PART 4. DEPARTMENT OF SAVINGS AND MORTGAGE LENDING
CHAPTER 55. RESIDENTIAL MORTGAGE LOAN ORIGINATORS
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts new rules in 7 TAC Chapter 55: §§55.1 - 55.6, 55.100 - 55.114, 55.200 - 55.205, 55.300 - 55.303, 55.310, and 55.311. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6864). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 81, Mortgage Bankers and Residential Mortgage Loan Originators, affect mortgage bankers registered with SML and individual residential mortgage loan originators (originators) licensed by SML under Finance Code Chapter 157.
Changes Concerning the Reorganization (Relocation) of Residential Mortgage Loan Originator Rules from Chapter 81 to Chapter 55
SML has determined it should reorganize its rules concerning originators by relocating them to Chapter 55, a vacant chapter, and devoting such chapter exclusively to rules affecting originators. The adopted rules effectuate these changes.
Changes Concerning General Provisions (Subchapter A)
The adopted rules: in §55.2, Definitions, adopt new definitions for "E-Sign Act," "making a residential mortgage loan," "person," "SML," "State Examination System," and "trigger lead," while eliminating definitions for "Commissioner's designee," and "Department"; in §55.3, Formatting Requirements for Notices, adopt formatting requirements for the various disclosures an originator is required to make; in §55.4, Electronic Delivery and Signature of Notices, clarify that any notice or disclosure made by an originator may be delivered and signed electronically; and, in §55.5, Computation of Time, clarify how time periods measured in calendar days are computed.
Changes Concerning Licensing (Subchapter B)
The adopted rules: in §55.100, Licensing Requirements, clarify when an originator license is required (including as it relates to a loan processor or underwriter who is an independent contractor); in §55.102, Fees, clarify that the license fee charged by SML is exclusive of fees charged by the Nationwide Multistate Licensing System (NMLS), and clarify that an insufficient funds fee under Finance Code §157.013(d) may be charged if the originator makes a payment to SML by automated clearing house and that payment fails; in §55.103, Renewal of the License, clarify that a license approved with a pending deficiency is a conditional license and requires the originator to resolve the deficiency within 30 days after the date the license is approved, and clarify that, if a license is not renewed within the reinstatement period provided by Finance Code §157.016, the individual must apply for a new license; in §55.105, Conditional License, clarify the terms and conditions under which a conditional license may be granted; in §55.106, Surrender of the License, clarify circumstances under which SML may not grant a request made by the originator to surrender his or her license; in §55.107, Sponsorship of the Originator, clarify that an originator may be sponsored by more than one mortgage company or mortgage banker, and establish requirements for an originator sponsored by more than one mortgage company or mortgage banker; in §55.108, Required Education, clarify that the pre-licensing examination required by Finance Code §180.057 means the uniform national examination approved by NMLS on or after April 1, 2013; and, in §55.109, Temporary Authority, clarify that the maximum duration for temporary authority under Finance Code §180.0511 is 120 days.
Changes Concerning Duties and Responsibilities (Subchapter C)
The adopted rules: in §55.200, Required Disclosures, remove the requirement that the disclosure to consumers required by Finance Code §156.004(a) or §157.0021(a) be signed by the originator and the mortgage applicant; in §55.202, Fraudulent, Misleading, or Deceptive Practices and Improper Dealings, clarify that an originator commits a violation if the originator knowingly misrepresents the lien position of a residential mortgage loan, create requirements concerning the use of trigger leads, clarify that an originator commits a violation if the originator solicits a consumer on the federal do-not-call registry, clarify that an originator commits a violation if the originator issues a conditional pre-qualification letter or conditional approval letter that is inaccurate, erroneous, or negligently-issued, and clarify that an originator commits a violation if the originator acts as an originator when his or her license is inactive; in §55.204, clarify that the books and records of an originator must be maintained by the mortgage company or mortgage banker sponsoring his or her license, and require that the originator work diligently and cooperatively with the mortgage company or mortgage banker to fulfill such requirements; and, in §55.205, Mortgage Call Reports, clarify that mortgage call reports are filed by the mortgage company or mortgage banker sponsoring the originator's license, and remove that seeming requirement.
Changes Concerning Supervision and Enforcement (Subchapter D)
The adopted rules: in §55.300, Examinations, provide that examinations are conducted using the State Examination System, and that SML may participate in, leverage, or accept an examination conducted by another state agency or regulatory authority; in §55.302, Confidentiality of Examination, Investigation, and Inspection Information, clarify the confidentiality of information arising from an examination, investigation, or inspection by SML; in §55.303, Corrective Action, clarify when SML may direct an originator to voluntarily take corrective action, and creating requirements for refunds made to consumers; in §55.310, Appeals, establish various deadlines by which an originator or other individual subject to an enforcement action must appeal; and, in §55.311, Hearings, clarify how hearing costs under Finance Code §157.017(f) are calculated.
Other Modernization and Update Changes
The adopted rules make changes to modernize and update the rules including: adding and replacing language for clarity and to improve readability; removing unnecessary or duplicative provisions; and updating terminology.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments. No comments were received.
SUBCHAPTER A. GENERAL PROVISIONS
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(a), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405262
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act. §55.100 is also adopted under the authority of, and to implement, Finance Code: §§156.002(4-a), 156.004(a), 156.105(a), 157.012, 157.0021, 157.02012(a), 180.051, and 180.152. §55.101 is also adopted under the authority of, and to implement, Finance Code: §§157.013, 157.015, and §180.053. §55.102 is also adopted under the authority of, and to implement, Finance Code: §§157.013, 157.015, 180.058, and 180.061(2). §55.103 is also adopted under the authority of, and to implement, Finance Code: §157.0141, 157.015, 157.016, 180.059, and 180.060. §55.104 is also adopted under the authority of, and to implement, Finance Code §180.061. §55.105 is also adopted under the authority of, and to implement, Finance Code §157.0141. §55.106 is also adopted under the authority of, and to implement, Finance Code §180.061(4). §55.107 is also adopted under the authority of, and to implement, Finance Code: §157.019 and §180.061(4). §55.108 is also adopted under the authority of, and to implement, Finance Code: §§180.056, 180.057, and 180.060. §55.109 is also adopted under the authority of, and to implement, Finance Code §180.0511. §55.110 is also adopted under the authority of, and to implement, Occupations Code Chapter 55. §55.111 and §55.112 are also adopted under the authority of, and to implement: Finance Code: §§157.0132, 180.054, 180.055, and 180.061(1); and Government Code §411.1385. §55.113 is also adopted under the authority of, and to implement, Occupations Code §53.025. §55.114 is also adopted under the authority of, and to implement, Occupations Code Chapter 53, Subchapter D.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405263
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act. §55.200 is also adopted under the authority of, and to implement, Finance Code: §§156.004, 157.0021, 180.061(4) and 180.151. §55.201 is also adopted under the authority of, and to implement, Finance Code: §§156.105, 157.0023(b), and 157.02012. §55.202 and §55.203 are also adopted under the authority of, and to implement, Finance Code: §§157.02015, 157.024(a)(2) and (3), 180.151, 180.152, and §180.153. §55.204 is also adopted under the authority of, and to implement, Finance Code: §157.02015(b) and §180.061(5). §55.205 is also adopted under the authority of, and to implement, Finance Code §157.020(a-1) and §180.101.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405264
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§55.300 - 55.303, 55.310, 55.311
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act. §§55.300 - 55.303 are also adopted under the authority of, and to implement, Finance Code: §§157.021, 157.0211, 157.025, 180.061(5), and 180.062. §55.310 is also adopted under the authority of, and to implement, Finance Code: §§157.017, 157.023, 157.024, and 157.031. §55.311 is also adopted under the authority of, and to implement, §157.017.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405265
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts new rules in 7 TAC Chapter 56: §§56.1 - 56.6, 56.100 - 56.108, 56.200 - 56.206, 56.210, 56.300 - 56.304, 56.310, and 56.311. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6881). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 80, Residential Mortgage Loan Companies, affect residential mortgage loan companies (mortgage companies) licensed by SML under Finance Code Chapter 156 (Chapter 156).
Changes Concerning the Reorganization (Relocation) of Mortgage Company Rules from Chapter 80 to Chapter 56
SML has determined it should reorganize its rules concerning mortgage companies by relocating them to Chapter 56, a vacant chapter. The adopted rules effectuate this change.
Changes Concerning General Provisions (Subchapter A)
The adopted rules: in §56.2, Definitions, adopt new definitions for "E-Sign Act," "engage in or conduct the business of a mortgage company," "making a residential mortgage loan," "mortgage banker," "SML," "State Examination System," "trigger lead," "UETA," "wrap lender," and "wrap mortgage loan" while eliminating definitions for "Commissioner's designee," and "Department"; in §56.3, Formatting Requirements for Notices, adopt formatting requirements for the various disclosures a mortgage company is required to make; in §56.4, Electronic Delivery and Signature of Notices, clarify that any notice or disclosure made by a mortgage company may be delivered and signed electronically; and, in §56.5, Computation of Time, clarify how time periods measured in calendar days are computed.
Changes Concerning Licensing Requirements (§56.100)
The adopted rules, in §56.100, Licensing Requirements, clarify when a mortgage company license is required. §56.100(c) clarifies, among other things, the requirements of Finance Code §156.202(a-1)(3), which provides that an "owner of residential real estate who in any 12-consecutive month period makes no more than three residential mortgage loans to purchasers of the property for all or part of the purchase price of the residential real estate against which the mortgage is secured" (emphasis added) is exempt from the requirement to be licensed by SML as a mortgage company under Chapter 156 (meaning, a person who acts as the lender and makes more than three such loans is not exempt and must be licensed). In response to an early precomment draft of the rules published on SML's website, SML received an informal comment from the Texas Land Developers Association (TLDA) asserting that §56.100(c) seeks to impose licensing requirements on certain seller-finance mortgage lenders selling residential real estate (seller-finance lenders) currently operating under the belief that a mortgage company license is not required if the seller-finance lender secures the services of an entity licensed or registered by SML to provide residential mortgage loan origination services in making the loan, and that lender does not actually originate the mortgage loan. According to TLDA, this belief has its origins in informal guidance posted on SML's website as late as 2016 in the form of an answer to a "frequently asked question," as follows: "Q: May an individual or entity owner finance more than five properties within a 12 month period without being licensed if they use a licensed RMLO to facilitate the transaction?; A: Yes, assuming that they only act as the lender in the transaction and do not take an application or negotiate rate and terms with potential borrowers" (at that time, the statutory threshold for exempt transactions was five). However, the licensing requirements referenced by §56.100(c) are imposed by Finance Code §156.202(a-1)(3), not the rule, and the statute plainly states a mortgage company license is required for a person that makes (as the lender) more than the number of exempt transactions allowed under the statute. §56.100(c) clarifies the statutory requirements of Finance Code §156.202(a-1)(3) and dispels the belief that a license is not required under the circumstances described above. Given the apparent pervasiveness of this belief, §56.100 is adopted with a delayed effective date of January 2026, to provide time for industry to move toward compliance and allow the Texas Legislature to consider this issue during the 89th legislative session.
Other Changes Concerning Licensing (Subchapter B)
The adopted rules: in §56.102, Fees, clarify that the license fee charged by SML is exclusive of fees charged by the Nationwide Multistate Licensing System (NMLS), and clarify that an insufficient funds fee under Finance Code §156.203(e) may be charged if the mortgage company makes a payment to SML by automated clearing house and that payment fails; in §56.103, Renewal of the License, clarify that a license approved with a pending deficiency is a conditional license and requires the mortgage company to resolve the deficiency within 30 days after the date the license is approved, and clarify that, if a license is not renewed within the reinstatement period provided by Finance Code §156.2081, a person must apply for a new license; in §56.104, NMLS License Records; Notices Sent to the Mortgage Company, change the contact person in NMLS to whom notices are sent from the contact person under "Identifying Information" to the contact person designated as the "Primary Company Contact" under "Contact Employee"; in §56.105, Conditional License, clarify the terms and conditions under which a conditional license may be granted; in §56.106, Surrender of the License, clarify circumstances under which SML may not grant a request made by the mortgage company to surrender its license; in §56.107, Sponsorship of the Originator; Responsibility for Originator's Actions, provide that a mortgage company license will revert to inactive status if the mortgage company fails to maintain a sponsored individual residential mortgage loan originator; and, in §56.108, Qualified Individual, establish a requirement that the contact information for the Qualified Individual for the mortgage company must match the principal address of the mortgage company in NMLS.
Changes Concerning Books and Records (§56.204)
Pursuant to Finance Code §156.301(a), SML may conduct inspections (examinations) of a mortgage company or an individual residential mortgage loan originator (originator) sponsored by a mortgage company (sponsored originator) to determine compliance with the requirements of Chapter 156 and the rules adopted thereunder. Examinations include inspection of the mortgage company's or sponsored originator's "books, records, documents, operations, and facilities . . . and access to any documents required under rules adopted under [Chapter 156]" (Finance Code §156.301(a)). Pursuant to Finance Code §156.301(b), SML, upon receipt of a signed, written complaint against a mortgage company "shall investigate the actions and records" of the mortgage company or its sponsored originator. Pursuant to Finance Code §156.301(e), the commission "by rule shall . . . determine the information and records to which [SML] may demand access during an inspection or an investigation." Pursuant to Finance Code §156.102(c), the commission may "adopt rules regarding books and records that a [mortgage company] is required to keep, including the location at which the books and records must be kept." Meanwhile, with respect to sponsored originators, pursuant to Finance Code §157.021(a), SML may conduct examinations of an originator to determine compliance with Chapter 157 and the Texas SAFE Act, or the rules adopted thereunder. Examinations include inspection of the originator's "books, records, documents, operations, and facilities" (Finance Code §157.021(a)). Pursuant to Finance Code §157.021(b), SML, upon receipt of a signed written complaint against an originator, "shall investigate the actions and records" of the originator. Pursuant to Finance Code §157.021(e), the commission "by rule shall . . . determine the information and records [of the originator] to which [SML] may demand access during an inspection or an investigation." Pursuant to Finance Code §157.02015(b), the commission "may adopt rules regarding books and records that [an originator] is required to keep, including the location at which the books and records must be kept." The adopted rules, in §56.204, Books and Records: clarify that a mortgage company must maintain books and records on behalf of its sponsored originators; expand preexisting requirements by establishing additional data points for the mortgage transaction log a mortgage company is required to maintain under existing rules; establish a requirement for a mortgage company to maintain books and records concerning home equity line of credit transactions; establish a requirement for a mortgage company to maintain records relating to home equity loans; establish a requirement for a mortgage company to maintain a loan processing and underwriting log to track loan processing and underwriting services the mortgage company provides; establish recordkeeping requirements for corrective action taken by the mortgage company under §56.304; and establish recordkeeping requirements for the handling of unclaimed funds of the consumer under §56.305. The records and information a mortgage company is required to maintain under §56.204 are required by other state and federal law or otherwise generated in the ordinary course of doing business. The adopted rules merely require that the mortgage company capture and maintain the records or information, including transposing certain information to the transaction logs required by the rule. Applicable state and federal law a mortgage company is required to comply with and that triggers the maintenance of the records and information includes, but is not limited to: Article XVI, Section 50, Texas Constitution; Finance Code Chapter 156; Finance Code Chapter 159; Finance Code Chapter 343; the federal Consumer Credit Protection Act, Truth in Lending Act (15 U.S.C. §1601 et seq.) and Regulation Z (12 C.F.R. §1026.1 et seq.); the federal Real Estate Settlement Procedures Act (12 U.S.C. §2601 et seq.) and Regulation X (12 C.F.R. §1024.1 et seq.); the federal Equal Credit Opportunity Act (15 U.S.C. §1691 et seq.) and Regulation B (12 C.F.R. §1002.1 et seq.); the federal Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) and Regulation V (12 C.F.R. §1022.1 et seq.); the federal Gramm-Leach-Bliley Act (15 U.S.C. §6801 et seq.), Regulation P (12 C.F.R. §1016.1 et seq.), and the Federal Trade Commission's (FTC) Privacy of Consumer Financial Information Rules (16 C.F.R. §313.1 et seq.); the FTC's Standards for Safeguarding Customer Information Rule (16 C.F.R. §314.1 et seq.); the federal Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. §5101 et seq.) and Regulation H (12 C.F.R. §1008.1 et seq.); and Regulation N (Mortgage Acts and Practices-Advertising (MAP Rule); 12 C.F.R. §1014.1 et seq.).
Changes Concerning Reportable Incidents (§56.210)
The mortgage industry in recent years, like many other industries, has experienced increasing operational risks to cybersecurity posed by threat actors, including third-party service providers subject to such risks. SML has found that, in many instances, regulated persons do not self-report incidents that pose a threat to operations, and SML only learns of the incident through consumer complaints filed with SML, or through media reports, leaving SML in a poor position to mount a regulatory response. The adopted rules, in §56.210, Reportable Incidents, establish requirements for a mortgage company to report certain information to SML when the mortgage company experiences a "security event" or a "catastrophic event." A "security event" is defined by the rule to mean "an event resulting in unauthorized access to, or disruption or misuse of, an information system, information stored on such information system, or customer information held in physical form." A "catastrophic event" is defined by the rule to mean "an event, other than a security event, that is unforeseen and results in extraordinary levels of damage or disruption to operations." For an event to be reportable under the rule, it must present "a material risk, financial or otherwise, to a mortgage company's operations or its customers." SML asserts such information is necessary to facilitate SML's examination authority described in the Changes Concerning Books and Records (§56.204) section above. Under federal law, pursuant to the FTC's Standards for Safeguarding Customer Information rules (16 C.F.R. §314.1, et seq.), a mortgage company must "develop, implement, and maintain a comprehensive information security program" to safeguard customer information (16 C.F.R. §314.3(a)), and must, among other things: conduct periodic risk assessments of the information system; design and implement safeguards to control risks to the integrity of the information system (including data encryption and controlling access); regularly test or monitor the effectiveness of the safeguards; implement policies and procedures and internal controls to ensure personnel can execute the information security program; oversee service providers to ensure compliance with the information security program; continuously evaluate and adjust the information security program; establish a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information; and, in the event of a breach involving the information of 500 or more consumers, report certain information to the FTC concerning the nature and extent of the breach. Meanwhile, pursuant to Business and Commerce Code §521.052, a mortgage company "shall implement and maintain reasonable procedures, including taking any appropriate corrective action, to protect from unlawful use or disclosure any sensitive personal information collected or maintained by the business in the regular course of business." Pursuant to Business and Commerce Code §521.053(i), for a breach involving the information of 250 or more Texas consumers, a mortgage company must report certain information to the attorney general. Considering the foregoing, the existing requirements of state and federal law already require a mortgage company to maintain the information required to be reported to SML under §56.210 in the event of a security event. Moreover, a report made to the FTC or to the attorney general described above generally satisfies the requirements of the rule, other than the requirement to provide a "root cause analysis" concerning the "results or findings of an audit or investigation to determine the origin or root cause of security event, identify strategic measures to effectively contain and limit the impact of a security event, and to prevent a future security event"; however, SML asserts that a root cause analysis is subsumed under the existing requirements of state and federal law related to security events, as described above, in order to meaningfully comply with such requirements.
Other Changes Concerning Duties and Responsibilities (Subchapter C)
The adopted rules: in §56.200, Required Disclosures, remove the requirement that the disclosure to consumers required by Finance Code §156.004(a) or §157.0021(a) be signed by the individual residential mortgage loan originator and the mortgage applicant, remove the requirement that a mortgage company make the disclosure on social media sites, and establish the requirement for a mortgage company to disclose its website address on all correspondence sent to the mortgage applicant; in §56.201, Conditional Pre-Qualification and Conditional Approval Letters, establish the requirement that a conditional pre-qualification letter or conditional approval letter be signed by an individual residential mortgage loan originator acting on behalf of the mortgage company; in §56.202, Fraudulent, Misleading, or Deceptive Practices and Improper Dealings, clarify that a mortgage company commits a violation if the mortgage company knowingly misrepresents the lien position of a residential mortgage loan, create requirements concerning the use of trigger leads, clarify that a mortgage company commits a violation if the originator solicits a consumer on the federal do-not-call registry, clarify that a mortgage company commits a violation if the mortgage company issues a conditional pre-qualification letter or conditional approval letter that is inaccurate, erroneous, or negligently-issued, and clarify that a mortgage company commits a violation if the mortgage company engages in business when its license is inactive; in §56.203, Advertising, establish the requirement for a mortgage company to state its website address when making an advertisement, and establish requirements for the use of team names by a mortgage company; in §56.205, Mortgage Call Reports, clarify the required components of the mortgage call report, and clarify that mortgage call reports must be complete and accurate when filed.
Changes Concerning Supervision and Enforcement (Subchapter D)
The adopted rules: in §56.300, Examinations, provide that examinations are conducted using the State Examination System, and that SML may participate in, leverage, or accept an examination conducted by another state agency or regulatory authority; in §56.302, Confidentiality of Examination, Investigation, and Inspection Information, clarify the confidentiality of information arising from an examination, investigation, or inspection by SML; in §56.303, Corrective Action, clarify when SML may direct a mortgage company to take corrective action, and creating requirements for refunds made to consumers; in §56.304, establish requirements concerning the mortgage company's handling of unclaimed funds of the consumer, including requiring the maintenance of a log to track the handling of such funds; in §56.310, Appeals, establish various deadlines by which a mortgage company or other person subject to an enforcement action must appeal; and, in §56.311, Hearings, clarify how hearing costs under Finance Code §156.209(f) are calculated.
Other Modernization and Update Changes
The adopted rules make changes to modernize and update the rules, including: adding and replacing language for clarity and to improve readability; removing unnecessary or duplicative provisions; and updating terminology.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments.
SML received a comment from the Texas Mortgage Bankers Association (TMBA). TMBA commented that §56.201(d), requiring a residential mortgage loan originator working for a mortgage company to sign a conditional pre-qualification letter or conditional approval letter, is unnecessarily burdensome on industry as it would require reprograming the loan origination systems used by mortgage companies and outweighs any public benefit derived from the rule. SML respectfully disagrees with the comment. A conditional pre-approval letter or conditional approval letter is used to document a mortgage applicant's purchasing power in the marketplace and is relied on by the mortgage applicant to make an offer on residential real property and execute a real estate sales contract. The contract typically requires the mortgage applicant to tender an option fee and earnest money of several thousand dollars. If the mortgage applicant fails to complete the purchase, that money is often forfeited. Most claims made on the recovery fund established pursuant to Finance Code Chapter 156, Subchapter F are as a result of improperly issued conditional pre-qualification and conditional approval letters. It is important to establish that a residential mortgage loan originator issued the letter as evidenced by his or her signature so that SML can properly evaluate claims made on the fund. SML notes that the form for the conditional pre-qualification letter and conditional approval letter (required by Finance Code §156.105) is unchanged from the preexisting rule and contemplates that a residential mortgage loan originator issue the letter. With respect to costs, SML notes that the rule does not require the use of loan origination systems. As such, costs associated with making changes to such systems as a result of the adopted rules are not directly related to the rules. TMBA commented that §56.107(a) should include provisions backdating the sponsorship of an originator in its employ to the time the request for sponsorship was made in the system. §56.107(a), among other things, requires that a mortgage company must not allow an originator to work on behalf of a mortgage company until that originator is officially sponsored of record by the mortgage company in NMLS, the licensing database system used by SML. SML respectfully disagrees with the comment. SML relies on NMLS to determine when an originator is properly sponsored. As stated in the rule, a mortgage company is responsible for violations of law committed by its sponsored originators. The backdating of sponsorship is not feasible in NMLS and would create uncertainty as to whether an originator is truly sponsored. Additionally, an originator who knows his or her sponsorship will be backdated may not be properly motivated to remedy deficiencies holding up approval of a sponsorship request in the system. TMBA commented that §56.210, concerning Reportable Incidents, is outside SML's statutory authority. SML respectfully disagrees with the comment. Statutory authority for the rule was recited in the commission's proposal. §56.210 requires a mortgage company to report to SML when it is subject to certain catastrophic events or security incidents. The rule is an extension of SML's examination authority and is similar to preexisting rules requiring a mortgage company to compile and maintain certain information in order to facilitate the examination process. As indicated in the proposal, a mortgage company, in order to comply with federal law, is already required to compile the information that is reported to SML under the rule. TMBA commented that §56.303, concerning Corrective Action, is outside SML's statutory authority. SML respectfully disagrees with the comment. Statutory authority for the rule was recited in the commission's proposal. The rule lays out certain actions a mortgage company may be asked to take to correct violations of law determined during an examination. As stated in the rule, corrective action is voluntary. SML sees great benefit in establishing protocols in rule to help guide and facilitate corrective action so that industry is aware of SML's expectations.
SML received a comment from the Texas Land Developers Association (TLDA). TLDA's comment relates to §56.100, which clarifies the exemption from licensing requirements created by Finance Code §156.202(a-1), concerning seller-finance lenders. TLDA, among other things, commented that it disagrees with SML's evaluation of the costs associated with §56.100 and questioned the methodology of SML’s analysis, insisting that SML underestimated the potential number of seller-finance lenders required to be licensed under Finance Code. SML respectfully disagrees with the comment. As stated in the proposal, the requirement to be licensed is imposed by the Finance Code, not §56.100. The proposal included an exhaustive analysis of the licensing requirements imposed by the Finance Code. This analysis was done based on publicly available data concerning the number of seller-finance lenders that is inherently difficult to discern. That analysis included cost estimates based on TLDA's own assertions as to the potential number of seller-finance lenders required to be licensed under the Finance Code. Although TLDA challenges SML's methodology and the conclusions it reached, TLDA fails to identify another source of publicly available information that it suggests SML should have relied on. As indicated in the proposal, §56.100 is adopted with a delayed implementation date of January 1, 2026, in order for industry to come into compliance with statutory requirements, and for the Legislature to potentially take up and consider this issue during the 89th Legislative Session.
TLDA included with its comment purported comments from eight individuals who appear to be consumers. The TLDA comment also included a comment from the Mayor of Los Indios, Texas, a small city (population 1,008 in the 2020 census) situated along the Texas/Mexico border in Cameron County. The commenters generally extol the importance of seller-finance lending in the mortgage industry and encourage the commission to take a position on the rules that would maintain access to seller-finance lending for those who might not qualify for traditional financing. SML recognizes the impact of the seller-finance industry in the residential mortgage loan market; however, SML must administer and enforce the licensing requirements of the Finance Code as enacted by the Texas Legislature.
SUBCHAPTER A. GENERAL PROVISIONS
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act).
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405266
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §56.100 is also adopted under the authority of, and to implement, Finance Code §156.201 and §156.202.
The adopted rule affects the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405267
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: January 1, 2026
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §56.101 and §56.102 are also adopted under the authority of, and to implement, Finance Code: §156.203 and §156.208. §56.103 is also adopted under the authority of, and to implement, Finance Code: §§156.208, 156.2081, and 156.210. §56.104 is also adopted under the authority of, and to implement, Finance Code §156.211. §56.105 is also adopted under the authority of, and to implement, Finance Code §156.210. §56.107 is also adopted under the authority of, and to implement, Finance Code: §156.201(c) and §156.211. §56.108 is also adopted under the authority of, and to implement, Finance Code: §156.201(c).
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405268
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§56.200 - 56.204, 56.206, 56.210
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §56.200 is also adopted under the authority of, and to implement, Finance Code §156.004. §56.201 is also adopted under the authority of, and to implement, Finance Code §156.105. §§56.202, 56.203, and 56.210 are also adopted under the authority of, and to implement, Finance Code §156.303(a)(2) and (3). §56.204 is also adopted under the authority of, and to implement, Finance Code: §156.102(c) and §156.301. §56.206 is also adopted under the authority of, and to implement, Finance Code §156.212.
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405269
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §56.205 is also adopted under the authority of, and to implement, Finance Code §156.213.
The adopted rule affects the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405270
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: January 1, 2026
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§56.300 - 56.304, 56.310, 56.311
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §§56.300 - 56.304 are also adopted under the authority of, and to implement, Finance Code: §156.301 and §156.305. §56.310 is also adopted under the authority of, and to implement, Finance Code: §§156.209, 156.302, 156.303, and 156.406. §56.311 is also adopted under the authority of, and to implement, Finance Code §156.209.
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405271
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts new rules in 7 TAC Chapter 57: §§57.1 - 57.6, 57.100 - 57.104, 57.106, 57.107, 57.200 - 57.207, 57.210, 57.300 - 57.304, 57.310, and 57.311. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6905). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 81, Mortgage Bankers and Residential Mortgage Loan Originators, affect mortgage bankers registered with SML and individual residential mortgage loan originators licensed by SML under Finance Code Chapter 157.
Changes Concerning the Reorganization (Relocation) of Mortgage Banker Rules from Chapter 81 to Chapter 57
SML has determined it should reorganize its rules concerning mortgage bankers by relocating them to Chapter 57, a vacant chapter, and devoting such chapter exclusively to rules affecting mortgage bankers. The adopted rules effectuate these changes.
Changes Concerning General Provisions (Subchapter A)
The adopted rules: in §57.2, Definitions, adopt new definitions for "control person," "E-Sign Act," "making a residential mortgage loan," "person," "SML," "State Examination System," "trigger lead," "UETA," "wrap lender," and "wrap mortgage loan," while eliminating definitions for "Commissioner's designee," and "Department"; in §57.3, Formatting Requirements for Notices, adopt formatting requirements for the various disclosures a mortgage banker is required to make; in §57.4, Electronic Delivery and Signature of Notices, clarify that any notice or disclosure made by a mortgage banker may be delivered and signed electronically; and, in §57.5, Computation of Time, clarify how time periods measured in calendar days are computed.
Changes Concerning Registration (Subchapter B)
The adopted rules: in §57.100, Registration Requirements, clarify when a mortgage banker registration is required; in §57.101, Applications for Registration, establish requirements for applying for a mortgage banker registration; in §57.102, Fees, clarify that the registration fee charged by SML is exclusive of fees charged by the Nationwide Multistate Licensing System (NMLS); in §57.103, Renewal of the Registration, clarify the requirements to renew the registration, clarify that a registration approved with a pending deficiency requires the mortgage banker to resolve the deficiency within 30 days after the date the registration is approved, and clarify that, if a registration is not renewed within the reinstatement period provided by Finance Code §157.0062, a person must apply for a new registration; in §57.104, NMLS Records; Notices Sent to the Mortgage Banker, establish requirements for the mortgage banker to update its registration records in NMLS and establish requirements concerning how SML will contact the mortgage banker using such records; in §57.106, Surrender of the Registration, clarify circumstances under which SML may not grant a request made by a mortgage banker to surrender its registration; and, in §57.107, Sponsorship of the Originator; Responsibility for Originator's Actions, establish requirements for which a mortgage banker is responsible for the actions of the individual residential mortgage loan originators it allows to act on its behalf, and provide that a mortgage banker registration will revert to inactive status if the mortgage banker fails to maintain a sponsored individual residential mortgage loan originator.
Changes Concerning Books and Records (§57.204)
Pursuant to Finance Code §157.0022, SML "may request documentary
and other evidence [from a mortgage banker] considered
by [SML] as necessary to effectively evaluate [a consumer
] complaint, including correspondence, loan documents, and disclosures
. . . [and a] mortgage banker shall promptly provide any
evidence requested by the commissioner." Meanwhile, with respect to
originators sponsored by a mortgage banker, pursuant to Finance Code §157.021(a),
the SML commissioner (commissioner) may conduct inspections (including
examinations) of an originator to determine compliance with Chapter
157 and the Texas SAFE Act, or the rules of [SML] adopted
thereunder. Inspections include inspection of the originator's "books,
records, documents, operations, and facilities" (Finance Code §157.021(a)).
Pursuant to Finance Code §157.021(b), the commissioner, upon
receipt of a signed written complaint against an originator, "shall
investigate the actions and records" of the originator. Pursuant to
Finance Code §157.021(e), the commission "by rule shall . . .
determine the information and records [of the originator]
to which the commissioner may demand access during an inspection or
an investigation." Pursuant to Finance Code §157.02015(b), the
commission "may adopt rules regarding books and records that [an
originator] is required to keep, including the location at which
the books and records must be kept." The adopted rules, in §57.204,
Books and Records: clarify that a mortgage banker must maintain books
and records on behalf of the individual residential mortgage loan
originators it sponsors; establish additional data points for the
mortgage transaction log a mortgage banker is required to maintain
under existing rules; establish a requirement for a mortgage banker
to maintain books and records concerning home equity line of credit
transactions it originates; establish a requirement for a mortgage
banker to maintain certain additional records relating to home equity
loans; establish a requirement for a mortgage banker to maintain a
loan processing and underwriting log to track loan processing and
underwriting services the mortgage banker provides; establish recordkeeping
requirements for corrective action taken by the mortgage banker under
adopted §57.304; and establish recordkeeping requirements for
the handling of unclaimed funds of the consumer under adopted §57.305.
Most of the records and information a mortgage banker is required
to maintain under adopted §57.204 are required by other state
and federal law or otherwise generated in the ordinary course of doing
business. The adopted rules merely require that the mortgage banker
capture and maintain the records or information, including transposing
certain information to the transaction logs required by the rule.
Applicable state and federal law a mortgage banker is required to
comply with and that triggers the maintenance of the records and information
includes, but not limited to: Article XVI, Section 50, Texas Constitution;
Finance Code Chapter 157; Finance Code Chapter 159; Finance Code Chapter
343; the federal Consumer Credit Protection Act, Truth in Lending
Act (15 U.S.C. §1601 et seq.) and Regulation Z (12 C.F.R. §1026.1
et seq.); the federal Real Estate Settlement Procedures Act (12 U.S.C. §2601
et seq.) and Regulation X (12 C.F.R. §1024.1 et seq.); the federal
Equal Credit Opportunity Act (15 U.S.C. §1691 et seq.) and Regulation
B (12 C.F.R. §1002.1 et seq.); the federal Fair Credit Reporting
Act (15 U.S.C. §1681 et seq.) and Regulation V (12 C.F.R. §1022.1
et seq.); the federal Gramm-Leach-Bliley Act (15 U.S.C. §6801
et seq.), Regulation P (12 C.F.R. §1016.1 et seq.), and the Federal
Trade Commission's (FTC) Privacy of Consumer Financial Information
Rules (16 C.F.R. §313.1 et seq.); the FTC's Standards for Safeguarding
Customer Information Rule (16 C.F.R. §314.1 et seq.); the federal
Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. §5101
et seq.) and Regulation H (12 C.F.R. §1008.1 et seq.); and Regulation
N (Mortgage Acts and Practices-Advertising (MAP Rule); 12 C.F.R. §1014.1
et seq.).
Changes Concerning Reportable Incidents (§57.210)
The mortgage industry in recent years, like many other industries, has experienced increasing operational risks to cybersecurity posed by threat actors, including third-party service providers subject to such risks. SML has found that, in many instances, regulated persons do not self-report incidents that pose a threat to operations, and SML only learns of the incident through consumer complaints filed with SML, or through media reports, leaving SML in a poor position to mount a regulatory response. The adopted rules, in §57.210, Reportable Incidents, establish requirements for a mortgage banker to report certain information to SML when the mortgage banker experiences a "security event" or a "catastrophic event." A "security event" is defined by the rule to mean "an event resulting in unauthorized access to, or disruption or misuse of, an information system, information stored on such information system, or customer information held in physical form." A "catastrophic event" is defined by the rule to mean "an event, other than a security event, that is unforeseen and results in extraordinary levels of damage or disruption to operations." For an event to be reportable under the rule, it must present "a material risk, financial or otherwise, to a mortgage banker's operations or its customers." SML asserts such information is necessary to facilitate SML's inspection/examination authority described in the Changes Concerning Books and Records (§57.204) section above. Under federal law, pursuant to the FTC's Standards for Safeguarding Customer Information rules (16 C.F.R. §314.1, et seq.), a mortgage banker must "develop, implement, and maintain a comprehensive information security program" to safeguard customer information (16 C.F.R. §314.3(a)), and must, among other things: conduct periodic risk assessments of the information system; design and implement safeguards to control risks to the integrity of the information system (including data encryption and controlling access); regularly test or monitor the effectiveness of the safeguards; implement policies and procedures and internal controls to ensure personnel can execute the information security program; oversee service providers to ensure compliance with the information security program; continuously evaluate and adjust the information security program; establish a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information; and, in the event of a breach involving the information of 500 or more consumers, report certain information to the FTC concerning the nature and extent of the breach. Meanwhile, pursuant to Business and Commerce Code §521.052, a mortgage banker "shall implement and maintain reasonable procedures, including taking any appropriate corrective action, to protect from unlawful use or disclosure any sensitive personal information collected or maintained by the business in the regular course of business." Pursuant to Business and Commerce Code §521.053(i), for a breach involving the information of 250 or more Texas consumers, a mortgage banker must report certain information to the attorney general. Considering the foregoing, the existing requirements of state and federal law already require a mortgage banker to maintain the information required to be reported to SML under adopted §57.210 in the event of a security event. Moreover, a report made to the FTC or to the attorney general described above generally satisfies the requirements of the rule, other than the requirement to provide a "root cause analysis" concerning the "results or findings of an audit or investigation to determine the origin or root cause of security event, identify strategic measures to effectively contain and limit the impact of a security event, and to prevent a future security event"; however, SML asserts that a root cause analysis is subsumed under the existing requirements of state and federal law related to security events, as described above, in order to meaningfully comply with such requirements.
Other Changes Concerning Duties and Responsibilities (Subchapter C)
The adopted rules: in §57.200, Required Disclosures, remove the requirement that the disclosure to consumers required by Finance Code §157.0021(a) be signed by the individual residential mortgage loan originator and the mortgage applicant, remove the requirement that a mortgage banker make the disclosure on social media sites, and establish the requirement for a mortgage banker to disclose its website address on all correspondence sent to the mortgage applicant; in §57.201, Conditional Pre-Qualification and Conditional Approval Letters, establish the requirement that a conditional pre-qualification letter or conditional approval letter be signed by an individual residential mortgage loan originator acting on behalf of the mortgage banker; in §57.202, Fraudulent, Misleading, or Deceptive Practices and Improper Dealings, clarify that a mortgage banker commits a violation if the mortgage banker knowingly misrepresents the lien position of a residential mortgage loan, create requirements concerning the use of trigger leads, clarify that a mortgage banker commits a violation if the mortgage banker solicits a consumer on the federal do-not-call registry, clarify that a mortgage banker commits a violation if the mortgage banker issues a conditional pre-qualification letter or conditional approval letter that is inaccurate, erroneous, or negligently-issued, and clarify that a mortgage banker commits a violation if the mortgage banker engages in business when its registration is inactive; in §57.203, Advertising, establish the requirement for a mortgage banker to state its website address when making an advertisement, and establish requirements for the use of team names by a mortgage banker; in §57.205, Mortgage Call Reports, clarify the required components of the mortgage call report, and clarify that mortgage call reports must be complete and accurate when filed; and in §57.207, Periodic Statements, establish a requirement that the mortgage banker comply with the requirements of federal law under Regulation Z (12 C.F.R. §1026.41), governing periodic statements sent to the borrower.
Changes Concerning Supervision and Enforcement (Subchapter D)
The adopted rules: in §57.300, Examinations, provide that examinations are conducted using the State Examination System, and that SML may participate in, leverage, or accept an examination conducted by another state agency or regulatory authority; in §57.302, Confidentiality of Examination, Investigation, and Inspection Information, clarify the confidentiality of information arising from an examination, investigation, or inspection by SML; in §57.303, Corrective Action, clarify when SML may direct a mortgage banker to take corrective action, and creating requirements for refunds made to consumers; in §57.304, Unclaimed Funds, establish requirements concerning the mortgage banker's handling of unclaimed funds of the consumer, including requiring the maintenance of a log to track the handling of such funds; and, in §57.310, Appeals, establish various deadlines by which a mortgage banker or other person subject to an enforcement action must appeal.
Other Modernization and Update Changes
The adopted rules make changes to modernize and update the rules including: adding and replacing language for clarity and to improve readability; removing unnecessary or duplicative provisions; and updating terminology.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments.
SML received a comment from the Texas Mortgage Bankers Association (TMBA). TMBA commented that §57.201(d), requiring a residential mortgage loan originator working for a mortgage banker to sign a conditional pre-qualification letter or conditional approval letter, is unnecessarily burdensome on industry as it would require reprograming the loan origination systems used by mortgage bankers and outweighs any public benefit derived from the rule. SML respectfully disagrees with the comment. A conditional pre-approval letter or conditional approval letter is used to document a mortgage applicant's purchasing power in the marketplace and is relied on by the mortgage applicant to make an offer on residential real property and execute a real estate sales contract. The contract typically requires the mortgage applicant to tender an option fee and earnest money of several thousand dollars. If the mortgage applicant fails to complete the purchase, that money is often forfeited. Most claims made on the recovery fund established pursuant to Finance Code Chapter 156, Subchapter F are as a result of improperly issued conditional pre-qualification and conditional approval letters. It is important to establish that a residential mortgage loan originator issued the letter as evidenced by his or her signature so that SML can properly evaluate claims made on the fund. SML notes that the form for the conditional pre-qualification letter and conditional approval letter (required by Finance Code §157.02012) is unchanged from the preexisting rule and contemplates that a residential mortgage loan originator issue the letter. With respect to costs, SML notes that the rule does not require the use of loan origination systems. As such, costs associated with making changes to such systems as a result of the adopted rules are not directly related to the rules. TMBA commented that §57.107(a) should include provisions backdating the sponsorship of a residential mortgage loan originator in its employ to the time the request for sponsorship was made in the system. §57.107(a), among other things, requires that a mortgage banker must not allow a residential mortgage loan originator to work on behalf of a mortgage banker until that residential mortgage loan originator is officially sponsored of record by the mortgage banker in NMLS, the licensing database system used by SML. SML respectfully disagrees with the comment. SML relies on NMLS to determine when a residential mortgage loan originator is properly sponsored. As stated in the rule, a mortgage banker is responsible for violations of law committed by its sponsored originators. The backdating of sponsorship is not feasible in NMLS and would create uncertainty as to whether a residential mortgage loan originator is truly sponsored. Additionally, a residential mortgage loan originator who knows his or her sponsorship might be backdated may not be properly motivated to remedy deficiencies holding up approval of a sponsorship request in the system. TMBA commented that §57.210, concerning Reportable Incidents, is outside SML's statutory authority. SML respectfully disagrees with the comment. Statutory authority for the rule was recited in the commission's proposal. §57.210 requires a mortgage banker to report to SML when it is subject to certain catastrophic events or security incidents. The rule is an extension of SML's examination authority and is similar to preexisting rules requiring a mortgage banker to compile and maintain certain information in order to facilitate the examination process. As indicated in the proposal, a mortgage banker, in order to comply with federal law, is already required to compile the information that is reported to SML under the rule. TMBA commented that §57.303, concerning Corrective Action, is outside SML's statutory authority. SML respectfully disagrees with the comment. Statutory authority for the rule was recited in the commission's proposal. The rule lays out certain actions a mortgage banker may be asked to take to correct violations of law determined during an examination. As stated in the rule, corrective action is voluntary. SML sees great benefit in establishing protocols in rule to guide and facilitate corrective action so that industry is aware of SML's expectations.
SUBCHAPTER A. GENERAL PROVISIONS
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act).
The adopted rules affect the statutes in Finance Code Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405272
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§57.100 - 57.104, 57.106, 57.107
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §57.100 is also adopted under the authority of, and to implement, Finance Code §157.003. §§56.101 - 57.103 are also adopted under the authority of, and to implement, Finance Code §§157.006 - 157.0062. §57.104 is also adopted under the authority of, and to implement, Finance Code §157.005. §57.107 is also adopted under the authority of, and to implement, Finance Code §157.019.
The adopted rules affect the statutes in Finance Code Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405273
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§57.200 - 57.204, 57.206, 57.207, 57.210
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §57.200 is also adopted under the authority of, and to implement, Finance Code §157.0021. §57.201 is also adopted under the authority of, and to implement, Finance Code §157.0023(b) and §157.02012. §§57.202, 57.203, 57.207, and 57.210 are also adopted under the authority of, and to implement, Finance Code §157.009. §57.204 is also adopted under the authority of, and to implement, Finance Code §157.02015(b). §57.206 is also adopted under the authority of, and to implement, Finance Code §157.003(6).
The adopted rules affect the statutes in Finance Code Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405274
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §57.205 is also adopted under the authority of, and to implement, Finance Code §157.020.
The adopted rule affects the statutes in Finance Code Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405275
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: January 1, 2026
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§57.300 - 57.304, 57.310, 57.311
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). §§57.300 - 57.304 are also adopted under the authority of, and to implement, Finance Code §§157.0022, 157.009(d), 157.021, and 157.0211. §57.310 is also adopted under the authority of, and to implement, Finance Code §157.003(e) and §157.009.
The adopted rules affect the statutes in Finance Code Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405276
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts new rules in 7 TAC Chapter 58: §§58.1 - 58.5, 58.100 - 58.104, 58.106, 58.107, 58.200, 58.207, 58.210, 58.301 - 58.304, 58.310 and 58.311. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6924). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 79, Residential Mortgage Loan Servicers, affect residential mortgage loan servicers (mortgage servicers) registered with SML under Finance Code Chapter 158, Residential Mortgage Loan Servicers.
Changes Concerning the Reorganization (Relocation) of Residential Mortgage Loan Servicer Rules from Chapter 79 to Chapter 58
SML has determined it should reorganize its rules concerning mortgage servicers by relocating them to Chapter 58, a vacant chapter. The adopted rules effectuate this change.
Changes Concerning General Provisions (Subchapter A)
The adopted rules: in §58.2, Definitions, adopt new definitions for "control person," "dwelling," "E-Sign Act," "mortgage servicer," "mortgage servicer rights," "residential mortgage loan," "residential real estate," "SML," and UETA," while eliminating definitions for "Commissioner's designee," "Department," and "the Act"; in §58.3, Formatting Requirements for Notices, adopt formatting requirements for the various disclosures a mortgage servicer is required to make; in §58.4, Electronic Delivery and Signature of Notices, clarify that any notice or disclosure made by a mortgage servicer may be delivered and signed electronically; and, in §58.5, Computation of Time, clarify how time periods measured in calendar days are computed.
Changes Concerning Registration (Subchapter B)
The adopted rules: in §58.100, Registration Requirements, clarify when a mortgage servicer registration is required (including as it relates to master servicers); in §58.102, Fees, clarify that the registration fee charged by SML is exclusive of fees charged by the Nationwide Multistate Licensing System (NMLS); in §58.103, Renewal of Registration, clarify that a registration approved with a pending deficiency requires the mortgage servicer to resolve the deficiency within 30 days after the date the registration is approved, and clarify that, if registration is not renewed prior to its expiration, the person must apply for a new registration; in §55.104, NMLS Records; Notices Sent to the Mortgage Servicer, establish requirements for the mortgage servicer to update its registration records in NMLS and establish requirements concerning how SML will contact the mortgage servicer using such records; in §58.106, Surrender of the Registration, clarify circumstances under which SML may not a request made a mortgage servicer to surrender its registration; and, in §58.107, Surety Bond Requirement, establish a requirement to use an electronic surety bond, and establishing requirements governing the required amount of the surety bond.
Changes Concerning Reportable Incidents (§58.210)
The mortgage industry in recent years, like many other industries, has experienced increasing operational risks to cybersecurity posed by threat actors, including third-party service providers subject to such risks. SML has found that, in many instances, regulated persons do not self-report incidents that pose a threat to operations, and SML only learns of the incident through consumer complaints filed with SML, or through media reports, leaving SML in a poor position to mount a regulatory response. The adopted rules, in §58.210, Reportable Incidents, establish requirements for a mortgage servicer to report certain information to SML when the mortgage servicer experiences a "security event" or a "catastrophic event." A "security event" is defined by the rule to mean "an event resulting in unauthorized access to, or disruption or misuse of, an information system, information stored on such information system, or customer information held in physical form." A "catastrophic event" is defined by the rule to mean "an event, other than a security event, that is unforeseen and results in extraordinary levels of damage or disruption to operations." For an event to be reportable under the rule, it must present "a material risk, financial or otherwise, to a mortgage servicer's operations or its customers." SML asserts such information is necessary to facilitate SML's investigation authority described in Finance Code §158.102. Under federal law, pursuant to the Federal Trade Commission's (FTC) Standards for Safeguarding Customer Information rules (16 C.F.R. §314.1, et seq.), a mortgage servicer must "develop, implement, and maintain a comprehensive information security program" to safeguard customer information (16 C.F.R. §314.3(a)), and must, among other things: conduct periodic risk assessments of the information system; design and implement safeguards to control risks to the integrity of the information system (including data encryption and controlling access); regularly test or monitor the effectiveness of the safeguards; implement policies and procedures and internal controls to ensure personnel can execute the information security program; oversee service providers to ensure compliance with the information security program; continuously evaluate and adjust the information security program; establish a written incident response plan designed to promptly respond to, and recover from, any security event materially affecting the confidentiality, integrity, or availability of customer information; and, in the event of a breach involving the information of 500 or more consumers, report certain information to the FTC concerning the nature and extent of the breach. Meanwhile, pursuant to Business and Commerce Code §521.052, a mortgage servicer "shall implement and maintain reasonable procedures, including taking any appropriate corrective action, to protect from unlawful use or disclosure any sensitive personal information collected or maintained by the business in the regular course of business." Pursuant to Business and Commerce Code §521.053(i), for a breach involving the information of 250 or more Texas consumers, a mortgage servicer must report certain information to the attorney general. Considering the foregoing, the existing requirements of state and federal law already require a mortgage servicer to maintain the information required to be reported to SML under adopted §58.210 in the event of a security event. Moreover, a report made to the FTC or to the attorney general described above generally satisfies the requirements of the rule, other than the requirement to provide a "root cause analysis" concerning the "results or findings of an audit or investigation to determine the origin or root cause of security event, identify strategic measures to effectively contain and limit the impact of a security event, and to prevent a future security event"; however, SML asserts that a root cause analysis is subsumed under the existing requirements of state and federal law related to security events, as described above, in order to meaningfully comply with such requirements.
Other Changes Concerning Duties and Responsibilities (Subchapter C)
The adopted rules: in §58.200, Required Disclosures, remove the requirement that the disclosure to consumers required by Finance Code §158.101 be included on all correspondence sent to the borrower, and, instead, establish a requirement to make the disclosure on the first notice sent to the borrower that notifies the borrower of the mortgage servicer's role in servicing the loan, and establish a requirement to include the disclosure on the mortgage servicer's website; and, in §58.207, Periodic Statements, establish a requirement that the mortgage servicer comply with the requirements of federal law under Regulation Z (12 C.F.R. §1026.41), governing periodic statements sent to the borrower.
Changes Concerning Supervision and Enforcement (Subchapter D)
The adopted rules: in §58.302, Confidentiality of Investigation Information, clarify the confidentiality of information arising from an investigation by SML; in §58.303, Corrective Action, clarify when SML may direct a mortgage servicer to take corrective action, and creating requirements for refunds made to consumers; in §58.304, Unclaimed Funds, establish requirements concerning the mortgage servicer's handling of unclaimed funds of the consumer, including requiring the maintenance of a log to track the handling of such funds; and, in §58.310, Appeals, establish various deadlines by which a mortgage servicer or other person subject to an enforcement action must file an appeal.
Other Modernization and Update Changes
The adopted rules make changes to modernize and update the rules including: adding and replacing language for clarity and to improve readability; removing unnecessary or duplicative provisions; and updating terminology.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments.
SML received a comment from the Texas Mortgage Bankers Association (TMBA). TMBA commented that §58.210, concerning Reportable Incidents, is outside SML's statutory authority. SML respectfully disagrees with the comment. Statutory authority for the rule was recited in the commission's proposal. §58.210 requires a mortgage servicer to report to SML when it is subject to certain catastrophic events or security incidents. The rule is an extension of SML's investigation authority. As indicated in the proposal, a mortgage servicer, in order to comply with federal law, is already required to compile the information that is reported to SML under the rule. TMBA commented that §58.303, concerning Corrective Action, is outside SML's statutory authority. SML respectfully disagrees with the comment. Statutory authority for the rule was recited in the commission's proposal. The rule lays out certain actions a mortgage servicer may be asked to take to correct violations of law determined during examination. As stated in the rule, corrective action is voluntary. SML sees great benefit in establishing protocols in rule to guide and facilitate corrective action so that industry is aware of SML's expectations.
SUBCHAPTER A. GENERAL PROVISIONS
The rules are adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158.
The adopted rules affect the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405277
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§58.100 - 58.104, 58.106
Statutory Authority
The rules are adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158. §58.100 is also adopted under the authority of, and to implement, Finance Code §158.051. §58.101 and §58.102 are also adopted under the authority of, and to implement, Finance Code: §158.053 and §158.058. §58.103 is also adopted under the authority of, and to implement, Finance Code §158.058. §58.104 is also adopted under the authority of, and to implement, Finance Code §158.054.
The adopted rules affect the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405278
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158. §58.107 is also adopted under the authority of, and to implement, Finance Code §158.055.
The adopted rule affects the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405279
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: January 1, 2026
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§58.200, 58.207, 58.210
Statutory Authority
The rules are adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158. §58.200 is also adopted under the authority of Finance Code §158.101.
The adopted rules affect the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405280
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§58.301 - 58.304, 58.310, 58.311
Statutory Authority
The rules are adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158. §§58.301 - 58.304 are also adopted under the authority of, and to implement, Finance Code §158.102 and §158.106. §58.310 is also adopted under the authority of, and to implement, Finance Code: §§158.058 - 158.060, 158.103, 158.105, and 158.106.
The adopted rules affect the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405281
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts new rules in 7 TAC Chapter 59: §§59.1 - 59.5, 59.100 - 59.102, 59.200, 59.201, 59.300 - 59.303, 59.400 - 59.403. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6932). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 78, Wrap Mortgage Loans, affect wrap mortgage lenders, borrowers, and any person who collects or receives a payment from a wrap borrower under the terms of a wrap mortgage loan, including servicers of a wrap mortgage loan under Finance Code Chapter 159, Wrap Mortgage Loan Financing.
Changes Concerning the Reorganization (Relocation) of Wrap Mortgage Loan Rules from Chapter 78 to Chapter 59
SML has determined it should reorganize its rules concerning wrap mortgage loans by relocating them to Chapter 59, a vacant chapter. The adopted rules effectuate this change.
Changes Concerning General Provisions (Subchapter A)
The adopted rules: in §59.2, Definitions, adopt a new definition for "SML," while eliminating a definition for "Department"; in §59.3, Formatting Requirements for Notices, adopt formatting requirements for the various disclosures required under Finance Code Chapter 159; in §59.4, Electronic Delivery and Signature of Notices, clarify that any required notice or disclosure may be delivered and signed electronically; and, in §59.5, Computation of Time, clarify how time periods measured in calendar days are computed.
Other Modernization and Update Changes
The adopted rules make changes to modernize and update the rules including: adding and replacing language for clarity and to improve readability; removing unnecessary or duplicative provisions; and updating terminology.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments. No comments were received.
SUBCHAPTER A. GENERAL PROVISIONS
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405282
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159. §59.101 is also adopted under the authority of, and to implement, Finance Code: §159.101 and §159.102. §59.102 is also adopted under the authority of, and to implement, Finance Code §159.105.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405284
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159. §59.201 is also adopted under the authority of, and to implement, Finance Code §159.202.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405283
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159. §59.301 and §59.303 are also adopted under the authority of, and to implement, Finance Code §159.152. §59.302 is also adopted under the authority of, and to implement, Finance Code §159.151.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405285
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159. §§59.401 - 59.403 are also adopted under the authority of, and to implement, Finance Code §159.252.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405286
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts the repeal of all preexisting rules in 7 TAC Chapter 78: §§78.1 - 78.3, 78.100 - 78.102, 78.200, 78.201, 78.300 - 78.303, and 78.400 - 78.403. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6941). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 78, Wrap Mortgage Loans, affect wrap mortgage lenders, borrowers, and any person who collects or receives a payment from a wrap borrower under the terms of a wrap mortgage loan, including servicers of a wrap mortgage loan under Finance Code Chapter 159, Wrap Mortgage Loan Financing.
Changes Concerning the Reorganization (Relocation) of Wrap Mortgage Loan Rules from Chapter 78 to Chapter 59
SML has determined it should reorganize its rules concerning wrap mortgage loans by relocating them to Chapter 59, a vacant chapter. The adopted rules repeal all preexisting rules in Chapter 78. In a related adoption published elsewhere in this issue of the Texas Register, SML adopts new rules in Chapter 59 affecting wrap mortgage lenders, borrowers, and any person who collects or receives a payment from a wrap borrower under the terms of a wrap mortgage loan. The new rules are patterned after the preexisting rules in Chapter 78.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments. No comments were received.
SUBCHAPTER A. GENERAL PROVISIONS
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405287
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405288
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405316
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405317
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §159.108, authorizing the commission to adopt and enforce rules for the intent of or to ensure compliance with Finance Code Chapter 159.
The adopted rules affect the statutes in Finance Code Chapter 159, Wrap Mortgage Loan Financing.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405289
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts the repeal of all preexisting rules in 7 TAC Chapter 78: §§78.1 - 78.3, 78.100 - 78.102, 78.200, 78.201, 78.300 - 78.303, and 78.400 - 78.403. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6943). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 79, Residential Mortgage Loan Servicers, affect residential mortgage loan servicers (mortgage servicers) registered with SML under Finance Code Chapter 158, Residential Mortgage Loan Servicers.
Changes Concerning the Reorganization (Relocation) of Residential Mortgage Loan Servicer Rules from Chapter 79 to Chapter 58
SML has determined it should reorganize its rules concerning mortgage servicers by relocating them to Chapter 58, a vacant chapter. The adopted rules repeal all preexisting rules in Chapter 79. In a related adoption published elsewhere in this issue of the Texas Register, SML adopts new rules in Chapter 59 affecting mortgage servicers that are patterned after the preexisting rules in Chapter 79.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments. No comments were received.
SUBCHAPTER A. REGISTRATION
Statutory Authority
The rules are adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158.
The adopted rules affect the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405290
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158.
The adopted rule affects the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405291
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158.
The adopted rule affects the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405292
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158.
The adopted rule affects the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405293
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rule is adopted under the authority of Finance Code §158.003, authorizing the commission to adopt rules necessary for the purposes of or to ensure compliance with Finance Code Chapter 158.
The adopted rule affects the statutes in Finance Code Chapter 158, the Residential Mortgage Loan Servicer Registration Act.
§79.50.Savings Clause.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405294
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts the repeal of all preexisting rules in 7 TAC Chapter 80: §§80.1 - 80.5, 81.100 - 80.102, 80.105 - 80.107, 80.200 - 80.206, and 80.300 - 80.302. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6945). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 80, Residential Mortgage Loan Companies, affect residential mortgage loan companies (mortgage companies) licensed by SML under Finance Code Chapter 156.
Changes Concerning the Reorganization (Relocation) of Mortgage Company Rules from Chapter 80 to Chapter 56
SML has determined it should reorganize its rules concerning mortgage companies by relocating them to Chapter 56, a vacant chapter. The adopted rules repeal all preexisting rules in Chapter 80. In a related adoption published elsewhere in this issue of the Texas Register, SML adopts new rules in Chapter 56 affecting mortgage companies that are patterned after the preexisting rules in Chapter 80.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments. No comments were received.
SUBCHAPTER A. GENERAL PROVISIONS
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act).
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405295
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
7 TAC §§80.100 - 80.102, 80.105 - 80.107
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act).
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405296
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act).
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405297
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §156.102, authorizing the commission to adopt rules necessary for the intent of or to ensure compliance with Finance Code Chapter 156, and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act).
The adopted rules affect the statutes in Finance Code Chapter 156, the Residential Mortgage Loan Company Licensing and Registration Act.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405298
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
The Finance Commission of Texas (commission), on behalf of the Department of Savings and Mortgage Lending (SML), adopts the repeal of all preexisting rules in 7 TAC Chapter 81: §§81.1 - 81.5, 81.100 - 81.111, 81.200 - 81.206, and 81.300 - 81.302. The commission's proposal was published in the September 6, 2024, issue of the Texas Register (49 TexReg 6947). The rules are adopted without changes to the published text and will not be republished.
Explanation of and Justification for the Rules
The preexisting rules under 7 TAC Chapter 81, Mortgage Bankers and Residential Mortgage Loan Originators, affect mortgage bankers registered with SML and individual residential mortgage loan originators (originators) licensed by SML under Finance Code Chapter 157.
Changes Concerning the Reorganization (Relocation) of Mortgage Banker Rules from Chapter 81 to Chapter 57
SML has determined it should reorganize its rules concerning mortgage bankers by relocating them to Chapter 57, a vacant chapter, and devoting such chapter exclusively to rules affecting mortgage bankers. The adopted rules repeal all preexisting rules in Chapter 81 concerning mortgage bankers. In a related adoption published elsewhere in this issue of the Texas Register, SML adopts new rules in Chapter 57 affecting mortgage bankers that are patterned after the preexisting rules in Chapter 81.
Changes Concerning the Reorganization (Relocation) of Residential Mortgage Loan Originator Rules from Chapter 81 to Chapter 55
SML has determined it should reorganize its rules concerning originators by relocating them to Chapter 55, a vacant chapter, and devoting such chapter exclusively to rules affecting originators. The adopted rules repeal all preexisting rules in Chapter 81 concerning originators. In a related adoption published elsewhere in this issue of the Texas Register, SML adopts new rules in Chapter 55 affecting originators that are patterned after the preexisting rules in Chapter 81.
Summary of Public Comments
Publication of the commission's proposal recited a deadline of 30 days to receive public comments. No comments were received.
SUBCHAPTER A. GENERAL PROVISIONS
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405299
Iain A. Berry
General Counsel
Department of Savings and Mortgage and Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405300
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405301
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535
Statutory Authority
The rules are adopted under the authority of Finance Code §157.0023, authorizing the commission to adopt rules necessary to implement or fulfill the purposes of Finance Code Chapter 157 and as required to carry out the intentions of the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (12 U.S.C. §5101 et seq.; federal SAFE Act). The rules are also adopted under the authority of Finance Code §180.004(b), authorizing the commission to adopt rules necessary to implement Finance Code Chapter 180 and as required to carry out the intentions of the federal SAFE Act.
The adopted rules affect the statutes in Finance Code: Chapter 157, the Mortgage Banker Registration and Residential Mortgage Loan Originator License Act; and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on November 3, 2024.
TRD-202405302
Iain A. Berry
General Counsel
Department of Savings and Mortgage Lending
Effective date: November 23, 2024
Proposal publication date: September 6, 2024
For further information, please call: (512) 475-1535