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


Senate Research CenterC.S.H.B. 1493
78R16937 PAM-FBy: Solomons (Harris)
Business & Commerce
5-21-2003
Committee Report (Substituted)

DIGEST AND PURPOSE 

Chapter 51, Property Code, governs the foreclosure process.   There are
some practices that have been developed to manage the foreclosure process
that are not expressly authorized by the Property Code.  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, but a recent appeals court ruling has put the legality of
this process in doubt.  Additionally, key terms are not currently defined
by Texas law. C.S.H.B. 1493 defines several terms used in the statutes
governing the foreclosure process and authorizes a mortgage servicer to
administer the foreclosure process on behalf of the mortgagee,
establishing the framework for that process. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to
a state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 51, Property Code, by adding Sections 51.0001,
51.0021, 51.0025, 51.0075, and 51.009, as follows: 

Sec. 51.0001.  DEFINITIONS.  Defines "book entry system," "debtor's last
known address," "mortgage servicer," "mortgagee," "mortgagor," "security
instrument," "substitute trustee," and "trustee." 

Sec. 51.0021.  NOTICE OF CHANGE OF ADDRESS REQUIRED.  Requires a debtor to
inform the mortgage servicer of the debt in a reasonable manner of any
change of address of the debtor for purposes of providing notice to the
debtor under Section 51.002 (Sale of Real Property Under Contract Lien). 

Sec.  51.0025.  ADMINISTRATION OF FORECLOSURE BY MORTGAGE SERVICER.
Authorizes a mortgage servicer to administer the foreclosure of property
under Section 51.002 (Sale of Real Property Under Contract Lien) on behalf
of a mortgagee under certain circumstances. 

Sec. 51.0075.  AUTHORITY OF TRUSTEE OR SUBSTITUTE TRUSTEE.  (a) Authorizes
a trustee or substitute trustee to set reasonable conditions for
conducting the public sale if the conditions are announced before bidding
is opened for the first sale of the day held by the  trustee or substitute
trustee. 

(b)  Provides that a trustee or substitute trustee is not a debt collector.

(c) Authorizes a mortgagee to appoint or to authorize a mortgage servicer
to appoint a perpetual substitute trustee by power of attorney or written
instrument. Requires the power of attorney or written instrument to be
signed by the mortgagee's representative, acknowledged, and sworn to with
a jurat. 

Sec. 51.009.  FORECLOSED PROPERTY SOLD "AS IS."  Provides that a purchaser
at  a sale of real property under Section 51.002 (Sale of Real Property
Under Contract Lien) acquires the foreclosed property "as is" without any
expressed or implied warranties and at the purchaser's own risk, and such
a purchaser is not a consumer. 

SECTION 2.  Amends Sections 51.002(b), (d), and (e), Property Code, as
follows: 

(b) Requires the notice of sale, which is required to include a statement
of the earliest time at which the sale will begin, to be given at least 21
days before the date of the sale by, in addition to other actions, the
mortgage servicer of the debt, rather than the holder of the debt, to
which the power of sale is related serving written notice of the sale by
certified mail on each debtor, who according to the records of the
mortgage servicer of the debt, rather than the holder of the debt, is
obligated to pay the debt. 

(d) and (e) Make conforming changes.

SECTION 3.  Effective date: January 1, 2004.