Part 4.
TEXAS SAVINGS AND LOAN DEPARTMENT
Chapter 80.
MORTGAGE BROKER AND LOAN OFFICER LICENSING
The Texas Savings and Loan Commissioner (the "Commissioner") proposes
to adopt regulations, 7 TAC §§80.1-80.18, to implement the Mortgage
Broker License Act,
Finance Code
, Chapter
156 (the "Act"). The Act, enacted by the Texas Legislature and signed into
law on July 19, 1999, became effective on September 1, 1999. It requires all
mortgage brokers and loan officers, except for those specifically exempt,
to be licensed by January 1, 2000. The Act requires mortgage brokers and loan
officers to make certain disclosures to mortgage applicants, and imposes certain
standards of professional conduct and requirements on the activities of individuals
licensed under the Act, including advertising practices.
The Act provides that consumer complaints regarding licensed mortgage brokers
and loan officers should be submitted in writing to the Commissioner and authorizes
the Commissioner to conduct investigations of such complaints. A toll-free
consumer hotline has been established at 1-877-276-5550 to facilitate consumer
complaints. The Act also authorizes the Commissioner to initiate enforcement
actions against such mortgage brokers and loan officers under specified circumstances,
including cease and desist orders, license suspensions and license revocations,
and to take action against unlicensed mortgage broker activity. The Act establishes
a Recovery Fund, funded by mortgage broker and loan officer contributions
and maintained by the Commissioner, for persons who obtain a judgment against
mortgage brokers and loan officers and meet certain requirements.
The Act charges the Commissioner with oversight of the Act and directs
the Commissioner to promulgate regulations to implement the Act. An Advisory
Committee has been established under the Act to advise the Commissioner with
respect to the proposal and adoption of rules implementing the Act. The Advisory
Committee was formed and met on September 3, 1999 to review the proposed rules.
The proposed rules reflect changes made in response to the comments offered
by the Advisory Committee.
Two fundamental principles have guided the Commissioner in the promulgation
of these proposed rules. Most importantly, the Act is a consumer protection
statute and the proposed rules are intended to offer disclosure and information
to consumers as they access mortgage broker services in the state. Second,
the proposed rules are intended to minimize, to the extent practicable, unnecessary
disruptions in the lawful operation of mortgage brokerage businesses.
Several issues addressed in the Act have generated significant discussion.
These issues have been reviewed with the Advisory Committee. This preamble
will identify these issues as part of the overall review and outline of the
proposed rules.
Definition of Mortgage Broker and Loan Officer
. Section 80.1 relating to the scope of the Act includes definitions
of "Mortgage Broker" and "Loan Officer." Section 156.002(9) of the Act provides
that these definitions do not include "a person who performs only clerical
functions such as delivering a loan application to a mortgage broker or mortgage
banker or gathering information related to a Mortgage Loan application on
behalf of the prospective borrower, mortgage broker, or mortgage banker."
This exclusion of persons performing only clerical functions and the examples
cited as clerical functions (delivering a loan application and gathering information)
present a notable risk of misinterpretation as to who must be licensed as
a mortgage broker or loan officer. The inclusion of specific examples also
implies that some activities are not clerical in nature and performance of
such activities would cause a person to be required to obtain a license. Several
alternative approaches to help clarify this distinction were discussed with
the Advisory Committee at its meeting on September 3 to provide potential
licensees a better understanding of when it becomes necessary for a person
to be licensed under the Act.
Based on these discussions, as a means of clarifying which activities require
licensing and which do not, the Commissioner proposes that "if an individual
receives an application from a prospective borrower and either:
a)interviews and consults with a person who becomes a Mortgage Applicant
AND makes decisions where the loan application is sent or obtains loan approval
for the loan OR
b)collects and retains any portion of fees from a Mortgage Applicant for
any services in connection with the application... then such individual shall
be presumed to be a Mortgage Broker or Loan Officer and will be required to
be licensed under Section 156.201 of the Act." This language was unanimously
supported by the Advisory Committee.
Exemptions
. Section 156.202 of the Act
specifically exempts certain individuals from the requirements of the Act.
These include, among other exempted persons: "any of the following entities
or an employee of any of the following entities provided the employee is acting
for the benefit of the employer:
(A) a bank, savings bank, or savings and loan association, or a subsidiary
or an affiliate of a bank, savings bank, or savings and loan association;
(B) a state or federal credit union;
(C) an insurance company licensed or authorized to do business in this
state under the Insurance Code;
(D) a mortgage banker; or
(E) an organization that qualifies for an exemption from state franchise
and sales tax as a 501(c)(3) organization;"
In order to meet the criteria set forth for an exemption under this section,
an individual would have to be (1) an employee of the entity listed and (2)
acting for the benefit of his or her employer. The Act did not exempt agents
or independent contractors of these entities presumably because agents and
independent contractors are not under the same degree of control by the entities
for which they perform services as are employees. With the inclusion of a
definition of employee in the proposed Section 80.2, the Commissioner will
look to the manner in which one of the listed entities elects to treat a particular
individual for federal income tax withholding purposes to determine whether
such person is an employee or an independent contractor or other type of agent.
Physical Office Requirement
. Section 156.212
provides that "Each mortgage broker licensed under this chapter shall maintain
a physical office in this state." In defining this requirement in the proposed
Section 80.2, care has been taken to address the legitimate needs of Texas
consumers, namely that mortgage brokers have a physical place where they could,
at known hours, arrange to meet face-to-face with licensees. Therefore, the
Commissioner proposes to require a street address. Post office boxes or similar
designations will not suffice. It must be accessible to the general public
and must hold itself open on a regular basis during posted hours.
Application and Licensing Requirements
.
The qualifications for mortgage brokers and loan officers reflect minimum
levels of required education and/or experience as well as age, financial requirements,
and other requirements and are included as set forth in the Act.
Disclosures, Advertising and False, Misleading
or Deceptive Practices
. At the time of application, a Mortgage Broker
or Loan Officer is required in Section 156.004 of the Act to provide to the
Mortgage Applicant a disclosure describing the nature of their relationship,
the duties of the Mortgage Broker or Loan Officer to the Mortgage Applicant,
and a description of how the Mortgage Broker or Loan Officer will be compensated
for his or her services. The Act requires the Commissioner to promulgate by
rule a standard disclosure form to be used at the time of application. The
proposed disclosure form follows the text of the proposed regulations. The
proposed rule sets forth lists of specific advertising practices and specific
circumstances which would constitute violations of the consumer protection
provisions of the Act.
Books and Records
. The Act specifically
authorizes the Commissioner to investigate consumer complaints and initiate
enforcement actions against mortgage brokers and loan officers under specified
circumstances. In order to facilitate such investigations it is necessary
that mortgage brokers and loan officers maintain adequate business records
and records pertaining to Mortgage Applicants and Mortgage Loans originated.
The proposed rules set forth minimum requirements for mortgage application
records and general business records required to enable the Commissioner to
ascertain compliance with the Act. The proposal also requires the maintenance
of a mortgage transaction log that identifies all applicants and the disposition
of applications submitted.
Continuing Education
. The Act requires
mortgage brokers and loan officers to meet certain continuing education requirements.
Compliance with such requirements will be necessary for license renewal. The
proposed rules set forth the criteria for approval of such continuing education
courses.
Complaints and Investigations
. The proposed
rules set forth the circumstances under which the Commissioner may initiate
an investigation of a consumer complaint and those circumstances under which
the Commissioner may initiate an investigation without a consumer complaint.
The Commissioner may impose administrative penalties of up to $2,500 per day
for violations of the Act or an order adopted under the Act. Additionally,
the proposed rules set forth the circumstances under which the Commissioner
may issue, without notice or hearing, a cease and desist order against a mortgage
broker or loan officer for violation of the Act or an order adopted under
the Act.
Hearings
. The proposal designates the hearings
officer of the Finance Commission as the hearings officer for all proceedings
under the Act and specifies that unless otherwise authorized by the Commissioner,
all such hearings shall be conducted in Travis County, Texas under the administrative
hearings rules set forth in 7 TAC Chapter 9. All appeals of decisions by the
Commissioner are to be made to State District Court in Travis County, Texas.
Interpretations
. The proposed rules provide
that the Commissioner may, from time to time publish written interpretations
of the Act.
James L. Pledger, Savings and Loan Commissioner, has determined that for
the first five year period the new sections as proposed will be in effect,
there will be no fiscal implications for state and local government as a result
of enforcing or administering these sections.
Mr. Pledger estimates that, for the first five years the proposed section
is in effect, the public will benefit from having a place to voice concerns
regarding the activities of mortgage brokers and their loan officers. No difference
will exist between the cost of compliance for small businesses and the cost
of compliance for the largest businesses affected by these sections since
licensing and enforcement will be on an individual basis.
Comments on the proposed sections may be submitted in writing to James
L. Pledger, Commissioner, Savings and Loan Department, 2601 North Lamar Boulevard,
Suite 201, Austin, Texas 78705-4294, or e-mailed to TSLD@tsld.state.tx.us.
Subchapter A. LICENSING
7 TAC §§80.1-80.7
The new sections are proposed under §156.102(a) of the
The proposed new sections implement Subtitle E of the
Finance Code
, §§156.001-156.508, are affected by the new
sections.
§80.1.Scope.
This Chapter governs the licensing and conduct of Mortgage Brokers,
and the Loan Officers working for them, under the Mortgage Broker License
Act (the "Act").
(1)
As used herein the term "Mortgage Broker" means an individual
who receives an application from a prospective borrower to attempt to obtain
a Mortgage Loan. The fact that an individual is not exclusively engaged in
activities as a Mortgage Broker does not mean that they are not a Mortgage
Broker.
(2)
As used herein, the term "Loan Officer" means an individual
sponsored by a licensed Mortgage Broker for the purposes of performing the
acts of a Mortgage Broker.
(3)
The terms Mortgage Broker and Loan Officer do not
include:
(A)
An individual who performs only clerical functions in connection
with the obtaining, compiling, or delivery of an application for a Mortgage
Loan; or
(B)
An individual functioning solely as a Mortgage Loan processor.
In determining whether an individual is required to be licensed as a Mortgage
Broker or a Loan Officer based on the activities they perform, if an individual
receives an application from a prospective borrower and either:
(i)
interviews and consults with a person who becomes a Loan
Applicant AND makes the decision where that Loan Applicant's application for
a Mortgage Loan will be sent OR
(ii)
collects and retains any portion of fees from a Loan Applicant
for any services in connection with the application for or obtaining of a
Mortgage Loan (including, but not limited to, appraisal fees, credit report
fees, points, and loan commitment fees). then such individual shall be presumed
to be a Mortgage Broker or Loan Officer and required to be licensed under §156.201
of the Act.
(4)
Exemptions.
(A)
The following business entities are exempt from the Act
and this Chapter, and the Employees, as defined in paragraph (11) of §80.2
of this Chapter (relating to Definitions), of such entities are also exempt
from the Act and this Chapter to the extent they are working for the benefit
of their employer:
(i)
a bank, savings bank, or savings association and any subsidiary
or affiliate of any of the foregoing;
(ii)
a state or federal credit union;
(iii)
an insurance company licensed or authorized to do business
in the State of Texas;
(iv)
a Mortgage Banker; or
(v)
an organization that qualifies for an exemption form state
franchise and sales taxes by virtue of its status under §501(c)(3) of
the Internal Revenue Code, as amended. An Employee is presumed to be working
for the benefit of his or her employer with respect to a Mortgage Loan if
when the Mortgage Loan is made it is closed at the direction of the employer
or the employer directly shares in the economic gain or loss of the Mortgage
Loan transaction.
(B)
The following individuals are exempt from the Act and this
Chapter:
(i)
an individual who makes a Mortgage Loan from the individual's
own funds to a spouse, former spouse, or person or persons in the lineal line
of consanguinity of the person making such Mortgage Loan;
(ii)
an owner of real property who makes a Mortgage Loan to
a purchaser of the real property for all or a part of the purchase price of
that same real property; and
(iii)
an individual who makes a Mortgage Loan from that individual's
own funds who is not and is not required, by virtue of his or her business,
to be an authorized lender under Chapter 342, Finance Code, and does not regularly
engage in the business of making or brokering Mortgage Loans. A person is
deemed to be regularly engaging in the business of making or brokering Mortgage
Loans if that person:
(I)
has more than 50% of his or her net assets invested in
Mortgage Loans (other than loans of the types set forth in clauses (ii) and
(iii), above) in which he or she participated in either the origination or
brokering; or
(II)
is found by the Commissioner, after notice and an opportunity
for a hearing, to be engaging in the business of making or brokering Mortgage
Loans.
§80.2.Definitions.
As used in this Chapter, the following terms have the meanings indicated:
(1)
"Commissioner" means the Savings and Loan Commissioner
of the State of Texas.
(2)
"Commissioner's designee" means an employee of the
Department performing his or her assigned duties or such other person as the
Commissioner may designate in writing. A Commissioner's designee is deemed
to be the Commissioner's authorized "personnel or representative" as such
term is used in the Act.
(3)
"Commission" means the Finance Commission of the State
of Texas.
(4)
"Department" means the Texas Savings and Loan Department.
(5)
"Mortgage Loan" means any indebtedness secured by
a first priority lien against, or security interest in, one-to-four family
residential real property. It includes new loans and renewals, extensions,
modifications, and rearrangements of such loans. The term Mortgage Loan does
not include any loan which, although secured by one-to-four family residential
property, is clearly commercial in nature. A loan would not be a Mortgage
Loan subject to this Chapter if the loan is not for personal or consumer purposes
or if the collateral for the loan does not and will not involve a residence
which is or will be occupied by any of the obligors on the secured indebtedness
(6)
"One-to-four family residential real property" means
improved or unimproved real property, or any portion of or interest in any
such real property, on which a one-to-four family dwelling, including a mobile
home, is, is being or is to be constructed or situated.
(7)
"Mortgage Banker" means a person who is:
(A)
approved or authorized by the United States Department
of Housing and Urban Development as a mortgagee, for Mortgage Loans as defined
in this Chapter, with direct endorsement underwriting authority;
(B)
an approved seller or servicer under the Federal National
Mortgage Association;
(C)
an approved seller or servicer under the Federal Home Loan
Mortgage Corporation; or
(D)
an approved issuer for the Government National Mortgage
Association.
(8)
"Mortgage Applicant" means any person who is
solicited to use or uses a Mortgage Broker, directly or through a Mortgage
Broker's Loan Officer, to obtain a Mortgage Loan.
(9)
"Physical Office" means an actual office where the
business of mortgage lending and/or the business of taking or soliciting Mortgage
Loan applications is conducted. It must have a street address. A post office
box or other similar designation will not suffice. It must be accessible to
the general public as a place of business and must hold itself open on a regular
basis during posted hours. The physical office of a Mortgage Broker or a Loan
Officer need not be the location at which such person's required records are
maintained, but the location at which such required records are maintained
must be accessible to the Commissioner or the Commissioner's designee for
inspection during normal business hours.
(10)
"Branch office" means any location at which a Mortgage
Broker, acting directly or through one or more Loan Officers, solicits or
receives applications for Mortgage Loans. A branch office includes any location
at which a Mortgage Broker (or a Loan Officer acting on behalf of a Mortgage
Officer) owns, leases, operates, maintains, or staffs a computer or other
similar electronic device by means of which a consumer may make application
for a Mortgage Loan.
(11)
"Employee" means, with respect to an individual working
for a business entity, any individual whom the business entity has elected
to treat as an employee for federal income tax and FICA withholding purposes.
(12)
"Recovery Fund" means the Mortgage Broker Recovery
Fund established and administered in accordance with Subchapter F of the Act.
(13)
"Criminal Offense" means any violation of any state
or federal criminal statute which:
(A)
involves theft, misappropriation, or misapplication, of
monies or goods in any amount;
(B)
involves the falsification of records, perjury, or other
similar criminal offenses indicating dishonesty;
(C)
involves the taking of bribes, kickbacks, or other illegal
compensation;
(D)
involves deceiving the public by means of swindling, false
advertising or the like; or
(E)
involves any other crime which the Commissioner determines
has a reasonable relationship to whether a person is fit to serve as a Mortgage
Broker or Loan Officer in a manner consistent with the purposes of the Act
and the best interest of the State of Texas and its residents.
§80.3.Licensing-General.
(a)
Only individuals may apply for and obtain Mortgage Broker
or Loan Officer licenses. Entities other than individuals may not be licensed
under the Act and this Chapter. All applications for Mortgage Broker or Loan
Officer licenses are to be submitted on the current version(s) of forms promulgated
by the Commissioner, including the forms for attachments. No application or
notice required under the Act or these regulations is deemed to be submitted
unless it is accompanied by the required fee. Such fees are not refundable.
A license issued pursuant to the Act is valid for a period of two years or,
in the instance of a provisional or probationary license, such shorter period
as the Commissioner may specify. The Commissioner's schedule of fees is Appendix
A to this Chapter. If an application is submitted and the Commissioner or
the Commissioner's designee requests additional, clarifying, or supplemental
information, failure to provide such requested information within thirty days
may result in the application being returned and deemed withdrawn.
(b)
Provisional Licenses
(1)
If the Commissioner determines that the completion of an
application for a license required by the Act will be delayed significantly
due to the need for additional information to render the application complete
and the Commissioner has determined that there is no reason to believe, based
on the facts and circumstances known, that the application will be denied,
the Commissioner may, in his or her sole discretion, issue a provisional license.
A provisional license:
(A)
may contain such limitations and restrictions as the Commissioner
determines are reasonably necessary or appropriate to further the purposes
of the Act;
(B)
is subject to revocation for any of the grounds set forth
in the Section 156.303 of the Act; and
(C)
is subject to revocation if the Commissioner determines
that any facts or circumstances exist which would have constituted grounds
for denial of the application.
(2)
The holder of a provisional license shall be
required, while operating under such provisional license, to comply with all
requirements of the Act as if he or she were the holder of a license, including,
but not limited to, display of his or her provisional license.
§80.4.Qualifications for obtaining licenses.
(a)
Mortgage Broker Licenses. In order to be issued a license
as a Mortgage Broker the applicant must establish to the satisfaction of the
Commissioner that:
(1)
the applicant is an individual of at least 18 years of
age;
(2)
the applicant is either a United States citizen or
a lawfully admitted alien;
(3)
the applicant maintains a Physical Office in the State
of Texas and has designated that office in his or her application;
(4)
the applicant either:
(A)
has received a bachelor's degree in an area relating to
finance, banking, or business administration from an accredited college or
university AND has 18 months or more of actual experience in the mortgage
lending field as evidenced by documentary proof of full-time employment for
the required period as a mortgage broker or loan officer or with a person
exempt under § 156.202 of the Act;
(B)
is currently licensed in the State of Texas as:
(i)
an active real estate broker;
(ii)
an active attorney; or
(iii)
a local recording agent or insurance agent for a legal
reserve life insurance company under Chapter 21 of the Insurance Code (or
holds an equivalent license under the Insurance Code or its equivalent regulations
as now or hereafter promulgated); or
(C)
has three years or more experience in the mortgage lending
field as evidenced by documentary proof of full-time employment for the required
period as a loan officer or with a person exempt under §156.202 of the
Act;
(5)
the applicant either has net assets of $25,000
or more or has provided an acceptable surety bond in an amount of not less
than $50,000 (an acceptable bond being a bond issued by a surety licensed
by the Texas Department of Insurance and issued on a form approved by the
Texas Department of Insurance for that purpose); and
(6)
the applicant has not been convicted of any Criminal
Offense as defined in paragraph (13) of §80.2 (relating to Definitions)
of this Chapter or, if the applicant has been convicted of any such Criminal
Offense, the applicant has been found by the Commissioner, in accordance with §4(c)
of Article 6252-13c, Texas Civil Statutes, to be fit to be licensed as a Mortgage
Broker.
(b)
Loan Officer Licenses. In order to be issued a license
as a Loan Officer, an applicant must establish to the satisfaction of the
Commissioner that:
(1)
the applicant is an individual of at least 18 years of
age;
(2)
the applicant is either a United States citizen or
a lawfully admitted alien;
(3)
the applicant is sponsored by a licensed Mortgage
Broker, as evidenced by an appropriately completed Acknowledgement of Sponsoring
Broker form;
(4)
the applicant has either:
(A)
successfully completed at least 15 hours of education courses
approved by the Commissioner;
(B)
the applicant has 18 months or more of experience as a
mortgage loan officer as evidenced by documentary proof of full-time employment
as such with a mortgage broker or a person exempt under §156.202 of the
Act;
(C)
the applicant is otherwise qualified to be a Mortgage Broker;
or
(D)
ONLY WITH RESPECT TO APPLICATIONS
RECEIVED PRIOR TO JANUARY 1, 2000
- the Mortgage Broker sponsoring
the applicant has certified under oath on the Commissioner's prescribed form
that the applicant has been provided with the necessary and appropriate training
and education to be aware of and familiar with the state and federal laws
and regulations applicable to mortgage lending; and
(5)
the applicant has not been convicted of any Criminal
Offense as defined in paragraph (13) of §80.2 of this Chapter (relating
to Definitions) or, if the applicant has been convicted of any such Criminal
Offense, the applicant has been found by the Commissioner, in accordance with §4(c)
of Article 6252-13c, Texas Civil Statutes, to be fit to be licensed as a Loan
Officer.
(c)
Additional Information. The Commissioner may require such
additional, clarifying, or supplemental information from any applicant for
the issuance or renewal of any license pursuant to the Act as is deemed necessary
or advisable to determine that the requirements of the Act have been met.
§80.5.Renewals.
A license may be renewed, provided the license holder has not been
convicted of a Criminal Offense as defined in paragraph (13) of §80.2
of this Chapter (relating to Definitions), upon:
(1)
submission of a completed application for renewal on the
prescribed form (together with any requested additional, clarifying, or supplemental
information) and
(2)
providing the Commissioner with satisfactory evidence
of compliance with the applicable educational requirements or licensing requirements
specified in §156.204 of the Act and §80.4 of this Chapter (relating
to Qualifications for Obtaining Licenses).
§80.6.Sponsorship and termination thereof.
(a)
An applicant for a Loan Officer license must be sponsored
by a licensed Mortgage Broker. A Loan Officer may not be sponsored by or act
for more than one Mortgage Broker at any given time. The Mortgage Broker must
acknowledge and accept the responsibilities set forth in the Act, including
responsibility for the actions of the Loan Officer, by executing and providing
to the Commissioner an Acknowledgment of Sponsoring Broker form.
(b)
If a Loan Officer's license is approved, it will be issued
to and must be held by the Sponsoring Mortgage Broker and displayed at the
licensed office of the sponsoring Mortgage Broker.
(c)
If sponsorship of a Loan Officer terminates, the sponsoring
Mortgage Broker and the Loan Officer shall immediately notify the Commissioner,
and the sponsoring Mortgage Broker shall return the Loan Officer's license
to the Commissioner or the Commissioner's Designee, whereupon that license
will become inactive. Sponsorship of a Loan Officer remains in effect until
the Commissioner has been notified in writing of the termination of sponsorship
AND the Loan Officer's license is received by the Commissioner or the Commissioner's
Designee. Prior to its scheduled expiration, an inactive Loan Officer's license
may be reactivated upon designation of a new sponsoring Mortgage Broker, as
evidenced by execution and providing to the Commissioner of an Acknowledgement
of Sponsoring Broker form.
§80.7.Background checks.
(a)
In connection with each application for the issuance or
renewal of a license under the Act, the Commissioner shall initiate a background
check by obtaining a criminal history on the applicant from the Department
of Public Safety and shall require a fingerprint card and authorization for
such additional background checks as the Commissioner may deem necessary or
advisable, including but not limited to obtaining criminal background information
from the Federal Bureau of Investigation.
(b)
The Commissioner shall keep confidential any criminal background
information obtained under this subsection and §156.206 of the Act and
may not release or disclose the information unless:
(1)
the information is a public record at the time the Commissioner
obtains the information; or
(2)
the Commissioner releases the information:
(A)
under order from a court;
(B)
with the permission of the applicant;
(C)
to a person through whom the applicant is conducting or
will conduct business; or
(D)
to a governmental agency.
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of the Secretary of State, on
September 30, 1999.
TRD-9906387
James L. Pledger
Commissioner
Texas Savings and Loan Department
Earliest possible date of adoption: November 14, 1999
For further information, please call: (512) 475-1350
7 TAC §§80.8-80.11
The new sections are proposed under §156.102(a) of the
The proposed new sections implement Subtitle E of the
Finance Code
, §§156.001-156.508, are affected by the new
sections.
§80.8.Limitations on charging of fees.
(a)
Before completing the mortgage lending or procurement services
agreed to be performed, a Mortgage Broker or Loan Officer may, to the extent
not limited or prohibited by other applicable state or federal laws or by
contract, charge a Mortgage Applicant any or all of the following fees for
assisting that Mortgage Applicant in obtaining a Mortgage Loan:
(1)
a fee to obtain a credit report;
(2)
a fee for the appraisal of real estate;
(3)
a fee for processing a Mortgage Loan application;
(4)
a fee for taking a Mortgage Loan application;
(5)
a fee for automated underwriting;
(6)
a fee for a courier service;
(7)
a fee to issue a loan commitment; and/or
(8)
a fee for locking in an interest rate, provided there
is a signed, written agreement between the Mortgage Applicant and the Mortgage
Broker or Loan Officer that contains (at least) a clear statement as to whether
a fee to lock in an interest rate is refundable, and, if so, the terms and
conditions necessary to obtain the refund.
(b)
Nothing herein shall be construed as authorizing a Mortgage
Broker or Loan Officer to provide any of the services made the subject of
fees. It is the responsibility of the Mortgage Broker or Loan Officer providing
any such services to obtain any necessary, approvals, licenses, or permits
and to comply with applicable legal and contractual requirements.
§80.9.Required disclosures.
(a)
At the time an application for a Mortgage Loan is made
to a Mortgage Broker or Loan Officer, the Mortgage Broker or Loan Officer
shall provide the Mortgage Applicant with a disclosure describing their relationship,
the duties of the Mortgage Broker or Loan Officer to the Mortgage Applicant,
and a description of how the Mortgage Broker or Loan Officer will be compensated
for his or her services. Such disclosures are to be made using forms promulgated
by the Commissioner. Such disclosures shall include a statement to the effect
that the Department oversees the enforcement of the Act (including conducting
investigations of any complaints) and provide a consumer toll free telephone
number for the Department.
(b)
Anytime a Mortgage Broker or Loan Officer charges or receives
from a Mortgage Applicant a fee for a service that is provided by a third
party and retains any portion of the fee so charged or received:
(1)
the portion retained by the Mortgage Broker or Loan Officer
and a description of the service actually rendered by the Mortgage Broker
or Loan Officer shall be disclosed to the Mortgage Applicant in writing and
(2)
the portion so retained by the Mortgage Broker or
Loan Officer shall not exceed the reasonable value of services actually rendered
by the Mortgage Broker or Loan Officer for the benefit of the Mortgage Applicant.
(3)
Any Mortgage Broker or Loan Officer retaining any
portion of any fee or fees charged by third parties, however, denominated,
shall maintain appropriate documentation to substantiate the basis for the
retention of such monies, including the reasonable value of the services rendered
for such fee or fees.
(4)
Affiliated business arrangements, as provided for
under the Real Estate Settlement Procedures Act, and payments made pursuant
thereto shall be disclosed to Mortgage Applicants.
§80.10.Prohibition on false, misleading, or deceptive practices.
No Mortgage Broker or Loan Officer may:
(1)
knowingly misrepresent his or her relationship to a Mortgage
Applicant or any other party to an actual or proposed Mortgage Loan transaction;
(2)
knowingly misrepresent or understate any cost, fee,
interest rate, or other expense in connection with a Mortgage Applicant's
applying for or obtaining a Mortgage Loan;
(3)
disparage any source or potential source of Mortgage
Loan funds in a manner which knowingly disregards the truth or makes any knowing
and material misstatement or omission;
(4)
broker, arrange, or make a Mortgage Loan involving
costs and/or fees which are significantly in excess of costs and/or fees prevailing
at the time in the local market for comparable transactions involving comparably
situated applicants without material facts or circumstances to justify such
deviation;
(5)
broker, arrange, or make a Mortgage Loan in which
the Mortgage Broker or Loan Officer retains fees or receives other compensation
for services which are not actually performed or where the fees or other compensation
received bear no reasonable relationship to the value of services actually
performed;
(6)
broker, arrange, or make a Mortgage Loan with repayment
terms which clearly exceed the Mortgage Applicant's documented capacity to
pay;
(7)
recommend or encourage default or delinquency or continuation
of an existing default or delinquency by a Mortgage Applicant on any existing
indebtedness prior to closing a Mortgage Loan which refinances all or a portion
of such existing indebtedness;
(8)
induce any Mortgage Applicant to breach a contractual
obligation to a third party; or
(9)
engage in any other practice which the Commissioner,
by published interpretation, has determined to be false, misleading, or deceptive.
§80.11.Advertising.
(a)
Any advertisement of Mortgage Loans which are offered by
or through a Mortgage Broker or Loan Officer shall:
(1)
comply with all applicable state and federal disclosure
requirements, including, but not limited to, those under the Truth in Lending
Act regarding the disclosure of annual percentage rates;
(2)
advertise only such products and terms as are actually
available and, if their availability is subject to any material requirements
or limitations, specify those requirements or limitations;
(3)
not make any statement or omit to make any statement
the result of which is to present a misleading or deceptive impression to
consumers; and
(4)
if the person who caused the advertisement to be published
is a Mortgage Broker or a Loan Officer, disclose that fact.
(b)
A Mortgage Broker or Loan Officer receiving a verbal or
written inquiry about his or her services shall respond accurately to any
questions about the scope and nature of such services and any costs.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
September 30, 1999.
TRD-9906388
James L. Pledger
Commissioner
Texas Savings and Loan Department
Earliest possible date of adoption: November 14, 1999
For further information, please call: (512) 475-1350
7 TAC §§80.12-80.14
The new sections are proposed under §156.102(a) of the
The proposed new sections implement Subtitle E of the
Finance Code
, §§156.001-156.508, are affected by the new
sections.
§80.12.Display of License Certificates; Change of Address.
(a)
Each application for a license under the Act requires the
applicant to indicate the location(s) at which he or she proposes to conduct
the licensed activity. A separate license is required for each specified location.
When issued, each license will indicate the location for which it is issued.
(b)
Each required license issued pursuant to the Act and this
Chapter must be prominently displayed at the location indicated thereon. With
respect to any such licensed location which is primarily a computer or similar
electronic device, if it is not reasonably possible to display any and all
required licenses at such location, the person(s) responsible for complying
with the requirement for displaying required licenses may comply with such
requirement by setting forth the information specified in their license and
causing it to be conspicuously displayed on the first computer screen viewed
by a prospective Mortgage Applicant after accessing such computer or similar
electronic device. If, due to the number of persons required to display such
information, more than one screen is required, sequentially accessed screens
following the first screen accessed will be deemed to comply with this requirement.
(c)
Before the tenth day preceding the effective date of any
change in address, a Mortgage Broker shall notify the Commissioner in writing
of the proposed new address of that Mortgage Broker or, as applicable, a Loan
Officer sponsored by that Mortgage Broker. A new license certificate, reflecting
the new address, must be obtained prior to a Mortgage Broker or Loan Officer
conducting business at a new address.
§80.13.Books and Records.
In order to assure that each licensee will have all records necessary
to enable the Commissioner or the Commissioner's designee to investigate complaints
and discharge their responsibilities under the Act and this Chapter, each
Mortgage Broker and Loan Officer shall maintain records as set forth below.
The particular format of records to be maintained is not specified. However,
they must be complete, current, legible, readily accessible, and readily sortable.
Records maintained for other purposes, such as compliance with other state
and federal laws, will be deemed to satisfy these requirements if they include
the same information.
(1)
Mortgage Application Records. Each Mortgage Broker and
each Loan Officer is required to maintain, at the location specified in his
or her application, the following books and records:
(A)
A Mortgage Loan file for each Mortgage Loan application
received; each such file shall contain at least the following:
(i)
a copy of the Mortgage Loan application (including any
attachments, supplements, or addenda thereto);
(ii)
either a copy of the signed closing statement if the Mortgage
Loan is closed in the name of the Mortgage Broker or an entity through which
the Mortgage Broker is providing mortgage lending services or documentation
of the timely denial or other disposition of the application for a Mortgage
Loan;
(iii)
a copy of the disclosure statement required by the Act
and subsection (a) of §80.9 of this Chapter (relating to Required Disclosures);
(iv)
a copy of each item of correspondence, each evidence of
any contractual arrangement or understanding (including, but not limited to,
any interest rate lock-ins or loan commitments), and all notes and memoranda
of conversations or meetings with any Mortgage Applicant or any other party
in connection with that Mortgage Loan application or its ultimate disposition.
(B)
Mortgage Transaction Log. A mortgage transaction log, maintained
on a current basis (which means that all entries must be made within no more
than seven days from the date on which the matters they relate to occurred),
setting forth, at a minimum:
(i)
the name of each Mortgage Applicant and how to contact
them;
(ii)
the date of the Mortgage Loan application;
(iii)
a description of the disposition of the application for
a Mortgage Loan; and
(iv)
the identity of the person or entity who initially funded
and/or acquired the Mortgage Loan and information as to how to contact them.
(C)
General Business Records. The following general business
records:
(i)
all checkbooks, check registers, bank statements, deposit
slips, withdrawal slips, and cancelled checks (or copies thereof) relating
to the mortgage brokerage business of such person;
(ii)
complete records (including invoices and supporting documentation)
for all expenses and fees paid on behalf of a Mortgage Applicant, including
a record of the date and amount of all such payments actually made by each
Mortgage Applicant;
(iii)
copies of all federal tax withholding forms, reports
of income for federal taxation, and evidence of payments to all employees,
independent contractor, and others compensated by such Mortgage Broker or
Loan Officer in connection with the conduct of mortgage lending business;
(iv)
all correspondence and other matters relating to the maintenance
of any surety bond required by the Act;
(v)
copies of all written complaints or inquiries (or summaries
of any verbal complaints or inquiries) along with any and all correspondence,
notes, responses, and documentation relating thereto and the disposition thereof;
(vi)
copies of all contractual arrangements or understandings
with third parties in any way relating to the providing of mortgage lending
services (including, but not limited to, any delegations of underwriting authority,
any agreements for pricing of goods or services, any investor contracts, any
employment agreements, and any non-compete agreements);
(vii)
copies of all reports of audits, examinations, inspections,
reviews, investigations, or other similar matters performed by any third party,
including any regulatory or supervisory authorities; and
(viii)
copies of all advertisements in the format (recorded
sound, video, print, etc.) in which they were published or distributed.
(2)
Each Mortgage Broker and each Loan Officer
shall maintain such other books and records as may be required to evidence
compliance with applicable state and federal laws and regulations including,
but not limited to, the Real Estate Settlement Procedures Act, the Equal Credit
Opportunity Act, and the Truth in Lending Act.
(3)
Each Mortgage Broker and Loan Officer shall maintain
such other books and records as the Commissioner or the Commissioner's designee
may from time to time specify in writing.
(4)
Each and all of the foregoing books and records must
be maintained in good order and shall be produced for the Commissioner or
the Commissioner's designee upon request. Failure to produce such books and
records upon request, after a reasonable time for compliance, may be grounds
for suspension or revocation of a license.
(5)
The foregoing books and records shall be maintained
for three years or such longer period(s) as may be required by applicable
state and/or federal laws and regulations.
(6)
A Loan Officer may meet applicable record-keeping
requirements if his or her sponsoring Mortgage Broker maintains the required
records.
§80.14.Approval of courses.
(a)
In order to be approved by the Commissioner, a person or
entity providing a course to meet the educational requirements of the Act
must establish that the subject matter of such course will specifically promote
or further the purposes of the Act. Courses of a general business nature will
generally not be approved. Courses directed towards an understanding of mortgage
lending processes, markets, and legal requirements are encouraged.
(b)
In order to have an educational course approved by the
Commissioner, the person or entity providing the course must provide to the
Commissioner a written request for approval, using the prescribed form (together
with any required or appropriate supplemental material) and such other information
as the Commissioner may reasonably request.
(c)
A course is not approved until and unless the Commissioner
issues written approval.
(d)
It is the responsibility of each person or entity providing
any such courses to obtain such other licenses, permits, and approvals as
may be required by applicable law. It is the responsibility of the person
or entity providing any such courses to take all steps necessary to assure
that the instruction and materials reflect current legal and regulatory requirements
and that the course materials and presentation conform to the presentation
to the Commissioner for approval.
(e)
Unless the approval of the Commissioner indicates otherwise,
approval of a course is valid for one year. Approval of a course may be terminated
by the Commissioner at anytime without need of any prior notice if the Commissioner
finds that a course is not being conducted in accordance with the purposes
of the Act.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
September 30, 1999.
TRD-9906389
James L. Pledger
Commissioner
Texas Savings and Loan Department
Earliest possible date of adoption: November 14, 1999
For further information, please call: (512) 475-1350
7 TAC §80.15
The new sections are proposed under §156.102(a) of the
The proposed new sections implement Subtitle E of the
Finance Code
, §§156.001-156.508, are affected by the new
sections.
§80.15.Complaints, administrative penalties, and disciplinary and/or enforcement actions.
(a)
Upon receipt of a signed, written complaint setting forth
known, suspected, or asserted facts relating to acts or omissions of a person
required to be licensed under the Act, the Commissioner or the Commissioner's
designee will:
(1)
make an initial determination whether the complaint sets
forth reasonable cause to warrant an investigation;
(2)
if it has been determined that the complaint warrants
an investigation, advise the Mortgage Broker or Loan Officer who is the subject
of the complaint by written notice to the authorized office specified on that
person's license that a complaint has been filed;
(3)
if it is determined that a complaint does not warrant
investigation, so advise the complainant and close the file, advising the
complainant of the right to bring forth additional facts or information to
have the initiation of an investigation reconsidered;
(4)
if an investigation is to be conducted, advise the
party who is the subject of the complaint that an investigation will be conducted
and conduct such investigation as is deemed appropriate in light of all the
relevant facts and circumstances then known. Such investigation may include
any or all of the following:
(A)
review of documentary evidence;
(B)
interviews with complainants, licensees, and third parties;
(C)
obtaining reports, advice, and other comments and assistance
of other state and/or federal regulatory, enforcement, or oversight bodies;
and
(D)
such other lawful investigative techniques as the Commissioner
reasonably deems necessary and/or appropriate, including, but not limited
to, requesting that complainants and/or other parties made the subject of
complaints provide explanatory, clarifying, or supplemental information.
(b)
The Commissioner may conduct an undercover or covert investigation
only if the Commissioner, after due consideration of the circumstances, determines
that the investigation is necessary to prevent immediate harm and to carry
out the purposes of the Act.
(c)
The Commissioner may authorize or direct an employee of
the Department to initiate a complaint against a person licensed under the
Act and to conduct the appropriate investigation if:
(1)
a judgment against that person has been paid from the Recovery
Fund;
(2)
that person holds a provisional license issued under §156.207
of the Act and subsection (b) of §80.3 of this Chapter (relating to Provisional
Licenses);
(3)
the Commissioner has reasonable cause to suspect or
believe that person may have been convicted of a criminal offense which may
constitute grounds for the suspension or revocation of that person's license;
or
(4)
that person has failed to honor a check issued to
the Commissioner.
(d)
If the Commissioner determines that a person has violated
the requirements of the Act, this Chapter, or any order adopted under the
Act or this Chapter, the Commissioner may impose an administrative penalty
on that person. Such penalties shall not exceed $2500 per violation. Each
day that a violation occurs or is continuing is deemed to be a separate violation
for the purposes of imposing administrative penalties hereunder.
(e)
In fixing the amount of any administrative penalty(ies)
for any violation(s) of the Act or these regulations, the Commissioner shall
consider:
(1)
the seriousness of each violation, including, but not limited
to, the nature, circumstances (including any mitigating circumstances), extent,
and gravity of each violation;
(2)
the history of any previous violations;
(3)
the amount deemed necessary or appropriate to deter
future violations;
(4)
efforts to correct the violation(s); and
(5)
any other matter that justice may require or that
the Commissioner determines has a reasonable bearing on the appropriateness
of the amount of the administrative penalty.
(f)
The enforcement of the penalty may be stayed while it is
under judicial review if the person pays the penalty to the clerk of the court
which is reviewing the penalty or files with such court a
supersedeas
bond in the amount of the penalty. A person who cannot
afford to pay the penalty or provide the bond may stay enforcement by filing
an affidavit in the manner required by the Texas Rules of Civil Procedure
for a party who cannot afford to provide security for costs, subject to the
right of the Commissioner to contest the affidavit as provided for by those
rules.
(g)
The Attorney General for the State of Texas may sue to
collect a penalty imposed under the Actor these regulations.
(h)
A proceeding to impose an administrative penalty under
the Act and these regulations is considered to be a contested case under Chapter
2001, Government Code.
(i)
If a person against whom an order is made requests a hearing,
the Commissioner shall set and give notice of a hearing before the Commissioner
or a hearings officer. The hearing shall be governed by Chapter 2001, Government
Code. Based on the findings of fact, conclusions of law, and any recommendations
of the hearings officer, the Commissioner shall by order find that a violation
has or has not occurred.
(j)
If a hearing has not been requested under the preceding
subsection of these regulations within thirty days of the date on which the
initial order is issued, such order will, with no further action by the Commissioner
or anyone else, become final and not subject to appeal.
(k)
If the Commissioner has reasonable cause to believe that
a person licensed under this Chapter has violated or is about to violate the
Act, this Chapter, or an order under this Chapter, the Commissioner may, without
notice and hearing, issue an order to cease and desist a particular action
or an order to take affirmative action, or both, to enforce compliance with
the Act and this Chapter. Any such order must contain a reasonably detailed
statement of the facts on which the order is made. If a person against whom
an order is made requests a hearing, the Commissioner shall set and give notice
of a hearing to be held in accordance with this Chapter and Chapter 2001,
Government Code. Based on the findings of fact and conclusions of law, the
Commissioner may find by order that a violation has or has not occurred.
(l)
In addition to or in lieu of an action to invoke or enforce
suspension or revocation of a license or to impose administrative penalties
or any other enforcement action permitted by the Act and this Chapter, the
Commissioner may initiate an action which, upon notice and an opportunity
for a hearing, will result in the affected licensee's being placed on probationary
status. The order placing a licensee on probationary status shall specify
the terms and conditions of probation.
(m)
The Commissioner may, after giving notice, impose against
any person who violates a cease and desist order, an administrative penalty
in an amount not to exceed $1,000 for each day on which the violation is continuing.
In addition to any other remedy provided for by law, the Commissioner may
institute in district court for Travis County an action for injunctive relief
and/or to collect the administrative penalty. A bond is not required of the
Commissioner with respect to any request for injunctive relief under this
subsection. Any penalty collected under this subsection will be deposited
in the Recovery Fund.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
September 30, 1999.
TRD-9906390
James L. Pledger
Commissioner
Texas Savings and Loan Department
Earliest possible date of adoption: November 14, 1999
For further information, please call: (512) 475-1350
7 TAC §80.16
The new sections are proposed under §156.102(a) of the
The proposed new sections implement Subtitle E of the
Finance Code
, §§156.001-156.508, are affected by the new
sections.
§80.16.Hearings and appeals.
The Hearings Officer for the Commission is designated as the hearings
officer for hearings under this Chapter. All such hearings are to be conducted
in accordance with 7 TAC, Chapter 9, including, but not limited to motions
for rehearing, notices of appeal, and applications for review. All such hearings
shall, unless specifically authorized by the Commissioner, be conducted in
Austin, Travis County, Texas. All appeals of decisions of the Commissioner
shall be made to the State District Court in Travis County, Texas. Such rules,
as set forth in 7 TAC, Chapter 9, are incorporated herein by reference for
all purposes.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
September 30, 1999.
TRD-9906391
James L. Pledger
Commissioner
Texas Savings and Loan Department
Earliest possible date of adoption: November 14, 1999
For further information, please call: (512) 475-1350
Subchapter B. PROFESSIONAL CONDUCT
Subchapter C. ADMINISTRATION AND RECORDS
Subchapter D. COMPLAINTS AND INVESTIGATIONS
Subchapter E. HEARINGS AND APPEALS
Subchapter F. INTERPRETATIONS