeding to impose
8-25 the] penalty under this section is considered to be a contested
8-26 case under Chapter 2001, Government Code.
8-27 SECTION 8. This Act takes effect September 1, 2001.