78R4616 DWS-D
By: Solomons H.B. No. 902
A BILL TO BE ENTITLED
AN ACT
relating to servicing of a mortgage loan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 5, Finance Code, is amended by adding
Chapter 397 to read as follows:
CHAPTER 397. SERVICING OF MORTGAGE LOAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 397.001. DEFINITIONS. In this chapter:
(1) "Effective date of transfer" means the date on
which a mortgage payment is first due to a transferee servicer.
(2) "Mortgage loan" means an original or refinanced
loan secured by a first or subordinate lien on residential real
property, including an individual unit of a condominium or
cooperative, designed principally for occupancy by one to four
families.
(3) "Servicer" means a person responsible for
servicing a loan, including a maker or holder of a loan who services
the loan. The term does not include:
(A) the Federal Deposit Insurance Corporation in
connection with assets acquired, assigned, sold, or transferred
under 12 U.S.C. Section 1823(c) or as receiver or conservator of an
insured depository institution; or
(B) the Government National Mortgage
Association, the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, or the Federal Deposit
Insurance Corporation if the transfer of the servicing is preceded
by:
(i) termination of the contract for
servicing for cause;
(ii) commencement of proceedings for
bankruptcy of the servicer; or
(iii) commencement of proceedings by the
Federal Deposit Insurance Corporation for conservatorship or
receivership of the servicer or an entity that owns or controls the
servicer.
(4) "Servicing" means receiving scheduled periodic
payments from a borrower under a loan, including amounts for an
escrow account maintained in connection with the loan, and making
payments of principal and interest and other payments with respect
to amounts received from the borrower as required under the loan.
[Sections 397.002-397.050 reserved for expansion]
SUBCHAPTER B. TRANSFER OF SERVICING
Sec. 397.051. DISCLOSURE TO APPLICANT. A person who makes a
mortgage loan shall disclose to each applicant for the loan at
settlement whether the servicing of the loan may be transferred to
another person at any time while the loan is outstanding.
Sec. 397.052. NOTICE BY TRANSFEROR. Except as provided by
Section 397.054, a servicer of a mortgage loan who transfers the
servicing of the loan to another person shall notify the borrower in
writing of the transfer not later than the 16th day before the
effective date of transfer.
Sec. 397.053. NOTICE BY TRANSFEREE. Except as provided by
Section 397.054, a transferee servicer of a mortgage loan shall
notify the borrower of the transfer not later than the 15th day
after the effective date of transfer.
Sec. 397.054. NOTICE EXCEPTIONS. (a) Sections 397.052 and
397.053 do not apply to a transfer of servicing if the person who
makes the loan provides the borrower at settlement notice of the
transfer in the form required by Section 397.055.
(b) A notice required under Section 397.052 or 397.053 must
be given not later than the 30th day after the effective date of
transfer if the transfer of the servicing is preceded by:
(1) termination of the contract for servicing for
cause;
(2) commencement of proceedings for bankruptcy of the
servicer; or
(3) commencement of proceedings by the Federal Deposit
Insurance Corporation for conservatorship or receivership of the
servicer.
Sec. 397.055. CONTENT OF NOTICE. A notice required under
this subchapter must include:
(1) the effective date of transfer of the servicing;
(2) the name, address, and toll-free or collect call
telephone number of the transferee servicer;
(3) a toll-free or collect call telephone number for
an individual employed by the transferor servicer, or the
department of the transferor servicer, that can be contacted by the
borrower to answer inquiries relating to the transfer of servicing;
(4) the name and toll-free or collect call telephone
number for an individual employed by the transferee servicer, or
the department of the transferee servicer, that can be contacted by
the borrower to answer inquiries relating to the transfer of
servicing;
(5) the date on which the transferor servicer will
cease to accept payments relating to the loan and the date on which
the transferee servicer will begin to accept the payments;
(6) information concerning the effect the transfer may
have, if any, on the terms of or the continued availability of
mortgage life or disability insurance or any other type of optional
insurance and what action, if any, the borrower must take to
maintain coverage; and
(7) a statement that the transfer of the servicing of
the mortgage loan does not affect any term or condition of the
security instruments other than terms directly related to the
servicing of the loan.
Sec. 397.056. TREATMENT OF PAYMENTS DURING TRANSFER.
During the 60-day period beginning on the effective date of
transfer of servicing of a mortgage loan a late fee may not be
imposed on the borrower with respect to a payment on the loan and a
payment may not be treated as late for any other purposes if the
payment is received by the transferor servicer before the due date
of the payment.
[Sections 397.057-397.100 reserved for expansion]
SUBCHAPTER C. BORROWER INQUIRIES
Sec. 397.101. QUALIFIED REQUEST. For the purposes of this
subchapter, a request by a borrower is a qualified request if the
request:
(1) is a written correspondence, other than notice on
a payment coupon or other payment medium provided by the servicer;
(2) includes or otherwise enables the servicer to
identify the name and account of the borrower; and
(3) includes a statement of the reasons for the
borrower's belief, to the extent applicable, that the account is in
error or provides sufficient detail to the servicer regarding other
information the borrower seeks.
Sec. 397.102. SERVICER ACTION ON RECEIPT OF QUALIFIED
REQUEST. (a) Not later than the 20th working day after the date a
servicer of a mortgage loan receives a qualified request, the
servicer shall:
(1) provide the borrower a written response
acknowledging receipt of the request; or
(2) take the action requested.
(b) Not later than the 60th working day after the date a
servicer of a mortgage loan receives a qualified request and, if
applicable, before taking action on the request, the servicer
shall:
(1) make appropriate corrections in the borrower's
account, including crediting any late charges or penalties, and
send the borrower a written notification of the correction; or
(2) after conducting an investigation, send the
borrower a written explanation or clarification that includes:
(A) to the extent applicable, a statement of the
reasons for which the servicer believes the borrower's account is
correct as determined by the servicer; or
(B) information requested by the borrower or a
statement of why the information is unavailable or cannot be
obtained by the borrower.
(c) A notification, explanation, or clarification provided
under Subsection (b) must include the name and telephone number of
an individual employed by, or the office or department of, the
servicer that can provide assistance to the borrower.
Sec. 397.103. PROTECTION OF CREDIT RATING. During the
60-day period beginning on the date a servicer receives a qualified
request relating to a dispute regarding a payment of the borrower,
the servicer may not provide information to a consumer reporting
agency, as defined by Section 20.01, Business & Commerce Code,
about an overdue payment owed by the borrower and relating to that
period or the request.
[Sections 397.104-397.150 reserved for expansion]
SUBCHAPTER D. ESCROW ACCOUNTS
Sec. 397.151. TIMELY PAYMENT. If the terms of a mortgage
loan require the borrower to make payment to the servicer of the
loan for deposit into an escrow account to assure payment of taxes,
insurance premiums, or other charges with respect to the property,
the servicer shall make payment from the escrow account for the
taxes, premiums, and other charges in a timely manner as the
payments become due.
[Sections 397.152-397.200 reserved for expansion]
SUBCHAPTER E. REMEDIES
Sec. 397.201. (a) A borrower damaged by a violation of this
chapter may bring an action for damages.
(b) A plaintiff who prevails in an action under this section
is entitled to:
(1) the plaintiff's actual damages arising from the
violation;
(2) if the court determines that the defendant in bad
faith has engaged in a pattern or practice of violations of this
chapter, additional damages in an amount not to exceed $1,000; and
(3) court costs and reasonable attorney's fees.
Sec. 397.202. CORRECTION OF VIOLATION. A servicer is not
liable for a violation of this chapter if, not later than the 60th
day after the date the servicer discovers the violation and before
the borrower brings an action under this subchapter or provides the
servicer written notice of the violation, the servicer notifies the
borrower of the violation and makes any necessary adjustments to
ensure that the borrower will not be required to pay an amount
greater than the borrower would have paid if the violation had not
occurred.
SECTION 2. This Act takes effect September 1, 2003.