Many of our Credit Union clients have witnessed the devastation of Hurricane Harvey and are now helping their members restore some semblance of normalcy. It is a daunting task but Credit Unions have historically been the leaders in helping people during a crisis. Please let us know if there’s any way we can assist you in your efforts.
The most recent session of the Texas Legislature passed a number of bills that will impact Texas’ residential mortgage lenders. We’ve outlined the bills we consider the most important for our clients and urge anyone with questions or concerns to contact us.
Home Equity Lending
Joint Resolution 60 (Effective January 1, 2018 if approved by Texas voters on November 7, 2017)
Because Joint Resolution 60 proposes to amend the Texas Constitutional Home Equity law, it must be approved by Texas voters on November 7, 2017 to be effective. If approved, the new Home Equity provisions would go into effect on January 1, 2018.
The proposed changes to Texas Home Equity law are the following:
- Survey, Appraisal and Title Premium/Title Search Fee would not be included in the 3% fee cap calculation. Note: these three expenses usually comprise the largest cost for the Home Equity borrower and their exclusion from the fee cap calculation should create more lending opportunities for smaller Home Equity loans.
- The 3% cap on fees would be lowered to a 2% cap.
- The prohibition against Home Equity loans on property with an Agricultural Tax Exemption would be eliminated
- A Home Equity loan may be refinanced into a Conventional loan if the following conditions are met:
- At least one year has elapsed since the Home Equity loan was closed
- There can be no advance of new money (except closing costs)
- The new principal loan balance may not exceed 80% of the property’s fair market value on the day of refinance
- The Borrower must be provided with a new disclosure 12 days prior to closing, advising Borrower of the risks of refinancing into a non-Home Equity loan
- Borrower and Borrower’s spouse must sign an Affidavit at closing acknowledging that the above four requirements have been met
- HELOCS – Eliminates the confusing current provision which prohibits additional advances after the initial advance if the loan balance exceeds 50% of the fair market value at closing. The $4,000 minimum draw and 80% maximum loan –to-value ratio would remain in place
Durable Powers of Attorney in Texas
There were two new bills that will have a significant impact on the use of Durable Powers of Attorney in Texas. A Durable Power of Attorney is one that does not terminate upon the subsequent disability or incapacity of the maker.
- House Bill 1974 (Effective September 1, 2017) significantly modifies Texas’ Statutory Durable Power Of Attorney law.
- If the principal’s residence is listed on the Statutory Durable Power of Attorney (POA), the POA is governed by the laws of the jurisdiction of the principal’s residence. If there is no residence listed, the POA is governed by the law of the jurisdiction were the POA was signed. If a POA is executed in a different state, then the lender must verify that the POA complies with that state’s requirements.
- If a lender is presented with a POA, they must accept the POA, unless there is a statutorily authorized reason for rejecting the POA. The Lender, within 10 days of being presented with the POA, may request an agent’s certification as to the validity and enforceability of the POA. The agent is the person empowered to act on behalf of another through the POA. Lenders may rely on the statements made in the certification.
- The agent’s certification should be in the form found here. A MS Word version of this certification is available upon request.
- Lenders should update their policies and procedures to ensure that they automatically request the statutory certification within 10 days of receiving the POA.
- The lender may also require an opinion letter from the agent’s attorney regarding any matter of law concerning the POA, provided the Lender provides a reason for the request. The request for an attorney opinion letter should be made within 10 days of receiving the POA.
- If the POA is in a language other than English, the Lender may require a translation. Request for a translation should be made within 5 days of receiving the POA.
- There is a laundry list of acceptable reasons to reject a POA. Some of the more common examples are:
- The Lender has a good faith belief that the POA is invalid
- The Lender has a good faith belief that the POA does not grant the power to the agent for which it will be used
- Accepting the POA would be inconsistent with a policy adopted by the Lender in good faith that is necessary to comply with another law of Texas or a federal statute, rule, regulation, regulatory directive, guidance or executive order (FNMA or VA requirements on POAs)
- If the Lender refuses to accept the POA, they must provide the agent with a written statement of rejection
- A photocopy or electronic copy of a POA has the same legal effect as the original POA
- The Statutory Durable POA form has been updated significantly. Most importantly, there is now a statement in the Statutory Durable POA that if the POA is to be used for a Home Equity loan, it must be signed in the office of an attorney, a title company, or the lender.
- A copy of the updated Statutory Durable POA can be found here. A MS Word version of the updated Statutory Durable POA is available upon request.
- The new law also provides a cause of action for an agent named in the POA if a lender improperly rejects the POA. The exclusive remedy for a successful court action would be a court order that the lender must accept the POA and an award to the plaintiff/agent for their court costs and attorney’s fees.
- Senate Bill 617 (Effective September 1, 2017) provides that a Trustee of a Revocable Living Trust may grant authority to an agent through a Power of Attorney for real property transactions, even if the governing trust instrument does not specifically create that authority.
This new law will have a big impact on residential mortgage lenders throughout Texas.
House Bill 1217 (Effective July 1, 2018) allows for “remote notarization” where the notary may acknowledge a signature via a two-way video and audio conference technology. The notary need not be in Texas. The Texas Secretary of State must develop rules and standards for remote notarization prior to implement this new law. Remote notarization is not permitted prior to July 1, 2018.
House Bill 1470 (Effective September 1, 2017) authorizes the Trustee or Substitute Trustee on a Deed of Trust to contract with an auction company to perform some or all of the duties of the public sale.
The winning bidder at a public sale must provide the Trustee with the following information:
- Name, address, telephone number and e-mail address of all bidders
- If the bidder is acting on behalf of another individual or organization, the name, address, phone number and e-mail of the other individual or organization
- The name and address of the person to appear as grantee on the Trustee’s deed
- A government-issued photo ID
- Any other information reasonably needed to complete the Trustee’s duties and functions
If the winning bidder refuses to provide any of the information, the Trustee may decline to complete the transaction or deliver a deed.
The new law imposes additional duties on the Trustee at a public sale. The Trustee must:
- Provide winning bidder with a receipt for the sales proceeds tendered
- Deliver the trustee’s deed to the winning bidder within a reasonable time
- Keep sales proceeds in a separate account until distributed
- Make reasonable attempts to identify and locate the person entitled to all or any part of the sale proceeds
Revocable Living Trusts
Senate Bill 617 (Effective September 1, 2017) provides that the Trustee of a Revocable Living Trust may grant an agent authority to act for the Trustee with respect to real property transactions, even if the governing instrument does not affirmatively permit the trustee to hire agents or expressly prohibit the Trustee from hiring agents. The delegation must be in writing and notarized. The delegation may be effective for up to six months.
If you have any questions or concerns about these pending changes, please give us a call.
242 W. Sunset, Ste. 201
San Antonio, TX 78209