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A BILL TO BE ENTITLED
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AN ACT
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relating to notice of dragnet clauses in deeds of trust. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Title 8, Business & Commerce Code, is amended by |
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adding Chapter 262 to read as follows: |
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CHAPTER 262. DEEDS OF TRUST |
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Sec. 262.001. NOTICE TO CERTAIN GUARANTORS AND SURETIES. |
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(a) Before a person agrees to become obligated as a surety or |
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guarantor on a loan secured by a deed of trust, the mortgagee must |
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provide the person with the following written notice: |
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"NOTICE TO SURETY OR GUARANTOR: You are being asked to become |
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obligated as a surety or guarantor on a loan secured by a deed of |
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trust. Please read the documents carefully and review with your own |
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attorney. Please note that if the deed of trust contains a 'dragnet |
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clause,' which provides that the deed of trust secures other |
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indebtedness, then the deed of trust may not be released in the |
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event you are called on to honor your obligation as a surety or |
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guarantor. |
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I have read and understand the above notice. |
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________________________________ |
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Date |
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________________________________ |
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Signature of Surety or Guarantor" |
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(b) The notice required under this section must be provided |
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on a form separate from the guaranty or surety agreement and signed |
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and dated by the surety or guarantor. |
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(c) If a mortgagee does not provide the notice required by |
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this section, the person entitled to the notice is not liable for |
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obligations on the loan if any dragnet clause included in the deed |
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of trust would prevent the surety or guarantor from being |
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subrogated to the mortgagee's or other holder's security interest |
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in the property subject to the deed of trust. |
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SECTION 2. Chapter 262, Business & Commerce Code, as added |
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by this Act, applies only to an agreement to become obligated as a |
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surety or guarantor on a loan secured by a deed of trust that is |
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entered into on or after January 1, 2010. An agreement to become |
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obligated as a surety or guarantor on a loan secured by a deed of |
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trust that is entered into before January 1, 2010, is governed by |
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the law in effect when the agreement was entered into, and that law |
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is continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2009. |