Senate Research Center S.B. 1520
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Texas law has permitted property tax lien transfers, whereby an owner of real property consents to the payment of their real property taxes by a third party, to whom the taxing unit then transfers its preexisting lien on the property, prior to its codification into Property Code by the 66th Legislature. The 79th Legislature enacted H.B. 2491 to revise the law governing those transfers by limiting transfers on some current year taxes, by detailing the required elements of a contract to repay a tax lien, and by clarifying ambiguities in the statute regarding the definition of certain terms. However, S.B. 1587 was simultaneously enacted, which also provided for certain notification procedures to first lien mortgage holders in the event a transferred tax lien is foreclosed. Statutory change may be necessary to clarify the differences enacted by these two bills.
S.B. 1520 amends current statute regarding certain aspects of ad valorem tax lien transfers and includes additional protections to consumers who authorize lien transfers for the payment of property taxes.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 32.06, Tax Code, by amending Subsections (a-1), (a-2), (a-3), (b), (c), (d), (f), (i), and (k), and adding Subsections (a-4), (b-1), (c-1), (d-1), (f-1), (f-2), (f-3), (f-4), and (k-1), as follows:
(a-1) Authorizes a person to authorize another person to pay the taxes, rather than the delinquent taxes, imposed by a taxing unit on the person's real property by filing with the collector for the unit a sworn document stating certain information, including that notice has been given to the property owner that if they are age 65 or disabled, they may be eligible for a tax deferral under Section 33.06 (Deferred Collection of Taxes on Residence Homestead of Elderly or Disabled Person).
(a-2) Authorizes the transfer of a tax lien (transfer) to the person who pays the taxes on behalf of the property owner under the authorization for taxes that are delinquent at the time of payment, or taxes that are not delinquent at the time of payment under certain circumstances. Deletes existing text authorizing the transfer of taxes on the property that become due in subsequent tax years before the delinquency date after a tax lien has been transferred.
(a-3) Requires the collector to certify in one document the transfer of the liens for all the taxes if the property owner has executed an authorization under Subsection (a-2)(2)(B) consenting to a transfer of the tax liens for both the taxes on the property that are not delinquent and taxes on the property that are delinquent.
(a-4) Requires the Finance Commission of Texas (commission) to prescribe the form and content of an appropriate disclosure statement to be provided to a property owner before the execution of a tax lien transfer and to adopt rules relating to the reasonableness of closing costs, fees, and other charges permitted under this section. Deletes existing text authorizing the transfer of a tax lien before the delinquency date if the real property is not subject to a lien other than the tax lien.
(b) Requires the collector or a person designated by the collector (designee) to certify that the taxes and any penalties and interest on the subject property and collection costs have been paid by the transferee on behalf of the property owner. Deletes existing text requiring the collector or the designee to certify on the sworn document that payment of the taxes and any penalties and interest on the described property and collection costs has been made by the transferee on behalf of the property owner liable for the taxes when imposed. Requires the collector to attach to the certified statement, rather than sworn document, the collector's seal of office or to sign the statement before a notary public and to deliver a tax receipt and the statement, rather than an affidavit attesting to the transfer of the tax lien, attesting to the transfer of the tax lien to the transferee within 30 days. Requires the collector to identify in a discrete field in the applicable property owner's, rather than taxpayer's, account the date of the transfer. Requires the transferee, upon release of the tax lien, to file a release with the county clerk of each county in which the property encumbered by the lien is located for the clerks' recordation and to send a copy of the release to the collector. Authorizes the transferee to charge the property owner a reasonable fee for filing the release. Makes conforming changes.
(b-1) Requires the transferee, not later than the 10th business day after receipt of the certified statement, to send a copy of the sworn document described under Subsection (a-1) to any mortgage servicer and to each holder of a recorded first lien encumbering the property. Requires the copy to be sent, as applicable, to the address shown on the most recent payment invoice, statement, or payment coupon provided by the mortgage servicer to the property owner or the address of a holder of a recorded first lien shown in the real property records.
(c) Entitles the transferee of a tax lien and any successor in interest to foreclose the lien in the manner specified in Section 51.002 (Sale of Real Property Under Contract Lien), Property Code and Section 32.065 (contract for Foreclosure of Tax Lien), Tax Code, after the transferee or a successor in interest obtains a court order for foreclosure under Rule 736 (Expedited Foreclosure Proceeding), Texas Rules of Civil Procedure, except as provided by Subsection (c-1) of this section, if the property owner and the transferee enter into a contract that is secured by a lien on the property.
(c-1) Requires the application, if a transferee seeks to foreclose a tax lien on property under Subsection (c)(2), to be served on and name as parties the property owner and the holder of any recorded preexisting first lien on the property and to make certain statements and confirmations. Requires the holder of a preexisting lien to be provided at least 60 days' notice before the date of the proposed transfer.
(d) Requires a transferee to record a tax lien as provided by this section, rather than requiring the recording of the tax lien in order for the tax lien to be enforceable. Makes conforming changes.
(d-1) Provides that a right of rescission described by 12 C.F.R. Section 226.23 applies to a tax lien transfer under this section.
(f) Requires the holder of a loan secured by a transfer that is delinquent for 90 consecutive days to send a notice of delinquency by certified mail on or before the 120th day of delinquency, or if that day is not a business day, on the next business day after the 120th day of delinquency, to any holder of a recorded, preexisting lien on the property. Entitles the holder or mortgage servicer of a recorded, preexisting lien on property encumbered by a tax lien transferred as provided by Subsection (b) to obtain a release of the transferred tax lien within six months after the date the notice is sent, rather than the date the tax lien is recorded in all counties in which the property is located.
(f-1) Authorizes the mortgage servicer or holder of the first lien to send a notice of delinquency to the transferee of a tax lien if the obligation secured by a preexisting first lien on the property is delinquent for at least 90 consecutive days and has been referred to a collection specialist. Entitles the mortgage servicer or holder to obtain a release of the transferred tax lien by paying the transferee the amount owed under the contract between the property owner and the transferee within six months after the date on which the notice is sent. Requires the commission by rule to prescribe the form and content of said notice.
(f-2) Provides the rights granted by Subsections (f) and (f-1) do not affect a right of redemption in a foreclosure proceeding described by Subsection (k) or (k-1).
(f-3) Requires the transferee of a tax lien to provide the payoff information required by this section to the greatest extent permitted by the 15 U.S.C. Section 6802 (Obligations with Respect to Disclosures of Personal Information) and 12 C.F.R. Part 216 (Privacy of Consumer Financial Information). Requires the payoff statement to meet the requirements of a payoff statement defined by Section 12.017 (Title Insurance Company Affidavit as Release of Lien; Civil Penalty), Property Code, to be valid. Redesignates text from existing Subsection (f).
(f-4) Provides that failure to comply with Subsection (b-1), (f), or (f-1) does not invalidate a tax lien under this chapter, a contract lien, or a deed of trust.
(i) Deletes existing text requiring the transferee of a tax lien or any successor in interest to notify the holder of all recorded liens on the property before foreclosure in the same manner and within the same time frame as the transferee is required to notify the owner of the property under Section 51.002, Property Code.
(k) Entitles the person whose property is sold as provided by Subsection (c) or the mortgage servicer of a prior recorded lien against the property to redeem the foreclosed property from the purchaser or the purchaser's successor for a certain amount.
(k-1) Authorizes the right of redemption provided by Subsection (k) to be exercised on a certain date. Requires the purchaser at the tax sale or the purchaser's successor to deliver a deed without warranty to the property to the person redeeming the property if the person redeems the property as provided by Subsection (k) and this subsection.
SECTION 2. Amends Sections 32.065(b), (c), and (d), Tax Code, as follows:
(b) Requires a contract entered into for the payment of taxes under Subsection (a) to provide for a power of sale and foreclosure in the manner provided by Section 32.06(c)(2), Tax Code, rather than under Chapter 51 (Provisions Generally Applicable to Liens), Property Code. Sets forth other certain provisions required of the contract. Makes a conforming change.
(c) Provides that a transferee of a tax lien or the transferee's assignee is subrogated to and is entitled to exercise certain rights or remedies possessed by the transferring taxing unit, notwithstanding any other provisions of this code.
(d) Includes the provisions of Chapter 343 (Home Loans), Finance Code, other than Sections 343.203 (Negative Amortization) and 343.205 (Prepayment Penalties Prohibited), as provisions that do not apply to a transaction covered under Section 32.065 (Contract for Foreclosure of Tax Lien), Tax Code.
SECTION 3. Repealer: Section 32.065(g) (regarding requirement of lienholder to notify the holders of all recorded liens on the property before foreclosure), Tax Code, as added by Chapter 406, Acts of the 79th Legislature, Regular Session, 2005.
SECTION 4. Makes application of this Act prospective.
SECTION 5. Effective date: September 1, 2007.