Texas Register, Volume 40, Number 10, Pages 983-1152, March 6, 2015 Page: 1,071
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The commission disagrees with the contention that the decrease
in average closing costs makes the rule amendments unneces-
sary. On the contrary, as discussed earlier, the comments in-
dicated that some property tax lenders are currently including
non-closing-related amounts (such as advertising and overhead)
in the closing costs that they charge to borrowers. Reducing
the closing cost limitation to $900 will help ensure that lenders'
closing-related costs are accurately reflected in the amounts that
they charge. This will make lenders' prices more transparent and
help ensure that borrowers can make informed credit decisions,
leading to a more competitive marketplace.
The commission believes that the $900 cap provides an appro-
priate balance between consumer protection and industry cost
recovery, and represents a reasonable amount of closing costs.
Therefore, the commission declines to revise 89.601(c)(3) and
maintains the $900 general maximum fee limit for this adoption.
Property tax lenders are welcome to charge below the general
maximum fee cap to continue to foster a competitive market-
place.
C. Additional fees for multiple parcels of real property and docu-
ments to address title defects
For property tax loans including the payment of taxes for more
than one parcel of real property, new 89.601 (c)(4) states that
a property tax lender may charge up to $100 for each additional
parcel, in addition to the general maximum fee limit in paragraph
(3).
One commenter requested clarification that the additional $100
per parcel applies to residential property, stating: "We request
clarification that the additional $100.00 for each additional parcel
be clarified to only apply to the aforementioned Category A and
Category E Property Classification, as published by the Texas
Comptroller." The commission agrees with this suggestion and
has added text specifying that the $100 amount is authorized
for each additional piece of residential property described by
89.601(a), which states: "The fee limitations contained in this
section are applicable to property tax loans secured by prop-
erty designated as 'Category A (Real Property: Single-Family
Residential),' and homesteads designated as 'Category E (Real
Property: Farm and Ranch Improvements)' by the Property Clas-
sification Guide published by the Texas Comptroller of Public Ac-
counts."
A new provision is also contained in 89.601 (c)(5) regarding ad-
ditional costs for preparing documents necessary to address a
defect in title to real property. The provision allows a property
tax lender to charge a reasonable fee for costs directly incurred
in preparing, executing, and recording documents necessary to
address a title defect, in addition to the general maximum fee
limit described in paragraph (3). The fee for these documents is
limited to recording costs and reasonable attorney's fees paid to
a person who is not an employee of the property tax lender. The
purpose of this provision is to ensure that property tax lenders
can be compensated for costs incurred to address title defects.
Several precommenters identified situations where title defects
require different types of documents to be prepared, executed,
and recorded, such as deeds and affidavits of heirship. The fee
is limited to recording costs and attorney's fees in order to en-
sure that property tax lenders do not violate Texas Government
Code, 83.001 (a), which generally prohibits a person other than
an attorney from "charg[ing] or receiv[ing], either directly or indi-
rectly, any compensation for all or any part of the preparation of a
legal instrument affecting title to real property, including a deed,
deed of trust, note, mortgage, and transfer or release of lien."One commenter suggested that 89.601(c)(5) be amended to in-
clude costs charged by private entities designated for electronic
recording. Regarding the proposed language, the commenter
stated: "We believe this language prohibits recovery of legiti-
mate third party recording fees incurred when e-recording docu-
ments with a county clerk's office. Since this language could po-
tentially exclude certain charges legitimately associated with the
recording process, we object to this section and request amend-
ment to include e-recording fees paid to a licensed e-recording
provider." The commission agrees with this suggestion and has
added text to 89.601(c)(5) specifying that the additional amount
charged by the property tax lender may include recording costs
paid to "a private entity designated by a governmental entity for
electronic recording."
One commenter objected to a provision in the re-proposed ver-
sion of 89.601(c)(5) stating that in order for the property tax
lender to include additional amounts for attorney's fees, the at-
torney must provide a signed statement to the borrower. The
commenter stated: "The Agency may require a licensee to pro-
duce invoices or other documentation to ensure that allowable
charges for attorney review are in fact legitimate or paid. There
is no authorization, however, to dictate what an attorney repre-
senting a licensee must provide to a non-client. Further, many
property owners may be confused and think they have an attor-
ney representing their interests in the transaction." To address
this comment, the commission has amended 89.601(c)(5) to re-
move the word "signed" and specify that the property tax lender,
rather than the attorney, must provide the statement to the prop-
erty owner describing the nature of the title defect and the work
performed by the attorney. A conforming change has been made
to 89.207(3)(A)(ix).
Additionally, as a result of new 89.601(c)(3) - (5), the remain-
ing paragraph has been renumbered and includes correspond-
ing technical corrections.
II. Discount points
A. Prohibition on charging discount points
New 89.601(d) prohibits property tax lenders from charging dis-
count points in connection with a property tax loan. The subsec-
tion also provides that a property tax lender may not use the
term "discount point" in connection with a property tax loan. The
subsection explains that this prohibition applies notwithstanding
subsection (a), which limits the rule's general fee limitations to
residential and agricultural property tax loans.
In the December 26 re-proposal, 89.601(d) allowed legitimate
discount points but prohibited including them in the principal
balance of a property tax loan. All eighteen comments dis-
cussed the proposed provisions on legitimate discount points.
After carefully reviewing the comments, the commission has
determined that discount points are an unreasonable charge
in connection with a property tax loan. The commission has
therefore amended the rule to prohibit discount points. This
prohibition is adopted under Texas Tax Code, 32.06(a-4)(2),
which allows the commission to "adopt rules relating to the rea-
sonableness of closing costs, fees, and other charges permitted
under this section," and Texas Finance Code, 351.007, which
provides: "The finance commission may adopt rules to ensure
compliance with this chapter and Sections 32.06 and 32.065,
Tax Code."
The commission has four main reasons for determining that dis-
count points are an unreasonable charge in connection with a
property tax loan.ADOPTED RULES March 6, 2015 40 TexReg 1071
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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/m1/89/?q=32+TexReg+3206: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.