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A BILL TO BE ENTITLED
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AN ACT
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relating to prohibiting the non-judicial foreclosure of a loan for |
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the purchase of certain residential property during a loan |
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modification process; providing a penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 343, Finance Code, is amended by adding |
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Subchapter D to read as follows: |
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SUBCHAPTER D. REQUIREMENTS FOR MORTGAGE SERVICERS OF HOME LOANS |
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Sec. 343.301. DEFINITIONS. In this subchapter: |
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(1) "Foreclosure prevention alternative" means a loan |
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modification or other alternative to foreclosure offered by or |
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through a mortgage servicer. |
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(2) "Mortgage servicer" has the meaning assigned by |
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Section 51.0001, Property Code. |
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Sec. 343.302. DUAL-TRACKING NON-JUDICIAL FORECLOSURE |
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PROHIBITED. (a) This section applies only to a home loan that is a |
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federally related mortgage loan, as defined by 12 U.S.C. Section |
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2602, secured by a deed of trust or other contract lien on real |
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property used as the borrower's residence. |
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(b) If a borrower submits a complete application for a loan |
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modification offered by or through the borrower's mortgage |
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servicer, the mortgage servicer or trustee may not serve a notice of |
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default or notice of sale or exercise a power of sale under Section |
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51.002, Property Code, while the application is pending and before |
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the borrower has been provided with a written determination by the |
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mortgage servicer regarding the borrower's eligibility for the |
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requested loan modification. |
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(c) If a foreclosure prevention alternative is approved in |
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writing before the service of a notice of default under Section |
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51.002(d), Property Code, the mortgage servicer or trustee may not |
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serve a notice of default if: |
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(1) the borrower is in compliance with the written |
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terms of a trial or permanent loan modification, forbearance, or |
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repayment plan; or |
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(2) a foreclosure prevention alternative has been |
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approved in writing by all parties, including, for example, the |
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holder of the note, junior lienholder, and mortgage insurer, as |
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applicable, and proof of funds or financing has been provided to the |
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mortgage servicer. |
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(d) If a foreclosure prevention alternative is approved in |
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writing after the service of a notice of default under Section |
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51.002(d), Property Code, a mortgage servicer or trustee may not |
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serve a notice of sale or exercise a power of sale under Section |
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51.002, Property Code, if: |
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(1) the borrower is in compliance with the written |
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terms of a trial or permanent loan modification, forbearance, or |
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repayment plan; or |
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(2) a foreclosure prevention alternative has been |
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approved in writing by all parties, including, for example, the |
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holder of the note, junior lienholder, and mortgage insurer, as |
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applicable, and proof of funds or financing has been provided to the |
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mortgage servicer. |
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(e) For purposes of this section, an application is |
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considered complete when a borrower has supplied the mortgage |
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servicer with all documents required by the mortgage servicer for |
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the application within a reasonable time specified by the mortgage |
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servicer. |
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Sec. 343.303. FORECLOSURE PREVENTION ALTERNATIVE SURVIVES |
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TRANSFER. If a borrower has been approved in writing for a loan |
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modification or other foreclosure prevention alternative and the |
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borrower's loan is transferred or sold, the subsequent mortgage |
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servicer shall continue to honor any previously approved loan |
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modification or other foreclosure prevention alternative and is |
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subject to Section 343.302 to the same extent as the previous |
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mortgage servicer. |
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Sec. 343.304. LIABILITY. (a) A person who violates Section |
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343.302 or 343.303 is liable to the borrower for: |
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(1) any actual damages to the borrower as a result of |
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the violation; or |
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(2) if the court finds that the violation was the |
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result of reckless conduct or intentional or wilful misconduct, the |
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greater of: |
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(A) three times the borrower's actual damages; or |
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(B) $50,000. |
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(b) In addition to the amounts awarded under Subsection (a), |
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a person who is liable under this section is liable for court costs |
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and reasonable attorney's fees incurred in connection with the |
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action. |
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SECTION 2. Subchapter D, Chapter 343, Finance Code, as |
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added by this Act, applies only to a sale of residential real |
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property for which notice of default under Section 51.002(d), |
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Property Code, is provided on or after the effective date of this |
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Act. A sale in which notice of default is provided before the |
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effective date of this Act is subject to the law in effect |
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immediately before that date, and that law is continued in effect |
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for that purpose. |
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SECTION 3. This Act takes effect September 1, 2013. |