COMMISSIONS AMEND TEXAS ADMINISTRATIVE CODE TO MAKE CLEAR LENDERS MAY USE ELECTRONIC DISCLOSURES, DOCUMENTS, AND SIGNATURES FOR HOME EQUITY LOANS AND THAT OUT-OF-STATE BANKS MAY ORIGINATE HOME EQUITY LOANS
On December 17, 2021, the Finance Commission of Texas adopted amendments to certain Texas Administrative Code rules relating to home equity lending. The major purpose of the amendments are to make clear that: (1) to specify requirements for the use of electronic disclosures, documents, and signatures and (2) to out-of-state banks doing business in accordance with Texas law are authorized to originate home equity loans. The amendments are intended to clarify—but not materially alter—existing home equity lending rules.
The Texas Credit Union Commission previously adopted the amendments on November 5, 2021. The amendments take effect on January 6, 2022.
The Commissions’ interpretations of the home equity lending under the Texas Constitution are outlined in 7 Texas Administrative Code, Part 8, Chapter 153, and are administered by the Joint Financial Regulatory Agencies. The amendments to Chapter 153 were first published in the September 10, 2021, issue of the Texas Register (46 TexReg 5690). The Commissions received no comments on the proposed amendments.
The amendments to Chapter 153 provide clarity regarding the use of electronic documents, disclosures, and signatures in the origination of Texas home equity loans. The Commissions have never objected to the use of electronic disclosures, documents, or signatures that comply with federal and state law. However, they believed that a November 2020 amendment to §153.22 that authorizes a lender to provide electronic copies of the loan application and all executed closing documents at closing required additional rulemaking to address the initial electronic disclosure and execution of such documents.
To start, the Commissions amended §153.1 to add definitions and statutory citations for the terms “E-Sign Act”, in reference to the federal Electronic Signatures in Global and National Commerce Act, and “UETA”, in reference to the Texas Uniform Electronic Transaction Act. Both terms are used throughout the amendments as they relate to the use and acceptance of electronic disclosures, documents, and signatures.
The Commissions also amended applicable sections of Chapter 153 to provide that the following documents and disclosures may be submitted, signed, and/or disclosed electronically in accordance with the E-Sign Act and Texas UETA:
- An owner’s application for a Texas home equity loan may be submitted electronically under §153.12
- The lender may provide the “Preclosing disclosure” (generally provided in the form of a Closing Disclosure) electronically under §153.13
- The owner and lender may sign the written acknowledgment of Fair market value of the homestead property electronically under §153.26
- The lender may provide the owner with the 50(f)(2) conversion refinance disclosure electronically under §153.45
- The lender may provide the required 50(g) consumer disclosure (also known as the “12 Day Disclosure”) to the owner electronically under §153.51
Additionally, the Commissions amended §153.17 to make clear that a bank chartered under the laws of another state and doing business in Texas in accordance with applicable state law may originate home equity loans under the Texas Constitution. The Commissions inserted new §153.17(2) to explicitly include such state-charted banks within the list of lenders authorized to make home equity loans pursuant to Section 50(a)(6)(P), Article XVI of the Texas Constitution.
For more information or to read the adopted amendments:
https://www.fc.texas.gov/sites/default/files/2021-12/121721-fc-packet.pdf
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Allan Polunsky at Allan.Polunsky@mortgagelaw.com
Jay Beitel at Jay.Beitel@mortgagelaw.com
Marty Green at Marty.Green@mortgagelaw.com
Lauren Polunsky Dreszer at Lauren.Polunsky@mortgagelaw.com
Peter Idziak at Peter.Idziak@mortgagelaw.com
Claire Barber at Claire.Barber@mortgagelaw.com
Andrew Duane at Andrew.Duane@mortgagelaw.com
Tye McWhorter at Tye.McWhorter@mortgagelaw.com
Cody Beitel at Cody.Beitel@mortgagelaw.com
Doug Foster1 at Doug.Foster@mortgagelaw.com
1 Doug Foster is a non-lawyer and is not admitted to practice law in any state.