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The purpose of this bill is to: 

• amend continuing educational requirements under the West Virginia Safe Mortgage Licensing Act. 
• modernize and standardize licensing requirements for mortgage loan originators to permit adoption of a uniform national test for licensing. 
• increase the registration fee to fully cover the agency’s administrative costs, and to align it with the fee being assessed by the majority of other states.

These provisions are effective on May 31, 2018.

Buckley Sandler, LLP--InfoBytes Blog

On March 19, the Michigan governor signed legislation, HB 5094, which amends the Michigan Security Freeze Act to prohibit consumer reporting agencies (CRAs) from charging a fee for “placing, temporarily lifting, or removing a security freeze” on a credit report. Previously, the state allowed for a fee of up to $10 to use the service, if the consumer had not previously filed a police report alleging identity theft. HB 5094 is effective immediately.

On March 15, the Utah governor signed legislation, HB 45, which amends the Utah Consumer Credit Protection Act to prohibit CRAs from charging a fee in connection with placing or removing a security freeze. Additionally, the bill also prohibits CRAs from charging a fee in connection with mobile applications through which a consumer would place or remove a security freeze. The legislation outlines the manner in which a consumer may request a security freeze and the requirements CRAs must follow in responding to the requests. Previously, Utah allowed for CRAs to charge a “reasonable fee” in connection with a security freeze service. 

Buckley Sandler, LLP--InfoBytes Blog

On March 15, the Mississippi governor signed House Bill 1338, which amends sections of the Mississippi Code by authorizing state chartered or domiciled banks that offer open-end credit to assess finance charges, credit service charges, and other fees and charges “at rates and amounts . . . that financial institutions domiciled in other states are permitted to impose and collect when extending credit to Mississippi customers. . . .” In doing so, the amendment strives to retain existing financial services within the state. The amendment takes effect July 1.

Buckley Sandler, LLP--InfoBytes Blog

On March 13, the Indiana governor signed HB 1397 and SB 377, which make a variety of changes to various Indiana banking, consumer, and financial services laws administered by the state’s Department of Financial Institutions (DFI). Among other things, HB 1397 amends Indiana’s Universal Commercial Credit Code (UCCC) to codify current DFI practice, which allows for additional charges in connection with a consumer credit sale or loan, including charges for a skip-a-payment service ($25 maximum), an expedited payment service ($10 maximum), and a guaranteed asset protection agreement. The legislation also adds electronic funds transfers to the list of return payments that may be assessed a $25 charge. For payday loans, the legislation clarifies that a borrower, during the third consecutive loan or any subsequent consecutive loan, may request an extended payment plan if the rescission period has expired and the borrower has not previously defaulted on the outstanding loan. Indiana’s SB 377 allows for the director of DFI to use certain technology solutions to oversee compliance with and enforce state laws associated with the regulation of payday loans.

Both pieces of legislation are effective July 1. 

Buckley Sandler, LLP--InfoBytes Blog

On March 13, the Washington governor signed Senate Bill 6018, which amends sections of the state’s Fair Credit Reporting Act addressing the removal of security freezes. Among other things, the amended act prohibits credit reporting agencies (CRAs) from charging a fee for placing, temporarily lifting, or removing a security freeze, or when assigning consumers unique personal identification numbers. Additionally, the offices of cybersecurity and privacy and data protection and the Attorney General’s office are instructed to work with stakeholders to evaluate the amendment’s impact on consumers and CRAs. A findings report must be submitted by December 1, 2020, and include data breach trends and recommendations by federal and state agencies. The amendment takes effect June 7.

Effective July 1, 2018.

• Amends the definition of "substantial property interest of public record" for purposes of the tax sale statutes to specify that: (1) the term means title to or interest in a tract that is within the tract's chain of record title and either recorded or properly indexed in the county in which the tract is located; and (2) chain of record title includes instruments executed by the owner and recorded within the five day period before the date the owner acquires title to the tract. 
• Eliminates the requirement that a person that redeems property sold in a tax sale must pay an amount equal to the amount deposited in the tax surplus fund at the time of the tax sale. Continues current law requiring the redeeming party to pay 5% interest on that money. 
• Requires that a conveyance recorded after June 30, 2007, must include a statement specifying the mailing address for tax statement purposes and the mailing address of the grantee. Requires that the mailing address of the grantee be a street address or a rural route address.

LB 750 is designed to streamline and clarify a) the requirements for a lender to release its lien when the obligation secured by a mortgage or trust deed has been satisfied and a written request for release has been received and b) the consequences to a lender for failing to timely release its lien following such a request.

The bill would also provide that the transfer of any debt secured by a mortgage shall also operate as a transfer of a security of such debt, similar to existing provisions of law relating to trust deeds under section 76-1016.

Effective July 17, 2018.

TITLE INSURANCE – Amends existing law to provide that title insurers may provide a reimbursement or discount of escrow fees or title insurance premiums in certain instances and to provide that nothing shall prohibit title insurers from providing a certain reimbursement or discount of escrow fees or title insurance premiums.

https://custom.statenet.com/public/resources.cgi?id=ID:bill:ID2018000H519&cuiq=772db7b6-3984-5540-b5d2-a1a4dca7f1d9&client_md=61d1d5e5f748b9cdb5af704c57ac75df&mode=current_text

Vermont has enacted a new regulation that replaces Regulation B-2015-02effective March 15, 2018. This regulation governs the treatment of nonpublic personal information about consumers by the financial institutions.

Indiana approved an Emergency Rule to amend 750 IAC 1-1-1(a) to change the dollar amounts in the Uniform Consumer Credit Code. Amends 750 IAC 1-1-1(b) to change the dollar amount for high cost loans under IC 24-9-2-8. Effective July 1, 2018.

Sec. 1. (a) The dollar amounts in IC 24-4.5 which are required to be adjusted by IC 24-4.5-1-106, as amended, shall, on July 1, 2018, be as set forth in each of the following Indiana Uniform Consumer Credit Code sections.

(b) The dollar amount change which is required to be adjusted by IC 24-9-2-8, as amended, shall be on July 1, 2018, as follows:

(c) The dollar amount changes set forth in IC 34-55-10-2, as amended, which are required to be adjusted by IC 34-55-10-2.5, as amended, shall be as follows:

LexiNexis State Net

8. JOINT FINANCIAL REGULATORY AGENCIES

153. HOME EQUITY LENDING

The Finance Commission of Texas and the Texas Credit Union Commission ("commissions") adopt amendments to the following home equity lending interpretations: §§153.1, 153.5, 153.14, 153.17, 153.84, and 153.86; adopt new §153.45; and adopt the repeal of §153.87, in 7 TAC, Chapter 153, concerning Home Equity Lending.

The commissions adopt the amendments to §§153.1, 153.5, 153.14, 153.17, 153.84, and 153.86; and adopt the repeal of §153.87 without changes to the proposed text as published in the November 24, 2017, issue of the Texas Register (42 TexReg 6580).

The commissions adopt new §153.45 with changes to the proposed text as published in the November 24, 2017, issue of the Texas Register (42 TexReg 6580). The changes are a result of official comments that the commissions received.

The commissions received nine written comments on the proposal from the following parties: AmeriHome Mortgage Company, LLC; BairdLaw, PLLC; Black, Mann & Graham L.L.P.; Independent Bankers Association of Texas; Randolph-Brooks Federal Credit Union; Texas Bankers Association; Texas Mortgage Bankers Association; and two individuals.

One comment expresses general support for the amendments as proposed. Eight comments include recommendations relating to new §153.45 and the refinance of a home equity loan to a non-home-equity loan. These recommendations relate primarily to three issues: (1) the limitation on funds advanced and the exclusion for actual costs, (2) the date of the loan application for purposes of the requirement to provide a disclosure within three days of the application, and (3) the date on which a mailed disclosure is considered to be provided to the owner for purposes of the three-day requirement.

Some of the comments also include questions and recommendations on the following issues that were not addressed in the proposal: (1) the timing of disclosures for loans closed during the first 12 days of January 2018, (2) the law applicable to home equity lines of credit closed before January 1, 2018, and (3) the effect of SJR 60 on the property tax designation for agricultural property.

The commissions' responses to the official comments on new §153.45 are included in the purpose discussion for that section. The comments on the other three issues are discussed after the purpose discussions for the amendments that are part of this action.

The adoption applies the administrative interpretation of the home equity lending provisions of Article XVI, Section 50 of the Texas Constitution ("Section 50") allowed by Section 50(u) and Texas Finance Code, §11.308 and §15.413.

The main purpose of the adoption is to implement SJR 60, passed by the Texas Legislature in 2017. SJR 60 amends Section 50 and applies to home equity loans entered on or after January 1, 2018.

SJR 60's constitutional amendments relate primarily to six issues. First, SJR 60 amends Section 50(a)(6)(E) by replacing the current three percent fee limitation with a two percent limitation, and specifying that four types of fees are not included in the limitation: an appraisal fee, a property survey fee, a mortgagee title insurance premium, and a title report fee. Second, SJR 60 amends Section 50(a)(6)(I) by removing the current prohibition on a home equity loan for agricultural property. Third, SJR 60 amends Section 50(a)(6)(P) by adding certain subsidiaries of depository institutions to the list of lenders authorized to make home equity loans, and replacing a reference to a "mortgage broker" with "mortgage banker or mortgage company." Fourth, SJR 60 amends Section 50(f) by allowing a home equity loan to be refinanced as a non-home-equity loan if four conditions are met: a one-year timing limitation, a limitation on advance of additional funds, an 80% loan-to-value limitation, and a required disclosure to the property owner. Fifth, SJR 60 amends Section 50(g) to make conforming changes to the required 12-day consumer disclosure. Sixth, SJR 60 amends Section 50(t)(6) by removing the 50% limitation on additional debits or advances for a home equity line of credit.

After the legislature passed SJR 60, the Texas Department of Banking, the Texas Department of Savings and Mortgage Lending, the Office of Consumer Credit Commissioner, and the Texas Credit Union Department ("agencies") circulated an initial precomment draft of proposed changes to interested stakeholders. The agencies then held a stakeholder meeting where attendees provided oral precomments. In addition, the agencies received four informal written precomments from stakeholders. Certain concepts recommended by the precommenters were incorporated into the proposal, and the agencies appreciate the thoughtful input provided by stakeholders.

The individual purposes of the amendments, new section, and repeal are provided in the following paragraphs.

The adopted amendments to §§153.1, 153.5, and 153.14 implement SJR 60's amendments to Section 50(a)(6)(E). As discussed previously, SJR 60 amends Section 50(a)(6)(E) by replacing the current three percent fee limitation with a two percent limitation, and specifying that certain types of fees are not included in the limitation.

An amendment to §153.1(15) replaces the phrase "three percent limitation" with "two percent limitation."

In §153.5, amendments to the introductory paragraph reflect SJR 60's amendments to Section 50(a)(6)(E). Throughout §153.5, amendments replace the phrase "three percent limitation" with "two percent limitation." Amendments to paragraph (3)(B) in §153.5 replace the phrase "legitimate discount points" with "bona fide discount points," reflecting SJR 60's exclusion of bona fide discount points from the two percent limitation. In paragraph (7), regarding third-party charges, an amendment moves a sentence providing an example of a third-party charge in order to provide better clarity. The amendment also removes the phrase "mortgage brokers' fees" from paragraph (7), reflecting SJR 60's removal of the phrase "mortgage broker" from Section 50. This amendment also responds to precomments stating that the phrase "mortgage brokers' fees" is no longer necessary. Amendments to paragraph (8), regarding charges to evaluate, conform to SJR 60's amendments on fees for appraisals, surveys, and title reports.

Adopted new paragraphs (13) - (16) in §153.5 identify the four types of fees that may be excluded from the two percent limitation under SJR 60's amendments to Section 50(a)(6)(E): an appraisal fee, a property survey fee, a mortgagee title insurance premium, and a title report fee.

Adopted §153.5(13) states that an appraisal must be performed by a person who is not an employee of the lender, and that the excludable appraisal fee is limited to the fee paid to the appraiser for completion of the appraisal, not the fee for appraisal management services. This paragraph is based on Section 50(a)(6)(E)(i) of SJR 60, which states that the two percent limitation excludes a fee for "an appraisal performed by a third party appraiser." Under Texas Occupations Code, §1104.158(a), an appraisal management company must "separately state the fees: (1) paid to an appraiser for the completion of an appraisal; and (2) charged by the company for appraisal management services" in reporting to a client. Adopted paragraph (13) specifies that only the first of these two fees, the fee paid to the appraiser for the completion of the appraisal, may be excluded from the two percent limitation. At the stakeholder meeting, one attendee asked whether a fee for an evaluation that is not an appraisal may be excluded. This fee would be subject to the two percent limitation under adopted §153.5(8), which provides that charges to evaluate are generally subject to the two percent limitation, and would not be excludable under adopted §153.5(13), which provides an exception to this general requirement for certain appraisal fees.

Adopted §153.5(14) states that a fee for a property survey performed by a state registered or licensed surveyor is not a fee subject to the two percent limitation, and that the property survey must be performed by a person who is licensed or registered under Texas Occupations Code, Chapter 1071. This paragraph is based on Section 50(a)(6)(E)(ii) of SJR 60, which states that the two percent limitation excludes a fee for "a property survey performed by a state registered or licensed surveyor."

Adopted §153.5(15) states that an excludable premium for title insurance is limited to the applicable basic premium rate for title insurance published by the Texas Department of Insurance (TDI), plus authorized premiums for applicable endorsements, and that rules adopted by TDI govern the applicability of endorsements and the authorized amount for each premium. This paragraph is based on Section 50(a)(6)(E)(iii) of SJR 60, which states that the two percent limitation excludes a fee for "a state base premium for a mortgagee policy of title insurance with endorsements established in accordance with state law."

One precommenter recommends removing the applicability requirement in §153.5(15)(C), which states that any endorsements must be applicable to the mortgagee policy for the equity loan. TDI has identified various endorsements that may be used to modify a title insurance policy, and has established premiums for each type of endorsement. The endorsements are described in TDI's Title Insurance Basic Manual. The authorized endorsements include Form T-42 (insuring against loss due to failure to comply with Section 50's requirements for home equity loans), as well as endorsements relating to minerals, condominiums, balloon mortgages, and other issues. The applicability requirement in adopted §153.5(15)(C) is intended to capture the concept that a lender should not charge the property owner a premium for an endorsement that does not apply to the transaction. For example, if the property is not a manufactured home, then the property owner should not be required to pay a premium for a manufactured housing endorsement, Form T-31. Similarly, if the loan is not a home equity line of credit, then the property owner should not be required to pay a premium for a future advance or revolving credit endorsement, Form T-35. As stated in paragraph (15), TDI's rules govern the applicability of endorsements.

At the stakeholder meeting, one attendee explained that some lenders might make amendments to title insurance policies, and that these "amendments" are not necessarily endorsements for which TDI's rules authorize a premium. The commissions believe that adopted §153.5(15) appropriately defers to TDI's rules regarding the applicability of endorsements and authorized amount of the premium. TDI's rules, not the labels used by the parties, will determine whether the endorsement is authorized.

Adopted §153.5(16) states that an excludable fee for a title report must be less than the applicable basic premium rate for title insurance, and that the title report fee may not be excluded if the equity loan is covered by a mortgagee policy of title insurance. This paragraph is based on Section 50(a)(6)(E)(iv) of SJR 60, which states that the two percent limitation excludes a fee for "a title examination report if its cost is less than the state base premium for a mortgagee policy of title insurance without endorsements established in accordance with state law." The agencies understand that this fee is intended to be excluded in transactions where the lender obtains a title report instead of a mortgagee policy of title insurance. In addition, adopted §153.5(16)(C) explains that the fee must comply with applicable law, including Texas Finance Code, §342.308(a)(1), which limits title examination fees for certain secondary mortgages.

One precommenter makes the following recommendation regarding paragraph (16): "Rather than require that such report fee be less than the state base premium without endorsements, it would be more appropriate to provide that it cannot exceed the state base premium for a mortgagee policy with endorsements." The commissions disagree with this recommendation. Section 50(a)(6)(E)(iv) of SJR 60 states that the two percent limitation excludes a fee for "a title examination report if its cost is less than the state base premium for a mortgagee policy of title insurance without endorsements established in accordance with state law." The plain language of this provision requires the title report fee to be less than the state base premium for title insurance without endorsements.

In the initial precomment draft sent to stakeholders, paragraphs (13), (14), (15), and (16) each included a statement that the relevant fee "must comply with applicable law." This phrase was based on existing interpretations in current §153.5, which state that certain fees may be charged "to the extent authorized by applicable law" or that the lender "must comply with applicable law." Two precommenters recommended removing or amending this phrase, arguing that it is unnecessary or could create confusion. At the stakeholder meeting, one attendee recommended removing the phrase "must comply with applicable law" in paragraphs (14) and (15), while acknowledging that it is appropriate to state that a surveyor must be licensed under the Texas Occupations Code. The attendee recommended a provision-by-provision approach to using the phrase. In response to these precomments, adopted §153.5 does not include the phrase "must comply with applicable law" in paragraphs (13), (14), and (15), which relate to services performed by third parties, but includes the phrase in paragraph (16) regarding the title report, where the commissions believe that the phrase is appropriate.

An adopted amendment to §153.14(2)(D) replaces the phrase "3% fee cap" with "two percent limitation."

In §153.17, regarding lenders that are authorized to make home equity loans, adopted amendments to the introductory paragraph reflect SJR 60's amendments to Section 50(a)(6)(P). Adopted amendments to §153.17(3) remove a reference to a "mortgage broker" and specify that a person licensed under Texas Finance Code, Chapter 157 is a person regulated as a mortgage banker for purposes of Section 50(a)(6)(P)(vi).

Adopted new §153.45 describes the permissible ways in which a home equity loan can be refinanced, in accordance with Section 50(f) as amended by SJR 60. Paragraphs (1) - (4) of the new section describe the four conditions that must be met to refinance a home equity loan as a non-home-equity loan under Section 50(f)(2) of SJR 60.

Adopted §153.45(1) explains that the refinance may not be closed before the first anniversary of the closing date of the home equity loan, and that the closing date of the refinance is the date on which the owner signs the loan agreement for the refinance. This paragraph is based on Section 50(f)(2)(A) of SJR 60, which provides the following condition that must be met to refinance a home equity loan as a non-home-equity loan: "the refinance is not closed before the first anniversary of the date the extension of credit was closed." The statement regarding the closing date of the refinance is based on the definition of "closing" in current §153.1(3). One commenter agrees with this provision and expresses support for the statement in §153.45(1) that the closing date is the date on which the owner signs the loan agreement.

Adopted §153.45(2) describes the limitation on the advance of additional funds for the refinance. This paragraph is based on Section 50(f)(2)(B) of SJR 60, which provides the following condition that must be met to refinance a home equity loan as a non-home-equity loan: "the refinanced extension of credit does not include the advance of any additional funds other than: (i) funds advanced to refinance a debt described by Subsections (a)(1) through (a)(7) of this section; or (ii) actual costs and reserves required by the lender to refinance the debt." Adopted §153.45(2)(A) explains that actual costs must be identifiable, must be actually required by the lender, and must comply with any applicable limitations on costs. Adopted §153.45(2)(B) explains that reserves (e.g., an escrow account for taxes and insurance) must be actually required by the lender to refinance the debt, and must comply with applicable law. The commissions believe that the statement that the reserves "must comply with applicable law" is appropriate in this provision to ensure that the lender complies with any laws governing reserve accounts, such as the escrow requirements in Regulation X, 12 C.F.R. §1024.17, and Regulation Z, 12 C.F.R. §1026.35(b).

One commenter suggests that the phrase "refinanced extension of credit" in proposed §153.45(2) is a typographical error, and that this phrase should be replaced with "refinance of the extension of credit" in order to clarify that this provision refers to the refinance of the home equity loan, rather than the home equity loan being refinanced. In response to this comment, the phrase "refinanced extension of credit" has been replaced with "refinance" in this adoption. This makes it clear that §153.45(2) refers to requirements for the refinance, not requirements for the home equity loan that is being refinanced.

Four commenters specifically address the limitation on the advance of additional funds and the exclusion for actual costs. These comments are addressed in the following paragraphs.

One commenter expresses concern about how the interpretation in §153.45(2) applies to costs that the borrower pays at or before closing. The commenter states: "A lender does not ordinarily 'incur' the cost of the title premium, survey, appraisal, attorney fees, or other charges connected to a home loan. The lender does require the borrower to pay these charges at or before closing. . . . The proposed interpretation creates unnecessary ambiguity as to whether an origination charge required by and paid to the lender is a cost 'actually incurred by the lender.'"

Since the proposal, in response to this comment, changes have been made to §153.45(2), to add the phrase "In order to be included in the funds advanced for the refinance" at the beginning of subparagraphs (A) and (B), and to add new subparagraph (C) explaining that amounts that the owner pays before or at closing are not advanced by the lender, and are not subject to the limitation on the advance of additional funds. These changes clarify that the types of costs identified by the commenter, which are paid at or before closing, are not subject to the limitation on funds advanced.

Three commenters expressed additional concerns about the phrase "actually incurred" in proposed §153.45(2)(A). Two of these commenters recommend removing the statement in proposed §153.45(2)(A) that costs must be "actually incurred by the lender." These two commenters state that the phrase "actual costs" in Section 50(f)(2)(B)(ii) refers to costs required by the lender to refinance the debt, and recommend replacing "incurred" with "required" in §153.45(2)(A). Another commenter recommends removing the word "actually" before "incurred" and amending §153.45(2)(A) to state that actual costs "must be incurred by the lender, directly or indirectly, whether paid to lender or third party in conjunction with refinance transaction."

Since the proposal, in response to these comments, a change has been made to §153.45(2)(A), to replace "must be actually incurred by the lender" with "must be actually required by the lender to refinance the debt." The commissions believe that this requirement, combined with the requirements that costs must be identifiable and must comply with any applicable cost limitations, appropriately reflects the lender's ability to advance "actual costs . . . required by the lender to refinance the debt" under Section 50(f)(2)(B)(ii).

Adopted §153.45(3) describes the 80% loan-to-value limitation for the refinance. This paragraph is based on Section 50(f)(2)(C) of SJR 60, which provides the following condition that must be met to refinance a home equity loan as a non-home-equity loan: "the refinance of the extension of credit is of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the refinance of the extension of credit is made." Subparagraphs (A), (B), and (C) in proposed §153.45(3) describe the method of calculating the principal amount of the refinance and the principal balance of other outstanding debt. These subparagraphs are based on current §153.3, which describes the 80% loan-to-value limitation for home equity loans.

One commenter asks whether an estimated value may be used for the fair market value of the property in transactions where the lender has submitted an estimated value and exercised an appraisal waiver through a government-sponsored enterprise (GSE). The commenter states: "One of the key questions that has arisen as we work to implement SJR 60 is that of (f)(2) loans and the applicability of GSE appraisal waivers, specifically Fannie Mae Property Inspection Waivers and Freddie Mac Automated Collateral Evaluation. As you may know, the eligibility for such a waiver is determined by Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor. If the waiver is exercised by the lender, the GSEs accept the estimated value submitted by the lender. The GSEs expressly prohibit a lender from exercising such a waiver if the lender has obtained an appraisal. . . . So the question is, can a lender exercise a GSE appraisal waiver and still meet the 80% of fair market value requirement?" Unlike Section 50(h), which applies to home equity loans, Section 50(f)(2) does not identify the specific types of appraisals or value estimates that lenders may rely on to establish the fair market value of the property. For this reason, the commissions decline to adopt an interpretation on this issue at this time. The agencies intend to monitor this issue to determine whether an interpretation is appropriate.

One precommenter recommends adding the following subparagraph (D) in §153.45(3): "On a closed-end multiple advance refinance, the principal balance also includes contractually obligated future advances not yet disbursed." The commissions disagree with this recommendation. Section 50(f)(2)(B) of SJR 60 limits the advance of funds to the amount refinanced, actual costs, and required reserves. It does not appear that the legislature intended for the Section 50(f)(2) refinance to include multiple future advances.

One commenter requests "greater clarity regarding the advancement of additional funds. Specifically, if a borrower has an existing HELOC which closed over one year ago, is there a seasoning requirement for advanced funds? For example, assuming an applicant has an existing $100,000 HELOC that closed over one year ago with a current balance of $80,000, would the applicant be able to draw an additional $20,000 prior to closing and refinance a $100,000? Or would the applicant only be permitted to refinance the $80,000 balance? Additionally, if there is a limit on seasoning of funds, would the lender be required to obtain statements regarding HELOC activity for the prior 12 months to determine compliance with the rule?" This comment is unclear. Specifically, it is unclear whether the commenter is asking about the one-year requirement in Section 50(f)(2)(A), the limitation on advance of funds in Section 50(f)(2)(B), or the 80% loan-to-value limitation in Section 50(f)(2)(C), and it appears that the commenter has not provided sufficient information to determine whether the lender has complied with these three requirements in the hypothetical situation. Current §153.85(b) specifies that the time the extension of credit is established for a home equity line of credit refers to the date of closing, so clarification on this issue is unnecessary. In addition, Section 50(f)(2)(C) clearly states that the fair market value for the 80% loan-to-value limitation is the value on the date the refinance is made, so clarification on this issue is unnecessary. For these reasons, the commissions decline to address this comment.

Adopted §153.45(4) describes the requirement to provide a disclosure to the owner in connection with the refinance. This paragraph is based on Section 50(f)(2)(D) of SJR 60, which provides the following condition that must be met to refinance a home equity loan as a non-home-equity loan: "the lender provides the owner the following written notice on a separate document not later than the third business day after the date the owner submits the loan application to the lender and at least 12 days before the date the refinance of the extension of credit is closed . . . ." Section 50(f)(2)(D) then includes the text of the required refinance disclosure, which provides important information about the consumer protections that a borrower loses by agreeing to refinance a home equity loan into a non-home-equity loan.

Adopted §153.45(4)(A) explains that submission of a loan application to an agent of the lender is submission to the lender, and that a loan application may be given orally or electronically. This provision is based on the current interpretation at §153.12 relating to the closing date for home equity loans.

Five commenters recommend specifying that the date on which the loan application is submitted for purposes of the three-day period in Section 50(f)(2)(D). These commenters explain that a lender might not know, at the time of application, whether the applicant is applying specifically for a refinance of a home equity loan to a non-home-equity loan under Section 50(f)(2). According to the commenters, this means that the lender might not know whether it is required to provide the refinance disclosure within three business days of the application. One of the five commenters states that in the absence of additional clarification in the interpretations, lenders will either "provide the refinance disclosure to every owner applying for the refinance of an existing home mortgage," or will "have the initial application withdrawn or denied when it is discovered that the existing loan is an (a)(6) loan, and require the consumer to submit a new application."

Since the proposal, in response to these comments, subparagraph (B) has been added to §153.45(4) to specify the date on which the loan application is submitted for purposes of the three-day period in Section 50(f)(2)(D). As adopted, §153.45(4)(B) explains that the application is submitted on the date the owner submits a loan application specifically for a refinance of a home equity loan to a non-home-equity loan. If the owner initially applies for another type of loan, then the application is considered submitted on the earliest of: (1) the date the owner modifies the application to specify that it is for a refinance of a home equity loan to a non-home-equity loan, or (2) the date the owner submits a new application specifically for a refinance of a home equity loan to a non-home-equity loan.

Adopted §153.45(4)(D) describes the time period for providing the refinance disclosure to comply with the three-day and 12-day periods in Section 50(f)(2)(D). Adopted §153.45(4)(D) states that if a lender mails the refinance disclosure to the owner, the lender must allow a reasonable period of time for delivery, and that a period of three calendar days, not including Sundays and federal legal public holidays, constitutes a rebuttable presumption for sufficient mailing and delivery. This subparagraph is similar to current §153.51(1), which provides a rebuttable presumption for the 12-day consumer disclosure under Section 50(g).

Four commenters recommend including a statement that the refinance disclosure must be delivered or placed in the mail no later than the third business day after the application. The four commenters explain that it would be difficult or costly for lenders to mail the refinance disclosure on the same day the application is submitted, or to restart the application process in order to meet the three-day deadline. Three of commenters support this recommendation by comparison to federal Regulation Z's requirement to provide a loan estimate within three days of the application. For mortgage loans, Regulation Z requires a creditor to "provide" the consumer with a loan estimate disclosure, and states that the creditor "shall deliver or place in the mail [the loan estimate] . . . not later than the third business day after the creditor receives the consumer's application." 12 C.F.R. §1026.19(e)(1)(i), (iii). One commenter cites a similar requirement for appraisals in Regulation B, which states that the creditor "shall mail or deliver [notice of right to receive appraisals] to an applicant, not later than the third business day after the creditor receives an application for credit that is to be secured by a first lien on a dwelling." 12 C.F.R. §1002.14(a)(1). Another commenter cites Rule 21a of the Texas Rules of Civil Procedure. Under Rule 21a, service by mail "is complete upon deposit of the document, postpaid and properly addressed, in the mail or with a commercial delivery service." Tex. R. Civ. P. 21a(b)(1). If a party receives notice by mail, three days are generally added to any deadlines that apply to the recipient. Tex. R. Civ. P. 21a(c). A party may offer proof that the document was not received within three days from the date it was placed in the mail, in which case a court may extend an applicable deadline. Tex. R. Civ. P. 21a(e).

Since the proposal, in response to these comments, two sentences have been added to §153.45(4)(D), to specify that the lender must deliver the disclosure or place it in the mail no later than the third business day after the owner submits the loan application, and that the disclosure must be delivered to the owner at least 12 days before the refinance is closed. The three-day deadline under adopted §153.45(4)(D) is consistent with the similar deadlines for the loan estimate and appraisal notice under federal law, as discussed above. Certain lenders will be able to mail the refinance disclosure at the same time as the federal disclosures, helping to minimize costs. Adopted §153.45(4)(D) is also consistent with Rule 21a of the Texas Rules of Civil Procedure, which considers service to occur when a document is placed in the mail. At the same time, by specifying that the disclosure must be delivered at least 12 days before the refinance is closed, adopted §153.45(4)(D) helps ensure that the owner has a full 12 days to consider the important information in the refinance disclosure before closing the refinance. Adopted §153.45(4)(D) helps ensure that the borrower receives the important information in the refinance disclosure promptly after filing a loan application, and that the borrower has a full 12 days to consider this information before closing the refinance. In addition, the owner's ability to rebut the three-day presumption of delivery is consistent with Rule 21a and with the similar rebuttable presumption for home equity loans in current §153.51(1), which was upheld by the Texas Supreme Court in Finance Commission of Texas v. Norwood, 418 S.W.3d 566, 589 (Tex. 2013).

In response to a precomment, adopted §153.45(4)(E) provides that one copy of the refinance disclosure may be provided to married owners. Adopted §153.45(4)(F) explains that the refinance disclosure is only a summary of substantive rights governed by the constitution. Adopted §153.45(4)(G) explains that a lender may rely on an established system of verifiable procedures to evidence compliance with paragraph (4).

Adopted §153.45(4)(H) explains that the Finance Commission will publish a Spanish translation of the refinance disclosure on its website, and that a lender whose discussions with the owner are conducted primarily in Spanish may provide the Finance Commission's Spanish translation to the owner. These provisions are based on interpretations for the 12-day consumer disclosure in current §153.12 and §153.51. The agencies circulated an initial draft Spanish translation of the refinance disclosure to stakeholders, and have posted a final version of the Spanish disclosure on the Finance Commission's website.

Two commenters recommend including a statement that the Spanish disclosure is optional. These two commenters note that Section 50(f)(2) does not include a requirement to provide the Spanish disclosure, as opposed to Section 50(g), which requires the consumer disclosure for home equity loans to be provided to the borrower in the language in which discussions were conducted. Since the proposal, in response to these comments, a statement has been added to §153.45(4)(H) to clarify that the Spanish translation is not required by Section 50(f)(2).

One commenter recommends amending §153.45 to add a cure for failure to comply with Section 50(f)(2). The commenter proposes several methods of curing violations of the conditions in Section 50(f)(2) based on the methods for curing home equity loan violations in Section 50(a)(6)(Q)(x), including payment to the owner of any amount exceeding the limitation on funds advanced, sending an acknowledgement that the lien is valid only in the amount that does not exceed the 80% loan-to-value limitation, sending written notice modifying terms, and a $1,000 refund with a right to refinance. The commenter proposes that if the lender timely corrects the violation, then the violation does not invalidate the lien. The commissions decline to add the commenter's recommended language. Unlike Section 50(a)(6), Section 50(f)(2) does not include any provisions authorizing a cure of a violation. It is outside the intended scope of the interpretations to add a cure method that is not described in the constitution.

One precommenter suggests specifying that a home equity line of credit may be refinanced as a non-home-equity loan under Section 50(f)(2). The commissions believe that this addition is unnecessary. Home equity lines of credit are a type of home equity loan under Section 50, and are subject to the same requirements as other home equity loans unless the constitution specifies otherwise. Adding the precommenter's suggested language could raise other questions about whether home equity lines of credit are subject to general requirements for home equity loans.

In addition to the amendments discussed previously, SJR 60 adds Section 50(f-1), stating: "An affidavit executed by the owner or the owner's spouse acknowledging that the requirements of Subsection (f)(2) of this section have been met conclusively establishes that the requirements of Subsection (a)(4) of this section have been met." When the agencies circulated the initial precomment draft of the amendments, the agencies asked whether an interpretation is needed regarding the content of the affidavit and the manner of its execution. The agencies received mixed responses on this issue. One precommenter recommends an interpretation on what would satisfy the affidavit provision. Another precommenter states that the commissions should not adopt an interpretation on this issue "because an affidavit is defined by §312.011(1), Chapter 312, Government Code, and the manner of its execution is subject to subsection 50(a)(6)(N)." This same precommenter recommends "that the Commissions propose an Interpretation to address the cure of a defective (f)(2) refinance pursuant to their authority under Subsection (u) to interpret Subsections (a)(6) and (f)," but the precommenter does not identify the constitutional basis for the cure or what the cure should entail. At the stakeholder meeting, one attendee stated that the commissions did not necessarily need to promulgate the affidavit, but the attendee believed it would be helpful to have a title for the affidavit. The agencies intend to monitor this issue to determine whether an interpretation is appropriate.

The adopted amendments to §153.84 and §153.86, together with the repeal of §153.87, implement SJR 60's amendments to Section 50(t)(6). As discussed previously, SJR 60 amends Section 50(t)(6) by removing the 50% limitation on additional debits or advances for a home equity line of credit. Adopted amendments to §153.84 and §153.86 remove references to the 50% limitation in Section 50(t)(6) while maintaining references to the overall 80% loan-to-value limitation in Sections 50(a)(6)(B) and 50(t)(5), which SJR 60 did not amend. Section 153.87 is being repealed because it relates solely to the 50% limitation that SJR 60 removes.

One commenter recommends an interpretation for loans originated during January 2018, stating that "both new disclosures [under Section 50(a)(6) and (f)(2)] are effective with loans originated on and after January 1, 2018. [Section 50(a)(6)] loans originated (ie application taken) prior to January 1, 2018 may be closed using the existing [Section 50(a)(6)] disclosure no matter that they close after January 1, 2018." The commissions decline to address loans originated during January 2018 as part of this adoption, because January 2018 has already passed, and this adoption will not be effective until March 2018 at the earliest. The agencies addressed this issue in a joint statement on the passage of SJR 60, explaining that the safest course for lenders would be to wait until January 1, 2018 to begin providing updated disclosures under SJR 60, and to wait until January 13 at the earliest to begin originating loans. This statement is based on opinion DM-452 (1997), in which the Texas attorney general concluded that if a lender provided the required 12-day notice for home equity loans 12 days before January 1, 1998, and closed the loan on January 1, then the loan would not be enforceable under the constitution, because the disclosure was not "prescribed by" the constitutional amendment that went into effect on January 1, 1998. Because this issue was addressed in the agencies' joint statement, and because January 2018 has already passed, the commissions decline to address the issue in this adoption.

One commenter asks the following question: "Are existing HELOC's closed prior to 1/1/2018 required to be governed under the 50% LTV rule?" Subsection (c) of SJR 60's temporary provision explains that SJR 60's changes apply to a home equity loan made on or after January 1, 2018. This means that previous law applies to home equity loans made before January 1, 2018. In particular, the 50% limitation on additional advances in previous Section 50(t)(6) applies to home equity lines of credit made before January 1, 2018. The commissions believe that this issue is clearly addressed in SJR 60's temporary provision, and decline to adopt an interpretation on this issue.

One precommenter recommends that the commissions issue an interpretation of SJR 60's temporary provision, specifying that the changes made by SJR 60 continue after January 1, 2019. The commissions believe that this interpretation is unnecessary. The legislature clearly intended for the amendments in SJR 60 to continue in effect beyond December 31, 2018, and would have made a clearer statement if it intended for all of the amendments in SJR 60 to expire on December 31, 2018.

One commenter requests guidance on how the property tax designation for agricultural property should be interpreted after SJR 60. Before SJR 60, Section 50(a)(6)(I) generally prohibited a home equity loan on property designated for agricultural use, unless the property was used primarily for the production of milk. SJR 60 removes this prohibition. Currently, the Texas Tax Code contains an exception to the general property tax designation for agricultural property, stating: "On or after January 1, 2008, an individual is not entitled to have land designated for agricultural use if the land secures a home equity loan described by Section 50(a)(6), Article XVI, Texas Constitution." Tex. Tax Code §23.42(a-1). The commissions decline to adopt an interpretation on this issue. The commenter's question is outside the intended scope of the home equity interpretations, because it is an issue of interpreting the Texas Tax Code, not the constitution. The applicability of property tax designations is determined by the Texas Legislature and the Texas Comptroller of Public Accounts, which has rulemaking authority regarding those exemptions, and is not determined by the commissions. However, the commissions recognize that this is an important issue and encourage lenders to contact the comptroller or local taxing authorities if they have any questions about the applicability of property tax designations.

7 TAC §§153.1, 153.5, 153.14, 153.17, 153.45, 153.84, 153.86

The amendments, new section, and repeal are adopted under Article XVI, Section 50(u) of the Texas Constitution and Texas Finance Code, §11.308 and §15.413, which authorize the commissions to adopt interpretations of Article XVI, Section 50(a)(5) - (7), (e) - (p), (t), and (u) of the Texas Constitution.

The constitutional provisions affected by the adoption are contained in Article XVI, Section 50 of the Texas Constitution.

§153.45. Refinance of an Equity Loan: Section 50(f).

A refinance of debt secured by the homestead, any portion of which is an extension of credit described by Subsection (a)(6) of Section 50, may not be secured by a valid lien against the homestead unless either the refinance of the debt is an extension of credit described by Subsection (a)(6) or (a)(7) of Section 50, or all of the conditions in Section 50(f)(2) are met.

(1) One Year Prohibition. To meet the condition in Section 50(f)(2)(A), the refinance may not be closed before the first anniversary of the closing date of the equity loan. For purposes of this section, the closing date of the refinance is the date on which the owner signs the loan agreement for the refinance.

(2) Advance of Additional Funds. To meet the condition in Section 50(f)(2)(B), the refinance may not include the advance of any additional funds other than funds advanced to refinance a debt described by Subsections (a)(1) through (a)(7) of Section 50, or actual costs and reserves required by the lender to refinance the debt.

(A) In order to be included in the funds advanced for the refinance, actual costs must be identifiable, must be actually required by the lender to refinance the debt, and must comply with any applicable limitations on costs.

(B) In order to be included in the funds advanced for the refinance, reserves (e.g., an escrow account for taxes and insurance) must be actually required by the lender to refinance the debt, and must comply with applicable law.

(C) Amounts that the owner pays before or at closing (e.g., through cash, check, or electronic funds transfer) are not advanced by the lender, and are not subject to the limitation on the advance of additional funds.

(3) 80 Percent Limitation on Loan Amount. To meet the condition in Section 50(f)(2)(C), the refinance of the extension of credit must be of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the refinance of the extension of credit is made.

(A) The principal amount of the refinance is the sum of the amount advanced and any charges at the inception of the refinance, to the extent these charges are financed in the principal amount of the refinance.

(B) The principal balance of all outstanding debt secured by the homestead on the date the refinance is made determines the maximum principal amount of the refinance.

(C) The principal amount of the refinance does not include interest accrued after the date the refinance is made (other than any interest capitalized and added to the principal balance on the date the refinance is made), or other amounts advanced by the lender after closing as a result of default, including for example, ad valorem taxes, hazard insurance premiums, and authorized collection costs, including reasonable attorney's fees.

(4) Refinance Disclosure. To meet the condition in Section 50(f)(2)(D), the lender must provide the refinance disclosure described in Section 50(f)(2)(D) to the owner on a separate document not later than the third business day after the date the owner submits the loan application to the lender and at least 12 days before the date the refinance of the extension of credit is closed.

(A) Submission of a loan application to an agent acting on behalf of the lender is submission to the lender. A loan application may be given orally or electronically.

(B) For purposes of Section 50(f)(2)(D), the application is submitted on the date the owner submits a loan application specifically for a refinance of a home equity loan to a non-home-equity loan. If the owner initially applies for another type of loan, then the application is considered submitted on the earliest of:

(i) the date the owner modifies the application, orally or in writing, to specify that it is for a refinance of a home equity loan to a non-home-equity loan; or

(ii) the date the owner submits a new application specifically for a refinance of a home equity loan to a non-home-equity loan.

(C) For purposes of determining the earliest permitted closing date, the next succeeding calendar day after the date that the lender provides the owner a copy of the required refinance disclosure is the first day of the 12-day waiting period. The refinance may be closed at any time on or after the 12th calendar day after the lender provides the owner a copy of the required refinance disclosure.

(D) The lender must deliver the refinance disclosure or place it in the mail no later than the third business day after the owner submits the loan application. The refinance disclosure must be delivered to the owner at least 12 days before the refinance is closed. If a lender mails the refinance disclosure to the owner, the lender must allow a reasonable period of time for delivery. A period of three calendar days, not including Sundays and federal legal public holidays, constitutes a rebuttable presumption for sufficient mailing and delivery.

(E) One copy of the required refinance disclosure may be provided to married owners.

(F) The refinance disclosure is only a summary of the owner's rights, which are governed by the substantive terms of the constitution. The substantive requirements prevail regarding a lender's responsibilities in an equity loan or refinance. A lender may supplement the refinance disclosure to clarify any discrepancies or inconsistencies.

(G) A lender may rely on an established system of verifiable procedures to evidence compliance with this paragraph.

(H) The Finance Commission will publish a Spanish translation of the refinance disclosure on its website. A lender whose discussions with the owner are conducted primarily in Spanish may provide the Finance Commission's Spanish translation to the owner, although the Spanish translation is not required by Section 50(f)(2).

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 March 9, 2018.

TRD-201801058

Leslie J. Pettijohn

Consumer Credit Commissioner

Joint Financial Regulatory Agencies

Effective date: March 29, 2018

Proposal publication date: November 24, 2017

For further information, please call: (512) 936-7621

Buckley Sandler, LLP

On March 1, the governor of South Dakota signed House Bill 1078 to revise certain provisions addressing the removal of credit security freezes. The amended act states that a security freeze will remain in place until a consumer requests the removal from the consumer reporting agency. The consumer reporting agency is then required to remove the freeze within three business days. Separately, on February 27, the governor signed House Bill 1127 (HB 1127) to revise certain provisions concerning fees charged for security freezes. Among other things, HB 1127 prohibits consumer reporting agencies from charging a fee for placing or removing a security freeze, and stipulates that a consumer reporting agency may advise a third party that a consumer’s credit report has been frozen.

On February 28, the governor of Nebraska approved Legislative Bill 757 strengthening certain provisions of the state’s Credit Report Protection Act and the Financial Data Protection and Consumer Notification of Data Security Breach Act of 2006. Among other things, the amendments state that (i) any individual or commercial entity in the state that possesses computerized data containing personal information of Nebraska residents must maintain reasonable security and disposal procedures and practices; (ii) nonaffiliated third-parties with access to personal information must also maintain reasonable security and disposal procedures; and (iii) consumer reporting agencies must provide services free-of-charge for the placement or removal of a credit security freeze.