CHAPTER 343. HOME LOANS - Texas Statutes

FINANCE CODE

TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS

SUBTITLE B. LOANS AND FINANCED TRANSACTIONS

CHAPTER 343. HOME LOANS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 343.001. DEFINITIONS. In this chapter:

(1) "Bridge loan" means temporary or short-term financing

requiring payment of only interest until the entire unpaid

balance is due.

(2) "Home loan" means a loan that is:

(A) made to one or more individuals for personal, family, or

household purposes; and

(B) secured in whole or part by:

(i) a manufactured home, as defined by Section 347.002, used or

to be used as the borrower's principal residence; or

(ii) real property improved by a dwelling designed for occupancy

by four or fewer families and used or to be used as the

borrower's principal residence.

(3) "Restructure" means a change in the payment schedule or

other terms of a home loan as a result of the borrower's default.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.002. APPLICABILITY. This chapter does not apply to:

(1) a reverse mortgage; or

(2) an open-end account, as defined by Section 301.002.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.003. CONFLICT WITH OTHER PROVISIONS OF TITLE. If this

chapter conflicts with another provision of this title, this

chapter controls.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

SUBCHAPTER B. PROVISIONS RELATING TO HOME LOANS IN GENERAL

Sec. 343.101. REFINANCING. (a) For purposes of this section, a

low-rate home loan is a home loan that at its inception carries

an interest rate two percentage points or more below the yield on

treasury securities having comparable periods of maturity to the

loan maturity, except that if the loan's interest rate is a

discounted introductory rate or a rate that automatically steps

up over time, the fully indexed rate or the fully stepped-up

rate, as appropriate, shall be used instead of the rate at the

loan's inception to determine whether the loan is a low-rate

loan.

(b) A lender may not replace or consolidate a low-rate home loan

directly made by a government or nonprofit lender before the

seventh anniversary of the date of the loan unless the new or

consolidated loan has a lower interest rate and requires payment

of a lesser amount of points and fees than the original loan or

is a restructure to avoid foreclosure.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.104. RESTRICTIONS ON SINGLE PREMIUM CREDIT INSURANCE.

A lender may not offer any individual or group credit life,

disability, or unemployment insurance on a prepaid single premium

basis in conjunction with a home loan unless the following notice

is provided to each applicant for the loan by hand delivery or

mail to the applicant not later than the third business day after

the date the applicant's application for a home loan is received:

INSURANCE NOTICE TO APPLICANT

You may elect to purchase credit life, disability, or involuntary

unemployment insurance in conjunction with this mortgage loan. If

you elect to purchase this insurance coverage, you may pay for it

either on a monthly premium basis or with a single premium

payment at the time the lender closes this loan. If you choose

the single premium payment, the cost of the premium will be

financed at the interest rate provided for in the mortgage loan.

This insurance is NOT required as a condition of closing the

mortgage loan and will be included with the loan only at your

request.

You have the right to cancel this credit insurance once

purchased. If you cancel it within 30 days of the date of your

loan, you will receive either a full refund or a credit against

your loan account. If you cancel this insurance at any other

time, you will receive either a refund or credit against your

loan account of any unearned premium. YOU MUST CANCEL WITHIN 30

DAYS OF THE DATE OF THE LOAN TO RECEIVE A FULL REFUND OR CREDIT.

To assist you in making an informed choice, the following

estimates of premiums are being provided along with an example of

the cost of financing. The examples assume that the term of the

insurance product is ____ years and that the interest rate is

______ percent (a rate that has recently been available for the

type of loan you are seeking). PLEASE NOTE THAT THE ACTUAL LOAN

TERMS YOU QUALIFY FOR MAY VARY FROM THIS EXAMPLE. "Total amount

paid" is the amount that would be paid if you financed only the

total insurance premium for a ___ year period and is equal to the

amount you would have paid if you made all scheduled payments.

This is NOT the total of payments on your loan.

CREDIT LIFE INSURANCE: Estimated premium of $_______

DISABILITY INSURANCE: Estimated premium of $_______

INVOLUNTARY UNEMPLOYMENT INSURANCE: Estimated premium of

$________

TOTAL INSURANCE PREMIUMS: $_______

TOTAL AMOUNT PAID: $_______

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.105. NOTICE OF PENALTIES FOR MAKING FALSE OR MISLEADING

WRITTEN STATEMENT. (a) A lender, mortgage banker, or licensed

mortgage broker shall provide to each applicant for a home loan a

written notice at closing.

(b) The notice must:

(1) be provided on a separate document;

(2) be in at least 14-point type; and

(3) have the following or substantially similar language:

"Warning: Intentionally or knowingly making a materially false or

misleading written statement to obtain property or credit,

including a mortgage loan, is a violation of Section 32.32, Texas

Penal Code, and, depending on the amount of the loan or value of

the property, is punishable by imprisonment for a term of 2 years

to 99 years and a fine not to exceed $10,000.

"I/we, the undersigned home loan applicant(s), represent that

I/we have received, read, and understand this notice of penalties

for making a materially false or misleading written statement to

obtain a home loan.

"I/we represent that all statements and representations contained

in my/our written home loan application, including statements or

representations regarding my/our identity, employment, annual

income, and intent to occupy the residential real property

secured by the home loan, are true and correct as of the date of

loan closing."

(c) On receipt of the notice, the loan applicant shall verify

the information and execute the notice.

(d) The failure of a lender, mortgage banker, or licensed

mortgage broker to provide a notice complying with this section

to each applicant for a home loan does not affect the validity or

enforceability of the home loan by any holder of the loan.

Added by Acts 2007, 80th Leg., R.S., Ch.

285, Sec. 1, eff. September 1, 2007.

SUBCHAPTER C. HIGH-COST HOME LOANS

Sec. 343.201. DEFINITIONS. In this subchapter:

(1) "High-cost home loan" means a loan that:

(A) is made to one or more individuals for personal, family, or

household purposes;

(B) is secured in whole or part by:

(i) a manufactured home, as defined by Section 347.002, used or

to be used as the borrower's principal residence; or

(ii) real property improved by a dwelling designed for occupancy

by four or fewer families and used or to be used as the

borrower's principal residence;

(C) has a principal amount equal to or less than one-half of the

maximum conventional loan amount for first mortgages as

established and adjusted by the Federal National Mortgage

Association;

(D) is not:

(i) a reverse mortgage; or

(ii) an open-end account, as defined by Section 301.002; and

(E) is a credit transaction described by 12 C.F.R. Section

226.32, as amended, except that the term includes a residential

mortgage transaction, as defined by 12 C.F.R. Section 226.2, as

amended, if the total loan amount is $20,000 or more and:

(i) the annual percentage rate exceeds the rate indicated in 12

C.F.R. Section 226.32(a)(1)(i), as amended; or

(ii) the total points and fees payable by the consumer at or

before loan closing will exceed the amount indicated in 12 C.F.R.

Section 226.32(a)(1)(ii), as amended.

(2) "Points and fees" has the meaning assigned by 12 C.F.R.

Section 226.32(b), as amended.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.202. BALLOON PAYMENT. A high-cost home loan may not

contain a provision for a scheduled payment that is more than

twice as large as the average of earlier scheduled monthly

payments, unless the balloon payment becomes due not less than 60

months after the date of the loan. This prohibition does not

apply if the payment schedule is adjusted to account for the

seasonal or otherwise irregular income of the borrower or if the

loan is a bridge loan in connection with the acquisition or

construction of a dwelling intended to become the borrower's

principal dwelling.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.203. NEGATIVE AMORTIZATION. A high-cost home loan may

not provide for a payment schedule with regular periodic payments

that cause the principal balance to increase, except that this

section does not prohibit negative amortization as a consequence

of a temporary forbearance, bridge loan, or restructure sought by

the borrower.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.204. CONSIDERATION OF OBLIGOR'S PAYMENT ABILITY. (a)

In this section, "obligor" means a person obligated to pay a

loan, including a borrower, cosigner, or guarantor. If more than

one person is obligated to pay a loan, the term refers to those

persons collectively.

(b) A lender may not engage in a pattern or practice of

extending credit to consumers under high-cost home loans based on

the consumers' collateral without regard to the obligor's

repayment ability, including the obligor's current and expected

income, current obligations, employment status, and other

financial resources, other than the obligor's equity in the

dwelling that secures repayment of the loan.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.205. PREPAYMENT PENALTIES PROHIBITED. A lender may not

make a high-cost home loan containing a provision for a

prepayment penalty.

Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,

2001.

Sec. 343.206. CHARGE PROHIBITED FOR PRODUCT OR SERVICE NOT

RECEIVED. A lender, in connection with a high-cost home loan,

may not charge a borrower an amount for a service or product if

the borrower does not receive the service or product.

Added by Acts 2003, 78th Leg., ch. 1207, Sec. 3, eff. Sept. 13,

2003.