C.S.H.B. 2673 78(R)    BILL ANALYSIS


C.S.H.B. 2673
By: Flynn
Financial Institutions
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

A mortgage broker is defined by statute as an individual who receives a
mortgage loan application from a potential borrower for the purposes of
making a loan from the mortgage broker's own funds or the funds of another
person.  Current law prohibits a person from acting in the capacity or
engaging in the business of a mortgage broker, or advertising or holding
oneself out as a mortgage broker, unless the person holds an active
mortgage broker license or is otherwise exempt.   

Mortgage bankers are exempt from this requirement under the current
statute.  A mortgage banker is defined by statute as an individual who is
authorized by the U.S. Department of Housing and Urban Development as a
mortgagee with direct underwriting authority or an approved seller or
servicer of the Federal Home Loan Mortgage Association, the Federal
National Mortgage Association, or the Governmental National Mortgage
Association.  Because of their exemption, mortgage bankers are permitted
to broker mortgages without a license.  This requires Texans to seek aid
from federal authorities when they are aggrieved by the actions of a
mortgage banker, rather than be able to seek help from a state agency as
with virtually all other individuals engaged in mortgage lending in this
state.  

C.S.H.B. 2673 establishes registration requirements for mortgage bankers,
permits the Savings and Loan Department to investigate complaints filed
against mortgage bankers, and provides the savings and loan commissioner
with the authority to revoke mortgage bankers' registrations under certain
circumstances. 

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly
granted to the Finance Commission of Texas in SECTION 1 (Section 157.011,
Finance Code) of this bill. 

ANALYSIS

C.S.H.B. 2673 adds Section 157, Finance Code to require mortgage bankers
to register with the Savings and Loan Department ("department").  The bill
specifies the information that must be filed by a mortgage banker.  The
savings and loan commissioner ("commissioner") may charge a reasonable fee
not to exceed $500 annually to cover the cost of administering the bill's
provisions. No periodic renewal of a registration is required, but a
registrant must update the information contained in a registration within
30 days of the date the information changed.  The bill provides exemptions
from the registration requirement to various licensed individuals.   

The bill permits the commissioner to revoke the registration for certain
causes, and the bill provides processes for contesting the revocation of a
registration. A mortgage banker who is aggrieved by a ruling, order, or
decision of the commissioner may appeal to district court.  If a
registration is revoked by the commissioner, the mortgage banker may
register again only with the authorization of the commissioner.  A
mortgage banker who is not permitted to re-register may appeal to district
court. 

The bill requires mortgage bankers to provide a specific disclosure to
loan applicants notifying them that complaints should be filed with the
department.  The bill requires the department to investigate written
complaints filed against mortgage bankers and seek resolution of the
disputes. The bill requires mortgage bankers to provide any evidence
requested by the commissioner promptly.  
 
C.S.H.B. 2673 permits the Finance Commission of Texas to adopt rules
necessary to implement the bill's provisions. 

EFFECTIVE DATE

January 1, 2004

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute adds several exemptions to the registration requirement not
specifically exempted by the original.  The substitute adds rulemaking
authority for the Finance Commission.  The substitute delays the effective
date to January 1, 2004 from September 1, 2003.