By: Gutierrez H.B. No. 3718

A BILL TO BE ENTITLED

AN ACT

Relating to the sale of real property.

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

SECTION 1. Chapter 34 of the Finance Code, is amended by adding Subchapter E to read as follows:

34.401. DEFINITIONS. (a) The definitions provided by Section 31.002 apply to this chapter.

(b) For the purposes of this Chapter, a short sale or discounted sale or proposed short sale or proposed discounted sale is defined as a sale or proposed sale of real property wherein the net proceeds of the sale are less than the amount the borrower owes to the bank(s) or lending institution(s) which have a secured lien against said real property.

34.402. No bank or lending institution operating within the State of Texas may, in the process of considering a discounted or short sale, disallow a cost incurred by the borrower which is charged by an attorney licensed by the Supreme Court of Texas and regulated by the State Bar of Texas, for services rendered to the borrower, assisting with the negotiation of the terms of the discounted or short sale approval if:

a) the amount of offer submitted for approval by the borrower, or their realtor or agent, to the lending institution or bank is at least 90% of the total outstanding balance of principal, interest and penalties owed on the note which is secured by a deed of trust on the property, calculated pursuant to the exact terms of the note and respective deed of trust; and

b) The amount of said legal fees incurred by the borrower to be paid at the time of closing of the proposed short sale does not exceed the lessor of $2,500.00 or 1% of the total purchase price of the purchase contract for sale submitted to the banking or lending institution for approval as a discounted or short sale.

34.403. In any situation where a debtor is more than 60 days delinquent on a mortgage which is secured by a deed of trust owed to a lender or bank doing business in the State of Texas, and upon the borrower receiving a notice of acceleration from the bank or lender in relation to enforcement of a note, and/or the notice of proposed foreclosure on the property through the deed of trust used as collateral or security on the note securing the debt owed by the borrower to the bank or lending institution, the borrower shall have the absolute right to, within 10 days from receiving the said notice, request the "broker price opinion" or informal or formal appraisal, which the bank or lending institution has prepared or has had prepared on its behalf, in relation to the acceleration of the note and/or the proposed foreclosure and sale of the property for enforcement of the note and deed of trust on the property. Upon receipt of the request by the borrower, sent by certified mail, return receipt requested, the bank or lending institution shall have, from the date of receiving said request, a maximum of 10 days to send, by certified mail, return receipt requested, to the borrower, a full and complete copy of the broker price opinion and/or formal or informal appraisal being relied upon by the bank for the purpose of establishing the appropriate market value of the house for consideration and approval or disapproval of the short sale offers and/or the foreclosure proceeding. Upon receipt of the broker price opinion and/or formal or informal appraisal from the bank or lending institution, the borrower may not disclose the information contained in the broker price opinion or formal or informal appraisal to any third parties other than the borrower's licensed real estate broker or agent, who has been employed by the borrower to assist in obtaining offers and negotiating the discounted or short sale, and/or an attorney licensed by the Supreme Court of Texas and regulated by the State Bar of Texas, who has been employed to assist in negotiations with the bank and providing legal advice and consultation to avoid deficiencies and acquire offers which will be the highest and best offers for avoiding a deficiency in the amount owed to the bank or lending institution by the borrower as a result of any potential discounted or short sale or foreclosure proceeding. The allowable disclosure by the borrower under this subsection includes disclosure to any employees, agents, escrow officers, paraprofessionals, or other contracted individuals by the broker, agent, or licensed attorney, provided however that the confidentiality required of the borrower, shall extend to said third parties as a condition of disclosure of the confidential information received by the borrower from the bank or lending institution in response to their request.

34.404. Upon approval and closing of a discounted or short sale transaction, or finalization of the foreclosure proceeding and transfer of title thereunder, the borrower, as well as any recipient of information from the borrower shall no longer be subject to the confidentiality requirement of this subsection with regard to the broker price opinion or formal or informal appraisal received hereunder.

34.405. Upon receipt of an offer for a discounted or short sale which is submitted by a borrower or a licensed real estate broker or agent, or licensed attorney acting on behalf of the borrower, a bank or lending institution doing business in the State of Texas holding the note which has been the subject of notice of acceleration and/or notice of pending foreclosure, shall have only 10 days to respond to said offer, and said response must be in writing and shall include an approval of the discounted or short sale, or if denied, specific and exact reasons why the discounted or short sale is not being approved. Upon receipt of a denial of a proposed discounted or short sale, a borrower shall have 15 days to accumulate additional information or cure any defects in an offer, or accumulate additional offers at higher prices or better terms, and submit said offers to the bank or lending institution. Upon receipt of subsequent offers from a borrower, broker, agent or attorney representing the borrower, the bank or lending institution shall provide its response on approval or disapproval, as required above, to the borrower within 10 days from receipt of the supplemental offer.

34.406. In the event a bank or lending institution refusing to approve a discounted or short sale offer from a borrower or borrower's representative under this section, and a foreclosure occurs, the bank or lending institution shall be liable for any deficiency by the borrower in the event the amount received at foreclosure of the property is equal to or less than 5% more than the highest and best discounted or short sale offer that was denied by the bank or lending institution prior to the foreclosure proceeding. In the event of such liability by the bank or lending institution, the bank or lending institution shall be required to write off any said deficiencies and pay a penalty of $2,000.00 to the borrower upon receipt and acceptance of the foreclosure offer and transfer of the property subject thereto.

SECTION 2. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2011.