Regulation Z - Truth-in-Lending,
12 C.F.R. Part
226, Appendix J. The odd days are determined by first ascertaining the one
month anniversary date preceding the first scheduled installment due date.
After determining the one month anniversary date preceding the first scheduled
installment due date, the odd days are determined by counting the number of
days between the date of the loan and the one month anniversary date.
(c)
An authorized lender may not contract for or charge more
than the maximum rate authorized by Art. 5069-Chapter 1D, Subchapter A in
calculating the interest charge for the additional odd days in the first installment
period.
§1.703.Default Charges.
(a)
Precomputed loan. Additional interest for default may be
charged in a precomputed secondary mortgage loan, whether regular or irregular,
or on a secondary mortgage loan that employs the scheduled installment earnings
method, to the extent it is authorized by Tex. Rev. Civ. Stat., Art. 5069-3A.502
or Art. 5069- 3A.505.
(b)
Interest-bearing loan. No additional interest for default
may be charged on an interest-bearing secondary mortgage loan except for a
loan contracted for on the scheduled installment earnings method.
(c)
Contract required. No default charge may be assessed, imposed,
charged, or collected unless contracted for in writing by the parties.
(d)
Default period. A default charge may not be assessed until
the10th day after the installment due date. For example, if the installment
due date is the 1st, a default charge may not be assessed until the 12th.
(e)
Missed payment covered by insurance. If any payment or
partial payment in default is later paid by some form of insurance, such as
credit disability insurance or collateral protection insurance, any prior
assessment of additional interest for default must be waived.
(f)
Pyramiding prohibited. An authorized lender seeking to
assess additional interest for default in a precomputed secondary mortgage
loan under Tex. Rev. Civ. Stat., Article 5069-3A.502 or Article 5069-3A.505
must comply with the prohibition on the pyramiding of late charges set forth
in the Federal Trade Commission Credit Practices Rule at 16 C.F.R. §444.4
or in Regulation AA, 12 C.F.R. Part 227, promulgated by the Board of Governors
of the Federal Reserve Board, as applicable.
§1.704.Deferment.
(a)
Definition. The term deferment means the postponement of
the due date of a scheduled installment. A deferment charge prescribed by
this section may occur in a loan transaction that employs either the precomputed
or the scheduled installment earnings method of calculation. A separate deferment
charge is not applicable to a loan transaction that employs the true daily
earnings method since an extension of time would be calculated on elapsed
daily charges and the parties may agree to modify the terms of the transaction
as long as the modification conforms to the requirements of Subchapter G.
(b)
Bilateral or mutual deferment. A borrower and a lender
may mutually agree to defer any scheduled installment. There is no limit on
the number of bilateral deferments that can be made during the time that a
loan contract is in effect. Bilateral or mutual deferments must be agreed
upon in writing.
(c)
Deferment notice. Each deferment must be noted on the account
record at the time the deferment is made. A written notice containing the
conditions of the deferment must be furnished to the borrower. The deferment
notice shall include the name of the lender, the name of the borrower, the
loan number, the date of the deferment, the installment or installments being
deferred, the deferment period, the amount of the deferment charge, the balance
on the account, and the date and amount of the next installment due. The signature
of the borrower denotes the borrower's agreement to a bilateral deferment.
(d)
Computation of deferment charge for a regular transaction.
Each deferment charge on a regular loan transaction shall be computed in accordance
with the method prescribed by the loan contract. If the loan contract does
not provide for a deferment charge, then no deferment charge may be assessed
or collected. A lender may employ any of the prescribed computational methods
described in Chapter 3A so long as the computational method employed is consistently
utilized throughout the term of the loan.
(1)
If the first installment is to be deferred, the interest
for the deferment may be no more than the difference between the refund that
would be required for prepayment in full on the first installment due date,
if it were one month from the date of the loan, and the total interest charged
subject to being refunded (
e.g.,
administrative
loan fee).
(2)
If any installment subsequent to the first installment
is deferred, the deferred installment period will be determined by dividing
the remaining precomputed balance owed on the account by the regular scheduled
installment amount. The dollar amount associated with the deferred installment
period must be rounded down to the nearest whole integer. Additionally, no
deferred installment period may have a default charge assessed against the
deferred installment period. After the determination of the deferred installment
period, the additional interest for the deferment may not exceed the difference
between the refund that would be required for prepayment in full for the determined
deferred installment and the refund that would be required for the prepayment
in full of the next succeeding installment. The resulting difference shall
be multiplied by the number of months in the deferment period. For example,
the terms of a precomputed Art. 5069-3A.501(a) loan are as follows: Date of
loan: 09/01/1997; First payment due date: 10/01/1997; Cash Advance: $2,766.48;
Finance Charge: $833.52; Total of Payments: $3,600.00; Term: 36 months; Monthly
Installment: $100; Refunding method: Sum of the periodic balances; and Annual
Percentage Rate: 18%. Assume a deferment is agreed to roughly six months into
the contract and, at that time, the remaining precomputed balance owed on
the account was $3,095.00 and the regularly scheduled installment amount was
$ 100.00. The nearest whole integer for the dollar amount associated with
the deferred time period would be 30 ($3,095.00 divided by $100 = 30.95, rounded
down to the nearest whole integer, 30). If a default charge had already been
assessed on the 30th remaining installment, the nearest whole integer would
be 29. Assuming no default charge had been assessed on the 30th remaining
installment, the additional interest charge for the deferment would be the
difference between the interest refund of the 30th and the 29th installments.
This difference would be $37.54 (interest refund as of the 30th installment
= $581.96; interest refund as of the 29th installment = $544.42; $581.96 -
$544.42 = $37.54). A scheduled installment earnings refund method would yield
a slightly different result of $36.69.
(3)
In lieu of computational methods one and two, a lender
may take the difference between the amount of the refund of unearned interest
as if a full prepayment of the loan occurred as of the date of the deferment
and the amount of the refund of unearned interest for a full prepayment of
the loan one full month prior to the date of the deferment. The results of
the computed interest for deferment charge under this subsection should be
multiplied by the number of months in the deferred installment period.
(e)
No deferment when payment applied to account balance. If
a payment has been applied to reduce an account balance, no deferment of any
prior balance or installments may be made. This does not preclude the collection
of a deferment fee previously assessed but not collected.
(f)
No deferment when a default charge has already been collected.
No installment may be deferred if a default charge has already been collected
on the account or if a partial payment in any amount has been credited to
any installment. If an amount equal to one whole installment has already been
credited to an account, this entry cannot be altered in order to credit part
of the installment to a deferment charge.
(g)
Accounting of payment. If a payment is submitted from which
a deferment charge is taken, the excess of the amount necessary to bring the
account current shall be applied to the remaining balance of the loan. However,
any difference that exceeds three dollars shall be returned to the borrower
upon the borrower's request.
(h)
Noncompliance. Deferment fees not assessed or collected
in accordance with the requirements of this rule are subject to refund to
the borrower. In the event deferment fees are refunded to the borrower, no
rescheduling of the loan contract is permitted.
§1.705.Amounts Authorized To Be Charged after Consummation.
(a)
Generally. A secondary mortgage loan contract may provide
for any one or more of the four listed categories of charges set forth in
Tex. Rev. Civ. Stat., Art. 5069- 3A.507. These charges may then be assessed
and collected by an authorized lender after consummation of the loan if appropriately
included in the contract.
(b)
Check return fee. An authorized lender may contract for,
assess, or collect the fee authorized by Tex. Rev. Civ. Stat., Art. 9022 in
a secondary mortgage loan.
§1.706.Amounts Authorized To Be Collected on or before Closing.
(a)
Generally. On or before the closing of a secondary mortgage
loan, an authorized lender may collect any one or more of the eight categories
of charges set forth in Tex. Rev. Civ. Stat., Art. 5069-3A.508(a).
(b)
Administrative loan fee. An authorized lender may collect
an administrative loan fee pursuant to Acts 1997, 75th Legislature, Chapter
164 on interest bearing and pre- computed loans.
(1)
To determine the maximum amount of the administrative fee,
an authorized lender should ascertain the amount of the cash advance of the
loan. If the cash advance is more than one thousand dollars, then the authorized
lender may contract for, charge, or receive $25. If the cash advance is one
thousand dollars or less, then the authorized lender may contract for, charge,
or receive $10.
(2)
An administrative fee may not be contracted for, charged,
or received by an authorized lender directly or indirectly on a renewal or
modification of an existing obligation more than once in any 180 day period.
The administrative fee may be contracted for, charged, or received in a renewal
or modification if the authorized lender did not contract for, charge, or
receive the administrative fee on any previous obligation within the 180 day
period.
(3)
Interest may not be assessed, charged, or received
on an administrative fee if the assessment causes the total amount of interest
to exceed the maximum amount authorized under Chapter 3A.
(c)
Appraisal fees. An appraisal fee may be charged when an
appraisal has been performed by an appraiser, certified or licensed by the
Texas Appraiser Licensing and Certification Board pursuant to Tex. Rev. Civ.
Stat., Art. 6573a.2., and who is not a salaried employee of the lender.
(d)
Cost of credit report. An authorized lender may collect
the cost paid to a credit reporting agency to obtain a credit report pursuant
to Tex. Rev. Civ. Stat., Art. 5069-3A.508(a)(5) but may not charge an additional
fee for reviewing or evaluating a credit report.
(e)
Survey fees. A survey fee may be charged when a survey
has been performed by a surveyor, registered or licensed by the Texas Board
of Professional Land Surveying pursuant to Tex. Rev. Civ. Stat., Art. 5282c.,
and who is not a salaried employee of the lender.
(f)
Flood zone determination fees. An authorized lender may
collect a flood zone determination fee when a flood zone determination is
required by a federal agency.
§1.707.Other Fees.
(a)
Generally. Fees not otherwise permitted by 7 T.A.C. §1.705
or §1.706 may not be charged or collected in a secondary mortgage loan
transaction.
(b)
Examples of unauthorized fees. Fees not authorized by either
7 T.A.C. § 1.705 or §1.706 include, but are not limited to, commitment
fees, those broker fees not covered by subsection (d) of this section, pay-off
statement fees, prepayment penalties, fax fees, courier fees, and escrow management
fees.
(c)
Escrow services. An authorized lender making a secondary
mortgage loan may require a borrower to make payments into an escrow trust
account for payment of anticipated tax and property insurance expenses. A
fee may not be charged for managing an escrow trust account.
(d)
Broker fees. An authorized lender may pay a broker fee
in a secondary mortgage loan if the consideration paid by the borrower in
the loan which involves a broker does not exceed the consideration paid by
the borrower in a loan which does not involve a broker.
(1)
Example 1: A prospective borrower is quoted a contract
rate of 12% plus a 2% origination fee when he makes his inquiry directly to
an authorized lender. On this same individual, a broker quotes a contract
rate of 12% plus a 4% origination fee for a loan of the same amount from the
same authorized lender. The charge for an additional 2% origination fee is
an unauthorized charge.
(2)
Example 2: A prospective borrower is quoted a finance
charge of 12% plus a 2% origination fee when the borrower makes the inquiry
directly to an authorized lender. On this same individual, a broker quotes
a contract rate of 12% plus a 2% origination fee for a loan of the same amount
from the same authorized lender. The loan was then consummated with the authorized
lender paying a 2% fee to the broker for originating the loan. Since the authorized
lender has absorbed the expense of the fee, no unauthorized charge has been
assessed, charged, or received.
(e)
Seller's points. Seller's points are treated as interest.
Seller's points are aggregated with other interest charges for the purposes
of a usury calculation.
(f)
Discount points. Discount points are treated as interest.
Discount points are aggregated with other interest charges for the purposes
of a usury calculation.
(g)
Origination fees. An origination fee is treated as interest.
An origination fee is aggregated with other interest charges for the purposes
of a usury calculation.
§1.708.Balloon Payments.
Balloon payments are authorized in a secondary mortgage loan unless
prohibited by other applicable law (for example, the high cost mortgage rules
of Truth in Lending, Regulation Z, 12 C.F.R. §226.32(d)(1)).
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on December
14, 1998.
TRD-9818342
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Effective date: January 3, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 936-7640
Subchapter H. Refunds in Precomputed Loans
7 TAC §§1.751-1.761
The Finance Commission of Texas (the commission) adopts new
§§1.751-1.761, concerning the methods for computing refunds
of unearned interest due to prepayment or acceleration of Subchapter E, F,
or G transactions that are precomputed as provided in Subchapter H, Chapter
3A, Article 5069. The sections are adopted without changes to the proposed
text as published in the October 23, 1998, issue of the
Texas Register
(23 TexReg 10773)
Section 1.751 explains the scope and applicability of the subchapter.
Section 1.752 prescribes the method for calculating refunds of interest
of Subchapter E and G loans.
Section 1.753 explains the method for refunding interest in Subchapter
E and G loans when prepayment occurs before the first installment due date.
Section 1.754 explains the method for refunding interest in Subchapter
E and G loans with a term of sixty months or less.
Section 1.755 explains the method for refunding interest in Subchapter
E & G loans with a term of more than sixty months and for which prepayment
occurs before the first installment due date.
Section 1.756 explains the method for refunding interest in Subchapter
E and G loans with a term of more than sixty months.
Section 1.757 explains the methods for refunding interest in irregular
Subchapter E and G loans.
Section 1.758 explains the charges subject to refunding in Subchapter F
loans.
Section 1.759 explains the method for refunding installment account handling
charges and acquisition charges on Subchapter F loans for which prepayment
occurs before the first installment due date.
Section 1.760 explains the method for refunding installment account handling
charges and acquisition charges in Subchapter F loans.
Section 1.761 details the situation in which a lender provides excess refunds
to a borrower and the applicable procedures for handling the situation.
The rule adoption is necessary due to the repeal of the former Article
5069, Chapters 3, 4, and 5 and the adoption of new Article 5069-3A.001 et seq.
Generally, these procedures are well established
and are commonly used throughout the regulated industry. These rules should
serve, however, to clarify the calculations and procedures.
The agency received no comments regarding the proposals.
The new sections are proposed under Tex. Civ. Stat., Art. 5069-3A.901,
which authorizes the Finance Commission to adopt rules to enforce new Chapter
3A.
Texas Civil Statutes, Art. 5069-3A, Subchapter H is affected by these proposed
new sections.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on December
14, 1998.
TRD-9818344
Leslie L. Pettijohn
Commissioner
Finance Commission of Texas
Effective date: January 3, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 936-7640