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79R1690 CLG-D
By: Chavez H.B. No. 1042
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of real estate seller-financers;
providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle E, Title 3, Finance Code, is amended by
adding Chapter 158 to read as follows:
CHAPTER 158. REGULATION OF REAL ESTATE SELLER-FINANCERS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 158.001. SHORT TITLE. This chapter may be cited as the
Real Estate Seller-Financers Registration Act.
Sec. 158.002. DEFINITIONS. In this chapter:
(1) "Commissioner" means the savings and loan
commissioner.
(2) "Executory contract for conveyance of residential
real estate" means:
(A) a lease of residential real estate for a term
of 180 days or more that includes an option to purchase allowing for
a portion of the lease payment to be applied to the purchase price
of the property; or
(B) a contract for the conveyance of real
property intended to be used as residential real estate allowing
for the purchase price of the property to be payable in four or more
installments.
(3) "Finance commission" means the Finance Commission
of Texas.
(4) "Mortgage loan" means a debt against real estate
secured by a first-lien security interest against residential real
estate created by a deed of trust, security deed, or other security
instrument.
(5) "Real estate seller-financer" means an owner of
residential real estate engaged in the business of extending credit
to, making a mortgage loan to, or entering into an executory
contract for conveyance of residential real estate with another
person for the purpose of selling the owner's residential real
estate.
(6) "Residential real estate" means a lot or parcel of
land located in this state that is improved or intended for
improvement with a one-to-four family dwelling used or occupied,
wholly or partly, as the residence of one or more persons, including
a manufactured home.
[Sections 158.003-158.100 reserved for expansion]
SUBCHAPTER B. ADMINISTRATIVE PROVISIONS
Sec. 158.101. ADMINISTRATION OF CHAPTER. (a) The
commissioner shall administer this chapter.
(b) The commissioner may appoint employees and support
staff hired to administer Chapter 156 to administer and enforce
this chapter in addition to their duties and responsibilities under
that chapter.
Sec. 158.102. RULEMAKING AUTHORITY. The finance commission
may adopt and enforce rules necessary to carry out the intent of or
to ensure compliance with this chapter.
Sec. 158.103. CERTAIN POWERS OF COMMISSIONER. The
commissioner may authorize specific employees to conduct hearings
and make recommendations for final decisions in contested cases.
[Sections 158.104—158.200 reserved for expansion]
SUBCHAPTER C. REGISTRATION AND OFFICES
Sec. 158.201. REGISTRATION REQUIRED. A person must hold a
certificate of registration under this chapter before engaging in
business as a real estate seller-financer in this state, unless the
person is exempt under Section 158.203.
Sec. 158.202. APPLICATION FOR CERTIFICATE OF REGISTRATION.
(a) A real estate seller-financer may apply for a certificate of
registration by filing an application with the commissioner that
contains:
(1) the legal name and business telephone number of
the real estate seller-financer;
(2) the physical street address for the location in
this state at which the person conducts business as a real estate
seller-financer;
(3) a list of any additional locations in this state at
which the person conducts business as a real estate
seller-financer;
(4) if the applicant is not a natural person:
(A) the name and address of each officer of the
applicant, in the case of a corporation;
(B) the name and address of each officer,
manager, or member of the applicant, in the case of a limited
liability company; or
(C) the name and address of each general partner
of the applicant, in the case of a partnership or limited liability
partnership; and
(5) any other information the commissioner may require
with respect to the applicant as determined by rule of the finance
commission.
(b) The application must be on a form prescribed by the
finance commission.
(c) If the applicant is a corporation, limited liability
company, or limited partnership not organized in this state, the
applicant must also provide to the commissioner:
(1) evidence that the applicant is qualified to engage
in business in this state; and
(2) the name and address of the applicant's registered
agent for service of process in this state.
Sec. 158.203. EXEMPTION. This chapter does not apply to:
(1) a person who in a consecutive 12-month period does
not enter into more than three transactions that are mortgage loans
or executory contracts for conveyance of residential real estate;
(2) a bank, savings bank, or savings and loan
association, or a subsidiary or an affiliate of a bank, savings
bank, or savings and loan association;
(3) a state or federal credit union or a subsidiary or
affiliate of a state or federal credit union;
(4) an insurance company licensed or authorized to do
business in this state under the Insurance Code;
(5) a mortgage banker registered under Chapter 157;
(6) a mortgage broker licensed under Chapter 156;
(7) a Farm Credit System institution; or
(8) a political subdivision of this state involved in
affordable home ownership programs.
Sec. 158.204. UPDATE OF APPLICATION INFORMATION. (a) A
real estate seller-financer shall update information contained in
the registration application not later than the 30th day after the
date the information changes.
(b) The commissioner may charge a person a reasonable fee
not to exceed $50 for each change in the registration application
made by a real estate seller-financer.
Sec. 158.205. REGISTRATION AND ADMINISTRATION FEE. The
commissioner may charge a real estate seller-financer a reasonable
fee, in an amount not to exceed $500 a year, to cover the costs of
filing the application for a certificate of registration and
administering this chapter.
Sec. 158.206. ISSUANCE OF CERTIFICATE. (a) The
commissioner shall issue a certificate of registration to an
applicant who meets the application and other requirements of
Section 158.202 and pays any application fee imposed under Section
158.205.
(b) A certificate of registration under this chapter is
valid for a period of two years from the date the certificate is
issued, unless revoked.
Sec. 158.207. RENEWAL OF CERTIFICATE. A certificate of
registration may be renewed on or before its expiration date if the
real estate seller-financer pays to the commissioner a renewal fee
in a reasonable amount as determined by the commissioner.
Sec. 158.208. MAINTENANCE AND LOCATION OF OFFICES. (a)
Each real estate seller-financer registered under this chapter
shall maintain a physical office in this state. The address of the
office shall be designated on the certificate of registration.
(b) A real estate seller-financer that maintains more than
one place of business in this state shall apply for, pay a fee of $50
for, and obtain an additional certificate of registration for each
additional office to be maintained by the person in this state.
Each additional certificate of registration is considered a branch
office registration.
Sec. 158.209. DISCLOSURE REGARDING COMPLAINTS. (a) Each
real estate seller-financer registered under this chapter shall
provide the following notice to an applicant or borrower in a
mortgage loan transaction or shall include the notice in each
executory contract for conveyance of residential real estate
executed by the person:
"COMPLAINTS REGARDING REAL ESTATE SELLER-FINANCERS SHOULD BE SENT
TO THE SAVINGS AND LOAN DEPARTMENT,
______________________________(street address of the Savings and
Loan Department). A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT
_______________ (telephone number of the Savings and Loan
Department's toll-free consumer hotline)."
(b) The notice to be provided in Subsection (a) must be
clear and conspicuous. In the case of a mortgage loan transaction,
the notice must be delivered to the borrower or applicant when the
person applies for a mortgage loan, or when an application is made,
before entering into or contemporaneously with the execution of a
mortgage loan transaction. In the case of an executory contract for
conveyance of residential real estate, the notice must be delivered
to the person before executing or contemporaneously with the
execution of the executory contract.
[Sections 158.210—158.300 reserved for expansion]
SUBCHAPTER D. REVOCATION AND SUSPENSION OF CERTIFICATE AND OTHER
ACTIONS AGAINST REGISTRATION HOLDER
Sec. 158.301. PROHIBITED ACTIVITIES; GROUNDS FOR
DISCIPLINARY ACTION. (a) In this section, "disciplinary action"
means an order by the commissioner that requires one or any
combination of the following:
(1) suspension or revocation of a certificate of
registration in accordance with Section 158.306;
(2) probation of a suspension or revocation of a
certificate of registration in accordance with Section 158.306;
(3) imposition of an administrative penalty as
provided by and in accordance with Section 158.304;
(4) to cease and desist from continuing a particular
action in accordance with Section 158.305; or
(5) to take affirmative action in accordance with
Section 158.305.
(b) The commissioner may order disciplinary action against
a person registered under this chapter if the commissioner
determines that the person:
(1) made a material misrepresentation in an
application for a certificate of registration under this chapter;
(2) published or caused to be published an
advertisement offering a mortgage loan or otherwise related to the
business of a real estate seller-financer that:
(A) is misleading;
(B) is likely to deceive the public;
(C) tends to create a misleading impression; or
(D) violates federal or state law;
(3) committed a false, misleading, or deceptive act or
otherwise engaged in improper dealing in connection with a mortgage
loan or an executory contract for conveyance of residential real
estate;
(4) failed within a reasonable time to honor a check
issued to the commissioner after the commissioner mailed a request
for payment by certified mail to the person's last known business
address as reflected by the commissioner's records;
(5) aided, abetted, or conspired with a person to
circumvent the requirements of this chapter;
(6) discriminated against a prospective borrower or
prospective party to an executory contract for conveyance of
residential real estate on the basis of race, color, religion, sex,
national origin, ancestry, familial status, or a disability;
(7) violated any federal or state statute or
regulation relating to:
(A) a mortgage loan or executory contract for
conveyance of residential real estate; or
(B) the sale of the property that is the subject
of a mortgage loan or the sale or lease of property that is the
subject of an executory contract for conveyance of residential real
estate;
(8) violated an ordinance or regulation of a political
subdivision of this state regulating:
(A) the sale of property that is the subject of a
mortgage loan; or
(B) the sale or lease of property that is the
subject of an executory contract for conveyance of residential real
estate; or
(9) failed or refused on demand to:
(A) produce for inspection by the commissioner or
the commissioner's authorized personnel or representative a
document, book, or record concerning a mortgage loan transaction
or an executory contract for conveyance of residential real estate;
(B) provide the commissioner or the
commissioner's authorized personnel or representative with free
access to the books or records relating to the person's business
kept by an officer, agent, or employee of the person or any business
entity, including a subsidiary or affiliate of the person, through
which the person conducts mortgage loan activities or activities
involving an executory contract for conveyance of residential real
estate; or
(C) provide information requested by the
commissioner as a result of a formal or informal complaint made to
the commissioner.
Sec. 158.302. INVESTIGATIONS. (a) On the signed written
complaint of a person, the commissioner shall investigate the
actions and records of a person registered under this chapter if the
complaint, or the complaint and documentary or other evidence
presented in connection with the complaint, provides reasonable
cause. The commissioner shall notify a person registered under this
chapter in writing of the complaint and that the commissioner
intends to investigate the matter, unless the commissioner has
reasonable cause to conclude that providing the notice would:
(1) result in the loss or destruction of evidence; or
(2) otherwise result in immediate harm to the public
or impede the conduct of the investigation.
(b) For reasonable cause, the commissioner at any time may
investigate a person registered under this chapter to determine
whether the person is complying with this chapter and applicable
rules.
(c) Except as provided by Subsection (d), information
obtained by the commissioner during an investigation is
confidential unless disclosure of the information is permitted or
required by other law.
(d) The commissioner may share information obtained in an
investigation under this section with a law enforcement agency or
with another state or a federal agency.
Sec. 158.303. SUBPOENAS. (a) During an investigation, the
commissioner may issue a subpoena addressed to a peace officer of
this state or to another person authorized by law to serve citation
or perfect service. The subpoena shall require a person to give a
deposition or produce documents, or both.
(b) If a person disobeys a subpoena or if a person appearing
in a deposition in connection with the investigation refuses to
testify, the commissioner may petition a district court in Travis
County to issue an order requiring the person to obey the subpoena,
testify, or produce the documents relating to the matter in issue,
as applicable.
(c) The court shall promptly set for hearing an application
to enforce a subpoena under Subsection (b) and shall cause notice of
the application and the hearing to be served on the person to whom
the subpoena is directed.
Sec. 158.304. ADMINISTRATIVE PENALTY. (a) The commissioner
may impose an administrative penalty on a person registered under
this chapter who violates this chapter, a rule adopted under this
chapter, or an order issued under this chapter.
(b) An order imposing an administrative penalty must
contain a reasonably detailed statement of the facts on which the
order is made.
(c) The amount of the penalty may not exceed $10,000, and
each day a violation continues or occurs is a separate violation for
the purpose of imposing a penalty. The amount shall be based on:
(1) the seriousness of the violation, including the
nature, circumstances, extent, and gravity of the violation;
(2) the history of previous violations;
(3) the amount necessary to deter a future violation;
(4) efforts to correct the violation; and
(5) any other matter that justice may require.
(d) A person against whom the penalty is imposed may file a
written request for a hearing on the penalty not later than the 30th
day after the date the order is issued. If the person requests a
hearing, the commissioner shall set and give notice of a hearing
before the commissioner or a hearing officer.
(e) A hearing under this section is governed by the
procedures for a contested case hearing under Chapter 2001,
Government Code.
(f) Based on the findings of fact, conclusions of law, and
recommendations of the hearing officer, the commissioner by order
may determine that a violation occurred or did not occur.
(g) If the commissioner does not receive a request for a
hearing under Subsection (d) before the 31st day after the date the
commissioner issues the order imposing the penalty, the order is
considered final.
(h) The enforcement of the penalty may be stayed during the
time the order is under judicial review if the person pays the
penalty to the clerk of the court or files a supersedeas bond with
the court in the amount of the penalty. A person who cannot afford
to pay the penalty or file the bond may stay the enforcement by
filing an affidavit in the manner required by the Texas Rules of
Civil Procedure for a party who cannot afford to file security for
costs, subject to the right of the commissioner to contest the
affidavit as provided by those rules.
(i) The attorney general may sue to collect the penalty.
Sec. 158.305. ORDER TO CEASE AND DESIST OR TO TAKE
AFFIRMATIVE ACTION. (a) If the commissioner has reasonable cause
to believe that a person registered under this chapter has violated
or is about to violate this chapter, the commissioner may issue,
without notice and hearing, an order to cease and desist from
continuing a particular action or an order to take affirmative
action, or both, to enforce compliance with this chapter.
(b) An order to take affirmative action may include an order
to pay restitution to a person for any amount the person paid to a
real estate seller-financer registered under this chapter in
violation of a law or regulation applicable to the mortgage loan
transaction or executory contract for conveyance of residential
real estate.
(c) A cease and desist order or an order to take affirmative
action must contain a reasonably detailed statement of the facts on
which the order is made.
(d) A person against whom a cease and desist order or order
to take affirmative action is made may file a written request for a
hearing on the order not later than the 30th day after the date the
order is issued. If the person requests a hearing, the commissioner
shall set and give notice of a hearing before the commissioner or a
hearing officer. The hearing shall be governed by Chapter 2001,
Government Code.
(e) Based on the findings of fact, conclusions of law, and
recommendations of the hearing officer, the commissioner by order
may determine that a violation occurred or did not occur.
(f) If the commissioner does not receive a request for a
hearing under Subsection (d) before the 31st day after the date the
order is issued by the commissioner, the order is considered final.
(g) If a person violates a final cease and desist order or
final order to take affirmative action, or both, issued under this
chapter, the commissioner may impose an administrative penalty
against the person in an amount not to exceed $2,500 for each day of
the violation. In addition to any other remedy provided by law, the
commissioner may institute in district court a suit for injunctive
relief and to collect the administrative penalty. A bond is not
required of the commissioner with respect to injunctive relief
granted under this subsection.
Sec. 158.306. SUSPENSION OR REVOCATION OF CERTIFICATE OF
REGISTRATION. (a) After providing notice and an opportunity for
hearing, the commissioner may order the suspension or revocation of
a certificate of registration under this chapter if the person
holding the certificate violates this chapter, a rule adopted under
this chapter, or an order issued under this chapter.
(b) In lieu of suspending or revoking a person's certificate
of registration, the commissioner may order, after notice and
hearing, probation of a suspension or revocation of a certificate
of registration on terms and conditions the commissioner determines
appropriate.
(c) A disciplinary order issued under this section may
contain an order to cease and desist from continuing a particular
action or to take affirmative action, or both, and may impose an
administrative penalty.
(d) A proceeding under this section is considered to be a
contested case under Chapter 2001, Government Code.
Sec. 158.307. ADMINISTRATIVE SUSPENSION WITHOUT PRIOR
HEARING. (a) In addition to any other remedy provided by law and
cumulative of other remedies provided by this chapter, the
commissioner, on providing not less than 10 days' notice to the
person and without a hearing, may suspend the certificate of
registration of a person who:
(1) fails to pay an administrative penalty after the
commissioner's order imposing the penalty becomes final; or
(2) otherwise fails to comply with a final cease and
desist order or final order to take affirmative action, or both,
issued by the commissioner.
(b) Suspension of a certificate of registration under this
section continues until the person has complied with the final
order or has paid the administrative penalty, as applicable.
During the period of suspension, the real estate seller-financer
may not originate mortgage loans or enter into an executory
contract for conveyance of residential real estate with another
person.
(c) A suspension order issued under this section may be
appealed in the manner provided for appeal of a contested case under
Chapter 2001, Government Code. A hearing of the commissioner's
action to order the suspension of a certificate of registration
under this section shall be held not later than the 15th day after
the date on which the commissioner receives the request for appeal.
Notwithstanding Section 2001.051, Government Code, the
commissioner shall provide the appellant at least three days'
notice of the time and place of the hearing.
[Sections 158.308—158.400 reserved for expansion]
SUBCHAPTER E. HEARINGS; CIVIL ACTIONS; UNREGISTERED ACTIVITY
Sec. 158.401. BURDEN OF PROOF TO ESTABLISH EXEMPTION. The
burden of proving an exemption in a proceeding or action brought
under this chapter is on the person claiming the benefit of the
exemption.
Sec. 158.402. UNREGISTERED ACTIVITY. (a) A person commits
an offense if the person is not exempt under Section 158.203 and
engages in business as a real estate seller-financer without
obtaining a certificate of registration under this chapter.
(b) Except as provided by Subsection (c), an offense under
this section is a Class B misdemeanor.
(c) An offense under this section is a Class A misdemeanor
if it is shown on the trial of the offense that the defendant has
been previously convicted under this section.
(d) The commissioner may issue a cease and desist order
against a person who is not exempt under Section 158.203 and who is
engaging in the business of a real estate seller-financer without
holding a certificate of registration under this chapter. The
order may direct that the person immediately cease and desist from
making mortgage loans or entering into an executory contract for
conveyance of residential real estate with another until such time
as the person has complied with the certification requirements of
this chapter. The order may also assess an administrative penalty
in an amount not to exceed $2,500 for each transaction entered into
in violation of this chapter.
(e) A person against whom a cease and desist order is
entered under this section may file a written request for a hearing
not later than the 30th day after the date the order is issued.
(f) A hearing under this section is governed by the
procedures for a contested case hearing under Chapter 2001,
Government Code.
(g) If the commissioner does not receive a request for a
hearing under Subsection (e) before the 31st day after the date on
which the cease and desist order is issued, the order is considered
final.
Sec. 158.403. PRIVATE CIVIL ACTION. (a) A borrower,
mortgage applicant, or person entering into an executory contract
for conveyance of residential real estate who is injured by a
violation of this chapter may bring an action to:
(1) enjoin a violation of this chapter; or
(2) recover actual monetary damages and reasonable
attorney's fees and court costs.
(b) A remedy provided by this section is in addition to any
other remedy provided by law.
Sec. 158.404. ACTION TO ENFORCE ORDER OF COMMISSIONER. (a)
The commissioner or attorney general may bring an action to enforce
a final order of the commissioner issued under this chapter.
(b) A remedy provided by this section is in addition to any
other remedy provided by law.
Sec. 158.405. INJUNCTIVE RELIEF. (a) In addition to any
other action, proceeding, or remedy authorized by law, the
commissioner may institute an action in the commissioner's name to
enjoin a violation of this chapter or a rule adopted under this
chapter. To sustain an action filed under this subsection, it is not
necessary to allege or prove that an adequate remedy at law does not
exist or that substantial or irreparable damage would result from a
continued violation of this chapter.
(b) The attorney general may bring an action to enjoin a
violation of this chapter.
Sec. 158.406. COMMISSIONER NOT REQUIRED TO FILE APPEAL
BOND. The commissioner is not required to file an appeal bond in
any action or proceeding to enforce this chapter.
SECTION 2. A person is not required to hold a certificate of
registration issued under Chapter 158, Finance Code, as added by
this Act, before January 1, 2006.
SECTION 3. This Act takes effect September 1, 2005.