80R9839 ATP-F

By: Wentworth S.B. No. 1307

A BILL TO BE ENTITLED

AN ACT

relating to residential mortgage fraud; imposing a fee on residential mortgage loans; providing criminal penalties.

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

SECTION 1. Title 3, Business & Commerce Code, is amended by adding Chapter 28 to read as follows: CHAPTER 28. TEXAS RESIDENTIAL MORTGAGE FRAUD ACT

Sec. 28.001. SHORT TITLE. This chapter may be cited as the Texas Residential Mortgage Fraud Act.

Sec. 28.002. DEFINITIONS. In this chapter:

(1) "Mortgage lender" means the secured creditor named in the mortgage lending process documents and the creditor's successors and assigns.

(2) "Mortgage lending process" means the process through which a person seeks or obtains a residential mortgage loan. The term includes the solicitation, origination, negotiation of terms, underwriting, signing and closing, and funding of the loan and the provision of third-party provider services and application for the loan.

(3) "Mortgage lending process document" includes:

(A) a contract for the sale of real property;

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

(C) an appraisal report;

(D) a credit report;

(E) a HUD-1 settlement statement;

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

(G) a certificate or affidavit of fact;

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

(I) any required disclosure.

(4) "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 the refinancing or renewal of a loan secured by residential real property.

(5) "Residential real property" means real property:

(A) used or intended to be used as a residence; and

(B) containing a single-family house, a townhouse, a duplex, triplex, or quadruplex, or a condominium or cooperative unit in a multifamily structure.

Sec. 28.003. RESIDENTIAL MORTGAGE FRAUD. (a) A person commits an offense if the person:

(1) in connection with the mortgage lending process:

(A) intentionally or knowingly makes a materially false or misleading written statement or omission of fact with the intent that the statement or omission be relied on by a mortgage lender, borrower, or other party to the mortgage lending process to obtain credit or property; or

(B) causes or induces a public servant to file or record a deed of trust or other instrument affecting title to residential real property knowing the instrument to contain a materially false or misleading written statement;

(2) intentionally or knowingly causes or aids an innocent or nonresponsible person to engage in conduct prohibited by Subdivision (1);

(3) acting with intent to promote or assist the commission of the offense under this section, solicits, encourages, directs, aids, or attempts to aid the other person to commit the offense; or

(4) having a legal duty to prevent commission of the offense under this section and acting with intent to promote or assist its commission, fails to make a reasonable effort to prevent commission of the offense.

(b) A person does not commit an offense under this section or Section 28.004 with respect to a statement or omission made by another person if the person does not have actual knowledge of the materially false or misleading written statement or omission of fact made by the other person. This section does not impose a duty on a person to inquire about or investigate mere suspicions or misgivings about a written statement or omission made by another person.

(c) If conduct constituting an offense under this section also constitutes an offense under another law, the actor may be prosecuted under this section, the other law, or both.

(d) Except as provided by Section 28.004, an offense under this section is:

(1) a felony of the third degree if the amount of the mortgage loan is less than $100,000;

(2) a felony of the second degree if the amount of the mortgage loan is $100,000 or more and less than $200,000; and

(3) a felony of the first degree if the amount of the mortgage loan is $200,000 or more.

(e) Each residential property transaction that violates this section constitutes a separate offense.

Sec. 28.004. PATTERN OF RESIDENTIAL MORTGAGE FRAUD. A second or subsequent offense under Section 28.003 is a felony of the first degree if the first and the second or subsequent offenses:

(1) are committed not more than five years apart;

(2) involve two or more residential properties; and

(3) have the same or similar results, accomplices, victims, or methods of commission.

Sec. 28.005. NOTICE OF CRIMINAL PENALTY. A mortgage lender or licensed mortgage broker may provide at any time to an applicant for a residential mortgage loan or to another party to the mortgage lending process a written notice in the following or substantially similar form:

"Warning: Intentionally or knowingly making a materially false or misleading written statement 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 to obtain credit or property violates the Texas Residential Mortgage Fraud Act (Chapter 28, Business & Commerce Code) and, depending on the amount of the loan, is punishable by imprisonment for a term of not more than 99 years or less than two years and a fine not to exceed $10,000."

SECTION 2. Chapter 343, Finance Code, is amended by adding Subchapter D to read as follows: SUBCHAPTER D. MORTGAGE LOAN FEE

Sec. 343.251. RESIDENTIAL MORTGAGE LOAN. In this subchapter, "residential mortgage loan" has the meaning assigned by Section 28.002, Business & Commerce Code.

Sec. 343.252. FEE IMPOSED. (a) A person who closes a mortgage loan shall pay a fee of $5 for each loan.

(b) For purposes of this section, a person is considered to have closed a loan if the person is indicated as the secured creditor on the instrument that establishes a lien on the residential real property.

(c) A change to a mortgage, lien, or similar instrument solely for the purpose of correcting a clerical error is not subject to the fee under this section.

Sec. 343.253. PAYMENT OF FEES; USE BY ATTORNEY GENERAL TO ENFORCE TEXAS RESIDENTIAL MORTGAGE FRAUD ACT. (a) The fee imposed under Section 343.252 shall be remitted to the comptroller quarterly.

(b) The fees shall be deposited to the credit of the general revenue fund and may only be used by the attorney general for the enforcement of Chapter 28, Business & Commerce Code. The attorney general shall use an amount determined by the attorney general for the investigation of residential mortgage fraud in this state and shall distribute the remaining money from the fee to prosecuting attorneys to be used for the enforcement of Chapter 28, Business & Commerce Code.

(c) The attorney general has discretion regarding the use of the money from the fee. The attorney general may establish a procedure for a prosecuting attorney to apply for money from the fee or may distribute the money in collaboration with prosecuting attorneys.

SECTION 3. The change in law made by Chapter 28, Business & Commerce Code, as added by this Act, applies only to an offense committed on or after the effective date of this Act. An offense committed before the effective date of this Act is covered by the law in effect when the offense was committed, and the former law is continued in effect for that purpose. For purposes of this section, an offense is committed before the effective date of this Act if any element of the offense occurs before the effective date.

SECTION 4. The fee imposed by Subchapter D, Chapter 343, Finance Code, as added by this Act, applies only to a residential mortgage loan closed on or after the effective date of this Act.

SECTION 5. This Act takes effect September 1, 2007.