December is always a busy month for The Texas Department of Savings and Mortgage Lending (“SML”). Annual license renewals are the biggest matter, and this year comes with some changes. Both SML and NMLS have issued updates on Continuing Education requirements and deadlines for smooth online renewals. The NMLS update includes a warning that failing to report CE course completion prior to December 13, 2024, may disrupt license renewals. SML has also announced licensing fee increases typically $25 for most applications and renewals. Our November MortgageLaw Minute provides additional details on renewals.
Five New Rules Requiring Immediate Changes in Your Current Operations
All Texas state agencies are required to review their rules for relevancy every four years. SML commenced a rule review of its mortgage regulations in early 2024, first publishing precomment drafts in June 2024. Our July MortgageLaw Minute alerted readers to these proposed changes in the rules.
Aside from the substantive changes and additions to the rules, SML’s proposal also reorganized Chapters 78-81 into new Chapters 55-59 in order to better align with the organization of the Chapters of the Texas Finance Code that authorize the adoption and enforcement of mortgage regulations (e.g., The rules authorized by Finance Code Chapter 156 addressing mortgage companies are moved from Chapter 80 to Chapter 56 of the Administrative Code).
At its October 2024 meeting, the Finance Commission of Texas formally adopted SML’s proposed rule changes, which were then published in the Texas Register on November 15, 2024, for an effective date of November 23, 2024. The current rules can also be found on the Secretary of State’s website.
Please be sure your compliance team familiarizes themselves with the revised rules, downloads the new form templates from the SML website, and expands their data collection to comply with the new requirements.
Here again are highlights of a few key items that should be addressed immediately:
Subsection (b) revises the required mortgage company/banker disclosure form under the Finance Code by providing that: (1) the licensee must capture and maintain records reflecting timely delivery at application, and (2) the notice may be signed and dated by the mortgage applicant to evidence receipt.
Subsection (c) provides that the consumer complaint notice required for posting on websites be in the form posted on SML’s website and removes the requirement to post the consumer complaint notice on social media sites.
Subsection (d) requires that correspondence sent to the mortgage applicant must include the mortgage company’s or mortgage banker’s website address.
Finally, for mortgage bankers, Subsection (e) of §57.200 provides that the servicer disclosure required by §157.0021(b) must be in the form posted on SML’s website.
The mortgage origination forms can be found here and the mortgage servicing forms can be found here.
Subsection (c)(1) expands the required elements of the Mortgage Transaction Log with the following new data points: (1) application/loan identification number assigned by both the mortgage company and by the lender, if different; (2) address of the subject property; (3) interest rate; (4) loan product (conventional, FHA, VA, reverse); and (5) closing date.
Subsection (d) also adds a new requirement to maintain a Loan Processing and Underwriting Log if conducting third-party loan processing and underwriting services. The data points for this log include: (1) full name of the mortgage applicant; (2) application/loan identification number assigned by the mortgage company and the lender (if different); (3) address of the subject property; (4) name and NMLS ID of the mortgage company or mortgage banker to which the mortgage company is providing loan processing or underwriting services; (5) the name, NMLS ID, and employment status (W-2 or 1099) of each individual loan processor or underwriter; (6) closing date; (7) description of the mortgage applicant’s intended use of the subject property; (8) description of the current status or disposition of the application; (9) dollar amount charged to and/or paid by the mortgage applicant for the services; and (10) description of whether the fee for the services was included on the CD as a fee paid directly to the mortgage company at closing.
Other changes to the Books and Records rule include the addition of the FTC’s Standards for Safeguarding Customer Information Rule to the list of other records required, as well as the retention of records showing compliance with the corrective action rule (§56.303 / §57.303) and unclaimed funds rule (§56.304 / §37.304).
The rule also adds additional record retention requirements for home equity loan and home equity line of credit transactions, including a requirement to maintain a record of any discount point acknowledgment form used by the lender to substantiate that the discount points are bona fide as required by 7 TAC §153.5.
Subsection (d) clarifies that a conditional pre-qualification letter or conditional approval letter must be issued and signed by the individual originator (existing forms for the letters already contemplate issuance by the individual originator).
This new rule creates requirements to file a report concerning a reportable incident. A “reportable incident” is an event or situation that presents a material, financial, or other significant risk to the mortgage entity’s operations, such as a data breach, security event, termination of a line of credit or funding source, or termination or curtailment of a relevant service provider. Subsection (c) provides that the filing of reports required by certain other laws identified in the rule satisfies the reporting requirements (except root cause analysis). Information relating to reportable incidents will be confidential examination information.
Subsection (c)(2) requires advertisements to include the website address if the licensee has a website. Also, the rule allows for the required information on advertisements on social media sites to be placed on the profile page rather than on each post. Finally, the rule provides for the use of team names in an advertisement provided certain requirements are met.
Questions about this memo, including any general regulatory questions, can be addressed to Doug at doug.foster@mortgagelaw.com. Please note that our firm is available for all services and issues relating to residential mortgage lending. Our team can be accessed through www.mortgagelaw.com/our-team.