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A BILL TO BE ENTITLED
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AN ACT
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relating to requiring counseling before closing certain complex |
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loans. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 343, Finance Code, is |
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amended by adding Section 343.105 to read as follows: |
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Sec. 343.105. COUNSELING REQUIRED BEFORE CLOSING COMPLEX |
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LOAN. (a) In this section, "complex loan" means a loan: |
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(1) that has a principal amount of less than $125,000; |
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(2) that is a home loan and that is or will be secured |
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by a first lien on the principal residence of the borrower; |
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(3) for which the ratio of the aggregate of the |
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principal balance of all loans secured by the property to the value |
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of the property on the date of closing is at least 90 percent; |
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(4) that is made to a borrower who has a credit score |
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of not more than 650; and |
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(5) that contains: |
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(A) a variable interest rate and has an initial |
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interest rate that is significantly lower than the fully indexed |
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rate at the time the loan is closed, as determined by the finance |
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commission; or |
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(B) a provision that permits periodic payments |
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that are less than the amount of accrued interest on the scheduled |
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payment date. |
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(b) A lender may not make a complex loan unless the loan |
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applicant presents to the lender a certificate of completion of |
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counseling signed by the counselor and the loan applicant that: |
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(1) establishes that, not later than the 10th day |
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before the date of closing, the loan applicant received counseling |
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in person or by phone from a housing counseling agency approved by |
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the United States Department of Housing and Urban Development or |
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from an attorney licensed to practice law in this state regarding |
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the advisability of a complex loan and the availability of |
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financial alternatives; and |
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(2) includes a signed statement by the counselor that |
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the counselor has training or experience in home loans. |
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(c) The lender or broker shall provide to the loan applicant |
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and counselor, before the applicant receives counseling as required |
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by Subsection (b), a written notice on a form prescribed by the |
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finance commission under Subsection (e) that states: |
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(1) the proposed terms of the loan; |
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(2) that the proposed loan is a complex loan; and |
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(3) that financial alternatives may be available. |
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(d) The lender shall maintain in the lender's records any |
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certificate of completion of counseling provided to the lender |
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under Subsection (b). |
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(e) The finance commission shall prescribe the form and |
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content of the: |
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(1) certificate of completion of counseling required |
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by Subsection (b); and |
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(2) notice required by Subsection (c). |
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(f) This section does not apply to an interim construction |
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loan with a maturity of less than 18 months. |
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(g) An attorney who counsels a loan applicant under |
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Subsection (b) may not represent or advise another party to the |
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loan. |
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(h) A violation of this section by a lender does not |
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invalidate or impair the lien or security interest for the complex |
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loan. |
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(i) The finance commission by rule may adopt a reasonable |
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fee that a person who provides counseling to a loan applicant under |
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this section may charge the loan applicant. |
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SECTION 2. The change in law made by this Act applies only |
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to a loan closed on or after the effective date of this Act. A loan |
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closed before the effective date of this Act is covered by the law |
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in effect on the date the loan was closed, and the former law is |
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continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2007. |