Texas Register, Volume 40, Number 10, Pages 983-1152, March 6, 2015 Page: 1,069
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The definition of "Affiliated business" has been added as new
(renumbered) 89.102(1). The purpose of this definition is to im-
plement recordkeeping requirements in 89.207 and disclosure
requirements in 89.504, which will be discussed further under
the purpose paragraphs for those sections.
New paragraph (1) provides that an "Affiliated business" is a per-
son that shares common management with a property tax lender,
shares more than 10% common ownership with a property tax
lender, or is controlled by a property tax lender through a control-
ling interest greater than 10%. The common ownership or con-
trolling interest may occur either directly or indirectly. The 10%
threshold has been selected to maintain consistency with the
ownership disclosure requirements found in the following prop-
erty tax lender licensing regulations: 89.302, concerning Filing
of New Application; 89.303, concerning Transfer of License;
and 89.304, concerning Change in Form or Proportionate Own-
ership. The disclosure of a 10% ownership or controlling interest
is also well established in similar regulations for industries under
the agency's authority. With the addition of new paragraph (1),
the remaining definitions existing in 89.102 have been renum-
bered accordingly.
In 89.207, concerning Files and Records Required, the amend-
ments provide clarification regarding records that must be
retained relating to payments made to attorneys, and records
regarding affiliated businesses. New provisions are contained
in 89.207(3)(A)(ix) concerning receipts or invoices along with
proof of payment for recording costs or attorney's fees nec-
essary to address a defect in title. The re-proposed version
of 89.207(3)(A)(x), which required lenders to retain records
related to discount points, has been removed for this adoption
because of the prohibition on discount points under 89.601(d).
The purpose of 89.207(3)(A)(ix) is to implementranother new
provision that has been added in 89.601(c)(5) regarding ad-
ditional costs for preparing documents necessary to address a
defect in title to real property. Section 89.601(c)(5) allows a
property tax lender to charge a reasonable fee for costs directly
incurred in preparing, executing, and recording documents nec-
essary to address a title defect, in addition to the general maxi-
mum fee limit described in 89.601(c)(3) (discussed later in this
adoption). The purpose of 89.601(c)(5) is to ensure that prop-
erty tax lenders can be compensated for costs incurred to ad-
dress title defects. As a result, the recordkeeping provision in
89.207(3)(A)(ix) has been added to clarify what records must
be maintained to establish compliance.
The purpose of the amendments in 89.207(3)(l)(iii) and (7) is
to enable the agency to verify that a property tax lender has
complied with Texas Finance Code, 351.0021(d), which pro-
vides that certain post-closing costs "must be for services per-
formed by a person that is not an employee of the property tax
lender." Certain property tax lenders impose post-closing costs
that are paid to companies affiliated with the property tax lender
through common management, ownership, or control. By requir-
ing property tax lenders to maintain records of their business re-
lationships with affiliated businesses, as well as records of all
amounts paid to affiliated businesses, the amended provisions
ensure that property tax lenders can substantiate their relation-
ship with affiliated businesses and the fact that costs are not paid
to employees of the property tax lender.
Additionally, please refer to the discussion following
89.601(c)(5) regarding documentation related to attorney's
fees to address title defects.In 89.207(3)(L)(i), concerning notices sent by attorneys involv-
ing judicial foreclosures under Texas Tax Code, 32.06, the
changes provide language that better tracks the statute. For this
adoption, the phrase "a non-salaried attorney of the licensee"
has been replaced by the phrase "an attorney who is not an
employee of the licensee."
Throughout 89.207, minor technical changes have been made
to accommodate the new and revised provisions, including
the renumbering of the last two paragraphs. In addition, the
agency's acronym "OCCC," as defined in 89.102(8) (as
renumbered), replaces the use of "Office of Consumer Credit
Commissioner" and "commissioner" in 89.207(9) (as renum-
bered). The first instance is simply for abbreviation purposes.
In the second instance, the agency believes that the use of
"OCCC" will provide better clarity as the context calls for action
by the agency, as opposed to the commissioner specifically.
In 89.504, concerning Requirements for Disclosure Statement
to Property Owner, the adoption adds subsection (f) relating to
the disclosure of affiliated businesses. New subsection (f) re-
quires property tax lenders that impose post-closing costs paid
to affiliated businesses to include additional information in the
disclosure form that the property tax lender must provide to the
borrower before closing. In particular, the subsection requires
the disclosure to include the name of the affiliated business, a
statement that it is affiliated with the property tax lender, and a
statement that costs paid to the affiliated business cannot be for
services performed by employees of the property tax lender. The
purpose of this amendment is to provide the borrower with addi-
tional information regarding the property tax lender's use of af-
filiated businesses, and to ensure that a property tax lender has
complied with Texas Finance Code, 351.0021(d), which pro-
vides that certain post-closing costs "must be for services per-
formed by a person that is not an employee of the property tax
lender."
In addition, regarding the affiliated business disclosure state-
ment required by 89.504(f), the agency believes that these re-
visions are appropriately contained in the rule text as opposed
to the corresponding forms in each rule. Only certain property
tax lenders use affiliated businesses. Thus, to avoid potential
confusion, the changes focus this voluntary practice in the rule
text, without placing optional language in the forms used by the
entire industry.
One commenter stated: "The idea that the disclosure of affiliated
business arrangements is sufficient to avoid abuses is illogical.
The disclosures would mean practically nothing to property own-
ers. Without a scheme for enforcing prohibitions for affiliate busi-
nesses charging unreasonable fees and costs to circumvent fee
and cost regulations, it is difficult to understand what purpose
these proposed regulations will serve."
The commission disagrees with this comment. As discussed
earlier, certain property tax lenders impose post-closing costs
that are paid to companies affiliated with the property tax lender
through common management, ownership, or control. By requir-
ing property tax lenders to disclose the identities of affiliated busi-
nesses, the amended provision ensures transparency and en-
ables the borrower to make an informed decision before closing.
Thus, the commission maintains new 89.504(f) for this adop-
tion.
ll. Closing cost limitation
The majority of the amendments are contained in 89.601, con-
cerning Fees for Closing Costs.ADOPTED RULES March 6, 2015 40 TexReg 1069
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Texas. Secretary of State. Texas Register, Volume 40, Number 10, Pages 983-1152, March 6, 2015, periodical, March 6, 2015; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth606207/m1/87/: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.