7 TAC §80.10
The Finance Commission of Texas (the "Finance Commission")
adopts an amendment to 7 TAC §80.10 of the regulations (the "Regulations")
that implement the Mortgage Broker License Act,
Finance Code
, chapter 156, (the "Act") with changes to the text as
published in the August 30, 2002, issue of the
Texas
Register
(27
TexReg
8095). The amended
section re-titles the rule as "Prohibitions on false, misleading, or deceptive
practices and improper dealings", restructures the current text of this section
as Subsection 80.10(a), and adopts text in Subsection 80.10(b).
Background and Summary of Factual Basis for the Rule
Section 156.303(a)(3) of the Act prohibits licensed mortgage brokers and
loan officers from engaging in improper dealings while performing acts that
require a license. Since there is no definition of improper dealings in the
Act, the purpose of Subsection 80.10(b) is to clarify the meaning of this
term.
Subsection 80.10(b) provides that improper dealings includes, but is not
limited to, three types of misconduct. The first type is negligence or incompetence
in performing the act of a mortgage broker or loan officer. The second type
is violating any provision of a federal, State of Texas, or local law, including
a final court decision, which governs the same subject matter that is governed
by the Act or by Texas Administrative Code, Title 7, Part IV, chapter 80.
The third type is violating any provision of seven laws listed, which consist
of the Real Estate Settlement Procedures Act, Regulation X, Truth in Lending
Act, Regulation Z, Equal Credit Opportunity Act, Regulation B, and Article
XVI, Section 50 of the Texas Constitution, as well as their successor statutes
and provisions.
With respect to the incorporation by reference of the federal statutes
and regulations listed in Subsection 80.10(b)(3), the Texas Savings and Loan
Department (the department) would note that these statutes and regulations
have long established a national standard for the origination of residential
mortgage loans. Consequently, the department believes that a Texas-licensed
mortgage broker or loan officer who originates a loan in violation of these
standards would be engaging in conduct that constitutes "improper dealings"
within the meaning of Section 156.303(a)(3) of the Act.
The effect of Subsection 80.10(b) would be to make a licensee’s negligence,
incompetence, or violation of the provisions of any other law that governs
Texas mortgage broker activity a violation of Section 156.303(a)(3) of the
Act and grounds for disciplinary action against the licensee.
The amendment was reviewed with the Mortgage Broker Advisory Committee
on August 6, 2002, and with the
Finance Commission
on August 16, 2002. The Finance Commission approved the proposed amendment
to the Regulations for publication for public comment, and it was published
in the August 30, 2002, issue of the
Texas Register
.
No written comments were received. However, the department has received
oral comments from two commenters which have resulted in two changes being
made to the text of subsection 80.10(b) as it was originally proposed.
First, the Mortgage Broker Advisory Committee reviewed the proposed amendment
again on October 9, 2002, and one of the Committee members suggested that
the term "state" in Subsection 80.10(b)(2) of the proposed amendment be changed
to "State of Texas" in order to clarify that other states’ laws would
not be included within the scope of subsection 80.10(b)(2). The department
believes that this change further clarifies the original intent of the rule
and, having no objection to it, has made this change in the proposed amendment
of Section 80.8 of the Regulations.
Additionally, a commenter noted at the regular meeting of the Finance Commission
on October 18, 2002, when the Finance Commission was considering the adoption
of the proposed amendment of section 80.10, that the words "or incompetently"
should be deleted from the text of proposed subsection 80.10(b)(1). The Texas
Savings and Loan Commissioner and the Finance Commission agreed to this change
at the meeting and the Finance Commission voted to adopt the proposed amendment
of section 80.10 with these two changes.
The amendment is adopted under
Finance
Code
, Section 11.306, which authorizes the Finance Commission to adopt
mortgage broker rules as provided by chapter 156 of the Act, and under Finance Code
, Section 156.102(a), which authorizes
the Commissioner, subject to review and compliance with the directives of
the Finance Commission, to adopt and enforce rules necessary for the intent
of or to ensure compliance with the Act.
§80.10. Prohibition on false, misleading, or deceptive practices and improper dealings.
(a)
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)
knowingly participate in or permit the submission of false
or misleading information of a material nature to any person in connection
with a decision by that person whether or not to make or acquire a Mortgage
Loan.
(5)
as provided for by the Real Estate Settlement Procedures
Act and its implementing regulations, 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)
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;
(7)
induce or attempt to induce a party to a contract to breach
the contract so the person may make a Mortgage; or
(8)
engage in any other practice which the Commissioner, by
published interpretation, has determined to be false, misleading, or deceptive.
(b)
The term "improper dealings" in Section 156.303(a)(3) of
the Act includes, but is not limited to, the following:
(1)
Acting negligently in performing an act for which a person
is required under the Act to hold a license;
(2)
Violating any provision of a federal, State of Texas, or
local constitution, statute, rule, ordinance, regulation, or final court decision
that governs the same activity, transaction, or subject matter that is governed
by the provisions of the Act or this Chapter; or
(3)
Violating any provision of the following statutes, regulations,
and constitutional provisions, or their successor statutes, regulations, and
provisions:
(A)
Real Estate Settlement Procedures Act, 12 U.S.C. Chapter
2600;
(B)
Regulation X, 24 C.F.R. Part 3500;
(C)
Consumer Credit Protection Act, 15 U.S.C. Chapter 1600
(Truth in Lending Act);
(D)
Regulation Z, 12 C.F.R. Part 226;
(E)
Equal Credit Opportunity Act, 15 U.S.C. §1691;
(F)
Regulation B, 12 C.F.R. Part 202; and
(G)
Section 50, Article XVI, Texas Constitution.
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 October 28, 2002.
TRD-200207047
Michael Chisum
General Counsel
Texas Savings and Loan Department
Effective date: November 17, 2002
Proposal publication date: August 30, 2002
For further information, please call: (512) 475-1350