C.S.H.B. 1493 78(R)    BILL ANALYSIS


C.S.H.B. 1493
By: Solomons
Financial Institutions
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Chapter 51, Property Code governs the foreclosure process.  Over the
years, practices have been developed to manage the foreclosure process,
many of which, though not inconsistent with Chapter 51, are not expressly
authorized by it.  For example, it is common practice for lenders to rely
upon mortgage servicers to accept loan payments on behalf of the lender,
but current law does not address the role of mortgage servicers in the
foreclosure process.  Current practice is for the mortgage servicer to
administer this process on behalf of the lender.  A recent appeals court
ruling has cast doubt as to whether a mortgage servicer may administer the
foreclosure process because the law does not specifically authorize it.
Further uncertainty exists in the foreclosure process because key terms,
such as "debtor's last known address," are not defined in law and other
common practices, such as appointing substitute trustees, are not included
in law.   

C.S.H.B. 1493 permits a mortgage servicer to administer the foreclosure
process on behalf of the mortgagee and clarifies several terms used in the
statutes governing the foreclosure process. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency, or
institution. 

ANALYSIS

C.S.H.B. 1493 adds new Section 51.0021 to the Property Code to expressly
permit a mortgage servicer to administer the foreclosure process on behalf
of a mortgagee.  The mortgage servicer must be granted this authority by
the mortgagee in writing, and the mortgage servicer must disclose this
fact to borrowers in the notices required by Section 51.002, Property Code
to sell foreclosed property. 

The bill clarifies that a trustee or substitute trustee may set reasonable
conditions for conducting a public sale if such conditions are announced
before bidding is opened for the first sale of the day held by the
trustee.  The bill clarifies that a trustee or substitute trustee is not a
debt collector.  The bill expressly permits a mortgagee to appoint, or
authorize a mortgage servicer to appoint, substitute trustees.  The bill
clarifies that property purchased at a foreclosure sale is acquired "as
is." 

The bill adds definitions for "book entry system," "debtor's last known
address," "mortgage servicer," "mortgagee," "mortgagor," "security
instrument," "substitute trustee," and "trustee" to Chapter 51, Property
Code.  

EFFECTIVE DATE

January 1, 2004

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute adds or expands several definitions.  The substitute adds
language clarifying the role and authority of a trustee or substitute
trustee and expressly permitting the appointment of a substitute trustee.
The substitute adds language clarifying that property purchased at a
foreclosure sale is acquired "as is."  The substitute delays the effective
date to January 1, 2004.