80R9840 DWS-F

By: Anderson H.B. No. 3681

A BILL TO BE ENTITLED

AN ACT

relating to the closing of a loan transaction and liability of certain persons involved in the lending and appraisal process.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter B, Chapter 343, Finance Code, is amended by adding Section 343.105 to read as follows:

Sec. 343.105. LIABILITY FOR RESIDENTIAL MORTGAGE FRAUD. (a) In this section:

(1) "Knowing" means possessing actual knowledge, information, or understanding. The term does not include mere suspicion or misgiving a person may have or information a person should have known or could have known on conducting an inquiry or investigation.

(2) "Mortgage lender" means the secured creditor named in a mortgage lending process document and the creditor's successors or assigns.

(3) "Mortgage lending process" means the process through which a person seeks or obtains a residential mortgage loan, including:

(A) solicitation, application, or origination;

(B) negotiation of terms;

(C) third-party provider services;

(D) underwriting;

(E) signing of mortgage lending process documents; and

(F) closing and funding of the loan.

(4) "Mortgage lending process document" includes:

(A) a contract of sale of real property;

(B) a uniform residential loan application or other form of loan application;

(C) an appraisal report;

(D) a HUD-1 settlement statement;

(E) supporting personal documentation for a loan application, such as a W-2 form, verification of income and employment, bank statement, tax return, or payroll stub;

(F) a certification or affidavit of fact;

(G) any required disclosure; and

(H) a promissory note, mortgage, deed of trust, other security instrument, release, transfer, assignment of lien, or other legal instrument relating to the mortgage lending process.

(5) "Residential mortgage loan" means a loan or agreement to extend credit made to a person and secured by a mortgage or other lien on residential real property, including a refinancing or renewal of a loan secured by residential real property.

(6) "Residential real property" means a single-family house, townhouse, duplex, triplex, or quadruplex, or a condominium or cooperative unit in a multifamily structure used or intended to be used as a dwelling or for residential purposes.

(b) A person commits residential mortgage fraud if:

(1) in connection with a residential mortgage loan or the mortgage lending process, the person:

(A) knowingly makes a material misstatement, misrepresentation, or omission of fact with the intent that it be relied on by a mortgage lender, borrower, or other party to the mortgage lending process;

(B) knowingly signs, authenticates, uses, or facilitates the use of a mortgage lending process document that the person knows to contain a material misstatement, misrepresentation, or omission of fact, with the intent that it be relied on by a mortgage lender, borrower, or other party to the mortgage lending process; or

(C) files or causes to be filed with a county clerk or any other governmental entity a document concerning residential real property knowing that it contains a material misstatement, misrepresentation, or omission of fact;

(2) the person receives or derives a direct financial benefit from the closing of a residential mortgage loan knowing of a violation of Subdivision (1) in connection with the loan by any person; or

(3) the person conspires with any person to violate Subdivision (1).

(c) A person who commits residential mortgage fraud is liable for all losses, including attorney's fees and costs of collection, incurred as a result of the mortgage fraud by any other party to that residential mortgage loan, unless the other party also committed residential mortgage fraud in connection with that residential mortgage loan. If the person who commits residential mortgage fraud is participating in the mortgage lending process as an employee or agent of another person, the employer or principal of the person committing the mortgage fraud also is liable for all losses incurred by any other party to that residential mortgage loan resulting from the mortgage fraud.

SECTION 2. Subchapter F, Chapter 2651, Insurance Code, is amended by adding Section 2651.254 to read as follows:

Sec. 2651.254. LIABILITY OF TITLE INSURANCE COMPANIES. A title insurance company that issues an insured closing and settlement letter in accordance with Section 2702.001 is liable for losses incurred by any party to a real estate closing transaction resulting from residential mortgage fraud under Section 343.105, Finance Code, committed by the title insurance company's title insurance agent or its employee in the transaction for which the insured closing and settlement letter was issued.

SECTION 3. Subchapter A, Chapter 2652, Insurance Code, is amended by adding Section 2652.007 to read as follows:

Sec. 2652.007. DUTY AND LIABILITY OF ESCROW OFFICERS. (a) An escrow officer shall close a transaction in accordance with Section 2501.006 and, if a loan is involved, in compliance with all directions and instructions of the lender. An escrow officer may execute written lender loan closing instructions to evidence the officer's receipt of the loan closing instructions and agreement to follow the directions and instructions of the lender.

(b) An escrow officer that violates Subsection (a) is liable for all losses incurred by the lender in the transaction as a result of residential mortgage fraud under Section 343.105, Finance Code, committed by any party.

SECTION 4. Subchapter D, Chapter 2652, Insurance Code, is amended by adding Section 2652.154 to read as follows:

Sec. 2652.154. RELATIONSHIP BETWEEN TITLE INSURANCE AGENT AND ESCROW OFFICER. An escrow officer who is an employee of a title insurance agent or direct operations is an agent for the title insurance agent or direct operations with respect to the closing of a real estate transaction.

SECTION 5. Subchapter I, Chapter 1103, Occupations Code, is amended by adding Section 1103.406 to read as follows:

Sec. 1103.406. LIABILITY OF APPRAISER. A person who holds a license, certificate, or approval issued under this chapter who does not comply with the requirements of Section 1103.405 or issues an appraisal that is materially inaccurate, whether intentionally or by carelessness or negligence in ascertaining the accuracy of the appraisal, is liable for all losses, including attorney's fees and costs of collection, resulting from the appraiser's action incurred by any person for whose benefit the appraisal was prepared and any person the appraiser could reasonably have foreseen or knew would use and rely on the appraisal.

SECTION 6. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.