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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 high-risk |
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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 HIGH-RISK |
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LOAN. (a) In this section, "high-risk loan" means a mortgage loan |
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that: |
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(1) has a variable interest rate; |
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(2) has a prepayment penalty; |
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(3) requires the payment of interest only; |
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(4) provides for a payment schedule with regular |
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periodic payments that cause the principal balance to increase; or |
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(5) provides for a scheduled payment that is more than |
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twice as large as the average of earlier scheduled monthly |
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payments. |
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(b) A lender may not make a high-risk loan for less than |
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$125,000 unless the loan applicant presents to the lender a |
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certificate of completion of counseling signed by the housing |
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counseling agency and the loan applicant that establishes that, not |
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later than the 10th day before the date of closing, the loan |
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applicant received counseling in person or by phone from a housing |
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counseling agency approved by the United States Department of |
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Housing and Urban Development regarding the advisability of a |
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high-risk loan and the availability of financial alternatives. |
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(c) The lender shall provide to the loan applicant and |
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housing counseling agency, before the applicant receives |
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counseling as required by Subsection (b), a written notice on a form |
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prescribed by the Texas Department of Banking under Subsection (e) |
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that states: |
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(1) the proposed terms of the loan; |
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(2) that the proposed loan is a high-risk loan; and |
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(3) that financial alternatives are 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 Texas Department of Banking shall prescribe the form |
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and 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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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. |