Bill Caption

Relating to residential mortgage loans, including the financing of residential real estate purchases by means of a wrap mortgage loan; providing licensing and registration requirements; authorizing an administrative penalty.

Fiscal Notes

No significant fiscal implication to the State is anticipated.

Bill Analysis

SB 43 would prohibit an individual from originating or making a wrap mortgage loan unless the person is licensed to originate or make a residential mortgage loan, or receives an exemption as established in this bill. In addition, conditions for a borrower to bring an action would be established.

The Savings and Mortgage Lending Commissioner would be permitted to conduct inspections and investigations of a wrap lender. SB 43 would stipulate that a lien securing a wrap-around mortgage loan is void unless those with interest in the real estate who have an unreleased lien on the property consent to the mortgage and it was closed by an attorney or title company.

Finally, an administrative penalty for the violation of a cease and desist order issued by the Commissioner for a violation of the chapter may be accessed up to $1,000 per day of the violation.

Vote Recommendation Notes

Texas Action opposes SB 43 as this bill would limit personal responsibility and individual liberty by prohibiting an individual from originating or making a wrap mortgage loan unless it is with a person who is licensed or received an exemption. This represents a growth of government regulation in private industry, also violating our limited-government principle. Wrap around loans are risky for buyers and sellers, and both parties to the transaction have a responsibility to do their due diligence before entering into a contract.