Here is yet another Bill being introduced by our Texas Legislature that will have a negative impact not only on the Homeowner but also the Honest investor trying to help them.
SB354 in Texas Legislature threatens Preforeclosure Investing
In an effort to curtail so-called "foreclosure consulting", a bill introduced by Texas State Senator Craig Estes in the current legislative session contains provisions that will make it almost impossible for legitimate real estate investors to purchase pre-foreclosure property before the auction.
The bill would clasify anyone who "acquires title to a residence in foreclosure" as an "Equity Purchaser" who would then be deemed a "Foreclosure Consultant", subject to very onerous rules governing the purchase of preforeclosure property.
The most onerous provision would require the use of an Equity Purchase Contract that mandates the total consideration paid to the homeowner be no less that 82% of "fair market value".
You can review this bill and make your thoughts known by visiting www.capitol.state.tx.us, the website of the Texas Legislature.
Here is the Bill as written:
By: Estes S.B. No. 354
A BILL TO BE ENTITLED AN ACT relating to transactions involving residential mortgage foreclosures; providing a penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Title 2, Business & Commerce Code, is amended by adding Chapter 21 to read as follows:
CHAPTER 21. HOMEOWNER PROTECTION FROM CERTAIN FORECLOSURE-RELATED TRANSACTIONS
SUBCHAPTER A. GENERAL PROVISIONS Sec. 21.001. DEFINITIONS. In this chapter:
(1) "Equity purchase contract" means a contract between an equity purchaser and the homeowner of a residence in foreclosure.
(2) "Equity purchaser" means a person who, in the course of the person's business, vocation, or occupation, acquires title to a residence in foreclosure. The term does not include a person who acquires the title:
(A) for purposes of using the property as the person's residence for at least one year;
(B) by a deed in lieu of foreclosure to the holder of a voluntary lien or encumbrance of record;
(C) by a deed from the officer charged with selling property under Chapter 34, Tax Code;
(D) at a sale of real property authorized by statute;
(E) by court order or judgment; or
(F) from the person's spouse or a relative of the person related by consanguinity or affinity.
(3) "Foreclosure consultant" means a person who performs, or represents that the person can or will perform, for compensation services in connection with the prevention or postponement of foreclosure proceedings against a homeowner's residential property or other services related to the foreclosure of the property.
(4) "Residence in foreclosure" means residential real property consisting of not more than four single-family dwelling units, at least one of which is occupied as the homeowner's principal place of residence, and against which a foreclosure action has been commenced.
Sec. 21.002. EXCEPTION FROM APPLICABILITY OF CERTAIN SUBCHAPTERS. (a) Except as provided by Subsection (b), Subchapters B and C do not apply to the following persons who perform foreclosure consulting services:
(1) an attorney admitted to practice in this state who performs those services in relation to the attorney's attorney-client relationship with a homeowner or the beneficiary of the lien being foreclosed;
(2) a person who holds or is owed an obligation secured by a lien on a residence in foreclosure if the person performs those services in connection with the obligation or lien;
(3) a person that regulates banks, trust companies, savings and loan associations, credit unions, or insurance companies under the laws of this state or the United States if the person performs those services as part of the person's normal business activities;
(4) an affiliate of a person described by Subdivision (3) if the affiliate performs those services as part of the affiliate's normal business activities;
(5) a judgment creditor of the homeowner of the residence in foreclosure, if:
(A) the legal action giving rise to the judgment was commenced before the notice of default required under Section 5.064 or 51.002(d), Property Code; and
(B) the judgment is recorded in the real property records of the clerk of the county where the residence in foreclosure is located;
(6) a licensed title insurer, title insurance agent, or escrow officer authorized to transact business in this state if the person is performing those services in conjunction with title insurance or settlement services;
(7) a licensed real estate broker or real estate salesperson if the person is engaging in an activity for which the person is licensed;
(8) a mortgage broker or loan officer licensed under Chapter 156, Finance Code, if the person is engaging in an activity for which the person is licensed; or
(9) a nonprofit organization that provides solely counseling or advice to homeowners who have a residence in foreclosure or have defaulted on their home loans, unless the organization is an associate of the foreclosure consultant.
(b) Subchapters B and C apply to a person described by Subsection (a) if the person is providing foreclosure consulting services designed or intended to transfer title, directly or indirectly, to a residence in foreclosure to that person or the person's associate.
[Sections 21.003-21.050 reserved for expansion] SUBCHAPTER B. CONTRACT FOR FORECLOSURE CONSULTING SERVICES Sec. 21.051. FORM AND TERMS OF CONTRACT.
(a) Each contract for the purchase of the services of a foreclosure consultant by a homeowner of a residence in foreclosure must be in writing, dated, and signed by each homeowner and the foreclosure consultant.
(b) In addition to the notice required by Section 21.052, the contract must:
(1) fully describe the services the foreclosure consultant is to perform for the homeowner; and
(2) contain the payment terms, including the total payments to be made to the foreclosure consultant or the foreclosure consultant's associate.
Sec. 21.052. REQUIRED DISCLOSURE. The contract must state the following, in at least 14-point boldfaced type, in immediate proximity to the space reserved for the homeowner's signature:
NOTICE REQUIRED BY TEXAS LAW
_______ (Name) or an associate of _________ (Name) cannot ask you to sign or have you sign any document that transfers any interest in your home or property to __________ (Name) or ___________ (Name's) associate.
_______ (Name) or ________ (Name's) associate cannot guarantee you that they will be able to refinance your home or arrange for you to keep your home.
This is an important legal contract and could result in the loss of your home. You should consider contacting an attorney or a housing counselor approved by the United States Department of Housing and Urban Development before signing.
[Sections 21.053-21.100 reserved for expansion] SUBCHAPTER C. PROHIBITIONS AND RESTRICTIONS REGARDING FORECLOSURE CONSULTING SERVICES Sec. 21.101. NOTICE OF CHARGE OR RECEIPT OF CONSIDERATION.
A foreclosure consultant may not receive any consideration from a third party in connection with foreclosure consulting services provided to the homeowner of a residence in foreclosure unless the consideration is fully disclosed in writing to the homeowner.
Sec. 21.102. PROHIBITED CONDUCT. A foreclosure consultant may not:
(1) charge, collect, or receive interest or compensation for a loan made by the foreclosure consultant to the homeowner of a residence in foreclosure that exceeds eight percent a year; or
(2) acquire an interest, directly or indirectly, in the real or personal property of the homeowner of a residence in foreclosure with whom the foreclosure consultant has contracted to perform services.
[Sections 21.103-21.150 reserved for expansion] SUBCHAPTER D. EQUITY PURCHASE CONTRACTS
Sec. 21.151. FORM AND TERMS OF CONTRACT.
(a) Each equity purchase contract must be in writing, dated, and signed by each selling owner of the residence in foreclosure and the equity purchaser before the execution of any instrument quit-claiming, assigning, transferring, conveying, or encumbering an interest in the residence in foreclosure.
(b) In addition to the notice required by Section 21.152, the contract must contain:
(1) the name, business address, and telephone number of the equity purchaser;
(2) the total consideration to be paid by the equity purchaser in connection with or incident to the equity purchaser's acquisition, which in no event may be less than 82 percent of the property's fair market value;
(3) the payment terms or the terms of other consideration for services the equity purchaser represents will be performed for the selling homeowner before or after the sale; and
(4) the following notice:
"NOTICE REQUIRED BY TEXAS LAW
Until your right to cancel this contract has ended, ____________ (Name) or anyone working for __________ (Name) CANNOT ask you to sign or have you sign any deed or any other document."
Sec. 21.152. NOTICE OF CANCELLATION. (a) The contract must conspicuously state the following as the last provision before the space reserved for the selling homeowner's signature:
"You may cancel this contract for the sale of your house without any penalty or obligation at any time before _________________(Date and time of day). See the attached notice of cancellation form for an explanation of this right."
(b) The contract must have attached two easily detachable copies of a cancellation notice. The notice must be in the following form:
"NOTICE OF CANCELLATION
______ (Date contract signed)
You may cancel this contract for the sale of your house, without any penalty or obligation, at any time before _________________________ (Date and time of day). To cancel this transaction, personally deliver a signed and dated copy of this Notice of Cancellation by United States mail, postage prepaid, to __________________, (Name of purchaser) at _______________________(Street address of purchaser's place of business) NOT LATER THAN __________________(Date and time of day). I hereby cancel this transaction.
_______________________________ (Date)
________________________________ (Seller's signature)"
[Sections 21.153-21.200 reserved for expansion] SUBCHAPTER E. PROHIBITIONS AND RESTRICTIONS REGARDING EQUITY PURCHASE CONTRACTS
Sec. 21.201. ACTIONS BEFORE CANCELLATION PERIOD EXPIRES.
An equity purchaser may not do any of the following before the period within which the homeowner may cancel the transaction has elapsed:
(1) accept from the homeowner an execution of, or induce the homeowner to execute, an instrument of conveyance of an interest in the residence in foreclosure;
(2) transfer or encumber or purport to transfer or encumber an interest in the residence in foreclosure to a third party; or
(3) pay any consideration to the homeowner.
Sec. 21.202. FALSE OR MISLEADING REPRESENTATION OR STATEMENT. (a) An equity purchaser may not make a false or misleading statement regarding the value of the residence in foreclosure or the amount of proceeds the homeowner will receive after a foreclosure sale.
(b) An equity purchaser may not represent, directly or indirectly, that the equity purchaser is assisting the foreclosed homeowner:
(1) to "save" the person's home or other words to that effect; or
(2) in preventing a completed foreclosure if the result of the transaction is that the foreclosed homeowner will not repurchase the property.
[Sections 21.203-21.250 reserved for expansion] SUBCHAPTER F. CIVIL REMEDIES
Sec. 21.251. DECEPTIVE TRADE PRACTICE.
A violation of this chapter is a false, misleading, or deceptive act or practice actionable under Subchapter E, Chapter 17.
SECTION 2. The changes in law made by this Act apply to a contract entered into on or after the effective date of this Act. A contract entered into before the effective date of this Act is governed by the law in effect on the date the contract was entered into, and the former law is continued in effect for that purpose.
SECTION 3. This Act takes effect September 1, 2009.
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