Texas Adopts Regulations Regarding Mortgage Licensee Requirements

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The Texas Finance Commission recently adopted multiple regulations related to residential mortgage loan originators (MLOs), mortgage loan companies, mortgage loan servicers, and mortgage bankers that address definitions, disclosure requirements, duties, and examinations. The regulations became effective between January 3, 2021, and January 7, 2021.

The regulations clarify the form and content of the required disclosure residential mortgage loan servicers must provide to the borrower. Additionally, the regulations clarify that the requirement only applies to residential mortgage loan registrants servicing residential mortgage loans secured by real estate located in Texas.

The regulations update certain definitions related to residential mortgage loan companies, mortgage bankers, and MLOs to provide clarity and improve readability.  New definitions include, but are not limited to: “Application,” “Dwelling,” “Mortgage applicant,” “Originator,” “Residential real estate,” “Social media site,” and “Takes a residential mortgage loan application.”

The disclosure and advertising obligations of residential mortgage loan companies, mortgage bankers, and MLOs were also amended. Changes include, among other topics: (i) eliminating the requirement to post disclosures at the physical office; (ii) requirement to disclose Nationwide Mortgage Licensing System and Registry (NMLS) identification on all correspondences; and (iii) clarifying an existing requirement that advertisements on social media sites are subject to the rules. Residential mortgage loan companies, mortgage bankers, and MLOs are subject to new recordkeeping requirements, including a requirement to maintain a log of mortgage transactions with a description of the purpose for the loan and the owner’s intended occupancy of the real estate securing the mortgage loan.

Additionally, mortgage loan companies, mortgage bankers, and MLOs are prohibited from engaging in discrete acts considered false, misleading, or deceptive practices and improper dealings under the Texas Financial Code.

Lastly, the new regulations limit the Commissioner’s authority to conduct investigations, impose administrative penalties, or bring enforcement actions. One such limitation includes the removal of the provision that previously allowed the Commissioner to conduct undercover investigations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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