Texas amends wrap mortgage loan provisions and various licensing requirements

Licensing State Issues Mortgages State Legislation

On May 24, the Texas governor signed SB 43, which amends various provisions related to residential mortgage loans, including those related to the financing of residential real estate purchases through the use of wrap mortgage loans, as well as various licensing and registration requirements. The act adds a new section related to wrap mortgage loan financing that will subject wrap loans to regulation like other mortgage loan products in order to provide certain protections for buyers and sellers, including written disclosures, tolling of limitations, closing requirements, and fiduciary duties. Among other things, the act defines certain terms, outlines exemptions, and will (i) prohibit a person from originating or making a wrap mortgage loan unless the person is licensed or registered to originate or make residential mortgage loans under certain statutory provisions, unless exempt; (ii) mandate specific disclosures related to wrap mortgages; (iii) authorize the savings and mortgage lending commissioner (commissioner) to conduct an inspection or investigation of a registered wrap lender; and (iv) authorize the commissioner to issue subpoenas and cease-and-desist orders to wrap lenders or wrap mortgage loan originators reasonably believed to have violated these provisions, and, if a violation is determined to have occurred, permits the commissioner to impose an administrative penalty of no more than $1,000 for each day of the violation. The commissioner may also seek injunctive relief. The act takes effect January 1, 2022.