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A BILL TO BE ENTITLED
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AN ACT
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relating to disclosures in connection with certain wrap mortgage |
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loan transactions; providing a criminal penalty. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle E, Title 3, Finance Code, is amended by |
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adding Chapter 160 to read as follows: |
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CHAPTER 160. RESIDENTIAL WRAP MORTGAGE LOAN FINANCING |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 160.001. DEFINITIONS. In this chapter: |
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(1) "Residential mortgage loan" and "residential real |
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estate" have the meanings assigned by Section 180.002. |
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(2) "Wrap borrower" means a person obligated to pay a |
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wrap mortgage loan. |
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(3) "Wrap lender" means a person who makes a wrap |
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mortgage loan. |
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(4) "Wrap mortgage loan" means a residential mortgage |
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loan: |
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(A) made to finance the purchase of residential |
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real estate that will continue to be subject to an unreleased lien |
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that: |
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(i) attached to the residential real estate |
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before the loan was made; and |
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(ii) secures a debt incurred by a person |
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other than the wrap borrower that was not paid off at the time the |
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loan was made; and |
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(B) obligating the wrap borrower to the wrap |
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lender for payment of a debt the principal amount of which includes: |
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(i) the outstanding balance of the debt |
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described by Paragraph (A)(ii); and |
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(ii) any remaining amount of the purchase |
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price financed by the wrap lender. |
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SUBCHAPTER B. DISCLOSURE REQUIREMENTS |
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Sec. 160.051. DISCLOSURE STATEMENT. (a) A wrap lender not |
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otherwise required to provide a written disclosure statement to the |
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wrap borrower under Section 5.016, Property Code, must, on or |
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before the seventh day before the wrap mortgage loan agreement is |
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entered into, provide to the wrap borrower and each holder of a lien |
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described by Section 160.001(4)(A), a separate written disclosure |
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statement in at least 12-point type that contains the information |
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required for a written disclosure statement under Section 5.016, |
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Property Code. |
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(b) Regardless of whether the wrap lender provides a written |
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disclosure statement under Subsection (a) or under Section 5.016, |
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Property Code, the wrap lender's disclosure statement to the wrap |
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borrower must include a statement in a form substantially similar |
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to the following: |
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NOTICE REGARDING PROPERTY INSURANCE: ANY INSURANCE MAINTAINED BY A |
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SELLER, LENDER, OR OTHER PERSON WHO IS NOT THE BUYER OF THIS |
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PROPERTY MAY NOT PROVIDE COVERAGE TO THE BUYER IF THE BUYER SUFFERS |
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A LOSS OR INCURS LIABILITY IN CONNECTION WITH THE PROPERTY. TO |
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ENSURE THE BUYER'S INTERESTS ARE PROTECTED, THE BUYER SHOULD |
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PURCHASE THE BUYER'S OWN PROPERTY INSURANCE. BEFORE PURCHASING |
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THIS PROPERTY, YOU MAY WISH TO CONSULT AN INSURANCE AGENT REGARDING |
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THE INSURANCE COVERAGE AVAILABLE TO YOU AS A BUYER OF THE PROPERTY. |
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Sec. 160.052. RECORD OF DISCLOSURE. A wrap lender must |
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retain a copy of a disclosure statement provided under Section |
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160.051 until the first anniversary of the earliest date on which |
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all liens described by Section 160.001(4)(A) are released. |
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Sec. 160.053. FOREIGN LANGUAGE REQUIREMENT. Regardless of |
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whether the wrap lender provides a written disclosure statement |
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under Section 160.051 or under Section 5.016, Property Code, if the |
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negotiations that precede the execution of the wrap mortgage loan |
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agreement are conducted primarily in a language other than English, |
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the wrap lender shall provide a copy of the required disclosure |
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statement in that language to the wrap borrower. |
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Sec. 160.054. FAILURE TO PROVIDE DISCLOSURE: TOLLING OF |
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LIMITATIONS. If a wrap lender fails to provide the disclosure |
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statement as required by Section 160.051 or fails to provide the |
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disclosure statement in the language required by Section 160.053, |
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the limitations period applicable to any cause of action of the wrap |
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borrower against the wrap lender arising out of the wrap lender's |
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violation of a law of this state in connection with the wrap |
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mortgage loan transaction is tolled until the 120th day after the |
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date the required disclosure statement is provided. |
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Sec. 160.055. FAILURE TO PROVIDE NOTICE: OFFENSE. (a) A |
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wrap lender commits an offense if the wrap lender fails to provide a |
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written disclosure statement under Section 160.051 or Section |
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5.016, Property Code, that meets the requirements of this chapter |
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and Section 5.016, Property Code, as applicable. |
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(b) An offense under this section is a Class A misdemeanor. |
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SECTION 2. Chapter 160, Finance Code, as added by this Act, |
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applies only to a wrap mortgage loan made on or after the effective |
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date of this Act. |
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SECTION 3. This Act takes effect September 1, 2017. |