Texas is taking a firm stance on mortgage borrower protections with newly adopted rules set to take effect on November 23, 2024. The Texas Department of Savings and Mortgage Lending (DSML) has introduced significant changes impacting mortgage loan companies, mortgage bankers, individual residential mortgage loan originators, and mortgage servicers.
From disclosure updates to new rules on trigger leads and reportable incidents, mortgage professionals operating in Texas must ensure compliance with these regulations. Here’s what you need to know.
Key Changes for Mortgage Loan Originators, Companies, and Bankers
1. Revised Disclosure Requirements
a) The Mortgage Company Disclosure and Mortgage Banker Disclosure have been updated for greater clarity and readability.
b) Conditional Pre-Qualification and Conditional Approval Letters now require the signature of the individual residential mortgage loan originator (if issued).
c) All notices must now use a specified font in at least 12-point size to improve readability.
2. Stricter Rules on Trigger Leads
Trigger leads—purchased data from credit bureaus identifying consumers who recently applied for credit—are now under tighter scrutiny. The DSML has classified misleading or deceptive use of trigger leads as a fraudulent practice.
To comply, mortgage professionals must clearly state:
a) They are not affiliated with the creditor to whom the consumer applied.
b) The name of the mortgage loan originator and their associated mortgage company or banker.
c) How they obtained the consumer’s contact information.
d) That the purpose of the communication is to solicit new business.
Violating these requirements could result in severe regulatory penalties.
3. Expanded Licensing Flexibility for Loan Originators
Mortgage loan originators may now be sponsored by multiple mortgage companies or bankers. However, they must comply with specific application, disclosure, and representation requirements to ensure transparency and consumer protection.
Updates for Mortgage Servicers
1. Adjusted Disclosure Requirements
Previously, the Mortgage Servicer Disclosure was required on all borrower correspondence. Under the new rules, it is now only required on the first notice informing borrowers of the servicer responsible for their loan.
Additionally, the new readability rule applies, requiring all notices to be provided in a specified font and at least 12-point size.
New Reporting Requirements for Mortgage Companies, Bankers, and Servicers Texas is stepping up its oversight of risk events that could impact lenders and consumers. Under the new rules, companies must now report “reportable incidents” to the DSML. These incidents fall into two categories:
a) Security Events – Unauthorized access to information systems or customer data.
b) Catastrophic Events – Any unforeseen occurrence (other than a security event) causing severe disruption or financial risk.
Reporting Requirements:
a) Initial report must be filed with the DSML within 30 days of the incident.
b) A root cause analysis must be submitted within 120 days, detailing:
1) The nature and impact of the event.
2) The number of affected Texas residents.
3) Actions taken to address the incident.
4) Planned future measures.
5) A designated point of contact for regulatory inquiries.
What This Means for Mortgage Professionals
Texas joins other regulators, including the CFPB and California’s DFPI, in tightening consumer mortgage protections. Lenders and servicers operating in Texas must ensure their disclosure practices, lead generation tactics, and incident response protocols are fully aligned with the new regulations.
Non-compliance isn’t an option. Mortgage companies need to adapt their operations now to avoid penalties and maintain trust with borrowers.
Final Thoughts
With these sweeping changes, Texas is reinforcing its commitment to transparency, fair lending, and consumer protection in the mortgage industry. Mortgage professionals must stay ahead by reviewing their compliance strategies and implementing the necessary updates before the November 23 deadline.
Would you like to ensure compliance? Reach out to Synergy for expert guidance on navigating regulatory changes efficiently.
Source: https://natlawreview.com/article/texas-passes-law-expanding-mortgage-borrower-protections