By West                                                S.B. No. 401
         77R4459 DWS-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to counseling in connection with a high cost home loan.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1. Subchapter E, Chapter 341, Finance Code, is
 1-5     amended by adding Sections 341.407 and 341.408 to read as follows:
 1-6           Sec. 341.407.  COUNSELING IN CONNECTION WITH HIGH COST HOME
 1-7     LOAN. (a)  In this section, "high cost home loan" means  a loan
 1-8     that:
 1-9                 (1)  is made to one or more individuals for personal,
1-10     family, or household purposes;
1-11                 (2)  is secured in whole or part by:
1-12                       (A)  a manufactured home, as defined by Section
1-13     347.002, used or to be used as the borrower's principal residence;
1-14     or
1-15                       (B)  real property improved by a dwelling
1-16     designed for occupancy by four or fewer families and used or to be
1-17     used as the borrower's principal residence;
1-18                 (3)  has a principal amount of less than $240,000;
1-19                 (4)  is not:
1-20                       (A)  a reverse mortgage; or
1-21                       (B)  an open-end account, as defined by Section
1-22     301.002; and
1-23                 (5)  is a credit transaction described by 12 C.F.R.
1-24     Section 226.32, as amended, except that the term includes:
 2-1                       (A)  a residential mortgage transaction, as
 2-2     defined by 12 C.F.R. Section 226.2, as amended, if the transaction
 2-3     meets the description of 12 C.F.R. Section 226.32(a)(1), as
 2-4     amended; and
 2-5                       (B)  a loan for which:
 2-6                             (i)  the total loan amount is $20,000 or
 2-7     more; and
 2-8                             (ii)  the total points and fees payable by
 2-9     the consumer at or before loan closing will exceed five percent of
2-10     the total loan amount.
2-11           (b)  A lender may not make a high cost home loan to a
2-12     borrower who has not received counseling on the advisability of and
2-13     alternatives to the loan from a counselor certified by the United
2-14     States Department of Housing and Urban Development.
2-15           Sec. 341.408.  PENALTIES FOR FAILURE TO PROVIDE COUNSELING.
2-16     (a)  A person who violates Section 341.407 is liable to the
2-17     aggrieved borrower for:
2-18                 (1)  the actual damages caused by the violation;
2-19                 (2)  punitive damages not to exceed $10,000 in an
2-20     action brought by the aggrieved borrower; and
2-21                 (3)  court costs.
2-22           (b)  In addition to the other liabilities prescribed by this
2-23     section a license issued under this subtitle that is held by a
2-24     person who violates Section 341.407 is subject to revocation or
2-25     suspension.
2-26           SECTION 2. This Act takes effect September 1, 2001, and
2-27     applies only to a loan closed on or after that date.