TITLE 7. BANKING AND SECURITIES
PART 1. FINANCE COMMISSION OF TEXAS
In this chapter, a "finance agency" means the Texas Department of Banking, the Department of Savings and Mortgage Lending, and the Office of Consumer Credit Commissioner.
Source: The provisions of this §5.100 adopted to be effective January 2, 2020, 44 TexReg 8230.
(a) Pursuant to the State Employees Training Act, Chapter 656, Subchapter C of the Texas Government Code, it is the policy and practice of the finance agencies to encourage employees' professional development through training and education programs sponsored or supported by the finance agencies.
(b) The finance agencies may provide assistance for education and training that will enhance an employee's ability to perform current or prospective job duties and will benefit both the respective finance agency and the employee.
(c) Approval to participate in a training or education program is not automatic and is subject to eligibility of individual employees as established in the respective finance agency's policy, and the availability of funds within the respective finance agency's budget.
(d) The employee training and education program for the finance agencies may include one or more of the following:
(1) agency-sponsored training provided in-house or by contract;
(2) seminars and conferences;
(3) technical or professional certifications and licenses; or
(4) reimbursement for tuition, fees and required course materials.
(e) The finance agencies maintain policies for administering the employee training and education program of each respective finance agency. These policies include:
(1) eligibility requirements for participation;
(2) designation of appropriate level of approval for participation; and
(3) obligations of program participants.
(f) Approval to participate in any portion of a finance agency's training and education program will not in any way affect an employee's at-will status.
(g) In order to receive tuition reimbursement for a course offered by an institution of higher education, the employee must successfully complete the course, and the executive head of the finance agency must personally authorize the tuition reimbursement payment.
Source: The provisions of this §5.101 adopted to be effective November 6, 2014, 39 TexReg 8571; amended to be effective March 10, 2016, 41 TexReg 1672; amended to be effective January 3, 2019, 43 TexReg 8583; amended to be effective January 2, 2020, 44 TexReg 8230.
(a) Policy. It is the policy of the finance commission to use alternative dispute resolution procedures where reasonable and appropriate under Texas Government Code, Chapter 2009 to assist in the resolution of internal and external disputes under the jurisdiction of a finance agency.
(b) Model guidelines. The procedures for alternative dispute resolution must conform, to the extent possible, to any model guidelines issued by the State Office of Administrative Hearings for the use of alternative dispute resolution by state agencies.
(c) Coordination and training. The finance agencies will coordinate with each other as reasonable to implement the use of appropriate alternative dispute resolution procedures and provide training as needed to implement the use of alternative dispute resolution procedures.
(d) Data collection and reporting. Each finance agency will collect data concerning the effectiveness of alternative dispute resolution procedures, and report to the finance commission its use of alternative dispute resolution procedures.
Source: The provisions of this §5.103 adopted to be effective January 2, 2020, 44 TexReg 8230.
(a) Policy. It is the policy of the finance commission to use negotiated rulemaking procedures under Texas Government Code, Chapter 2008 and §9.85 of this title (relating to Negotiated Rulemaking).
(b) Coordination and training. The finance agencies will coordinate with each other as reasonable to implement the use of negotiated rulemaking procedures and provide training as needed to implement the use of negotiated rulemaking procedures.
(c) Data collection and reporting. Each finance agency will collect data concerning the effectiveness of negotiated rulemaking procedures, and report to the finance commission its use of negotiated rulemaking procedures.
Source: The provisions of this §5.105 adopted to be effective January 2, 2020, 44 TexReg 8230.
(a) Generally. The finance agencies maintain policies for establishing and administering the sick leave pool and family leave pool of each respective finance agency.
(b) Sick leave pool. A sick leave pool is established to allow employees to transfer accrued sick leave to the pool to be used by employees who are eligible to withdraw time from the pool. The sick leave pool is intended to assist an employee and the employee's immediate family in dealing with a catastrophic illness or injury that forces the employee to exhaust all of the employee's available sick leave.
(1) The Commissioner of each finance agency is designated as the pool administrator for the respective finance agency's sick leave pool.
(2) The pool administrator will maintain operating procedures consistent with the requirements of this subsection and relevant law governing operation of the pool.
(3) Donations to the pool are strictly voluntary.
(c) Family leave pool. A family leave pool is established to allow employees to transfer accrued sick leave or vacation leave to the pool to be used by employees who are eligible to withdraw time from the pool. The family leave pool is intended to provide employees the flexibility to bond with and care for children during a child’s first year following birth, adoption, or foster placement; or to care for a seriously ill family member or the employee, including illnesses or complications resulting from a pandemic.
(1) The Commissioner of each finance agency is designated as the pool administrator for the respective finance agency's family leave pool.
(2) The pool administrator will maintain operating procedures consistent with the requirements of this subsection and relevant law governing operation of the pool.
(3) Donations to the pool are strictly voluntary.
Source: The provisions of this §5.107 adopted to be effective September 8, 2022, 47 TexReg 5332.
(a) This chapter implements Finance Code, Chapter 279, by providing application requirements for a municipality or county that seeks to establish a banking development district in conjunction with a financial institution.
(b) This chapter does not affect or circumvent:
(1) requirements under the Tax Increment Financing Act or the Property Redevelopment and Tax Abatement Act (Tax Code, Chapters 311 and 312, respectively), including requirements for designation of an area as a municipal or county reinvestment zone or for authorization to enter into a tax abatement agreement; or
(2) any required regulatory approval for a financial institution that seeks to establish a branch in a banking development district.
Source: The provisions of this §6.1 adopted to be effective November 5, 2015, 40 TexReg 7621; amended to be effective January 2, 2020, 44 TexReg 8230.
The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise:
(1) "Alternative providers" means check cashers, licensed money transmitters, licensed lenders, and licensed residential mortgage lenders.
(2) "Banking services" include deposit taking, check-cashing, and origination of residential mortgages, commercial mortgages, or other secured or unsecured consumer or commercial loans.
(3) "Branch" means a full-service main office or branch office of a financial institution or credit union.
(4) "Commission" means the Finance Commission of Texas.
(5) "Credit union" means a state or federal credit union.
(6) "Department" means the Texas Department of Banking.
(7) "District" means a banking development district under this chapter.
(8) "Financial institution" means a state or national bank, a state or federal savings bank, or a state or federal savings and loan association.
(9) "Local government" means a municipality or county.
Source: The provisions of this §6.2 adopted to be effective November 5, 2015, 40 TexReg 7621.
(a) Basic application. A local government, in conjunction with a financial institution, may submit an application to the commission for the designation of a proposed banking development district, as provided by §6.4 of this title (relating to Submission and Processing of Application). The application must include the following information to the extent available:
(1) identification of the local government applicant and evidence of the approval of the application by its governing body;
(2) identification of the participating financial institution by type and name, and identification of its primary state and/or federal regulator;
(3) a description of the geographic area comprising the proposed district, including a map that identifies the borders of the proposed district;
(4) a compilation and explanation of the population demographics included within the proposed district, including the number of residents and the percentage of the population that can be described as comprised of, for example, elderly (age 64 and over), disabled, non-English speaking, and identifiable racial, ethnic or other minorities;
(5) a compilation and explanation of economic indicators pertinent to the proposed district, to the extent available, including per capita annual income, median household annual income, unemployment data, percentage of the population at or below the poverty level, and percentage of the population receiving public assistance within the proposed district;
(6) a description of the type and nature of commercial businesses located in the proposed district, including the number and percentage of which constitute small business, as that term is defined by Government Code §2006.001(2);
(7) a compilation and summary of significant business developments within the past three years, including corporate restructurings, plant closings, other business closings, and recent or proposed business openings or expansions;
(8) the location, number, and proximity of sites where banking services are available in or near the proposed district, including branches of financial institutions and credit unions, and deposit-taking ATMs other than those located at branches;
(9) a compilation and description of alternate providers in the proposed district;
(10) a description of the anticipated impact that additional banking services would have on potential economic development within the proposed district.
(b) Optional information. An application for designation of a banking development district may also include:
(1) a description of other local government and community initiatives proposed to be undertaken and coordinated with establishment of the proposed district;
(2) indications of community support or opposition for the application, as evidenced by letters from entities such as local chambers of commerce, local businesses, community-based organizations, non-profit organizations, government officials, or community residents; and
(3) such other information that the applicant believes will demonstrate that the proposed district meets the standards set forth in §6.5 of this title (relating to Criteria for Approval).
Source: The provisions of this §6.3 adopted to be effective November 5, 2015, 40 TexReg 7621.
(a) The application must be submitted to the commission in care of the Texas Department of Banking, 2601 North Lamar Boulevard, Austin, Texas 78705. No filing fee is required.
(b) On or before the 15th day after initial submission of an application, the department shall issue a written notice informing the applicant either that the application is complete and accepted for filing, or that the application is deficient and specific additional information is required. The applicant must supply any additional information requested by the department on or before the 61st day after the date of initial submission of the filing. Upon a finding of good and sufficient cause, the department shall grant an applicant additional time to complete the application. Extensions will be communicated to the applicant before the expiration of the filing period.
(c) After the issuance of written notice informing the applicant that the application is complete and accepted for filing, the department shall evaluate the application to the extent necessary to make a written recommendation to the commission under the criteria set forth in §6.5 of this title. The department shall submit the completed application and the department's recommendation to the commission for decision at the next regularly scheduled meeting of the commission, which must be on or before the 120th day after the date the completed application is accepted for filing.
(d) If the finance commission approves the application, the department shall notify the interested parties as required by Finance Code, §279.055(b).
Source: The provisions of this §6.4 adopted to be effective November 5, 2015, 40 TexReg 7621.
In determining whether to approve an application for the designation of a banking development district, the commission shall take into consideration the following criteria:
(1) the location, number, and proximity of sites where banking services are available in the proposed district;
(2) consumer needs for banking services in the proposed district;
(3) the economic viability and local credit needs of the community in the proposed district;
(4) the existing commercial development in the proposed district;
(5) the impact additional banking services would have on potential economic development in the proposed district;
(6) the physical size and cohesiveness of the proposed district; and
(7) the history of the availability of banking services in the proposed district.
Source: The provisions of this §6.5 adopted to be effective November 5, 2015, 40 TexReg 7621.
(a) A local government that receives approval for a district under this chapter shall notify the department in writing on or before the 21st day after the date:
(1) the financial institution opens a branch in the district and the address of the branch; and
(2) the financial institution closes a branch in the district.
(b) On behalf of the commission, the department may request periodic status reports from the local government in order to ensure that the needs of the community located in the district are being met in an appropriate manner.
Source: The provisions of this §6.6 adopted to be effective November 5, 2015, 40 TexReg 7621.
Subchapter A. General
(a) This chapter governs contested case hearings conducted by an administrative law judge employed or contracted by an agency. All contested case hearings conducted by the State Office of Administrative Hearings (SOAH) are governed by SOAH's procedural rules found at Title 1, Chapter 155 of the Texas Administrative Code and §9.12(b) of this title (relating to Default).(a) The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in Government Code, §2001.003, and the definitions in subsection (b) of this section govern the interpretation of this chapter. If any section of this chapter is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this chapter.
(b) The same rules of construction that apply to interpretation of Texas statutes and codes, the definitions in Government Code, §2001.003, and the definitions in subsection (c) of this section govern the interpretation of this chapter. If any section of this chapter is found to conflict with an applicable and controlling provision of other state or federal law, the section involved shall be void to the extent of the conflict without affecting the validity of the rest of this chapter.
(c) The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
(1) Administrative law judge--The hearings officer employed by or contracted by an agency to conduct administrative hearings for the finance commission, the department of banking, the department of savings and mortgage lending, and the office of consumer credit commissioner.
(2) Agency--The finance commission, the department of banking, the department of savings and mortgage lending, or the office of consumer credit commissioner.
(3) Agency head(s)--Finance commission members, the banking commissioner, the savings and mortgage lending commissioner, or the consumer credit commissioner, or a designee if authorized by law.
(4) Applicant-A party seeking a license, registration, charter, or permit, or to amend its authority under an existing license, registration, charter or permit, or other action from an agency.
(5) Protestant-A party opposing an application for a license, registration, charter, permit, or other action filed with an agency who has paid any filing fees required by an applicable law.
(6) Respondent--A permittee, licensee, registrant, charter holder, or other party against whom a disciplinary proceeding is directed by an agency.
Source: The provisions of this §9.1 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective August 28, 2008, 33 TexReg 6808; amended to be effective January 9, 2011, 35 TexReg 11849; amended to be effective January 7, 2016, 41 TexReg 107, amended to be effective September 7, 2017, 42 TexReg 4459.
(a) Insofar as practicable and except as otherwise provided in this chapter, procedure in contested case hearings will be in accordance with the Texas Rules of Civil Procedure. References in the Texas Rules of Civil Procedure to the "court" or the "judge" will be construed as references to the administrative law judge as the context may require. All documents required by the Texas Rules of Civil Procedure to be filed with the clerk must be filed with the administrative law judge or with a person designated by the administrative law judge.
(b) The agency with jurisdiction over a particular case is a party to that case through its attorney of record. The agency attorney must be served with copies of all notices, orders, pleadings, motions, and correspondence, notified of all hearings and conferences, and has full rights to participate at all stages of the case.
Source: The provisions of this §9.2 adopted to be effective November 13, 1997, 22 TexReg 10951.
A person may not conduct oral or written communications with the administrative law judge regarding an issue of law or fact in a contested case other than on notice to all parties with an opportunity to participate or as otherwise authorized by law. Letters to the administrative law judge must show that copies have been sent to all parties (through counsel if a party is represented by counsel).
Source: The provisions of this §9.3 adopted to be effective November 13, 1997, 22 TexReg 10951.
Subchapter B. Contested Case Hearings
(a) An action subject to this chapter is initiated by the publication or service of such documents or notices as are required to be published or served under the substantive law governing the particular proceeding. Unless other law authorizing a different notice period is applicable to the particular proceeding, all hearings in contested cases must be preceded by at least 10 days notice, as required by Government Code, §2001.051. Applicants and holders of licenses, registrations, charters, and permits shall keep the agency informed as to their correct current mailing addresses and may be served with initial process by registered or certified mail, return receipt requested, to the address furnished the agency. Service of initial process on parties other than licensees, registrants, charter holders, permittees, or applicants (unless applicable law provides otherwise), must be made in the manner provided in the Texas Rules of Civil Procedure for initiating a civil suit.
(b) Notice of a disciplinary proceeding that is required to be preceded by a hearing must be signed by the agency head or administrative law judge and must contain:
(1) an order to appear at a specified time, date, and place;
(2) a statement of the nature of the administrative action to be commenced and the authority under which the administrative action is conducted;
(3) a description in plain language of the specific act(s) or omission(s) asserted as grounds for the contemplated administrative action;
(4) a description of the remedies sought, including the penalties or consequences sought to be imposed;
(5) a disclosure that the respondent is entitled to:
(A) be represented by an attorney of respondent's choice;
(B) directly or through an attorney contest the admissibility of evidence and cross-examine the witnesses against the respondent; and
(C) respond and present evidence and argument in respondent's behalf pursuant to Government Code, §2001.051(2) and §2001.087;
(6) a disclosure that the failure of respondent to appear at the hearing will be considered a waiver of respondent's rights under paragraph (5) of this subsection;
(7) a copy of this chapter included as an attachment;
(8) the name, title, address, and phone number of the person handling the administrative action for the agency and to whom the respondent or the respondent's attorney should direct inquiries regarding additional information, detail, or further discussion or negotiation in connection with the administrative action; and
(9) such other information as may be required under the substantive law governing the particular proceeding.
(c) Notice of an action that is not required to be preceded by a hearing, but that requires a party to be advised of a right to hearing before the action becomes final, must contain a notice that a written request for a hearing under the Administrative Procedure Act must be delivered to the agency by a specific date certain or the administrative action will become final. The notice must explain fully how a hearing may be requested and contain such other information as may be required under the substantive law governing the particular proceeding.
(d) In a case in which restitution is sought, the notice of hearing (or an amended or supplemental notice or pleading served a sufficient time before the hearing to provide respondent with fair notice of the claim and a reasonable opportunity to defend) shall contain, in plain language, pertinent information regarding why the agency seeks restitution, for whom it is sought, the aggregate amount of restitution anticipated, and a citation to the specific statutory provision under which the restitution claim is made. A claim for restitution, like any other notice or pleading under these rules, is subject to a motion for more definite statement.
Source: The provisions of this §9.11 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective January 9, 2011, 35 TexReg 11849.
(a) In-house hearings. In a hearing conducted by an administrative law judge employed or contracted by an agency, if, after served with notice in compliance with §9.11 of this title (relating to Notice and Initiation of Proceedings), a party fails to attend a hearing, the administrative law judge may proceed in that party's absence and, where appropriate, may issue a proposal for decision against that party. The proposal for decision shall be served upon the defaulting party and the party will be afforded the opportunity to contest the law as stated in the proposal for decision, but shall be deemed to have waived the right to contest the evidence, cross-examine the witnesses, and present an affirmative case or defense. In the alternative, an agency may informally dispose of the matter as permitted by §2001.056 of the Texas Government Code, without the necessity of a hearing.
(b) SOAH hearings. In a hearing conducted by the State Office of Administrative Hearings (SOAH), the agency may request that the administrative law judge make a finding of default under 1 TAC §155.501 (relating to Default Proceedings).
(1) Service of notice of hearing. A notice of hearing may be served to the party's last known address. Applicants and holders of licenses, registrations, charters, and permits shall keep the agency informed as to their correct current mailing addresses and may be served with initial process by registered or certified mail, return receipt requested, to the address provided to the agency.
(2) Adequate proof of notice of hearing. At the time of the request, the agency must present adequate proof to the administrative law judge that the agency properly served the party with the notice of hearing, as required by 1 TAC §155.501(b).
(3) Effect of default. If the administrative law judge receives the required showing of proof to support a default, the allegations contained in the notice of hearing may be deemed admitted, and the relief sought in the notice may be granted with respect to any party given proper notice of the hearing.
(4) Disposing of default case. The agency may request that the administrative law judge dismiss the case from the SOAH docket and remand it to the agency for informal disposition as permitted by Texas Government Code, §2001.056 and §2001.058(d-1).
(5) Final order after default. If the administrative law judge issues a conditional order of dismissal and remand that provides the defaulting party with adequate notice and opportunity to set aside the default under 1 TAC §155.501(e) and the conditional order of dismissal and remand has become final, the agency may issue a final order that:
(A) finds that the agency served the party with a notice of hearing stating that if the party failed to attend the hearing, then the allegations contained in the notice of hearing could be deemed admitted, and the relief sought might be granted;
(B) describes how the notice of hearing was served on the party;
(C) finds that the party failed to attend the hearing;
(D) finds that the allegations described in the notice are deemed admitted;
(E) concludes that the party has defaulted as a matter of law; and
(F) grants the relief described in the notice of hearing.
Source: The provisions of this §9.12 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective January 7, 2016, 41 TexReg 107; amended to be effective September 7, 2017, 42 TexReg 4459.
(a) Because contested case procedures are closely modeled upon those used in a court of law, the agency strongly urges but does not require parties to employ attorneys for representation. Only licensed attorneys may file pleadings, make written or oral arguments or objections to evidence, or examine witnesses in agency hearings, except that:
(1) a natural person may appear "pro se" (without an attorney) in his or her own behalf;
(2) a company or an employee of the company may appear through a bona fide officer or employee of the company even if the representative is not a lawyer; and
(3) a party may appear through an out-of-state attorney, qualified law student, or an unlicensed law school graduate under the same conditions as would govern an appearance by the representative in state court.
(b) In making an appearance at an agency hearing, each party and each representative shall obey the same rules of ethics and professional conduct that govern a licensed attorney in this state.
Source: The provisions of this §9.13 adopted to be effective November 28, 1995, 20 TexReg 9407; amended to be effective March 11, 2004, 29 TexReg 2301.
Protests shall be allowed to the extent authorized by law applicable to each agency and type of proceeding. A protestant must include a certificate of service on any protest showing that a copy has been served on the applicant. Every protest must be accompanied by any filing fees required by law.
Source: The provisions of this §9.14 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Every person or entity named or admitted as a party to a contested case has an equal right to participate fully in all stages of the proceeding.
(b) Party status is limited to persons or entities with a legal right, duty, privilege, power, or economic interest that may be directly affected by the outcome of the proceeding or who are entitled to be parties pursuant to a statute or regulation governing the particular proceeding.
(c) Party status will not be conferred on persons or entities that (1) only have an interest in the outcome of the proceeding that is common to members of the general public; (2) seek to litigate issues that are not by statute or regulation made part of the administrative proceeding in which party status is sought; or (3) are not among the persons or entities described by statute or regulation as eligible to participate in the particular type of administrative proceeding in which party status is sought.
(d) The administrative law judge has discretion to allow a member of the general public who has not been admitted as a party to testify under oath or affirmation in a contested case. The administrative law judge may set fair and reasonable conditions on such an appearance, and the testimony shall be subject to cross-examination, challenge and rebuttal. After affording all parties a reasonable opportunity to be heard on this issue, the administrative law judge shall determine the extent, if any, to which a member of the general public who is not a party will be allowed to participate in a contested case.
Source: The provisions of this §9.15 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Required pleadings in agency hearings consist of such applications, protests, notices, or requests for hearing as are required under the substantive law governing each particular type of proceeding.
(b) When an application for an original license or renewal license has been denied based on the applicant's criminal history, the applicant shall have the burden of pleading and proving affirmative defenses to establish that the applicant is entitled to the license under Chapter 53 of the Occupations Code (related to the collateral consequences of a criminal conviction) or any mitigating facts related to the applicant's convictions or deferred adjudications.
(c) In addition, a party may file such other pleadings as the party considers appropriate to fully explain and present the party's side of the case. A party who wishes to raise an "affirmative defense" as defined in Texas Rules of Civil Procedure, Rule 94, must notify the agency in writing at least seven days before the hearing unless the administrative law judge allows a shorter notification period pursuant to Texas Rules of Civil Procedure, Rule 63.
(d) If a pleading is so vague or ambiguous that a party is unable to fully understand what is intended to be placed in issue, the party may move for a more definite statement and the administrative law judge shall grant the motion if it is well taken and direct that a more definite statement be made.
Source: The provisions of this §9.16 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective March 11, 1999, 24 TexReg 1611; amended to be effective August 28, 2008, 33 TexReg 6808.
(a) A party applying to the administrative law judge for an order or ruling shall do so by written motion, plea, or other form of written request unless an oral motion, plea, or request is made during a hearing, conference, or telephone conference call of which all parties had advance notice with a reasonable opportunity to participate. The parties shall send copies of all pleadings and responses subject to this section to one another (through their attorneys if represented by counsel), and shall include a certificate of service on such documents attesting they have done so. Each pleading subject to this section shall specify the grounds on which the relief or order is sought and the legal basis for the relief or order.
(b) The administrative law judge shall allow all parties a reasonable amount of time to be heard before ruling on a pleading subject to this section unless the pleading is for:
(1) a continuance or an extension of time due to an emergency and reasonable attempts to reach opposing counsel have been unsuccessful;
(2) an order to which all parties have agreed; or
(3) a temporary emergency order until a hearing can be held.
(c) The administrative law judge has discretion to order oral or written argument or an evidentiary hearing on a pleading subject to this section as needed to clarify the issues and decide them properly.
(d) An application for a subpoena may be requested and issued ex parte and is not subject to this section.
Source: The provisions of this §9.17 adopted to be effective November 13, 1997, 22 TexReg 10951.
On the administrative law judge's own motion or on the written request of a party to a contested case pending before one of the finance commission agencies, the administrative law judge may issue a subpoena addressed to the sheriff or to a constable to require the attendance of a witness or the production of books, records, papers, or other objects that may be necessary and proper for the purposes of a proceeding if:
(1) good cause is shown; and
(2) for a subpoena requested by a party to a contested case, an amount is deposited that will reasonably ensure payment of the amounts estimated to be due under Government Code, §2001.103.
Source: The provisions of this §9.18 adopted to be effective August 28, 2008, 33 TexReg 6809.
Motions for continuance must be in writing and filed not less than five calendar days prior to the hearing, except for good cause shown. Motions must set forth the specific grounds upon which the moving party seeks continuance, make reference to all similar motions filed in the case, and state whether all parties agree with the continuance. The administrative law judge may not grant a continuance without consultation with all parties except in the event of an emergency after a bona fide effort to reach other parties to the case has been unsuccessful.
Source: The provisions of this §9.19 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Sua sponte or on the motion of any party, the administrative law judge may direct that the parties or their authorized representatives appear at a prehearing conference to consider any of the matters specified in Rule 166, Texas Rules of Civil Procedure (other than those matters having to do with trial by jury).
(b) In the administrative law judge´s discretion, the prehearing conference may be formal or informal, may be conducted in person or by telephone, and may be conducted with or without a court reporter. In the event that no court reporter is used, the administrative law judge shall prepare or may direct the parties to prepare a memorandum encompassing any agreements reached and decisions made.
Source: The provisions of this §9.20 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Parties may use all permissible forms of discovery authorized in the Texas Rules of Civil Procedure in accordance with and subject to the limitations provided therein. A party may apply to the administrative law judge for issuance of a commission to take a deposition only if the parties disagree on its scheduling or scope. Procedures for obtaining a ruling on objections or on a motion to compel compliance with discovery must comply with the Rule of Civil Procedure that relates to the particular form of discovery on which a ruling is sought.
(b) A motion regarding discovery must contain a certificate that efforts to resolve the discovery dispute without intervention by the administrative law judge have been attempted and failed.
(c) Due to space limitations, parties should not file a discovery document with the administrative law judge unless the document contains information material to an issue upon which a ruling is requested or is to be introduced into evidence.
(d) In the interest of justice and for good cause shown, the administrative law judge may enter a discovery order superceding a rule of discovery that might otherwise be applicable.
Source: The provisions of this §9.21 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective March 11, 2004, 29 TexReg 2301.
All exemptions and privileges recognized under Texas law are recognized in agency hearings to the same extent as they are recognized in civil cases in the courts of this state. If a party or witness is asked to reveal privileged material or conversations, the party may make a motion with the administrative law judge for such protective orders as are reasonable and necessary or may refuse to provide the information and assert the privilege in response to a motion to compel. The administrative law judge shall hold such hearings and issue such orders on motions to compel or requests for protective orders as are required by the law applicable to the facts and circumstances of the case.
Source: The provisions of this §9.22 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) At any time after a notice of hearing is issued, a party may move for a summary judgment on all or any part of a claim or defense.
(b) Except as set out in this section, the finance commission agencies adopt, by reference, the summary judgment procedure in Rule 166a, Texas Rules of Civil Procedure. In addition, the following requirements shall also apply:
(1) The administrative law judge shall hear oral argument on all motions for summary judgment unless the judge expressly waives this requirement.
(2) Before filing the motion, the party moving for summary judgment, in consultation with the administrative law judge's clerk, must schedule the motion for submission on oral argument at least 21 days after the date on which it is filed. If there is an applicable statutory deadline by which the agency must hold a hearing, the submission date must be within the deadline unless it has been waived by both parties.
(3) The party moving for summary judgment must serve on all opposing parties, with a copy of the motion for summary judgment, a notice containing the following information:
(A) the time, date, and place when the administrative law judge will hear oral argument on the motion;
(B) disclosure that any party opposing the motion must file affidavits, other written material, and any cross-claims or counterclaims, with the administrative law judge by the close of business seven days before the date of submission on oral argument;
(C) disclosure that the administrative law judge may take the allegations in the motion as true unless contested by opposing parties through affidavits or other written material; and
(D) disclosure that the administrative law judge will not hear any oral testimony related to the motion.
(4) If one of the agencies files the motion for summary judgment, the agency head or the administrative law judge must sign the notice.
(5) In the administrative law judge's discretion, the judge may set the motion for summary judgment on the same date as an evidentiary hearing scheduled in the cause which is the subject of the motion for summary judgment.
(6) The administrative law judge's proposal for decision recommending summary judgment shall be circulated for exceptions, replies to exceptions, and the filing of briefs before it is sent to the agency heads in compliance with §9.34 of this title (relating to Post-hearing Proceedings).
Source: The provisions of this §9.23 adopted to be effective August 28, 2008, 33 TexReg 6809.
§9.24. [Vacant.]
(a) The administrative law judge has authority analogous to that of a district judge sitting without a jury in a civil case and may make such rulings and issue such orders as may be required to provide a fair, just, expeditious, orderly, and proper hearing. Hearings are open to the public, except that matters made confidential by law must be considered in executive session if requested. If an executive session is not requested before confidential evidence is introduced, the confidentiality of such evidence is considered to have been waived.
(b) At the time and place set for hearing, the administrative law judge shall proceed with the hearing as nearly as may be according to the rules of procedure governing the trial of civil cases in the courts of this state. The party with the burden of proof shall present such party's case, followed by other parties in the sequence assigned by the administrative law judge. Each party shall have the opportunity to present such party's case, by calling and examining witnesses, offering documentary evidence, and making legal arguments. Each party shall have the opportunity to contest the admissibility of evidence and cross-examine opposing witnesses on any matter relevant to the issues even if the matter was not covered in direct examination. A party must make an objection to testimony or an evidentiary offer in a timely manner, stating the basis for the objection, or the objection is waived.
(c) In a case involving an original application for a license, the burden of proof is on the applicant. In cases involving an order to cease and desist, the imposition of penalties, the collection of restitution for violations of law, or an agency's failure to renew an existing license, the burden of proof is on the agency.
(d) A party pleading an "affirmative defense" as defined in Texas Rules of Civil Procedure, Rule 94, has the burden to prove that defense.
(e) The assertion that an applicant for an original or renewal license qualifies for the license under Chapter 53 of the Occupations Code (related to the collateral consequences of a criminal conviction) is an affirmative defense. The applicant for the original or renewal license has the burden to prove the satisfaction of the conditions on which the applicant would be entitled to the license under the Occupations Code. The existence of mitigating circumstances related to a criminal conviction is an affirmative defense. The applicant for an original or renewal license has the burden to prove the existence of such mitigating circumstances.
(f) Unless otherwise provided by statute, the burden of proof shall be by a preponderance of the evidence.
(g) If an applicant for an original license application fails to appear at a scheduled hearing and the agency can prove proper service of notice of the hearing, the administrative law judge may deny the application based on the applicant's failure to carry its burden of proof. If the respondent fails to appear at a hearing in which the agency has the burden of proof, the agency attorney must prove actual or constructive service of a notice of hearing and must present evidence sufficient to prove the agency's case. Failure of the respondent to answer or to appear and contest the agency's case may be considered as some evidence supporting an adverse inference that respondent could not defend or rebut the agency's case.
Source: The provisions of this §9.25 adopted to be effective August 28, 2008, 33 TexReg 6809.
(a) The Texas Rules of Evidence, as applied in non-jury cases in the courts of Texas, apply in contested cases under this subchapter. The administrative law judge shall exclude irrelevant, immaterial, or unduly repetitious evidence. When necessary to ascertain facts not reasonably susceptible of proof under those rules, the administrative law judge may admit evidence not admissible under those rules, except where precluded by law, if of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs. Letters and affidavits are not admissible into evidence in contested case hearings unless they satisfy an exception to the hearsay rule or come into evidence without objection.
(b) In cases arising under Occupations Code, Chapter 53 (related to consequences of criminal conviction), letters of recommendation will be considered by a finance agency if submitted during the investigative stage of the licensing proceeding but will not be admitted into evidence at the hearing unless the letter satisfies an exception to the hearsay rule or comes into evidence without objection. A party must arrange to have all character witnesses give testimony in person or, with advance notice to opposing counsel, by phone pursuant to and in accordance with §9.32 of this title (relating to Telephone Hearings).
Source: The provisions of this §9.26 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective November 8, 2007, 32 TexReg 7895; amended to be effective August 28, 2008, 33 TexReg 6808.
The administrative law judge will treat the Texas Administrative Procedure Act exception under Government Code, §2001.081 (providing for the admission of evidence "not admissible under the Texas Rules of Evidence if of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs"), as identical to Federal Rule of Evidence 807, i.e., the administrative law judge will admit evidence pursuant to this exception only if the administrative law judge finds that:
(1) although not covered by any of the exceptions listed in Rule 803, Texas Rules of Evidence, the statement has equivalent circumstantial guarantees of trustworthiness to the exceptions listed in the rule;
(2) the fact the statement is offered to prove is material;
(3) the statement is more probative on the point for which it is offered than any other evidence that the proponent can procure through reasonable efforts;
(4) the interests of justice will be served by the statement´s admission into evidence; and
(5) a reasonable time before the hearing, the statement´s proponent furnished opposing parties with a copy of the statement and the name and address of the declarant (or information regarding where the statement was published) and of the intent of the statement´s proponent to introduce the statement into evidence at the hearing so that opposing parties had a fair opportunity to anticipate the statement and rebut, explain, or contest it.
Source: The provisions of this §9.27 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective March 15, 2007, 32 TexReg 1231.
On the judge's own motion, or the motion of any party, the administrative law judge may omit oral presentation of the direct testimony of any witness and may allow prefiled written testimony to be presented in its place. The written testimony carries the same force and effect as though stated orally by the witness; provided that the witness must be present at the hearing at which such testimony is offered and adopt such testimony under oath, and must be made available for cross-examination. Written reports of agency investigations on fact issues, if offered into evidence in a hearing in which the facts covered by the report are directly at issue, will be treated as prefiled testimony and the investigator must be made available for cross-examination unless the investigator is unavailable to the agency as a witness or unless the report comes into evidence without objection. If the investigator is unavailable to the agency as a witness, the report shall be admissible under Rule 803, Texas Rules of Evidence if it meets the requirements for admission into evidence under that rule. For purposes of this section "unavailability as a witness" has the same meaning as in Rule 804(a), Texas Rules of Evidence.
Source: The provisions of this §9.28 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective January 8, 2009, 34 TexReg 42.
Parties may by written stipulation, or by oral stipulation on the record, agree upon the facts and their stipulation may be regarded and used as evidence at the hearing. The administrative law judge in such cases may require any additional evidence necessary to establish the facts to the administrative law judge's satisfaction.
Source: The provisions of this §9.29 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective August 28, 2008, 33 TexReg 6808.
The administrative law judge may take official notice of judicially cognizable facts, and of generally recognized facts within the area of the agency´s specialized knowledge. A party that desires the administrative law judge to take official notice of particular facts must make a motion that the administrative law judge do so, stating with specificity the facts, material, records, or documents encompassed in the motion. A party who opposes the motion will have the opportunity to contest the requested action. The administrative law judge may also sua sponte take official notice of facts, material, records, or documents on giving the parties an opportunity to contest the facts, material, records, or documents to be officially noticed.
Source: The provisions of this §9.30 adopted to be effective November 13, 1997, 22 TexReg 10951.
In all proceedings when requested by the administrative law judge, the agency, or by any party, a court reporter shall make a stenographic record of the hearing.
Source: The provisions of this §9.31 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Sua sponte or on motion of any party and a showing of good cause, after reasonable notice to all parties to allow them to object and argue against the procedure, the administrative law judge may conduct all or part of a hearing by telephone or other electronic means. In determining whether to allow testimony by telephone or other electronic means, the administrative law judge shall consider all relevant factors including whether the motion is opposed, the cost and feasibility of the witness being present at the hearing instead of appearing by telephone or other electronic means, the nature and duration of the expected testimony, the nature of any exhibits expected to be introduced through the witness, whether there is a good reason that the witness is unavailable to testify in person, and the extent to which the demeanor and credibility of the witness are likely to be significant factors in weighing the witness' testimony. In deciding a motion under this section, the administrative law judge shall ensure that substantive and procedural rights of all parties are respected.
(b) Documentary evidence to be offered during a telephone hearing must be delivered by the proponent to all parties and to the administrative law judge prior to hearing.
(c) In a telephone hearing, the administrative law judge may consider the following as a failure to appear if the conditions exist for more than 20 minutes after the scheduled time for hearing:
(1) failure to answer the telephone;
(2) failure to free the telephone for a hearing; or
(3) failure to be ready to proceed with the hearing as scheduled.
Source: The provisions of this §9.32 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective January 9, 2011, 35 TexReg 11849.
The administrative law judge may arrange for the services of a qualified mediator to work with the parties and attempt to bring about a settlement. The administrative law judge may assess costs of the mediator´s services against the parties in the same manner as other costs or may require advance payment. The mediation ends when successful or when a party decides that such party no longer wishes to participate in the mediation. The parties shall immediately inform the administrative law judge when the mediation ends. An offer to compromise or a statement made during mediation may not be admitted into evidence or considered for any purpose in the hearing of a case in which mediation was attempted.
Source: The provisions of this §9.33 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Following the hearing the administrative law judge upon request shall give the parties an opportunity to file written briefs and proposed findings of fact and conclusions of law. Pursuant to Government Code, §2001.062, the administrative law judge shall review these materials and all evidence and testimony, and prepare a proposal for decision containing a statement of the reasons for the proposed decision and of each finding of fact and conclusion of law necessary to the proposed decision. The administrative law judge shall also prepare a proposed final order for the agency head to sign adopting the proposed decision. Upon completion, the administrative law judge shall serve copies of the proposal for decision and proposed final order on all parties and give each adversely affected party an opportunity to file exceptions and present briefs. If a party files exceptions or presents briefs, the administrative law judge shall give an opportunity to other parties to file replies to the exceptions or briefs. Exceptions, replies to exceptions, and related briefs must be filed within deadlines established by the administrative law judge. The administrative law judge may amend the proposal for decision and proposed final order in response to the exceptions, replies, or briefs submitted. If the administrative law judge makes substantive revisions, the administrative law judge shall circulate the amended proposal for decision and proposed final order to the parties for additional exceptions and briefs before submitting the proposal for decision and the proposed final order based thereon to the agency head(s) for approval.
(b) After the administrative law judge has circulated the proposal for decision and proposed order to the parties and the parties have had an opportunity to file exceptions and briefs in the manner provided in subsection (a) of this section, the administrative law judge shall submit the proposal for decision and proposed order together with all materials listed in Government Code, §2001.060, to the agency head(s) for review. No additional briefs may be submitted after the case is under submission to the agency head(s) for decision unless requested by the agency head(s). The agency head(s) may:
(1) adopt the proposal for decision and proposed final order, in whole or in part;
(2) modify and adopt the proposal for decision and proposed final order, in whole or in part;
(3) decline to adopt the proposal for decision and proposed final order, in whole or in part;
(4) remand the proceeding for further examination by the administrative law judge, including for the limited purpose of receiving additional briefing or evidence from the parties on specific issues; or
(5) take another lawful and appropriate action with regard to the case.
(c) If a court renders a decision that may be pertinent to the outcome of the case after it is under submission to the agency head, a party may direct the agency´s attention to such decision by a cover letter transmitting a copy of the decision to the administrative law judge and agency head(s) (at the same time furnishing a copy to opposing parties). The cover letter may reference the case to which the decision pertains but may not contain arguments.
(d) If remand pursuant to subsection (b) of this section results in a substantially revised proposal for decision and order, the administrative law judge shall circulate the revised proposal for decision and order to the parties for additional exceptions and replies in the manner provided by subsection (a) of this section. After the parties have had an opportunity to file additional exceptions and replies, the administrative law judge shall submit the revised proposal for decision and order, together with the supplemental record, to the agency head(s) for consideration in the manner provided by subsection (b) of this section.
Source: The provisions of this §9.34 adopted to be effective November 13, 1997, 22 TexReg 10951; amended to be effective July 2, 1998, 23 TexReg 6714.
Following notice to all affected parties and the opportunity for hearing, the administrative law judge with the consent of the agency head may dismiss any contested case, with or without prejudice, under such conditions and for such reasons as are found just and reasonable, including the following:
(1) failure to prosecute;
(2) unnecessary duplication of proceedings or res judicata;
(3) withdrawal;
(4) moot questions or obsolete petitions;
(5) lack of jurisdiction;
(6) abuse of discovery;
(7) refusal to observe proper decorum or obey orders of the administrative law judge made within the scope of authority; or
(8) if necessary in the interest of justice.
Source: The provisions of this §9.35 adopted to be effective November 13, 1997, 22 TexReg 10951.
To preserve decorum and ensure the orderly administration of hearings conducted on behalf of the finance commission agencies, the administrative law judge may expel a person from a contested case hearing and impose appropriate sanctions if that person engages in conduct that disrupts the hearing.
Source: The provisions of this §9.36 adopted to be effective November 13, 1997, 22 TexReg 10951.
(a) Sua sponte or on motion of a party and after notice and an opportunity for a hearing and subject to approval by the agency head on behalf of which the hearing is being conducted, the administrative law judge may impose appropriate sanctions as provided by subsection (b) of this section against a party or its representative for:
(1) filing a motion or pleading that is groundless and brought:
(A) in bad faith;
(B) for the purpose of harassment; or
(C) for any other improper purpose, such as to cause unnecessary delay or needless increase in the cost of the proceeding;
(2) abuse of the discovery process in seeking, making, or resisting discovery; or
(3) failure to obey an order of the administrative law judge.
(b) A sanction imposed under subsection (a) of this section may include, as appropriate and justified, issuance of an order:
(1) disallowing further discovery of any kind or of a particular kind by the offending party;
(2) charging all or any part of the expenses of discovery against the offending party or its representatives;
(3) holding that designated facts be considered admitted for purposes of the proceeding;
(4) refusing to allow the offending party to support or oppose a designated claim or defense or prohibiting the party from introducing designated matters in evidence;
(5) disallowing in whole or in part requests for relief by the offending party and excluding evidence in support of those requests;
(6) striking pleadings or testimony, or both, in whole or in part; or
(7) imposing any other sanction that the agency head with jurisdiction in the case could have imposed if the agency head had personally presided in hearing the case.
Source: The provisions of this §9.37 adopted to be effective November 13, 1997, 22 TexReg 10951.
The administrative law judge may allocate costs incurred by the agency among the parties in accordance with applicable law. Notwithstanding any other provision of agency rules, the administrative law judge may impose costs that are solely or primarily attributable to a particular party against that party.
Source: The provisions of this §9.38 adopted to be effective November 13, 1997, 22 TexReg 10951.
The agency may dispose of exhibits after a case is final in the manner provided in Texas Rules of Civil Procedure, Rule 14b, and the order of the Texas Supreme Court adopted pursuant to Rule 14b effective January 1, 1988.
Source: The provisions of this §9.39 adopted to be effective March 11, 1999, 24 TexReg 1611.
Subchapter C. Court Appeals
Appeals to the courts shall be as provided by statute and applicable case law.
Source: The provisions of this §9.71 adopted to be effective November 28, 1995, 20 TexReg 9407.
The party appealing an agency order to the courts must pay the agency the cost of preparing the copy of the record that is to be transmitted to the reviewing court at rates approved by the Office of the Attorney General. If more than one party appeals the agency's order, the cost of the preparation of the record may be divided equally among the appealing parties or as agreed by the parties.
Source: The provisions of this §9.72 adopted to be effective November 28, 1995, 20 TexReg 9407; amended to be effective January 9, 2011, 35 TexReg 11849.
Subchapter D. Rulemaking
Rulemaking proceedings must comply with Government Code, Chapter 2001, Subchapter B (§§2001.021 et seq).
Source: The provisions of this §9.81 adopted to be effective November 28, 1995, 20 TexReg 9407; amended to be effective March 12, 1998, 23 TexReg 2285.
(a) Petitions to initiate rulemaking proceedings pursuant to Texas Government Code, §2001.021, must be submitted to the agency in writing. A petition must include:
(1) a brief explanation of the proposed rule;
(2) the full text of the proposed rule, and, if the petition is to modify an existing rule, the text of the proposed rule prepared in the same manner as an amendment to legislation that clearly identifies any words to be added or deleted from the existing text by underlining new language and striking through language to be deleted;
(3) a concise explanation of the legal authority to adopt the proposed rule, including a specific reference to the particular statute or other authority that authorizes it;
(4) an explanation of how the public would be benefitted by the adoption of the proposed rule;
(5) all available data or information showing a need for the proposed rule;
(6) any request to engage in negotiated rulemaking under §9.85 of this title (relating to Negotiated Rulemaking); and
(7) such other or additional information as the agency may request.
(b) An agency receiving a petition under subsection (a) of this section will present to the finance commission the petition and the agency's recommendation.
(c) The finance commission will vote to initiate a rulemaking proceeding, or to deny the petition and state the reasons for the denial.
Source: The provisions of this §9.82 adopted to be effective November 28, 1995, 20 TexReg 9407; amended to be effective January 2, 2020, 44 TexReg 8231.
(a) When the agency receives a rulemaking petition, the agency shall review it for compliance with the requirements of §9.82 of this title (relating to Petitions To Initiate Rulemaking). If the petition is determined to comply, the agency shall notify the applicant that it has been accepted for filing and the petition will be processed in accord with Government Code, §2001.021(c). If the petition is determined not to comply, the agency shall notify the applicant in writing of all deficiencies found and give the petitioner an opportunity to cure them by filing an amended petition. If no amended petition curing the deficiencies is filed with the agency by 5:00 p.m. on the 15th day following the date that the agency mailed a notice of deficiencies to the applicant, the petition shall be deemed denied for the reasons stated in the deficiency notice without the necessity of further action.
(b) If a petition is accepted for filing, within 60 days of the date that the petition was accepted for filing, the agency must either deny the petition for reasons stated in writing or initiate a rulemaking proceeding.
Source: The provisions of this §9.83 adopted to be effective November 28, 1995, 20 TexReg 9407.
(a) The agency shall grant an opportunity for a public hearing before adoption of any proposed rule as required by Government Code, §2001.029(b), or other applicable statute.
(b) The hearing may be held by the agency head(s) or by the administrative law judge or by any other person designated by the agency head(s). In the exercise of discretion, the agency head(s) may impose reasonable time limits on presentation of evidence and argument, determine the order of the presentations, and conduct the hearing in a manner suitable to the particular proceeding. Public hearings on proposed rules are neither contested cases nor full legal adversary proceedings. Ex parte prohibitions do not apply.
Source: The provisions of this §9.84 adopted to be effective November 28, 1995, 20 TexReg 9407; amended to be effective March 12, 1998, 23 TexReg 2285.
(a) Initiation of process. An agency may propose to engage in negotiated rulemaking process pursuant to Texas Government Code, Chapter 2008 if:
(1) the finance commission votes to initiate a rulemaking proceeding under §9.82 of this title (relating to Petitions To Initiate Rulemaking) that includes negotiated rulemaking; or
(2) the agency determines that drafting the proposed rule might benefit from the negotiated rulemaking process.
(b) Appointment of a convener. Upon proposing a negotiated rulemaking process under subsection (a) of this section, the agency will appoint a convener to assist in determining whether it is advisable to proceed with negotiated rulemaking. The convener will be appointed pursuant to, and perform the duties described by, Texas Government Code, §2008.052.
(c) Notice of negotiated rulemaking. If the agency decides to engage in negotiated rulemaking after considering the convener's recommendation and report, then the agency will publish timely notice of its intent on its website and with the secretary of state for publication in the Texas Register in compliance with Texas Government Code, §2008.053.
(d) Appointment of facilitator and committee. The agency will appoint a facilitator and members of the negotiated rulemaking committee to carry out the duties described in Texas Government Code, §2008.056.
(e) Adoption of rule. The finance commission may adopt, amend, or refuse to adopt a rule created through the negotiated rulemaking process in its sole discretion.
Source: The provisions of this §9.85 adopted to be effective January 2, 2020, 44 TexReg 8231.
Subchapter A. Negotiation and Mediation
This subchapter governs the negotiation and mediation of a claim of breach of contract asserted by a contractor against a Finance Unit of state government, under Government Code, Chapter 2260.
Source: The provisions of this §10.1 adopted to be effective November 7, 2010, 35 TexReg 9694.
The following words and terms, when used in this chapter, shall have the following meaning, unless the context clearly indicates otherwise:
(1) Chief administrative officer--The commissioner, executive director, president or other executive officer responsible for the day to day operations of a unit of state government, or that person's designee.
(2) Commission--The Finance Commission of Texas.
(3) Contract Protest Officer--The person or persons assigned by a Finance Unit to resolve disputes over the solicitation, evaluation, or award of a contract.
(4) Contractor--Independent contractor who has entered into a contract directly with a Finance Unit of state government. The term does not include:
(A) A contractor's subcontractor, officer, employee, agent, or other person furnishing goods or services to a contractor;
(B) An employee of a Finance Unit of state government; or
(C) A student at an institution of higher education.
(5) Day--A calendar day. If an act is required to occur on a day falling on a Saturday, Sunday, or holiday, the first working day which is not one of these days should be counted as the required day for purpose of this chapter.
(6) Finance Agency--The Texas Department of Banking, the Department of Savings and Mortgage Lending, or the Office of Consumer Credit Commissioner.
(7) Finance Unit of state government or Finance Unit--The Commission or any of the Finance Agencies.
(8) Interested parties--All vendors who have submitted bids, proposals or other expressions of interest for the provision of goods or services pursuant to a contract with a Finance Unit of state government.
(9) Parties--The contractor and Finance Unit of state government that have entered into a contract in connection with which a claim of breach of contract has been filed under this subchapter.
(10) Unit of state government--The state or an agency, department, commission, bureau, board, office, council, court, or other entity that is in any branch of state government and that is created by the constitution or a statute of this state, including a university system or institution of higher education. The term does not include a county, municipality, court of a county or municipality, special purpose district, or other political subdivision of this state.
Source: The provisions of this §10.2 adopted to be effective November 7, 2010, 35 TexReg 9694.
The procedures contained in this subchapter are exclusive and required prerequisites to suit under the Civil Practice and Remedies Code, Chapter 107, and the Government Code, Chapter 2260.
Source: The provisions of this §10.3 adopted to be effective November 7, 2010, 35 TexReg 9694.
This subchapter does not waive a Finance Unit of state government's sovereign immunity to suit or liability.
Source: The provisions of this §10.4 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) A contractor asserting a claim of breach of contract under the Government Code, Chapter 2260, shall file notice of the claim as provided by this section.
(b) The notice of claim shall:
(1) be in writing and signed by the contractor or the contractor's authorized representative;
(2) be delivered by hand, certified mail return receipt requested, or other verifiable delivery service, to the officer of the Finance Unit of state government designated in the contract to receive a notice of claim of breach of contract under the Government Code, Chapter 2260; if no person is designated in the contract, the notice shall be delivered to the Finance Unit's chief administrative officer; and
(3) state in detail:
(A) the nature of the alleged breach of contract, including the date of the event that the contractor asserts as the basis of the claim and each contractual provision allegedly breached;
(B) a description of damages that resulted from the alleged breach, including the amount and method used to calculate those damages; and
(C) the legal theory of recovery, i.e., breach of contract, including the relationship between the alleged breach and the damages claimed.
(c) The notice of claim shall be delivered no later than 180 calendar days after the date of the event that the contractor asserts as the basis of the claim.
Source: The provisions of this §10.5 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) A Finance Unit of state government asserting a counterclaim under the Government Code, Chapter 2260, shall file notice of the counterclaim as provided by this section.
(b) The notice of counterclaim shall:
(1) be in writing;
(2) be delivered by hand, certified mail return receipt requested or other verifiable delivery service to the contractor or representative of the contractor who signed the notice of claim of breach of contract; and
(3) state in detail:
(A) the nature of the counterclaim;
(B) a description of damages or offsets sought, including the amount and method used to calculate those damages or offsets; and
(C) the legal theory supporting the counterclaim.
(c) The notice of counterclaim shall be delivered to the contractor no later than 60 calendar days after the Finance Unit of state government's receipt of the contractor's notice of claim.
(d) Nothing in this subchapter precludes the Finance Unit of state government from initiating a lawsuit for damages against the contractor in a court of competent jurisdiction.
Source: The provisions of this §10.6 adopted to be effective November 7, 2010, 35 TexReg 9694.
The parties shall negotiate in accordance with the timetable set forth in §10.8 of this subchapter (relating to Timetable) to attempt to resolve all claims and counterclaims filed under this subchapter. No party is obligated to settle with the other party as a result of the negotiation.
Source: The provisions of this §10.7 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) Following receipt of a contractor's notice of claim, the chief administrative officer of the Finance Unit of state government or other designated representative shall review the contractor's claim and the Finance Unit's counterclaim, if any, and initiate negotiations with the contractor to attempt to resolve the claim and counterclaim.
(b) Subject to subsection (c) of this section, the parties shall begin negotiations no later than 120 calendar days following the date the Finance Unit of state government receives the contractor's notice of claim.
(c) The Finance Unit of state government may delay negotiations until after the 180th day after the date of the event giving rise to the claim of breach of contract by:
(1) delivering written notice to the contractor that the commencement of negotiations will be delayed; and
(2) delivering written notice to the contractor when the Finance Unit of state government is ready to begin negotiations.
(d) The parties may conduct negotiations according to an agreed schedule as long as they begin negotiations no later than the applicable deadlines set forth in subsections (b) or (c) of this section, whichever is applicable.
(e) Subject to subsection (f) of this section, the parties shall complete the negotiations that are required by this subchapter as a prerequisite to a contractor's request for contested case hearing no later than 270 days after the Finance Unit of state government receives the contractor's notice of claim.
(f) The parties may agree in writing to extend the time for negotiations on or before the 270th day after the Finance Unit of state government receives the contractor's notice of claim. The agreement shall be signed by representatives of the parties with authority to bind each respective party.
(g) The contractor may request a contested case hearing before the State Office of Administrative Hearings (SOAH) pursuant to §10.13 of this title (relating to Request for Contested Case Hearing) after the 270th day after the Finance Unit of state government receives the contractor's notice of claim, or the expiration of any extension agreed to under subsection (f) of this section.
(h) The parties may agree to mediate the dispute at any time before the 120th day after the Finance Unit of state government receives the contractor's notice of claim and before the expiration of any extension agreed to by the parties pursuant to subsection (f) of this section. The mediation shall be governed by §§10.14 - 10.21 of this subchapter.
(i) Nothing in this section is intended to prevent the parties from commencing negotiations earlier than the deadlines established in subsections (b) and (c) of this section, or from continuing or resuming negotiations after the contractor requests a contested case hearing before SOAH.
Source: The provisions of this §10.8 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) Negotiation is a consensual bargaining process in which the parties attempt to resolve a claim and counterclaim. A negotiation under this subchapter may be conducted by any method, technique, or procedure authorized under the contract or agreed upon by the parties. The parties may conduct negotiations with the assistance of one or more neutral third parties. The parties may choose to mediate their dispute in accordance with §§10.14 - 10.21 of this subchapter.
(b) To facilitate meaningful evaluation and negotiation of the claims and any counterclaims, the parties may exchange relevant documents that support their respective claims, defenses, counterclaims or positions.
Source: The provisions of this §10.9 adopted to be effective November 7, 2010, 35 TexReg 9694.
The parties' settlement approval procedures shall be disclosed prior to, or at the beginning of negotiations. To the extent possible, the parties shall select negotiators who are knowledgeable about the subject matter of the dispute, who are in a position to reach agreement and who can credibly recommend approval of an agreement.
Source: The provisions of this §10.10 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) A settlement agreement may resolve an entire claim or any designated and severable portion of a claim.
(b) To be enforceable, a settlement agreement must be in writing and signed by representatives of the contractor and the Finance Unit of state government who have authority to bind each respective party.
(c) A partial settlement does not waive a contractor's rights under the Government Code, Chapter 2260, as to the parts of the claim that are not resolved.
Source: The provisions of this §10.11 adopted to be effective November 7, 2010, 35 TexReg 9694.
Unless the parties agree otherwise, each party shall be responsible for its own costs incurred in connection with a negotiation, including, without limitation, the costs or fees for attorneys, consultants and experts.
Source: The provisions of this §10.12 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) If a claim of breach of contract is not resolved in its entirety through negotiation or mediation in accordance with this subchapter on or before the 270th day after the Finance Unit of state government receives the notice of claim, or after the expiration of any extension agreed to by the parties pursuant to §10.8(f) of this subchapter (relating to Timetable), the contractor may file a request with the Finance Unit of state government for a contested case hearing before SOAH.
(b) A request for a contested case hearing shall state the legal and factual basis for the claim, and shall be delivered to the chief administrative officer of the Finance Unit of state government within a reasonable time after the 270th day or the expiration of any written extension agreed to pursuant to §10.8(f) of this subchapter.
(c) The Finance Unit of state government shall forward the contractor's request for a contested case hearing to SOAH within a reasonable period of time, not to exceed thirty days, after receipt of the request.
(d) The parties may agree to submit the case to SOAH before the 270th day after the notice of claim is received by the Finance Unit of state government if they have achieved a partial resolution of the claim or if an impasse has been reached in the negotiations and proceeding to a contested case hearing would serve the interests of justice.
Source: The provisions of this §10.13 adopted to be effective November 7, 2010, 35 TexReg 9694.
The parties may agree to mediate a claim through an impartial third party. For purposes of this subchapter, "mediation" is assigned the meaning set forth in the Civil Practice and Remedies Code, §154.023. The mediation is subject to the provisions of the Governmental Dispute Resolution Act, Government Code, Chapter 2009. The parties may be assisted in the mediation by legal counsel or another individual.
Source: The provisions of this §10.14 adopted to be effective November 7, 2010, 35 TexReg 9694.
The mediator shall possess the qualifications required under the Civil Practice and Remedies Code, §154.052, be subject to the standards and duties prescribed by the Civil Practice and Remedies Code, §154.053 and have the qualified immunity prescribed by the Civil Practice and Remedies Code §154.055, if applicable.
Source: The provisions of this §10.15 adopted to be effective November 7, 2010, 35 TexReg 9694.
(a) A mediation conducted under this subchapter is confidential in accordance with the Government Code, §2009.054.
(b) The confidentiality of a final settlement agreement to which a Finance Unit of state government is a signatory that is reached as a result of the mediation is governed by the Public Information Act, Government Code, Chapter 552.
Source: The provisions of this §10.16 adopted to be effective November 7, 2010, 35 TexReg 9694.
Unless the parties agree otherwise in writing, each party shall be responsible for its own costs incurred in connection with a mediation, including without limitation, costs of document reproduction, fees for attorneys, consultants and experts, and the cost of the mediator shall be divided equally between the parties.
Source: The provisions of this §10.17 adopted to be effective November 7, 2010, 35 TexReg 9694.
The parties' settlement approval procedures shall be disclosed by the parties prior to the mediation. To the extent possible, the parties shall select representatives who are knowledgeable about the subject matter of the dispute, who are in a position to reach agreement, and who can credibly recommend approval of an agreement.
Source: The provisions of this §10.18 adopted to be effective November 7, 2010, 35 TexReg 9694.
Any settlement agreement reached during a mediation shall be signed by representatives of the contractor and the Finance Unit of state government, and shall describe any procedures that the parties must follow to obtain final and binding approval of the agreement.
Source: The provisions of this §10.19 adopted to be effective November 7, 2010, 35 TexReg 9694.
A final settlement agreement reached during or as a result of a mediation that resolves an entire claim or counterclaim, or any designated and severable portion of a claim or counterclaim, shall comply with §10.11 of this subchapter (relating to Settlement Agreement).
Source: The provisions of this §10.20 adopted to be effective November 7, 2010, 35 TexReg 9694.
If mediation does not resolve the claim to the satisfaction of the contractor, the contractor may request that the claim be referred to SOAH in accordance with §10.13 of this subchapter (relating to Request for Contested Case Hearing.)
Source: The provisions of this §10.21 adopted to be effective November 7, 2010, 35 TexReg 9694.
Subchapter B. Contract Protests
(a) Any actual or prospective bidder, offeror, or contractor who is aggrieved in connection with the solicitation, evaluation, or award of a contract by any Finance Unit of state government may formally protest to the Finance Unit. Such protests must be made in writing and received by the Chief Administrative Officer of the Finance Unit within 10 working days after the protesting party knows, or should have known, of the occurrence of the action that is protested. Formal protests must conform to the requirements of this section. The protesting party must mail or deliver copies of the protest to all other interested parties.
(b) In the event of a timely protest under this section, the Finance Unit of state government shall not proceed further with the solicitation or award of the contract unless the Chief Administrative Officer of such Finance Unit makes a written determination that the contract must be awarded without delay, to protect the best interests of the state.
(c) A formal protest must be sworn and contain:
(1) a specific identification of the statutory or regulatory provision that the protesting party alleges has been violated;
(2) a specific description of each action by the Finance Unit of state government that the protesting party alleges to be a violation of the statutory or regulatory provision that the protesting party has identified pursuant to paragraph (1) of this subsection;
(3) a precise statement of the relevant facts;
(4) a statement of any issues of law or fact that the protesting party contends must be resolved;
(5) a statement of the argument and authorities that the protesting party offers in support of the protest; and
(6) a statement that copies of the protest have been mailed or delivered to all other identifiable interested parties.
(d) The Contract Protest Officer of the Finance Unit of state government may settle and resolve the dispute over the solicitation or award of a contract at any time before the matter is submitted on appeal to the Chief Administrative Officer of the Finance Unit. The Contract Protest Officer of the Finance Unit of state government may solicit written responses to the protest from other interested parties.
(e) If the protest is not resolved by mutual agreement, the Contract Protest Officer of the Finance Unit of state government shall issue a written determination that resolves the protest.
(1) If the Contract Protest Officer of the Finance Unit of state government determines that no violation of statutory or regulatory provisions has occurred, then the Contract Protest Officer shall inform the protesting party and other interested parties by letter that sets forth the reasons for the determination.
(2) If the Contract Protest Officer of the Finance Unit of state government determines that a violation of any statutory or regulatory provisions has occurred in a situation in which a contract has not been awarded, then the Contract Protest Officer of the Finance Unit shall inform the protesting party and other interested parties of that determination by letter that details the reasons for the determination and the appropriate remedy.
(3) If the Contract Protest Officer of the Finance Unit of state government determines that a violation of any statutory or regulatory provisions has occurred in a situation in which a contract has been awarded, then the Contract Protest Officer of the Finance Unit shall inform the protesting party and other interested parties of that determination by letter that details the reasons for the determination. This letter may include termination of the contract.
(f) The protesting party may appeal a determination of a protest by the Contract Protest Officer of the Finance Unit of state government to the Chief Administrative Officer of the Finance Unit. An appeal of the Contract Protest Officer's determination must be in writing and received in the office of the Chief Administrative Officer of the Finance Unit by not later than 10 working days after the date on which written notice of determination was sent. The scope of the appeal shall be limited to review of the Contract Protest Officer's determination. The protesting party must mail or deliver to all other interested parties a copy of the appeal, which must contain a certified statement that such copies have been provided.
(g) A written decision that the Chief Administrative Officer has issued shall be the final administrative action of the Finance Unit of state government.
(h) The Finance Unit of state government shall maintain all documentation on the purchasing process that is the subject of a protest or appeal in accordance with the retention schedule of the Finance Unit.
Source: The provisions of this §10.30 adopted to be effective November 7, 2010, 35 TexReg 9694.
Subchapter C. Contract Monitoring
(a) Purpose. Under Texas Government Code, §2261.253, the finance agencies apply the following procedures concerning contracts for the purchase of goods or services from private vendors.
(b) Applicability.
(1) Finance agencies. This section applies to the agencies governed by the Finance Commission of the State of Texas: the Texas Department of Banking, the Texas Department of Savings and Mortgage Lending, and the Office of Consumer Credit Commissioner.
(2) Date of contracts subject to enhanced monitoring. This section applies to the following:
(A) contracts for which the request for bids or proposal is made public on or after September 1, 2015; and
(B) for contracts exempt from competitive bidding, contracts entered into on or after September 1, 2015.
(3) Documents not subject to enhanced monitoring. This section does not apply to:
(A) memoranda of understanding;
(B) interagency contracts;
(C) interlocal agreements; or
(D) contracts that do not involve a cost.
(c) Contract evaluation and monitoring.
(1) Use of finance agency policies and contract management handbook. Contracts are evaluated and monitored in accordance with each respective finance agency's policies and contract management handbook. Each finance agency maintains a contract management handbook in accordance with Texas Government Code, §2261.256.
(2) Finance Commission notice. If a finance agency identifies a contract that requires enhanced monitoring, the finance agency will notify the Finance Commission in accordance with its policies and contract management handbook. The finance agency will include in the notification any serious issues or risks identified with the contract.
(d) Website posting.
(1) Posting on finance agency website. Each finance agency will post on its website contracts that meet the posting requirements provided by Texas Government Code, §2261.253(a).
(2) Redaction of confidential information. Before posting the contracts under paragraph (1) of this subsection, each finance agency must redact information that is confidential by law, information excepted from public disclosure by the Texas Public Information Act (Texas Government Code, Chapter 552), and the social security number of any individual in accordance with Texas Government Code, §2261.253(e).
Source: The provisions of this §10.40 adopted to be effective March 8, 2018, 43 TexReg 1257
Subchapter A. General
(a) "Complainant" means a person who files a complaint or inquiry.
(b) "Complaint" means a written communication submitted to the department by a person that alleges misconduct by a person believed to be engaging in an activity that is regulated by the department. For purposes of this subchapter, a complaint shall contain at least the following information:
(1) the complainant's name and contact information;
(2) the name of the entity against whom the complaint is submitted;
(3) the date and place of the alleged violation;
(4) a description of the facts or conduct alleged to violate applicable statutes or rules; and
(5) written documentation supporting the complaint.
(c) "Inquiry" means a communication made to the department about an entity believed to be engaging in an activity that is regulated by the department, but such communication does not include all of the required elements of a complaint.
Source: The provisions of this §11.10 adopted to be effective September 8, 2019, 44 TexReg 4706.
(a) Complaints and inquiries filed with the department are generally considered public information, unless a specific statutory exception applies.
(b) Upon receipt of a complaint or inquiry, the department will make a good faith effort to protect complainant's identity to the extent possible. The department will determine if the complaint or inquiry relates to an activity that the department regulates.
(c) If the department does not regulate the activity that is the subject of the complaint or inquiry, the department shall close the complaint or inquiry, notify the complainant and refer the complaint or inquiry to the appropriate regulatory entity within five business days of receiving the complaint or inquiry, if known.
(d) If the department regulates the activity that is the subject of a complaint, the department shall initiate an investigation into the merits of the complaint by sending, within 10 business days of receiving the complaint, a copy of the complaint and any supporting documentation to the entity that is the subject of the complaint.
(e) The department shall prioritize complaints for purposes of determining the order in which complaints are investigated, taking into account the seriousness of the allegations made in a complaint and the length of time a complaint has been pending.
(f) A regulated entity that receives a complaint forwarded by the department shall respond within 30 days from the date the request is mailed by the department.
(g) The banking commissioner may appoint a hearings officer or other subject matter expert to investigate a complaint received by the department.
(h) The department may, at the discretion of the commissioner, arrange for the services of a qualified mediator or subject matter expert to assist in resolving the complaint.
(i) The department shall monitor how long each complaint is open, and shall make all reasonable efforts to resolve complaints within 90 days of receipt. The department shall notify the complainant of their complaint status at least quarterly if more than 45 days have elapsed since the complaint was received.
(j) If the department determines that the complaint is not supported by the evidence, or if the complaint is resolved to the satisfaction of the parties, the complaint will be dismissed.
(k) The department shall notify all parties to the complaint within 10 business days of closing the complaint.
(l) A complainant who disagrees with the disposition of a complaint may appeal by filing a petition against the department in a district court in Travis County.
Source: The provisions of this §11.11 adopted to be effective September 8, 2019, 44 TexReg 4706.
(a) The department shall maintain in accordance with its retention policy records of all complaints received. Such records shall include the information required in Finance Code, §12.108.
(b) A representative sample of complaints closed due to lack of jurisdiction or evidence shall be reviewed quarterly by the head of the division that received the complaint.
(c) At least quarterly, the department shall submit to the Finance Commission a report of the sources, subjects, types, and dispositions of complaint activity during the preceding period.
Source: The provisions of this §11.12 adopted to be effective September 8, 2019, 44 TexReg 4706.
(a) Definitions
(1) "Consumer" means an individual who obtains or has obtained a product or service from you that is to be used primarily for personal, family, or household purposes.
(2) "Privacy notice" means any notice which you give regarding a consumer´s right to privacy as required by a specific state or federal law.
(3) "Required notice" means a notice in a form set forth or provided for in subsection (b)(1) of this section.
(4) "You" means a bank, foreign bank, bank holding company, or trust company that is chartered, licensed, or registered by the Texas Department of Banking under the Finance Code.
(b) How do I provide notice of how to file complaints?
(1) You must use a notice that substantially conforms to the language and form of the following notice in order to let your consumers know how to file complaints: The (your name) is (chartered, licensed, or registered) under the laws of the State of Texas and by state law is subject to regulatory oversight by the Texas Department of Banking. Any consumer wishing to file a complaint against the (your name) should contact the Texas Department of Banking through one of the means indicated below:
In Person or U.S. Mail: 2601 North Lamar Boulevard, Suite 300, Austin, Texas 78705-4294
Telephone No.: (877) 276-5554
Fax No.: (512) 475-1313
Email: consumer.complaints@dob.texas.gov
Website: www.dob.texas.gov
(2) You must provide the required notice in the language in which a transaction is conducted.
(3) You must include the required notice with each privacy notice that you send out.
(4) Regardless of whether you are required by any state or federal law to give privacy notices, you must take appropriate steps to let your consumers know how to file complaints by giving them the required notice in compliance with paragraph (1) of this subsection.
(5) You must use the following measures to give the required notice:
(A) In each area where you conduct business on a face-to-face basis, you must conspicuously post the required notice. A notice is deemed to be conspicuously posted if a consumer with 20/20 vision can read it from the place where he or she would typically conduct business or if it is included on a bulletin board, in plain view, on which all required notices to the general public (such as equal housing posters, licenses, Community Reinvestment Act notices, etc.) are posted.
(B) For consumers who are not given privacy notices, you must give the required notice when the consumer first obtains a product or service from you.
(C) Those portions of your website that offer consumer goods and services must contain access to the required notice.
Source: The provisions of this §11.37 adopted to be effective January 3, 2002, 26 TexReg 10850; amended to be effective November 4, 2010, 35 TexReg 9695; amended to be effective September 8, 2016, 41 TexReg 6676.
(a) Issuing interpretations. The Finance Commission and Credit Union Commission may on their own motion issue interpretations of Section 50(a)(5) - (7), (e) - (p), and (t), Article XVI of the Texas Constitution. The commissions will propose and adopt interpretations in accordance with the rulemaking requirements of Texas Government Code, Chapter 2001, Subchapter B.
(b) Agency recommendations. The Office of Consumer Credit Commissioner, Department of Banking, or Department of Savings and Mortgage Lending may recommend proposed interpretations to the Finance Commission. The Credit Union Department may recommend proposed interpretations to the Credit Union Commission. The four agencies may seek informal input from stakeholders and the other agencies before recommending a proposed interpretation to the commissions.
(c) Informal request for interpretation. A person may submit an informal request for an interpretation of Section 50(a)(5) - (7), (e) - (p), and (t), Article XVI of the Texas Constitution. An informal request may be submitted to the Office of Consumer Credit Commissioner, Department of Banking, Department of Savings and Mortgage Lending, or Credit Union Department. A request should:
(1) cite the specific provision of the Texas Constitution to be interpreted;
(2) explain the factual and legal context for the request; and
(3) explain the requestor's opinion of how the request should be resolved.
(d) Petition for rulemaking. An interested person may formally request an interpretation of Section 50(a)(5) - (7), (e) - (p), and (t), Article XVI of the Texas Constitution by submitting a petition to initiate rulemaking.
(1) Any petition for the Finance Commission to issue an interpretation must be submitted to the Office of Consumer Credit Commissioner and must include the information required by §9.82 of this title (relating to Petitions to Initiate Rulemaking Proceedings).
(2) Any petition for the Credit Union Commission to issue an interpretation must be submitted to the Credit Union Department and must include the information required by §97.500 of this title (relating to Petitions to Initiate Rulemaking Proceedings).
Source: The provisions of this §151.1 adopted to be effective January 7, 2004, 29 TexReg 83; amended to be effective November 13, 2008, 33 TexReg 9073; amended to be effective November 26, 2020, 45 TexReg 8306.
The Finance Commission and Credit Union Commission intend that each provision of any interpretation adopted under Chapters 151, 152, and 153 of this title is consistent with Chapter 2001, Government Code. The provisions of any interpretation adopted under Chapters 151, 152, and 153 of this title are severable. If any provision of any interpretation adopted under Chapters 151, 152, and 153 of this title is determined to be inconsistent with Chapter 2001, Government Code or otherwise invalid, all valid provisions are severable from the invalid part.
Source: The provisions of this §151.8 adopted to be effective January 7, 2004, 29 TexReg 83; amended to be effective November 13, 2008, 33 TexReg 9073.
Any reference to Section 50 in this interpretation refers to Article XVI, Texas Constitution, Section 50. Words and terms have these meanings when used in this chapter, unless the context indicates otherwise:
(1) Contract--A contract for work and material, that complies with the Texas Constitution and the Texas Property Code, used to:
(A) construct new improvements;
(B) repair or renovate existing improvements; or
(C) both subparagraphs (A) and (B) of this paragraph.
(2) Existing improvements--A pre-existing addition to a homestead that is physically attached to the homestead.
(3) New improvements--An addition physically attached to a homestead:
(A) that does not exist on the homestead prior to the commencement of the use of work and material to physically attach the new improvements to the homestead under Section 50(a)(5); and
(B) the construction of which will not involve:
(i) work on existing improvements
(ii) the use of material on existing improvements; or
(iii) physically attaching material to existing improvements.
(4) Material--Material used in constructing new improvements or repairing or renovating existing improvements. Material alone is not improvements. Material used to construct new improvements becomes a part of the new improvements once physically attached to the new improvements. Likewise, material used to repair or renovate existing improvements becomes a part of the existing improvements once physically attached to the existing improvements.
(5) Owner--A person who has the right to possess, use, and convey, individually or with the joinder of another person, all or part of the homestead.
(6) Physically attach--To permanently attach, affix, add to, or fasten onto.
(7) Repair or Renovate--Work and material used to:
(A) replace material physically attached to existing improvements whether or not the new material is similar to or the same as the material being replaced (examples include replacing flooring, roofing, built-in appliances, siding, windows, or other material that is attached to existing improvements);
(B) physically attach material to existing improvements where there is no previously attached material being replaced that is the same as or similar to the material being attached (examples include attaching to existing improvements a new room, a built-in cabinet, or a second story); and
(C) mend, remedy or upgrade all or a portion of existing improvements without adding or replacing material to the existing improvements (examples include restoring wood flooring or woodwork of an existing improvement where the work does not include physically attaching material to the existing improvements, and removing flooring to expose flooring underneath).
(8) Title company--A title insurance company or an agent of a title insurance company.
Source: The provisions of this §152.1 adopted to be effective July 7, 2005, 30 TexReg 3863.
(a) Except as provided in §152.5(c) of this chapter, Section 50(a)(5)(A) - (D) does not apply to the construction of new improvements on a homestead.
(b) A valid lien, under Section 50(a)(5), may be created on a homestead if the debt for the work and material used for new improvements is contracted for in writing. Once the lien is created, the homestead is not protected by Section 50 from forced sale for the payment of the debt.
Source: The provisions of this §152.3 adopted to be effective July 7, 2005, 30 TexReg 3863.
(a) Section 50(a)(5)(A) - (D) applies only to contracts and applications for work and material used to repair or renovate existing improvements.
(b) If debt is incurred for work and material used to repair or renovate existing improvements and the requirements of Section 50(a)(5)(A) - (D) have been met, a lien is established on the homestead of a family, or of a single adult person, and it is not protected by Section 50 from forced sale for the payment of the debt.
(c) If the application and contract are for both work and material used to repair or renovate existing improvements and for work and material used in constructing new improvements, the entire transaction is considered a contract to repair and renovate existing improvements and compliance with the constitutional requirements of Section 50(a)(5)(A) - (D) is required to establish a lien on the homestead.
Source: The provisions of this §152.5 adopted to be effective July 7, 2005, 30 TexReg 3863.
(a) In the case of a family homestead, both spouses must consent in writing to the contract for repair or renovation of existing improvements, regardless of whether the spouse has a community property interest or other ownership interest in the homestead.
(b) In addition to the consent of both spouses of a family homestead, the lender or contractor, at its option, may also require all other owners and their spouses to consent to the contract.
Source: The provisions of this §152.7 adopted to be effective July 7, 2005, 30 TexReg 3863.
The contract for work and materials may not be executed before the fifth calendar day after the owner makes written application for any extension of credit for the work and materials except as provided in §152.13. To count the five days, the day after the application for extension of credit is made is day one. If the fifth calendar day falls on a Sunday or federal legal public holiday, then the contract for work and materials may not be executed until the next calendar day that is not a Sunday or federal legal public holiday.
Source: The provisions of this §152.9 adopted to be effective March 3, 2005, 30 TexReg 1065.
The owner and owner's spouse may rescind the contract for work and materials within three calendar days after execution by all parties of the contract for work and materials. To count the three days, the day after the contract is executed is day one. The rescission period ends at midnight of the third calendar day following the execution of the contract. If the third calendar day falls on a Sunday or federal legal public holiday, then the right of rescission is extended to midnight of the next calendar day that is not a Sunday or federal legal public holiday.
Source: The provisions of this §152.11 adopted to be effective March 3, 2005, 30 TexReg 1065
(a) If the owner wants to waive the 5-day waiting period in §50(a)(5)(B) or the 3-day right of rescission in §50(a)(5)(C), the owner must sign a statement that, at a minimum:
(1) describes how the conditions of the homestead property require immediate repair;
(2) describes how the conditions of the homestead property materially affect the health and safety of the owner or the person residing in the homestead; and
(3) states that the owner is waiving the 5-day waiting period under §50(a)(5)(B), the 3-day period to rescind the contract for work and materials under §50(a)(5)(C), or both;
(b) Printed forms for this purpose are prohibited.
Source: The provisions of this §152.13 adopted to be effective March 3, 2005, 30 TexReg 1065
(a) The persons granting or acknowledging the encumberance of their homestead interest must execute the contract for work and material used to repair or renovate existing improvements at the permanent physical address of:
(1) the office or branch office of a third-party lender making an extension of credit for the work and material;
(2) an attorney at law; or
(3) a title company.
(b) Execution of the contract may not occur at a mobile office located at:
(1) the homestead; or
(2) any other place not permitted by subsection (a) of this section.
Source: The provisions of this §152.15 adopted to be effective July 7, 2005, 30 TexReg 3863.
Any reference to Section 50 in this interpretation refers to Article XVI, Texas Constitution, unless otherwise noted. These words and terms have the following meanings when used in this chapter, unless the context indicates otherwise:
(1) Balloon -- An installment that is more than an amount equal to twice the average of all installments scheduled before that installment.
(2) Business day.
(A) As used in Section 50(a)(6)(M)(ii) and §153.13 of this title (relating to Preclosing Disclosures: Section 50(a)(6)(M)(ii)), "business day" means all 21 calendar days except Sundays and the following legal public holidays: New Year's Day, Birthday of Martin Luther King, Jr., Washington's Birthday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day, and any other legal public holiday specified in 5 U.S.C. § 6103(a). When a holiday falls on a Saturday or Sunday, entities might observe the holiday on the preceding Friday or following Monday (e.g., when July 4 falls on a Saturday, entities might observe the holiday on Friday, July 3). For purposes of this subparagraph, these observed holidays (in the example, July 3) are business days.
(B) As used in Section 50(f)(2)(D) and §153.45 of this title (relating to Refinance of an Equity Loan: Section 50(f)), "business day" means a day on which the lender's offices are open to the public for carrying on substantially all of its business functions. Activities that indicate that the lender is open for substantially all of its business functions include the availability of personnel to make loan disbursements, to open new accounts, and to handle loan inquiries. Activities that indicate that the lender is not open for substantially all of its business functions include a bank's having its customer-service windows open only for limited purposes such as deposits and withdrawals, bill paying, and related services.
(C) As used in §153.25 of this title (relating to Right of Rescission: Section 50(a)(6)(Q)(viii)), "business day" has the meaning provided by Regulation Z, 12 C.F.R. §1026.2(a)(6) that applies for purposes of rescission.
(3) Closed or closing -- The date when each owner and the spouse of each owner signs the equity loan agreement or the act of signing the equity loan agreement by each owner and the spouse of each owner.
(4) Consumer disclosure -- The written notice contained in Section 50(g) that must be provided to the owner at least 12 days before the date the extension of credit is made.
(5) Cross-default provision -- A provision in a loan agreement that puts the borrower in default if the borrower defaults on another obligation.
(6) Date the extension of credit is made -- The date on which the closing of the equity loan occurs.
(7) E-Sign Act -- The federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C.§§7001-7006.
(8) Equity loan -- An extension of credit as defined and authorized under the provisions of Section 50(a)(6).
(9) Equity loan agreement -- The documents evidencing the agreement between the parties of an equity loan.
(10) Fair market value -- The fair market value of the homestead as determined on the date that the loan is closed.
(11) Force-placed insurance -- Insurance purchased by the lender on the homestead when required insurance on the homestead is not maintained in accordance with the equity loan agreement.
(12) Interest -- As used in Section 50(a)(6)(E), "interest" means the amount determined by multiplying the loan principal by the interest rate over a period of time.
(13) Lockout provision -- A provision in a loan agreement that prohibits a borrower from paying the loan early.
(14) Owner -- A person who has the right to possess, use, and convey, individually or with the joinder of another person, all or part of the homestead.
(15) Preclosing disclosure -- The written itemized disclosure required by Section 50(a)(6)(M)(ii).
(16) Two percent limitation -- The limitation on fees in Section 50(a)(6)(E).
(17) UETA -- The Texas Uniform Electronic Transactions Act, Texas Business & Commerce Code, Chapter 322.
Source: The provisions of this §153.1 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective January 1, 2015, 39 TexReg 10407; amended to be effective March 29, 2018, 43 TexReg 1839; amended to be effective January 6, 2022, 46 TexReg 9240; amended to be effective July 14, 2022, 47 TexReg 3969.
An equity loan must be secured by a voluntary lien on the homestead created under a written agreement with the consent of each owner and each owner's spouse.
(1) The consent of each owner and each owner's spouse must be obtained, regardless of whether any owner's spouse has a community property interest or other interest in the homestead.
(2) An owner or an owner's spouse who is not a maker of the note may consent to the lien by signing a written consent to the mortgage instrument. The consent may be included in the mortgage instrument or a separate document.
(3) The lender, at its option, may require each owner and each owner's spouse to consent to the equity loan. This option is in addition to the consent required for the lien.
Source: The provisions of this §153.2 adopted to be effective January 8, 2004, 29 TexReg 84
An equity loan must be of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made. For example, on a property with a fair market value of $100,000, the maximum amount of debt against the property permitted by Section 50(a)(6)(B) is $80,000. Assuming existing debt of $30,000, the maximum amount of the equity loan debt is $50,000.
(1) The principal amount of an equity loan is the sum of:
(A) the amount of the cash advanced; and
(B) the charges at the inception of an equity loan to the extent these charges are financed in the principal amount of the loan.
(2) The principal balance of all outstanding debt secured by the homestead on the date the extension of credit is made determines the maximum principal amount of an equity loan.
(3) The principal amount of an equity loan does not include interest accrued after the date the extension of credit is made (other than any interest capitalized and added to the principal balance on the date the extension of credit is made), or other amounts advanced by the lender after closing as a result of default, including for example, ad valorem taxes, hazard insurance premiums, and authorized collection costs, including reasonable attorney's fees.
(4) On a closed-end multiple advance equity loan, the principal balance also includes contractually obligated future advances not yet disbursed.
Source: The provisions of this §153.3 adopted to be effective January 8, 2004, 29 TexReg 84.
An equity loan must be without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse obtained the extension of credit by actual fraud.
(1) If an owner or the spouse of an owner cosigns an equity loan agreement or consents to a security interest, the equity loan must not give the lender personal liability against an owner or an owner's spouse.
(2) A lender is prohibited from pursuing a deficiency except when the owner or owner's spouse has committed actual fraud in obtaining an equity loan.
(3) To determine whether a lender may pursue personal liability, the borrower or owner must have committed "actual fraud." To obtain personal liability under this section, the deceptive conduct must constitute the legal standard of "actual fraud." Texas case law distinguishes "actual fraud" from "constructive fraud." "Actual fraud" encompasses dishonesty of purpose or intentional breaches of duty that are designed to injure another or to gain an undue and unconscientious advantage.
Source: The provisions of this §153.4 adopted to be effective January 8, 2004, 29 TexReg 84.
An equity loan must not require the owner or the owner's spouse to pay, in addition to any interest or any bona fide discount points used to buy down the interest rate, any fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, two percent of the original principal amount of the extension of credit, excluding fees for an appraisal performed by a third party appraiser, a property survey performed by a state registered or licensed surveyor, a state base premium for a mortgagee policy of title insurance with endorsements established in accordance with state law, or a title examination report if its cost is less than the state base premium for a mortgagee policy of title insurance without endorsements established in accordance with state law.
(1) Optional Charges. Charges paid by an owner or an owner's spouse at their sole discretion are not fees subject to the two percent limitation. Charges that are not imposed or required by the lender, but that are optional, are not fees subject to the two percent limitation. The use of the word "require" in Section 50(a)(6)(E) means that optional charges are not fees subject to the two percent limitation.
(2) Optional Insurance. Insurance coverage premiums paid by an owner or an owner's spouse that are at their sole discretion are not fees subject to the two percent limitation. Examples of these charges may include credit life and credit accident and health insurance that are voluntarily purchased by the owner or the owner's spouse.
(3) Charges that are Interest. Charges an owner or an owner's spouse is required to pay that constitute interest under §153.1(12) of this title (relating to Definitions) are not fees subject to the two percent limitation.
(A) Per diem interest is interest and is not subject to the two percent limitation.
(B) Bona fide discount points are interest and are not subject to the two percent limitation. Discount points are bona fide if the discount points truly correspond to a reduced interest rate and are not necessary to originate, evaluate, maintain, record, insure, or service the equity loan. A lender may rely on an established system of verifiable procedures to evidence that the discount points it offers are bona fide. This system may include documentation of options that the owner is offered in the course of negotiation, including a contract rate without discount points and a lower contract rate based on discount points.
(4) Charges that are not Interest. Charges an owner or an owner's spouse is required to pay that are not interest under §153.1(12) of this title are fees subject to the two percent limitation.
(5) Charges Absorbed by Lender. Charges a lender absorbs, and does not charge an owner or an owner's spouse that the owner or owner's spouse might otherwise be required to pay are unrestricted and not fees subject to the two percent limitation.
(6) Charges to Originate. Charges an owner or an owner's spouse is required to pay to originate an equity loan that are not interest under §153.1(12) of this title are fees subject to the two percent limitation.
(7) Charges Paid to Third Parties. Charges an owner or an owner's spouse is required to pay to third parties for separate and additional consideration for activities relating to originating an equity loan are fees subject to the two percent limitation. For example, these charges include attorneys' fees for document preparation to the extent authorized by applicable law. Charges that third parties absorb, and do not charge an owner or an owner's spouse that the owner or owner's spouse might otherwise be required to pay are unrestricted and not fees subject to the two percent limitation.
(8) Charges to Evaluate. Charges an owner or an owner's spouse is required to pay to evaluate the credit decision for an equity loan, that are not interest under §153.1(12) of this title, are fees subject to the two percent limitation. Examples of these charges include fees collected to cover the expenses of a credit report, flood zone determination, tax certificate, inspection, or appraisal management services.
(9) Charges to Maintain. Charges paid by an owner or an owner's spouse to maintain an equity loan that are not interest under §153.1(12) of this title are fees subject to the two percent limitation if the charges are paid at the inception of the loan, or if the charges are customarily paid at the inception of an equity loan but are deferred for later payment after closing.
(10) Charges to Record. Charges an owner or an owner's spouse is required to pay for the purpose of recording equity loan documents in the official public record by public officials are fees subject to the two percent limitation.
(11) Charges to Insure an Equity Loan. Premiums an owner or an owner's spouse is required to pay to insure an equity loan are fees subject to the two percent limitation. Examples of these charges include title insurance and mortgage insurance protection, unless the premiums are otherwise excluded under paragraph (15) of this section.
(12) Charges to Service. Charges paid by an owner or an owner's spouse for a party to service an equity loan that are not interest under §153.1(12) of this title are fees subject to the two percent limitation if the charges are paid at the inception of the loan, or if the charges are customarily paid at the inception of an equity loan but are deferred for later payment after closing.
(13) Exclusion for Appraisal Fee. A fee for an appraisal performed by a third party appraiser is not a fee subject to the two percent limitation. The appraisal must be performed by a person who is not an employee of the lender. The excludable appraisal fee is limited to the amount paid to the appraiser for the completion of the appraisal, and does not include an appraisal management services fee described by Texas Occupations Code, §1104.158(a)(2).
(14) Exclusion for Property Survey Fee. A fee for a property survey performed by a state registered or licensed surveyor is not a fee subject to the two percent limitation. The property survey must be performed by a person who is licensed or registered under Texas Occupations Code, Chapter 1071.
(15) Exclusion for Title Insurance Premium. A state base premium for a mortgagee policy of title insurance with endorsements established in accordance with state law is not a fee subject to the two percent limitation.
(A) The excludable premium is limited to the applicable basic premium rate for title insurance published by the Texas Department of Insurance, plus authorized premiums for applicable endorsements.
(B) Any mortgagee policy for the equity loan must be provided by a company authorized to do business in this state.
(C) If additional premiums for endorsements are charged, the endorsements must be applicable to the mortgagee policy for the equity loan. Rules adopted by the Texas Department of Insurance govern the applicability of endorsements and the authorized amount of the premium for each endorsement.
(16) Exclusion for Title Examination Report Fee. A fee for a title examination report is not a fee subject to the two percent limitation if its cost is less than the state base premium for a mortgagee policy of title insurance without endorsements established in accordance with state law.
(A) The excludable fee must be less than the applicable basic premium rate for title insurance published by the Texas Department of Insurance, not including any additional premiums for endorsements.
(B) The fee for a title examination report may not be excluded from the two percent limitation if the equity loan is covered by a mortgagee policy of title insurance.
(C) The fee must comply with applicable law. If the equity loan is a secondary mortgage loan under Texas Finance Code, Chapter 342, then the fee is limited to a reasonable fee for a title examination and preparation of an abstract of title by an attorney who is not an employee of the lender, or a title company or property search company authorized to do business in this state, as provided by Texas Finance Code, §342.308(a)(1).
(17) Secondary Mortgage Loans. A lender making an equity loan that is a secondary mortgage loan under Texas Finance Code, Chapter 342 may charge only those fees permitted in Texas Finance Code, §§342.307, 342.308, and 342.502. A lender must comply with the provisions of Texas Finance Code, Chapter 342 and the constitutional restrictions on fees in connection with a secondary mortgage loan made under Texas Finance Code, Chapter 342.
(18) Escrow Funds. A lender may provide escrow services for an equity loan. Because funds tendered by an owner or an owner's spouse into an escrow account remain the property of the owner or the owner's spouse those funds are not fees subject to the two percent limitation. Examples of escrow funds include account funds collected to pay taxes, insurance premiums, maintenance fees, or homeowner's association assessments. A lender must not contract for a right of offset against escrow funds pursuant to Section 50(a)(6)(H).
(19) Subsequent Events. The two percent limitation pertains to fees paid or contracted for by an owner or owner's spouse at the inception or at the closing of an equity loan. On the date the equity loan is closed an owner or an owner's spouse may agree to perform certain promises during the term of the equity loan. Failure to perform an obligation of an equity loan may trigger the assessment of costs to the owner or owner's spouse. The assessment of costs is a subsequent event triggered by the failure of the owner's or owner's spouse to perform under the equity loan agreement and is not a fee subject to the two percent limitation. Examples of subsequent event costs include contractually permitted charges for force-placed homeowner's insurance costs, returned check fees, debt collection costs, late fees, and costs associated with foreclosure.
(20) Property Insurance Premiums. Premiums an owner or an owner's spouse is required to pay to purchase homeowner's insurance coverage are not fees subject to the two percent limitation. Examples of property insurance premiums include fire and extended coverage insurance and flood insurance. Failure to maintain this insurance is generally a default provision of the equity loan agreement and not a condition of the extension of credit. The lender may collect and escrow premiums for this insurance and include the premium in the periodic payment amount or principal amount. If the lender sells insurance to the owner, the lender must comply with applicable law concerning the sale of insurance in connection with a mortgage loan.
Source: The provisions of this §153.5 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective January 1, 2015, 39 TexReg 10407; amended to be effective November 24, 2016, 41 TexReg 9106; amended to be effective March 29, 2018, 43 TexReg 1839; amended to be effective January 6, 2022, 46 TexReg 9240.
An equity loan may be paid in advance without penalty or other charge.
(1) A lender may not charge a penalty to a borrower for paying all or a portion of an equity loan early.
(2) A lockout provision is not permitted in an equity loan agreement because it is considered a prepayment penalty.
Source: The provisions of this §153.7 adopted to be effective January 8, 2004, 29 TexReg 84.
An equity loan must not be secured by any additional real or personal property other than the homestead. The definition of "homestead" is located at Section 51 of Article XVI, Texas Constitution, and Chapter 41 of the Texas Property Code.
(1) A lender and an owner or an owner's spouse may enter into an agreement whereby a lender may acquire an interest in items incidental to the homestead. An equity loan secured by the following items is not considered to be secured by additional real or personal property:
(A) escrow reserves for the payment of taxes and insurance;
(B) an undivided interest in a condominium unit, a planned unit development, or the right to the use and enjoyment of certain property owned by an association;
(C) insurance proceeds related to the homestead;
(D) condemnation proceeds;
(E) fixtures; or
(F) easements necessary or beneficial to the use of the homestead, including access easements for ingress and egress.
(2) A guaranty or surety of an equity loan is not permitted. A guaranty or surety is considered additional property for purposes of Section 50(a)(6)(H). Prohibiting a guaranty or surety is consistent with the prohibition against personal liability in Section 50(a)(6)(C). An equity loan with a guaranty or surety would create indirect liability against the owner. The constitutional home equity lending provisions clearly provide that the homestead is the only allowable collateral for an equity loan. The constitutional home equity provisions prohibit the lender from contracting for recourse of any kind against the owner or owner's spouse, except for provisions providing for recourse against the owner or spouse when the extension of credit is obtained by actual fraud.
(3) A contractual right of offset in an equity loan agreement is prohibited.
(4) A contractual cross-collateralization clause in an equity loan agreement is prohibited.
(5) Any equity loan on an urban homestead that is secured by more than ten acres is secured by additional real property in violation of Section 50(a)(6)(H).
Source: The provisions of this §153.8 aopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 24, 2016, 41 TexReg 9106; amended to be effective November 26, 2020, 45 TexReg 8307.
An equity loan may not be accelerated because of a decrease in the market value of the homestead or because of the owner's default under other indebtedness not secured by a prior valid encumbrance against the homestead.
(1) An equity loan agreement may contain a provision that allows the lender to accelerate the loan because of a default under the covenants of the loan agreement. Examples of these provisions include a promise to maintain the property or not remove improvements to the property that indirectly affects the market value of the homestead.
(2) A contractual cross-default clause is permitted only if the lien associated with the equity loan agreement is subordinate to the lien that is referenced by the cross default clause.
Source: The provisions of this §153.9 adopted to be effective January 8, 2004, 29 TexReg 84.
An equity loan must be the only debt secured by the homestead at the time the extension of credit is made unless the other debt was made for a purpose described by Section 50(a)(1)-(a)(5) or (a)(8).
(1) Number of Equity Loans. An owner may have only one equity loan at a time, regardless of the aggregate total outstanding debt against the homestead.
(2) Loss of Homestead Designation. If under Texas law the property ceases to be the homestead of the owner, then the lender, for purposes of Section 50(a)(6)(K), may treat what was previously a home equity mortgage as a non-homestead mortgage.
Source: The provisions of this §153.10 adopted to be effective January 8, 2004, 29 TexReg 84.
Unless an equity loan is a home equity line of credit under Section 50(t), the loan must be scheduled at closing to be repaid in substantially equal successive periodic installments, not more often than every 14 days and not less often than monthly, beginning no later than two months from the date the extension of credit is made, each of which equals or exceeds the amount of accrued interest as of the date of the scheduled installment.
(1) Section 50(a)(6)(L)(i) does not prohibit a lender from agreeing with a borrower to modify an equity loan if the modification does not satisfy and replace the original equity loan and does not create a new extension of credit. The modification may include a deferment of the borrower's original obligation, and may include amounts that are past due under the equity loan (e.g., accrued but unpaid interest, taxes and insurance).
(2) The two month time period contained in Section 50(a)(6)(L)(i) begins on the date of closing. A modification described by paragraph (1) of this subsection does not affect the two month time period.
(3) For purposes of Section 50(a)(6)(L)(i), a month is the period from a date in a month to the corresponding date in the succeeding month. For example, if a home equity loan closes on March 1, the first installment must be due no later than May 1. If the succeeding month does not have a corresponding date, the period ends on the last day of the succeeding month. For example, if a home equity loan closes on July 31, the first installment must be due no later than September 30.
(4) For a closed-end equity loan to have substantially equal successive periodic installments, some amount of principal must be reduced with each installment. This requirement prohibits balloon payments.
(5) Section 50(a)(6)(L)(i) does not preclude a lender's recovery of payments as necessary for other amounts such as taxes, adverse liens, insurance premiums, collection costs, and similar items.
Source: The provisions of this §153.11 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 13, 2008, 33 TexReg 9074; amended to be effective November 26, 2020, 45 TexReg 8307.
An equity loan may not be closed before the 12th calendar day after the later of the date that the owner submits an application for the loan to the lender or the date that the lender provides the owner a copy of the required consumer disclosure. One copy of the required consumer disclosure may be provided to married owners. For purposes of determining the earliest permitted closing date, the next succeeding calendar day after the later of the date that the owner submits an application for the loan to the lender or the date that the lender provides the owner a copy of the required consumer disclosure is the first day of the 12-day waiting period. The equity loan may be closed at any time on or after the 12th calendar day after the later of the date that the owner submits an application for the loan to the lender or the date that the lender provides the owner a copy of the required consumer disclosure.
(1) Submission of a loan application to an agent acting on behalf of the lender is submission to the lender.
(2) A loan application may be submitted orally.
(3) A loan application may be submitted electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents. The UETA and the E-Sign Act include requirements for electronic signatures and delivery.
Source: The provisions of this §153.12 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 13, 2008, 33 TexReg 9074; amended to be effective January 6, 2022, 46 TexReg 9240.
An equity loan may not be closed before one business day after the date that the owner of the homestead receives a copy of the loan application, if not previously provided, and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. If a bona fide emergency or another good cause exists and the lender obtains the written consent of the owner, the lender may provide the preclosing disclosure to the owner or the lender may modify the previously provided preclosing disclosure on the date of closing.
(1) For purposes of this section, the "preclosing disclosure" consists of a copy of the loan application, if not previously provided, and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing.
(2) The copy of the loan application submitted to the owner in satisfaction of the preclosing disclosure requirement must be the most current version at the time the document is delivered. The lender is not obligated to provide another copy of the loan application if the only difference from the version previously provided to the owner is formatting. The lender is not obligated to give another copy of the loan application if the information contained on the more recent application is the same as that contained on the application of which the owner has a copy.
(3) The lender must deliver to the owner a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing.
(A) For a closed-end equity loan, the lender may satisfy this requirement by delivering a properly completed closing disclosure under Regulation Z, 12 C.F.R. §1026.19(f) and §1026.38.
(B) For a home equity line of credit, the lender may satisfy this requirement by delivering properly completed account-opening disclosures under Regulation Z, 12 C.F.R. §1026.6(a).
(4) The lender may provide the preclosing disclosure electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents. The UETA and the E-Sign Act include requirements for electronic signatures and delivery.
(5) Bona fide emergency.
(A) An owner may consent to receive the preclosing disclosure or a modification of the preclosing disclosure on the date of closing in the case of a bona fide emergency occurring before the date of the extension of credit. An equity loan secured by a homestead in an area designated by Federal Emergency Management Agency (FEMA) as a disaster area is an example of a bona fide emergency if the homestead was damaged during FEMA's declared incident period.
(B) To document a bona fide emergency modification, the lender should obtain a written statement from the owner that:
(i) describes the emergency;
(ii) specifically states that the owner consents to receive the preclosing disclosure or a modification of the preclosing disclosure on the date of closing;
(iii) bears the signature of all of the owners entitled to receive the preclosing disclosure; and
(iv) affirms the owner has received notice of the owner's right to receive a final itemized disclosure containing all actual fees, points, costs, and charges one day prior to closing.
(6) Good cause. An owner may consent to receive the preclosing disclosure or a modification of the preclosing disclosure on the date of closing if another good cause exists.
(A) Good cause to modify the preclosing disclosure or to receive a subsequent disclosure modifying the preclosing disclosure on the date of closing may only be established by the owner.
(i) The term "good cause" as used in this section means a legitimate or justifiable reason, such as financial impact or an adverse consequence.
(ii) At the owner's election, a good cause to modify the preclosing disclosure may be established if:
(I) the modification does not create a material adverse financial consequence to the owner; or
(II) a delay in the closing would create an adverse consequence to the owner.
(iii) The term "de minimis" as used in this section means a very small or insignificant amount.
(B) At the owner's election, a de minimis good cause standard may be presumed if:
(i) the total actual disclosed fees, costs, points, and charges on the date of closing do not exceed in the aggregate more than the greater of $100 or 0.125 percent of the principal amount of the loan (e.g. 0.125 percent on a $80,000 principal loan amount equals $100) from the initial preclosing disclosure; and
(ii) no itemized fee, cost, point, or charge exceeds more than the greater of $100 or 0.125 percent of the principal amount of the loan than the amount disclosed in the initial preclosing disclosure.
(C) To document a good cause modification of the disclosure, the lender should obtain a written statement from the owner that:
(i) describes the good cause;
(ii) specifically states that the owner consents to receive the preclosing disclosure on the date of closing;
(iii) bears the signature of all of the owners entitled to receive the preclosing disclosure; and
(iv) affirms the owner has received notice of the owner's right to receive a final itemized disclosure containing all fees, costs, points, or charges one day prior to closing.
(7) An equity loan may be closed at any time during normal business hours on the next business day following the calendar day on which the owner receives the preclosing disclosure or any calendar day thereafter.
(8) The owner maintains the right of rescission under Section 50(a)(6)(Q)(viii) even if the owner exercises an emergency or good cause modification of the preclosing disclosure.
Source: The provisions of this §153.13 adopted to be effective June 29, 2006, 31 TexReg 5080; amended to be effective November 9, 2006, 31 TexReg 9022; amended to be effective November 13, 2008, 33 TexReg 9074; amended to be effective November 24, 2016, 41 TexReg 9106; amended to be effective January 6, 2022, 46 TexReg 9240.
An equity loan may not be closed before the first anniversary of the closing date of any other equity loan secured by the same homestead property, unless the owner on oath requests an earlier closing due to a state of emergency that has been declared by the president of the United States or the governor as provided by law, and applies to the area where the homestead is located.
(1) Section 50(a)(6)(M)(iii) prohibits an owner who has obtained an equity loan from:
(A) refinancing the equity loan before one year has elapsed since the loan's closing date; or
(B) obtaining a new equity loan on the same homestead property before one year has elapsed since the previous equity loan's closing date, regardless of whether the previous equity loan has been paid in full.
(2) Section 50(a)(6)(M)(iii) does not prohibit modification of an equity loan before one year has elapsed since the loan's closing date. A modification of a home equity loan occurs when one or more terms of an existing equity loan is modified, but the note is not satisfied and replaced. A home equity loan and a subsequent modification will be considered a single transaction. The home equity requirements of Section 50(a)(6) will be applied to the original loan and the subsequent modification as a single transaction.
(A) A modification of an equity loan must be agreed to in writing by the borrower and lender, unless otherwise required by law. An example of a modification that is not required to be in writing is the modification required under the Servicemembers Civil Relief Act, 50 U.S.C. app. §§501-597b.
(B) The advance of additional funds to a borrower is not permitted by modification of an equity loan.
(C) A modification of an equity loan may not provide for new terms that would not have been permitted by applicable law at the date of closing of the extension of credit.
(D) The two percent limitation required by Section 50(a)(6)(E) applies to the original home equity loan and any subsequent modification as a single transaction.
(3) For purposes of Section 50(a)(6)(M)(iii), a state of emergency includes:
(A) a national emergency declared by the president of the United States under the National Emergencies Act, 50 U.S.C. §§1601-1651; and
(B) a state of disaster declared by the governor of Texas under Texas Government Code, Chapter 418.
Source: The provisions of this §153.14 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 13, 2008, 33 TexReg 9074; amended to be effective November 24, 2016, 41 TexReg 9106; amended to be effective March 29, 2018, 43 TexReg 1839; amended to be effective November 26, 2020, 45 TexReg 8307.
An equity loan may be closed only at an office of the lender, an attorney at law, or a title company. The lender is anyone authorized under Section 50(a)(6)(P) that advances funds directly to the owner or is identified as the payee on the note.
(1) An equity loan must be closed at the permanent physical address of the office or branch office of the lender, attorney, or title company. The closing office must be a permanent physical address so that the closing occurs at an authorized physical location other than the homestead. The closing may occur in any area located at the permanent physical address of the lender, attorney, or title company (e.g., indoor office, parking lot).
(2) Any power of attorney allowing an attorney-in-fact to execute closing documents on behalf of the owner or the owner's spouse must be signed by the owner or the owner's spouse at the permanent physical address of an office of the lender, an attorney at law, or a title company. A lender may rely on an established system of verifiable procedures to evidence compliance with this paragraph. For example, this system may include one or more of the following:
(A) a written statement in the power of attorney acknowledging the date and place at which the power of attorney was executed;
(B) an affidavit or written certification of a person who was present when the power of attorney was executed, acknowledging the date and place at which the power of attorney was executed; or
(C) a certificate of acknowledgement signed by a notary public under Chapter 121, Civil Practice and Remedies Code, acknowledging the date and place at which the power of attorney was executed.
(3) The consent required under Section 50(a)(6)(A) must be signed by the owner and the owner's spouse, or an attorney-in-fact described by paragraph (2) of this subsection, at the permanent physical address of an office of the lender, an attorney at law, or a title company.
Source: The provisions of this §153.15 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective January 1, 2015, 39 TexReg 10407; amended to be effective November 26, 2020, 45 TexReg 8307.
A lender may contract for and receive any fixed or variable rate of interest authorized under statute.
(1) An equity loan that provides for interest must comply with constitutional and applicable law. Interest rates on certain first mortgages are not limited on loans subject to the federal Depository Institutions Deregulation and Monetary Control Act of 1980 and the Alternative Mortgage Transaction Parity Act. Chapter 342 of the Texas Finance Code provides for a maximum rate on certain secondary mortgage loans. Chapter 124 of the Texas Finance Code and federal law provide for maximum rates on certain mortgage loans made by credit unions. These statutes operate in conjunction with Section 50(a) and other constitutional sections.
(2) An equity loan must amortize and contribute to amortization of principal.
(3) The lender may contract to vary the scheduled installment amount when the interest rate adjusts on a variable rate equity loan. A variable-rate loan is a mortgage in which the lender, by contract, can adjust the mortgage's interest rate after closing in accordance with an external index.
(4) The scheduled installment amounts of a variable rate equity loan must be:
(A) substantially equal between each interest rate adjustment; and
(B) sufficient to cover at least the amount of interest scheduled to accrue between each payment date and a portion of the principal.
(5) An equity loan agreement may contain an adjustable rate of interest that provides a maximum fixed rate of interest pursuant to a schedule of steps or tiered rates or provides a lower initial interest rate through the use of a discounted rate at the beginning of the loan.
Source: The provisions of this §153.16 adopted to be effective January 8, 2004, 29 TexReg 84
An equity loan must be made by one of the following that has not been found by a federal regulatory agency to have engaged in the practice of refusing to make loans because the applicants for the loans reside or the property proposed to secure the loans is located in a certain area: a bank, savings and loan association, savings bank, or credit union doing business under the laws of this state or the United States, including a subsidiary of a bank, savings and loan association, savings bank, or credit union described by this section; a federally chartered lending instrumentality or a person approved as a mortgagee by the United States government to make federally insured loans; a person licensed to make regulated loans, as provided by statute of this state; a person who sold the homestead property to the current owner and who provided all or part of the financing for the purchase; a person who is related to the homestead owner within the second degree of affinity and consanguinity; or a person regulated by this state as a mortgage banker or mortgage company.
(1) An authorized lender under Texas Finance Code, Chapter 341 must meet both constitutional and statutory qualifications to make an equity loan.
(2) For purposes of Section 50(a)(6)(P), a "bank, savings and loan association, savings bank, or credit union doing business under the laws of this state or the United States" includes a state-chartered financial institution described by Texas Finance Code, §201.101(1)(A) - (D) that:
(A) is chartered under the laws of another state; and
(B) does business in Texas in accordance with applicable state law, including the requirements of Texas Finance Code, §201.102.
(3) A HUD-approved mortgagee is a person approved as a mortgagee by the United States government to make federally insured loans for purposes of Section 50(a)(6)(P)(ii). Loan correspondents to a HUD-approved mortgagee are not authorized lenders of equity loans unless qualifying under another provision of Section 50(a)(6)(P).
(4) A person who is licensed under Texas Finance Code, Chapter 156 is a person regulated by this state as a mortgage company for purposes of Section 50(a)(6)(P)(vi). A person who is registered under Texas Finance Code, Chapter 157 is a person regulated by this state as a mortgage banker for purposes of Section 50(a)(6)(P)(vi).
(5) A person who is licensed under Texas Finance Code, Chapter 342 is a person licensed to make regulated loans for purposes of Section 50(a)(6)(P)(iii). If a person is not described by Section 50(a)(6)(P)(i), (ii), (iv), (v), or (vi), then the person must obtain a license under Texas Finance Code, Chapter 342 in order to be authorized to make an equity loan under Section 50(a)(6)(P)(iii).
Source: The provisions of this §153.17 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 24, 2016, 41 TexReg 9106; amended to be effective March 29, 2018, 43 TexReg 1839; amended to be effective January 6, 2022, 46 TexReg 9240.
An equity loan must be made on the condition that the owner of the homestead is not required to apply the proceeds of the extension of credit to repay another debt except debt secured by the homestead or debt to another lender.
(1) The lender may not require an owner to repay a debt owed to the lender, unless it is a debt secured by the homestead. The lender may require debt secured by the homestead or debt to another lender or creditor be paid out of the proceeds of an equity loan.
(2) An owner may apply for an equity loan for any purpose. An owner is not precluded from voluntarily using the proceeds of an equity loan to pay on a debt owed to the lender making the equity loan.
Source: The provisions of this §153.18 adopted to be effective June 29, 2006, 31 TexReg 5080
A home equity loan must be made on the condition that the owner of the homestead not sign any instrument in which blanks are left to be filled in.
(1) This Section of the Constitution prohibits the owner of the homestead from signing any instrument in which blanks are "left to be filled in". This Section is intended to prohibit a person other than the owner from completing one or more blanks in an instrument after the owner has signed the instrument and delivered it to the lender, thereby altering a party's obligation created in the instrument. Not all documents or records executed in connection with an equity loan are instruments, and not all blanks contained in an instrument are "blanks that are left to be filled in" as contemplated by this Section.
(2) As used in this Section, the term instrument means a document or record that creates or alters a legal obligation of a party. A disclosure required under state or federal law is not an instrument if the disclosure does not create or alter the obligation of a party.
(3) If at the time the owner signs an instrument, a blank is completed or box checked which indicates the owner's election to select one of multiple options offered (such as an election to select a fixed rate instead of an adjustable rate) and the owner therefore by implication has excluded the non-selected options, the instrument does not contain "blanks left to be filled in" when the non-selected option is left blank.
Source: The provisions of this §153.20 adopted to be effective June 29, 2006, 31 TexReg 5080
At closing, the lender must provide the owner with a copy of the final loan application and all executed documents that are signed by the owner at closing in connection with the equity loan.
(1) One copy of these documents may be provided to married owners.
(2) This requirement does not obligate the lender to give the owner copies of documents that were signed by the owner prior to or after closing.
(3) A lender may provide documents electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents. The UETA and the E-Sign Act include requirements for electronic signatures and delivery.
Source: The provisions of this §153.22 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective July 10, 2008, 33 TexReg 5295; amended to be effective November 26, 2020, 45 TexReg 8307; amended to be effective January 6, 2022, 46 TexReg 9240.
The lender must cancel and return the note to the owner and give the owner a release of lien or a copy of an endorsement and assignment of the lien to another lender refinancing the loan within a reasonable time after termination and full payment of the loan. The lender or holder, at its option, may provide the owner a release of lien or an endorsement and assignment of the lien to another lender refinancing the loan.
(1) The lender will perform these services and provide the documents required in 50(a)(6)(Q)(vii) without charge.
(2) This section does not require the lender to record or pay for the recordation of the release of lien.
(3) Thirty days is a reasonable time for the lender to perform the duties required under this section.
(4) An affidavit of lost or imaged note, or equivalent, may be returned to the owner in lieu of the original note, if the original note has been lost or imaged.
Source: The provisions of this §153.24 adopted to be effective January 8, 2004, 29 TexReg 84
The owner of the homestead and any spouse of the owner may, within three days after the extension of credit is made, rescind the extension of credit without penalty or charge.
(1) This provision gives the owner's spouse, who may not be in record title or have community property ownership, the right to rescind the transaction.
(2) The owner and owner's spouse may rescind the extension of credit within three calendar days. If the third calendar day falls on a Sunday or federal legal public holiday then the right of rescission is extended to the next calendar day that is not a Sunday or federal legal public holiday.
(3) A lender must comply with the provisions of the Truth-in-Lending Act permitting the borrower three business days to rescind a mortgage loan in applicable transactions. Lender compliance with the right of rescission procedures in the Truth-in-Lending Act and Regulation Z, satisfies the requirements of this section if the notices required by Truth-in-Lending and Regulation Z are given to each owner and to each owner's spouse.
Source: The provisions of this §153.25 adopted to be effective January 8, 2004, 29 TexReg 84
The owner of the homestead and the lender must sign a written acknowledgment as to the fair market value of the homestead property on the date the extension of credit is made.
(1) For purposes of Section 50(a)(6)(Q)(ix), the phrase "on the date the extension of credit is made" modifies only the immediately preceding phrase "the fair market value of the homestead property," in accordance with the doctrine of last antecedent.
(2) A lender may sign the written acknowledgment before or at closing.
(3) An authorized agent may sign the written acknowledgment on behalf of the lender.
(4) The owner and lender may sign the written acknowledgment electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents. The UETA and the E-Sign Act include requirements for electronic signatures and delivery.
Source: The provisions of this §153.26 adopted to be effective November 26, 2020, 45 TexReg 8307; amended to be effective January 6, 2022, 46 TexReg 9240.
A refinance of debt secured by a homestead and described by any subsection under Subsections (a)(1)-(a)(5) of Section 50 of the Texas Constitution that includes the advance of additional funds may not be secured by a valid lien against the homestead unless the refinance of the debt is an extension of credit described by Subsection (a)(6) of Section 50 of the Texas Constitution, or the advance of all the additional funds is for reasonable costs necessary to refinance such debt or for a purpose described by Subsection (a)(2), (a)(3), or (a)(5) of Section 50 of the Texas Constitution.
(1) Reasonableness and necessity of costs relate to the type and amount of the costs.
(2) In a secondary mortgage loan, reasonable costs are those costs which are lawful in light of the governing or applicable law that authorizes the assessment of particular costs. In the context of other mortgage loans, reasonable costs are those costs which are lawful in light of other governing or applicable law.
(3) Reasonable and necessary costs to refinance may include reserves or impounds (escrow trust accounts) for taxes and insurance, if the reserves comply with applicable law.
Source: The provisions of this §153.41 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 26, 2020, 45 TexReg 8307.
A refinance of debt secured by the homestead, any portion of which is an extension of credit described by Subsection (a)(6) of Section 50, may not be secured by a valid lien against the homestead unless either the refinance of the debt is an extension of credit described by Subsection (a)(6) or (a)(7) of Section 50, or all of the conditions in Section 50(f)(2) are met.
(1) One Year Prohibition. To meet the condition in Section 50(f)(2)(A), the refinance may not be closed before the first anniversary of the closing date of the equity loan. For purposes of this section, the closing date of the refinance is the date on which the owner signs the loan agreement for the refinance.
(2) Advance of Additional Funds. To meet the condition in Section 50(f)(2)(B), the refinance may not include the advance of any additional funds other than funds advanced to refinance a debt described by Subsections (a)(1) through (a)(7) of Section 50, or actual costs and reserves required by the lender to refinance the debt.
(A) In order to be included in the funds advanced for the refinance, actual costs must be identifiable, must be actually required by the lender to refinance the debt, and must comply with any applicable limitations on costs.
(B) In order to be included in the funds advanced for the refinance, reserves (e.g., an escrow account for taxes and insurance) must be actually required by the lender to refinance the debt, and must comply with applicable law.
(C) Amounts that the owner pays before or at closing (e.g., through cash, check, or electronic funds transfer) are not advanced by the lender, and are not subject to the limitation on the advance of additional funds.
(3) 80 Percent Limitation on Loan Amount. To meet the condition in Section50(f)(2)(C), the refinance of the extension of credit must be of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the refinance of the extension of credit is made.
(A) The principal amount of the refinance is the sum of the amount advanced and any charges at the inception of the refinance, to the extent these charges are financed in the principal amount of the refinance.
(B) The principal balance of all outstanding debt secured by the homestead on the date the refinance is made determines the maximum principal amount of the refinance.
(C) The principal amount of the refinance does not include interest accrued after the date the refinance is made (other than any interest capitalized and added to the principal balance on the date the refinance is made), or other amounts advanced by the lender after closing as a result of default, including for example, ad valorem taxes, hazard insurance premiums, and authorized collection costs, including reasonable attorney's fees.
(4) Refinance Disclosure. To meet the condition in Section 50(f)(2)(D), the lender must provide the refinance disclosure described in Section 50(f)(2)(D) to the owner on a separate document not later than the third business day after the date the owner submits the loan application to the lender and at least 12 days before the date the refinance of the extension of credit is closed.
(A) Submission of a loan application to an agent acting on behalf of the lender is submission to the lender. A loan application may be given orally or electronically.
(B) For purposes of Section 50(f)(2)(D), the application is submitted on the date the owner submits a loan application specifically for a refinance of a home equity loan to a non-home-equity loan. If the owner initially applies for another type of loan, then the application is considered submitted on the earliest of:
(i) the date the owner modifies the application, orally or in writing, to specify that it is for a refinance of a home equity loan to a non-home-equity loan; or
(ii) the date the owner submits a new application specifically for a refinance of a home equity loan to a non-home-equity loan.
(C) For purposes of determining the earliest permitted closing date, the next succeeding calendar day after the date that the lender provides the owner a copy of the required refinance disclosure is the first day of the 12-day waiting period. The refinance may be closed at any time on or after the 12th calendar day after the lender provides the owner a copy of the required refinance disclosure.
(D) The lender must deliver the refinance disclosure or place it in the mail no later than the third business day after the owner submits the loan application. The refinance disclosure must be delivered to the owner at least 12 days before the refinance is closed. If a lender mails the refinance disclosure to the owner, the lender must allow a reasonable period of time for delivery. A period of three calendar days, not including Sundays and federal legal public holidays, constitutes a rebuttable presumption for sufficient mailing and delivery.
(E) The lender may provide the refinance disclosure electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents. The UETA and the E-Sign Act include requirements for electronic signatures and delivery.
(F) One copy of the required refinance disclosure may be provided to married owners.
(G) The refinance disclosure is only a summary of the owner's rights, which are governed by the substantive terms of the constitution. The substantive requirements prevail regarding a lender's responsibilities in an equity loan or refinance. A lender may supplement the refinance disclosure to clarify any discrepancies or inconsistencies.
(H) A lender may rely on an established system of verifiable procedures to evidence compliance with this paragraph.
(I) The Finance Commission will publish a Spanish translation of the refinance disclosure on its website. A lender whose discussions with the owner are conducted primarily in Spanish may provide the Finance Commission's Spanish translation to the owner, although the Spanish translation is not required by Section 50(f)(2).
Source: The provisions of this §153.45 adopted to be effective March 29, 2018, 43 TexReg 1839; amended to be effective January 6, 2022, 46 TexReg 9240
An equity loan may not be closed before the 12th day after the lender provides the owner with the consumer disclosure on a separate instrument.
(1) If a lender mails the consumer disclosure to the owner, the lender shall allow a reasonable period of time for delivery. A period of three calendar days, not including Sundays and federal legal public holidays, constitutes a rebuttable presumption for sufficient mailing and delivery.
(2)The lender may provide the consumer disclosure electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents. The UETA and the E-Sign Act include requirements for electronic signatures and delivery.
(3) Certain provisions of the consumer disclosure do not contain the exact identical language concerning requirements of the equity loan that have been used to create the substantive requirements of the loan. The consumer notice is only a summary of the owner's rights, which are governed by the substantive terms of the constitution. The substantive requirements prevail regarding a lender's responsibilities in an equity loan transaction. A lender may supplement the consumer disclosure to clarify any discrepancies or inconsistencies.
(4) A lender may rely on an established system of verifiable procedures to evidence compliance with this section.
(5) A lender whose discussions with the borrower are conducted primarily in Spanish for a closed-end loan may rely on the translation of the consumer notice developed under the requirements of Texas Finance Code, §341.502. Such notice shall be made available to the public through publication on the Finance Commission's webpage.
(6) If the owner has executed a power of attorney described by §153.15(2) of this title (relating to Location of Closing: Section 50(a)(6)(N)), then the lender may provide the consumer disclosure to the attorney-in-fact instead of providing it to the owner.
Source: The provisions of this §153.51 adopted to be effective January 8, 2004, 29 TexReg 84; amended to be effective November 13, 2008, 33 TexReg 9074; amended to be effective January 1, 2015, 39 TexReg 10407; amended to be effective January 6, 2022, 46 TexReg 9240.
A home equity line of credit (HELOC) is a form of an open-end account that may be debited from time to time, under which credit may be extended from time to time and under which the owner requests advances, repays money, and reborrows money. Any owner who is also a named borrower on the HELOC may request an advance. A HELOC agreement may contain provisions that restrict which borrowers may request an advance or require all borrowers to consent to the request.
Source: The provisions of this §153.82 adopted to be effective March 11, 2004, 29 TexReg 2306
A HELOC is a form of an open-end account that may be debited from time to time, under which credit may be extended from time to time and under which an owner is prohibited from using a credit card, debit card, or similar device, or preprinted check unsolicited by the borrower to obtain a HELOC advance.
(1) A lender may offer one or more non-prohibited devices or methods for use by the owner to request an advance. Permissible methods include contacting the lender directly for an advance, telephonic fund transfers, and electronic fund transfers. Examples of devices that are not prohibited include prearranged drafts, preprinted checks requested by the borrower, or written transfer instructions. Regardless of the permissible method or device used to obtain a HELOC advance, the amount of the advance must comply with:
(A) the advance requirements in Section 50(t)(2); and
(B) the loan to value limits in Section 50(t)(5).
(2) A borrower may from time to time specifically request preprinted checks for use in obtaining a HELOC advance but may not request the lender to periodically send preprinted checks to the borrower. A borrower may use a check reorder form, which may be included with preprinted checks, as a means of requesting a specific number of preprinted checks.
(3) An owner may, but is not required to, make in-person contact with the lender to request preprinted checks or to obtain a HELOC advance.
Source: The provisions of this §153.84 adopted to be effective March 11, 2004, 29 TexReg 2306; amended to be effective July 10, 2008, 33 TexReg 5295; amended to be effective March 29, 2018, 43 TexReg 1839.
(a) A HELOC is a form of an open-end account that may be debited from time to time, under which credit may be extended from time to time and under which fees described in Subsection (a)(6)(E) are charged and collected only at the time the extension of credit is established and no fee is charged or collected in connection with any debit or advance.
(b) For the purpose of this section, the time the extension of credit is established for a HELOC refers to the date of closing.
Source: The provisions of this §153.85 adopted to be effective March 11, 2004, 29 TexReg 2306
A HELOC is a form of an open-end account that may be debited from time to time, under which credit may be extended from time to time and under which the maximum principal amount that may be extended under the account, when added to the aggregated total of the outstanding principal balances of all indebtedness secured by the homestead on the date the extension of credit is established, cannot exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made.
(1) At the time the initial or subsequent advance is made, the principal amount of the advance must comply with Section 50(t)(5). The following amounts when added together must be equal to or less than 80 percent of the fair market value:
(A) the amount of the advance;
(B) the amount of the principal balance of the HELOC at the time of the advance; and
(C) the principal balance outstanding of all other debts secured by the homestead on the date of the closing of the HELOC.
(2) An advance under Section 50(t)(5) must meet the requirements of Section 50(t)(2).
(3) The maximum principal balance of the HELOC that may be outstanding at any time must be determined on the date of closing and will not change through the term of the HELOC.
(4) For purposes of calculating the maximum principal balance under Section 50(t)(5), the outstanding principal balance of all other debts secured by the homestead is the principal balance outstanding of all other debts secured by the homestead on the date of the closing of the HELOC.
Source: The provisions of this §153.86 adopted to be effective March 11, 2004, 29 TexReg 2306; amended to be effective March 29, 2018, 43 TexReg 1839.
(a) A HELOC is a form of an open-end account that may be debited from time to time, under which credit may be extended from time to time and under which repayment is to be made in regular periodic installments, not more often than every 14 days and not less often than monthly, beginning not later than two months from the date the extension of credit is established, and during the period during which the owner may request advances, each installment equals or exceeds the amount of accrued interest; and after the period during which the owner may request advances, installments are substantially equal.
(b) Repayment of a HELOC is not required to begin until two months after the initial advance. For example, if an advance is not made at the time of closing, the repayment period is not required to begin until after the first advance. If there is no outstanding balance, then a payment is not required.
(c) Nothing in this section prohibits a borrower from voluntarily making payments on a schedule that is more frequent or earlier than is required by a lender.
Source: The provisions of this §153.88 adopted to be effective March 11, 2004, 29 TexReg 2306
(a) A borrower notifies a lender or holder of its alleged failure to comply with an obligation by taking reasonable steps to notify the lender or holder of the alleged failure to comply. The notification must include a reasonable:
(1) identification of the borrower;
(2) identification of the loan; and
(3) description of the alleged failure to comply.
(b) A borrower is not required to cite in the notification the section of the Constitution that the lender or holder allegedly violated.
Source: The provisions of this §153.91 adopted to be effective November 11, 2004, 29 TexReg 10257
(a) For purposes of Section 50(a)(6)(Q)(x), the day after the lender or holder receives the borrower's notification is day one of the 60-day period. All calendar days thereafter are counted up to day 60. If day 60 is a Sunday or federal legal public holiday, the period is extended to include the next day that is not a Sunday or federal legal public holiday.
(b) If the borrower provides the lender or holder inadequate notice, the 60-day period does not begin to run.
Source: The provisions of this §153.92 adopted to be effective November 11, 2004, 29 TexReg 10257
(a) At closing, the lender or holder may make a reasonably conspicuous designation in writing of the location where the borrower may deliver a written or oral notice of a violation under 50(a)(6)(Q)(x). The designation may include a mailing address, physical address, and telephone number. In addition, the lender or holder may designate an email address or other point of contact for delivery of a notice.
(b) If the lender or holder chooses to change the designated delivery location as provided in subsection (a) of this section, the address change does not become effective until the lender or holder sends conspicuous written notice of the address change to the borrower.
(c) The borrower may always deliver written notice to the registered agent of the lender or holder even if the lender or holder has named a delivery location.
(d) If the lender or holder does not designate a location where the borrower may deliver a notice of violation, the borrower may deliver the notice to any physical address or mailing address of the lender or holder.
(e) Delivery of the notice by borrower to lender or holder's designated delivery location or registered agent by certified mail return receipt or other carrier delivery receipt, signed by the lender or holder, constitutes a rebuttable presumption of receipt by the lender or holder.
(f) If the borrower opts for a location or method of delivery other than set out in subsection (e), the borrower has the burden of proving that the location and method of delivery were reasonably calculated to put the lender or holder on notice of the default.
Source: The provisions of this §153.93 adopted to be effective March 3, 2005, 30 TexReg 1068
(a) The lender or holder may correct a failure to comply under Section 50(a)(6)(Q)(x)(a) - (e), on or before the 60th day after the lender or holder receives the notice from an owner, if the lender or holder delivers required documents, notices, acknowledgements, or pays funds by:
(1) placing in the mail, placing with other delivery carrier, or delivering in person the required documents, notices, acknowledgements, or funds;
(2) crediting the amount to borrower's account; or
(3) using any other delivery method that the borrower agrees to in writing after the lender or holder receives the notice.
(b) The lender or holder has the burden of proving compliance with this section.
Source: The provisions of this §153.94 adopted to be effective November 11, 2004, 29 TexReg 10257
(a) If the lender or holder timely corrects a violation of Section 50(a)(6) as provided in Section 50(a)(6)(Q)(x), then the violation does not invalidate the lien.
(b) A lender or holder who complies with Section 50(a)(6)(Q)(x) to cure a violation before receiving notice of the violation from the borrower receives the same protection as if the lender had timely cured after receiving notice.
(c) A borrower's refusal to cooperate fully with an offer that complies with Section 50(a)(6)(Q)(x) to modify or refinance an equity loan does not invalidate the lender's protection for correcting a failure to comply.
Source: The provisions of this §153.95 adopted to be effective November 11, 2004, 29 TexReg 10257; amended to be effective November 13, 2008, 33 TexReg 9074.
(a) To correct a failure to comply under Section 50(a)(6)(Q)(x)(f), on or before the 60th day after the lender or holder receives the notice from the borrower the lender or holder may:
(1) refund or credit the $1,000 to the account of the borrower; and
(2) make an offer to modify or an offer to refinance the extension of credit on the terms provided in Section 50(a)(6)(Q)(x)(f) by placing the offer in the mail, other delivery carrier, or delivering the offer in person to the owner.
(b) To correct a failure to comply under Section 50(a)(6)(Q)(x)(f):
(1) the lender or holder has the option to either refund or credit $1,000; and
(2) the lender or holder and borrower may:
(A) modify the equity loan without completing the requirements of a refinance; or
(B) refinance with an extension of credit that complies with Section 50(a)(6).
(c) The lender or holder has the burden of proving compliance with this section.
(d) After the borrower accepts an offer to modify or refinance, the lender must make a good faith attempt to modify or refinance within a reasonable time not to exceed 90 days.
Source: The provisions of this §153.96 adopted to be effective November 11, 2004, 29 TexReg 10257
Subchapter A. Registration.
"Home loans" has the same meaning as that found in Texas Finance Code Chapter §343.001.
Source: The provisions of this §155.1 adopted to be effective January 8, 2012, 36 TexReg 9300.
(a) Requests made pursuant to this chapter shall be in writing and submitted to the mortgage servicer by mail, email, or fax. If the mortgage servicer has designated a specific mailing address, email address, fax number, and/or a specific representative to receive requests made pursuant to this chapter, then requests shall be submitted in accordance with such designation. Requests for a payoff statement shall, at a minimum, include the following:
(1) Name of the mortgagor;
(2) Physical address of the underlying collateral of the loan, or a legal description of the property; and
(3) Proposed closing date of the loan.
(b) Upon receipt of a valid request made under subsection (a) of this section, a mortgage servicer shall provide, in writing, by mail or email, the payoff statement information for the home loan specified in the request which must be provided on the prescribed payoff statement form, Figure 7 TAC §155.2(c)(6), or in a substantially similar format which contains all elements not indicated as optional on the prescribed payoff statement form. The statement must include the following information:
(1) The proposed closing date for the sale or other transaction, as provided in the request made pursuant to this chapter;
(2) The payoff amount that is valid through the proposed closing date; and
(3) Sufficient information to identify the loan for which the payoff information is provided, including:
(A) the loan number, if available; or
(B) the original amount of the loan, if the loan number is not available.
(c) If applicable, the payoff statement may contain:
(1) Adjustable rate mortgage;
(2) Per diem amount;
(3) Late charge information;
(4) Escrow disbursement information;
(5) A statement regarding which party is responsible for the release of lien; and
(6) Other information necessary to provide a clear and concise payoff statement.
Source: The provisions of this §155.2 adopted to be effective January 8, 2012, 36 TexReg 9300; amended to be effective September 20, 2020, 45 TexReg 6359.
A mortgage servicer shall deliver a payoff statement required under§155.2 to the title company by the eighth business day after the date the request is received unless federal law requires a shorter response time.
Source: The provisions of this §155.3 adopted to be effective January 8, 2012, 36 TexReg 9300.