BILL ANALYSIS

S.B. 472

By: Estes

Business & Industry

Committee Report (Unamended)

BACKGROUND AND PURPOSE

The Mortgage Bankers Association of America recently reported that at least one in ten Texas homeowners are at risk of default and foreclosure. Last fall, Texas Attorney General Greg Abbott recommended that the legislature consider lengthening to 45 days the time frame allowed to a debtor in default to cure a loan default before a notice of sale. Current state law provides homeowners a 20-day window to cure a default.

S.B. 472 increases the minimum amount of written notice to vacate the property a purchaser of a foreclosed building is required to give a residential tenant of the building, extends the cure period on a pending foreclosure from 20 to 45 days, requires a mortgage lender to serve a debtor with written notice of sale by regular and certified mail, authorizes the attorney general to create a model form for that notice, and requires a debtor to notify any tenants of a pending foreclosure within seven days after the debtor receives a notice of sale.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

S.B. 472 amends the Property Code to increase from 30 days to 60 days the minimum amount of written notice to vacate the purchaser of a building is required to give a residential tenant of the building if the purchaser bought the building at a tax foreclosure sale or a trustee's foreclosure sale under a lien superior to the tenant's lease, the tenant timely pays rent and is not otherwise in default under the tenant's lease after foreclosure, and the purchaser chooses not to continue the lease. The bill makes this change effective until September 1, 2011. The bill requires the purchaser to deliver to the tenant not later than 24 hours after the time of the foreclosure sale a notice that states the tenant's rights under provisions relating to forcible entry and detainer and under provisions generally applicable to liens. The bill requires the attorney general to prescribe the contents of that notice.

S.B 472 includes regular mail as a method for delivering a written notice of the sale of real property under contract lien on each debtor who, according to the records of the mortgage servicer of the debt, is obligated to pay the debt. The bill also includes regular mail as a method for delivering a written notice to a debtor in default under a deed of trust or other contract lien on real property used as the debtor's residence stating that the debtor is in default under the deed of trust or other contract lien, increases from 20 days to 60 days the minimum amount of time the notice is required to give the debtor to cure the default before notice of sale can be given, and makes conforming changes. The bill requires the attorney general to prescribe the contents of that notice. The bill requires a mortgage servicer of the debt, in addition to such notice, to serve the debtor with a written notice by regular and certified mail, sets forth the required format of the notice, requires the attorney general to prescribe the contents of the notice and specifies those contents. The bill provides that if a sale of property occurs, the tenant of the debtor is not required to vacate the property before the 61st day after the date of the sale, provided that the tenant timely pays rent to the new property owner, maintains the property in good order, and maintains a liability insurance policy during the term of the holdover period. The bill provides that, effective September 1, 2011, that deadline is the 31st day after the date of the sale.

S.B. 472 establishes that if a sale of property occurs as described above the debtor is not required to vacate the property before the 14th day after the date of the sale. The bill authorizes the purchaser to require the tenant to vacate the property before that period only for failure to pay rent or other payment due under the lease agreement, including a late fee, as of the date of sale. The bill prohibits a debtor who retains possession of the property during the 14-day period following the date of the sale from destroying, damaging, impairing, allowing to deteriorate, or committing waste on the property, and makes the debtor liable to the purchaser for such damage and to the injured party for any injury to an individual or damage to any property occurring during the period of possession.

S.B. 472 requires a debtor, not later than the seventh day after the date a debtor receives a notice of sale, to serve a copy of the notice on each tenant of the property by any one of the following methods: personal delivery to the tenant; certified mail, return receipt requested, to the tenant; or leaving the notice inside the dwelling in a conspicuous place if notice in that manner is authorized in a written lease.

EFFECTIVE DATE

September 1, 2009.