Yesterday, Gov. Greg Abbott (R) signed into law TX SB 43 (2020), which is, in part, “an act relating to residential mortgage loans, including the financing of residential real estate purchases by means of a wrap mortgage loan . . .”
This bill creates (inter alia) a new Chapter 159 to the Texas Finance Code, which regulates wrap mortgage loan financing. A “wrap mortgage loan” is basically defined under new Tex. Fin. Code § 159.001(7) as a loan used to purchase residential real estate that will continue to be subject to an unreleased lien which was not created by the borrower. Thus, the mortgage will cover both the purchase price and the amount of the unreleased lien and the borrower will be obligated to payoff both amounts.
One of the requirements of this bill is for the lender to provide a disclosure to the borrower (see Ibid. § 159.101). The borrower then has the right to rescind the transaction “no later than the seventh day after the date of receipt of the disclosure statement” (see Ibid. § 159.101[d]). Also, the disclosure must be in the language used primarily to negotiate the transaction (see Ibid. § 159.102).
This bill takes effect on January 1, 2022.
We are currently reviewing this bill to determine any impact, and evaluating any modifications, to our document library and/or systems. Any modifications we make as a result will be announced on our website (https://compliance.docutech.com/).