7 TAC §80.10
The Texas Savings and Loan Commissioner (the "Commissioner")
adopts an amendment to §80.10 of the regulations (the "Regulations")
that implement the Mortgage Broker License Act,
Finance Code
, Chapter 156 (the "Act") without changes to the proposed
text as published in the January 28, 2000, issue of the
Texas Register
(25 TexReg 477-638). The new subsection provides an
additional prohibition on false, misleading, or deceptive practices related
to knowingly participating in or permitting the submission of false or misleading
information of a material nature to any person in connection with a mortgage
loan.
This amendment is specifically intended to incorporate misrepresentations
by mortgage brokers about a potential borrower's financial condition during
the loan underwriting process. Numerous checks and balances exist in the underwriting
process to ensure that a potential borrower will be able to repay the mortgage
loan for which he or she is applying. However, if the borrower's financial
condition were misrepresented in the submission of the application and underwriting
information to the lender, these checks and balances would not be effective.
The submission of material false or misleading information in the application
or underwriting process might be done with or without the knowledge or participation
of the loan applicant. Even in instances where the loan applicant knew that
the practice was occurring, the loan applicant might not fully understand
the ramifications of such actions. Among the possible ramifications of this
practice to the mortgage loan applicant are the potential for criminal sanctions,
the possibility of obtaining a mortgage loan that exceeds the applicant's
actual ability to repay, the possibility that discovery of such falsification
will disrupt the processing of the loan application or jeopardize its approval,
and the possibility that the mortgage broker will use the loan applicant's
participation in such activity to gain undue leverage over the applicant.
For these reasons, it was deemed appropriate to add this additional prohibition
to the list of activities that would constitute false, misleading, or deceptive
practices. It is believed that including this paragraph will protect loan
applicants, prevent obvious abuses, and protect the applicant and the mortgage
lending/investing industry, which looks to the mortgage brokerage industry
to provide accurate and reliable information in connection with mortgage loan
applications.
The prohibition applies only to "knowing" participation in the submission
of false or misleading information and the prohibition includes a materiality
provision to make it clear that false or misleading information which is of
a
de minimis
nature and does not affect the
outcome of the loan approval process does not constitute a prohibited activity.
For example, the omission of an inconsequential obligation or the submission
of an approximate rather than precise loan balance, under certain circumstances,
would not violate the rule.
The prohibition includes submission of false or misleading information
of a material nature to "any person" in connection with the decision to make
or approve a mortgage loan. This would include another broker, an investor
or the ultimate lender.
The proposal was published for comment in the
Texas Register
on January 28, 2000, and no comments were received.
The new subsection expands upon previously adopted 7 TAC §80.10
which implements Section 156.102(b) of the Act, authorizing the Commissioner
to adopt rules to prohibit false, misleading, or deceptive practices by mortgage
brokers and loan officers. The new subsection implements Subtitle E of the Finance Code
; §156.102(b) is affected by the
new subsection.
The new subsection is adopted under §156.102 of the Finance Code which
authorizes the Commissioner to adopt rules necessary to ensure compliance
with the intent of the Act.
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 July 17, 2000.
TRD-200004928
James L. Pledger
Commissioner
Texas Savings and Loan Department
Effective date: August 6, 2000
Proposal publication date: January 28, 2000
For further information, please call: (512) 475-1350
Subchapter H. SAVINGS CLAUSE
7 TAC §80.19
The Texas Savings and Loan Commissioner (the "Commissioner")
adopts a new subchapter to the regulations ("Regulations") which implement
the Mortgage Broker License Act,
Finance Code
, §156
(the "Act") through the adoption of Subchapter H, containing a new section, §80.19,
Savings Clause, without changes to the proposed text as published in the January
28, 2000, issue of the
Texas Register
(25
TexReg 477-638).
This new section, added at the informal suggestion of the Office of the
Attorney General, makes it clear that if for any reason any section of the
Regulations is found to be illegal or invalid, such illegality or invalidity
will not affect the remaining provisions of the Regulations.
The new section has been published for comment in the
Texas Register
on January 28, 2000, and no comments have been received.
The new section is adopted under §156.102 of the Finance
Code, which authorizes the commissioner to adopt rules necessary to ensure
compliance with the intent of the Act.
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 July 17, 2000.
TRD-200004929
James L. Pledger
Commissioner
Texas Savings and Loan Department
Effective date: August 6, 2000
Proposal publication date: January 28, 2000
For further information, please call: (512) 475-1350