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A BILL TO BE ENTITLED
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AN ACT
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relating to the regulation of mortgage brokers. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Sections 156.002(9) and (10), Finance Code, are |
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amended to read as follows: |
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(9) "Mortgage broker" has the meaning assigned by 24 |
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C.F.R. Section 3500.2 [means a person who receives an application
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from a prospective borrower for the purposes of making a mortgage
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loan from that person's own funds or from the funds of another
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person]. The term does not include: |
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(A) a person who performs only clerical functions |
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such as delivering a loan application to a mortgage broker or |
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mortgage banker or gathering information related to a mortgage loan |
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application on behalf of the prospective borrower, mortgage broker, |
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or mortgage banker; or |
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(B) a person who performs functions of a loan |
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processor. |
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(10) "Mortgage loan" means a debt against real estate |
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secured by a [first lien] security interest against one-to-four |
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family residential real estate created by a deed of trust, security |
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deed, or other security instrument. |
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SECTION 2. Section 156.201, Finance Code, is amended by |
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adding Subsection (d) to read as follows: |
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(d) A person is subject to this chapter regardless of the |
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method or location of providing the loan with respect to which the |
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person acts as a mortgage broker. A person who advertises or |
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provides the services of a mortgage broker by mail, telephone, or |
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electronic means in connection with a mortgage loan is subject to |
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this chapter. |
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SECTION 3. Subchapter C, Chapter 156, Finance Code, is |
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amended by adding Sections 156.214 and 156.215 to read as follows: |
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Sec. 156.214. MORTGAGE BROKER DUTIES. |
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(a) A mortgage broker owes a fiduciary duty to a mortgage |
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applicant in the origination of a mortgage loan. The exercise of |
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this duty includes: |
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(1) ensuring that any mortgage loan offered is |
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affordable and meets the mortgage applicant's purposes, as |
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determined by considering factors including: |
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(A) the applicant's circumstances; |
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(B) the purposes of the loan, including the |
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reasons why the applicant sought the loan; and |
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(C) the applicant's ability to repay; |
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(2) making reasonable efforts to secure a loan that is |
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suitable to the mortgage applicant considering all the |
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circumstances, including the rates, charges, and repayment terms of |
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the loan and the loan options for which the applicant qualifies; and |
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(3) being knowledgeable about and offering the |
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mortgage applicant the most favorable terms available to a person |
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having the applicant's qualifications. |
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(b) A mortgage applicant's statement of ability to repay a |
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loan is not conclusive evidence of the applicant's ability to repay |
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the loan. A mortgage broker must evaluate other reliable, |
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objective evidence of affordability and ability to repay. |
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(c) If a mortgage broker is unable to offer or recommend a |
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suitable mortgage loan to a mortgage applicant, the mortgage broker |
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shall: |
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(1) based on the information available and using the |
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skill, care, and diligence reasonably expected for a mortgage |
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broker, broker a suitable mortgage loan by another creditor to a |
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mortgage applicant, if permitted by and in accordance with all |
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applicable laws; or |
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(2) state to a mortgage applicant: |
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(A) that the broker does not offer a mortgage |
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loan that would be suitable to the applicant but that other |
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creditors may offer such a mortgage loan; and |
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(B) the reasons the products are not available to |
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or suitable for the applicant. |
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(d) The duties of a mortgage broker may not be waived or |
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disclaimed unless otherwise provided by law. |
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Sec. 156.215. PROHIBITED PRACTICES. (a) A mortgage broker |
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may not recommend to a mortgage applicant a rate, charge, principal |
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amount, or prepayment term that is not suitable to the mortgage |
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applicant considering all of the applicant's circumstances, |
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including the characteristics of the property that secures or will |
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secure the mortgage loan and the loan terms for which the mortgage |
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applicant qualifies. |
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(b) A mortgage broker may not: |
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(1) mischaracterize: |
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(A) a mortgage applicant's credit history; or |
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(B) the mortgage loans available to an applicant; |
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(2) discourage a mortgage applicant from seeking a |
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mortgage loan from another creditor or with another mortgage |
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broker, if the mortgage broker is unable to offer or recommend a |
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suitable mortgage loan to the applicant; |
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(3) misrepresent the material facts or knowingly make |
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a false promise likely to induce an applicant to obtain a mortgage |
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loan, or pursue a course of misrepresentation through an agent or |
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otherwise; |
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(4) misrepresent to or conceal from a mortgage |
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applicant material factors or terms of a mortgage loan transaction; |
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(5) fail to disburse funds in accordance with an |
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agreement; |
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(6) engage in a transaction, practice, or course of |
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business that operates a fraud on a person or violates Subchapter E, |
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Chapter 17, Business & Commerce Code; |
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(7) fraudulently or deceitfully advertise a mortgage |
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loan or misrepresent the terms or charges incident to a mortgage |
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loan in an advertisement; |
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(8) recommend or encourage default on an existing loan |
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or other debt before and in connection with the closing or planned |
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closing of a mortgage loan that refinances all or a portion of that |
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existing loan or debt; |
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(9) knowingly and intentionally engage in the practice |
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of making a home loan to a mortgage applicant who refinances an |
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existing loan if the new loan does not have reasonable, tangible, |
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net benefit to the mortgage applicant considering all of the |
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circumstances, including the terms of the new and refinanced loans, |
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the cost of the new loan, and the mortgage applicant's |
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circumstances; and |
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(10) influence or attempt to influence through direct |
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or indirect means the outcome of a real estate appraisal sought in |
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connection with a mortgage loan, or otherwise engage in a practice |
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or course of business that induces or attempts to induce a real |
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estate appraiser to violate the Uniform Standards of Professional |
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Appraisal Practice in connection with a mortgage loan. |
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(c) This section does not prohibit a mortgage broker from |
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providing a mortgage applicant with accurate, unbiased, or general |
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information about consumer home loans, underwriting standards, |
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methods of improving credit history, or another matter relevant to |
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a mortgage applicant. |
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SECTION 4. Section 156.402, Finance Code, is amended by |
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amending Subsection (a) and adding Subsections (d) and (e) to read |
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as follows: |
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(a) A mortgage applicant injured by a violation of this |
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chapter may bring an action for recovery of [actual monetary] |
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damages. A mortgage broker found by a preponderance of the evidence |
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to have violated this chapter is liable to the applicant for: |
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(1) actual damages, including consequential damages; |
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(2) not less than three times the fees received by the |
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mortgage broker; |
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(3) punitive damages if the mortgage broker violated |
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this chapter recklessly or maliciously; |
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(4) [and] reasonable attorney's fees and court costs; |
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and |
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(5) any relief to which the applicant may be entitled |
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under other law. |
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(d) A remedy available to a mortgage applicant under this |
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chapter, common law, or other statutory law is supplemental to the |
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authority of the commissioner to impose disciplinary action or |
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otherwise enforce this chapter. |
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(e) Without regard to whether a mortgage applicant acts |
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individually or on behalf of another similarly situated, a |
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provision of an agreement with a mortgage broker limiting any claim |
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or defense an applicant may have or allowing a party to require an |
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applicant to assert a claim or defense in a forum that is less |
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convenient, more costly, or more dilatory for the resolution of a |
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dispute than a judicial forum established in this state, when the |
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applicant may otherwise properly bring a claim or defense, is |
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unconscionable and void. |
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SECTION 5. Section 156.406(b), Finance Code, is amended to |
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read as follows: |
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(b) A person who acts as a mortgage broker without holding a |
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license or being exempt under this chapter is not entitled to |
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recover or retain fees or charges connected with the mortgage |
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broker services performed while the person was not licensed. A |
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person who received money, or the equivalent of money, as a fee or |
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profit because of or in consequence of the person acting as a |
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mortgage broker or loan officer without an active license or being |
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exempt under this chapter is liable for damages in an amount that is |
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not less than the amount of the fee or profit received and not to |
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exceed three times the amount of the fee or profit received, as may |
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be determined by the court. An aggrieved person may recover damages |
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under this subsection in a court. |
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SECTION 6. Section 156.501(b), Finance Code, is amended to |
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read as follows: |
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(b) The fund shall be used to reimburse aggrieved persons to |
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whom a court awards actual damages because of certain acts |
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committed by a mortgage broker or loan officer who was licensed |
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under this chapter within one year from when the act was committed. |
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The use of the fund is limited to an act that constitutes a |
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violation of Section 156.303(a)(2), (3), (5), (6), (8), (9), (10), |
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(11), (12), (13), or (16) or 156.304 or other violation of this |
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chapter. Payments from the fund may not be made to a lender who |
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makes a mortgage loan originated by the mortgage broker or loan |
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officer or who acquires a mortgage loan originated by the mortgage |
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broker or loan officer. |
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SECTION 7. Section 156.505, Finance Code, is amended to |
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read as follows: |
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Sec. 156.505. RECOVERY LIMITS. (a) A person entitled to |
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receive payment out of the fund is entitled to receive, as |
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determined by the court as provided by this section: |
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(1) [reimbursement of] actual[, out-of-pocket] |
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damages, including consequential damages; |
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(2) not less than three times the fees received by the |
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mortgage broker; |
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(3) reasonable attorney's fees; [,] and |
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(4) court costs [as determined by the court as
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provided by this section]. |
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(b) A payment from the fund may be made only pursuant to a |
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court order as provided by Section 156.504. A payment for claims: |
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(1) arising out of the same transaction, including |
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attorney's fees, interest, and court costs, is limited in the |
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aggregate to $50,000 [$25,000], regardless of the number of |
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claimants; and |
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(2) based on judgments against a single person |
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licensed as a mortgage broker or loan officer under this chapter is |
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limited in the aggregate to $250,000 [$50,000] until the fund has |
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been reimbursed for all amounts paid. |
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(c) The recovery limits established by this section do not |
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limit the liability of a mortgage broker. |
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SECTION 8. This Act takes effect September 1, 2007. |