CHAPTER 343. HOME LOANS
FINANCE CODE
TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED TRANSACTIONS
SUBTITLE B. LOANS AND FINANCED TRANSACTIONS
CHAPTER 343. HOME LOANS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 343.001. DEFINITIONS. In this chapter:
(1) "Bridge loan" means temporary or short-term financing
requiring payment of only interest until the entire unpaid
balance is due.
(2) "Home loan" means a loan that is:
(A) made to one or more individuals for personal, family, or
household purposes; and
(B) secured in whole or part by:
(i) a manufactured home, as defined by Section 347.002, used or
to be used as the borrower's principal residence; or
(ii) real property improved by a dwelling designed for occupancy
by four or fewer families and used or to be used as the
borrower's principal residence.
(3) "Restructure" means a change in the payment schedule or
other terms of a home loan as a result of the borrower's default.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.002. APPLICABILITY. This chapter does not apply to:
(1) a reverse mortgage; or
(2) an open-end account, as defined by Section 301.002.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.003. CONFLICT WITH OTHER PROVISIONS OF TITLE. If this
chapter conflicts with another provision of this title, this
chapter controls.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
SUBCHAPTER B. PROVISIONS RELATING TO HOME LOANS IN GENERAL
Sec. 343.101. REFINANCING. (a) For purposes of this section, a
low-rate home loan is a home loan that at its inception carries
an interest rate two percentage points or more below the yield on
treasury securities having comparable periods of maturity to the
loan maturity, except that if the loan's interest rate is a
discounted introductory rate or a rate that automatically steps
up over time, the fully indexed rate or the fully stepped-up
rate, as appropriate, shall be used instead of the rate at the
loan's inception to determine whether the loan is a low-rate
loan.
(b) A lender may not replace or consolidate a low-rate home loan
directly made by a government or nonprofit lender before the
seventh anniversary of the date of the loan unless the new or
consolidated loan has a lower interest rate and requires payment
of a lesser amount of points and fees than the original loan or
is a restructure to avoid foreclosure.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.104. RESTRICTIONS ON SINGLE PREMIUM CREDIT INSURANCE.
A lender may not offer any individual or group credit life,
disability, or unemployment insurance on a prepaid single premium
basis in conjunction with a home loan unless the following notice
is provided to each applicant for the loan by hand delivery or
mail to the applicant not later than the third business day after
the date the applicant's application for a home loan is received:
INSURANCE NOTICE TO APPLICANT
You may elect to purchase credit life, disability, or involuntary
unemployment insurance in conjunction with this mortgage loan. If
you elect to purchase this insurance coverage, you may pay for it
either on a monthly premium basis or with a single premium
payment at the time the lender closes this loan. If you choose
the single premium payment, the cost of the premium will be
financed at the interest rate provided for in the mortgage loan.
This insurance is NOT required as a condition of closing the
mortgage loan and will be included with the loan only at your
request.
You have the right to cancel this credit insurance once
purchased. If you cancel it within 30 days of the date of your
loan, you will receive either a full refund or a credit against
your loan account. If you cancel this insurance at any other
time, you will receive either a refund or credit against your
loan account of any unearned premium. YOU MUST CANCEL WITHIN 30
DAYS OF THE DATE OF THE LOAN TO RECEIVE A FULL REFUND OR CREDIT.
To assist you in making an informed choice, the following
estimates of premiums are being provided along with an example of
the cost of financing. The examples assume that the term of the
insurance product is ____ years and that the interest rate is
______ percent (a rate that has recently been available for the
type of loan you are seeking). PLEASE NOTE THAT THE ACTUAL LOAN
TERMS YOU QUALIFY FOR MAY VARY FROM THIS EXAMPLE. "Total amount
paid" is the amount that would be paid if you financed only the
total insurance premium for a ___ year period and is equal to the
amount you would have paid if you made all scheduled payments.
This is NOT the total of payments on your loan.
CREDIT LIFE INSURANCE: Estimated premium of $_______
DISABILITY INSURANCE: Estimated premium of $_______
INVOLUNTARY UNEMPLOYMENT INSURANCE: Estimated premium of
$________
TOTAL INSURANCE PREMIUMS: $_______
TOTAL AMOUNT PAID: $_______
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.105. NOTICE OF PENALTIES FOR MAKING FALSE OR MISLEADING
WRITTEN STATEMENT. (a) A lender, mortgage banker, or licensed
mortgage broker shall provide to each applicant for a home loan a
written notice at closing.
(b) The notice must:
(1) be provided on a separate document;
(2) be in at least 14-point type; and
(3) have the following or substantially similar language:
"Warning: Intentionally or knowingly making a materially false or
misleading written statement to obtain property or credit,
including a mortgage loan, is a violation of Section 32.32, Texas
Penal Code, and, depending on the amount of the loan or value of
the property, is punishable by imprisonment for a term of 2 years
to 99 years and a fine not to exceed $10,000.
"I/we, the undersigned home loan applicant(s), represent that
I/we have received, read, and understand this notice of penalties
for making a materially false or misleading written statement to
obtain a home loan.
"I/we represent that all statements and representations contained
in my/our written home loan application, including statements or
representations regarding my/our identity, employment, annual
income, and intent to occupy the residential real property
secured by the home loan, are true and correct as of the date of
loan closing."
(c) On receipt of the notice, the loan applicant shall verify
the information and execute the notice.
(d) The failure of a lender, mortgage banker, or licensed
mortgage broker to provide a notice complying with this section
to each applicant for a home loan does not affect the validity or
enforceability of the home loan by any holder of the loan.
Added by Acts 2007, 80th Leg., R.S., Ch.
285, Sec. 1, eff. September 1, 2007.
SUBCHAPTER C. HIGH-COST HOME LOANS
Sec. 343.201. DEFINITIONS. In this subchapter:
(1) "High-cost home loan" means a loan that:
(A) is made to one or more individuals for personal, family, or
household purposes;
(B) is secured in whole or part by:
(i) a manufactured home, as defined by Section 347.002, used or
to be used as the borrower's principal residence; or
(ii) real property improved by a dwelling designed for occupancy
by four or fewer families and used or to be used as the
borrower's principal residence;
(C) has a principal amount equal to or less than one-half of the
maximum conventional loan amount for first mortgages as
established and adjusted by the Federal National Mortgage
Association;
(D) is not:
(i) a reverse mortgage; or
(ii) an open-end account, as defined by Section 301.002; and
(E) is a credit transaction described by 12 C.F.R. Section
226.32, as amended, except that the term includes a residential
mortgage transaction, as defined by 12 C.F.R. Section 226.2, as
amended, if the total loan amount is $20,000 or more and:
(i) the annual percentage rate exceeds the rate indicated in 12
C.F.R. Section 226.32(a)(1)(i), as amended; or
(ii) the total points and fees payable by the consumer at or
before loan closing will exceed the amount indicated in 12 C.F.R.
Section 226.32(a)(1)(ii), as amended.
(2) "Points and fees" has the meaning assigned by 12 C.F.R.
Section 226.32(b), as amended.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.202. BALLOON PAYMENT. A high-cost home loan may not
contain a provision for a scheduled payment that is more than
twice as large as the average of earlier scheduled monthly
payments, unless the balloon payment becomes due not less than 60
months after the date of the loan. This prohibition does not
apply if the payment schedule is adjusted to account for the
seasonal or otherwise irregular income of the borrower or if the
loan is a bridge loan in connection with the acquisition or
construction of a dwelling intended to become the borrower's
principal dwelling.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.203. NEGATIVE AMORTIZATION. A high-cost home loan may
not provide for a payment schedule with regular periodic payments
that cause the principal balance to increase, except that this
section does not prohibit negative amortization as a consequence
of a temporary forbearance, bridge loan, or restructure sought by
the borrower.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.204. CONSIDERATION OF OBLIGOR'S PAYMENT ABILITY. (a)
In this section, "obligor" means a person obligated to pay a
loan, including a borrower, cosigner, or guarantor. If more than
one person is obligated to pay a loan, the term refers to those
persons collectively.
(b) A lender may not engage in a pattern or practice of
extending credit to consumers under high-cost home loans based on
the consumers' collateral without regard to the obligor's
repayment ability, including the obligor's current and expected
income, current obligations, employment status, and other
financial resources, other than the obligor's equity in the
dwelling that secures repayment of the loan.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.205. PREPAYMENT PENALTIES PROHIBITED. A lender may not
make a high-cost home loan containing a provision for a
prepayment penalty.
Added by Acts 2001, 77th Leg., ch. 622, Sec. 1, eff. Sept. 1,
2001.
Sec. 343.206. CHARGE PROHIBITED FOR PRODUCT OR SERVICE NOT
RECEIVED. A lender, in connection with a high-cost home loan,
may not charge a borrower an amount for a service or product if
the borrower does not receive the service or product.
Added by Acts 2003, 78th Leg., ch. 1207, Sec. 3, eff. Sept. 13,
2003.