15 Aug Texas Legislative Update
The Texas legislature amended its laws relating to the sale of property under a power of sale in a deed of trust or other contract lien, under a writ of execution, or pursuant to foreclosure of a tax lien. They also added provisions to the Business and Commerce Code related to the public sale of real property under power of sale. The Texas Government Code has been amended concerning access to criminal history record information maintained by the Department of Public Safety of the State of Texas (the “Department”) to allow the Savings and Mortgage Lending Commissioner (“Commissioner”) to obtain information relating to a license applicant. The Estates Code has been amended with regard to a transfer on death deed. All the legislation discussed in this memorandum is effective September 1, 2017.
TEXAS HOUSE BILL 1128
The Property Code currently provides that a sale of real property under a power of sale conferred by a deed of trust or other contract lien must be a public sale at auction held between 10 a.m. and 4 p.m. on the first Tuesday of a month. The amendment adds that if the first Tuesday of a month occurs on January 1 or July 4, such public sale must be held between 10 a.m. and 4 p.m. on the first Wednesday of the month.
The Civil Practice and Remedies Code provides for a sale of real property under a writ of execution. The amendment requires that such a sale take place between 10 a.m. and 4 p.m. on the first Tuesday of a month or, if the first Tuesday of a month occurs on January 1 or July 4, then between 10 a.m. and 4 p.m. on the first Wednesday of the month.
The Tax Code provides that real property seized under a tax warrant or ordered sold pursuant to foreclosure of a tax lien is to be sold in a similar manner to property sold under writ of execution or through a public auction using online bidding and sale. The amendment provides that such sale of real property, except for an auction through online bidding and sale, must take place between 10 a.m. and 4 p.m. on the first Tuesday of a month or, if the first Tuesday of a month occurs on January 1 or July 4, between 10 a.m. and 4 p.m. on the first Wednesday of the month. For a sale by means of a public auction using online bidding and sale, it may begin at any time and must conclude at 4 p.m. on the first Tuesday of a month or, if the first Tuesday of a month occurs on January 1 or July 4, at 4 p.m. on the first Wednesday of the month.
Texas House Bill 1470
This amendment to the Business and Commerce Code applies only to a public sale of residential real property conducted under a power of sale in a security instrument.
“Auction Company” means a person who engages in the business of arranging, managing, sponsoring, advertising, or conducting auctions.
“Residential real property” means:
- A single-family house;
- A duplex, triplex, or quadraplex; or
- A unit in a multiunit residential structure in which title to an individual unit is transferred to the owner of the unit under a condominium or cooperative system.
“Security Instrument” means a deed of trust, mortgage, or other contract lien on an interest in real property.
“Substitute Trustee” means a person appointed by the current mortgagee or mortgage servicer under the terms of the security instrument to exercise the power of sale.
“Trustee” means a person or persons authorized to exercise the power of sale under the terms of a security instrument.
A trustee or substitute trustee conducting a sale to which this law applies may contract with:
- An attorney to advise the trustee or substitute trustee or to administer or perform any of the trustee’s or substitute trustee’s functions or responsibilities under a security instrument or this law; or
- An auction company to arrange, manage, sponsor, or advertise a public sale.
A winning bidder at a sale, other than the foreclosing mortgagee or mortgage servicer, must provide the following information to the trustee or substitute trustee at the time the trustee or substitute trustee completes the sale:
- The name, address, telephone number, and e-mail address of the bidder and of each individual tendering or who will tender the sale price for the winning bid;
- If the bidder is acting on behalf of another individual or organization, the name, address, telephone number, and e-mail address of the individual or organization and the name of a contact person for the organization;
- The name and address of any person to be identified as the grantee in a trustee’s or substitute trustee’s deed;
- The purchaser ’s tax identification number;
- A government-issued photo identification to confirm the identity of each individual tendering funds for the winning bid; and
- Any other information reasonably needed to complete the trustee’s or substitute trustee’s duties and functions concerning the sale.
If a winning bidder required to provide such information fails or refuses to provide the information, the trustee or substitute trustee may decline to complete the transaction or deliver a deed.
The trustee or substitute trustee must:
- Provide the winning bidder with a receipt for the sale proceeds tendered; and
- Except when prohibited by law, within a reasonable time:
- Deliver the deed to the winning bidder; or
- File the deed for recording;
- Ensure that funds received at the sale are maintained in a separate account until distributed;
- Cause to be maintained a written record of deposits to and disbursements from the account; and
- Make reasonable attempts to identify and locate the persons entitled to all or any part of the sale proceeds.
In connection with the sale and related post-sale actions to identify persons with legal claims to sale proceeds, determine the priority of any claims, and distribute proceeds to pay claims, a trustee or substitute trustee may receive:
- Reasonable actual costs incurred, including costs for evidence of title;
- A reasonable trustee’s or substitute trustee’s fee; and
- Reasonable trustee’s or substitute trustee’s attorney’s fees.
The above fee:
- Is considered earned at the time of the sale;
- May be paid from sale proceeds in excess of the payoff of the lien being foreclosed; and
- Is conclusively presumed to be reasonable if the fee:
- Is not more than the lesser of 2.5 percent of the sale proceeds or $5,000, for a trustee’s or substitute trustee’s fee; or
- Is not more than 1.5 percent of the sale proceeds, for trustee’s or substitute trustee’s attorney’s fees incurred to identify persons with legal claims to sale proceeds and determine the priority of the claims.
A trustee or substitute trustee who prevails in a suit based on a claim that relates to the sale and that is found by a court to be groundless in fact or in law is entitled to recover reasonable attorney’s fees necessary to defend against the claim, which may be paid from the excess sale proceeds, if any.
Nothing in this law precludes the filing of an interpleader action or the depositing of funds in a court registry.
TEXAS HOUSE BILL 2580
The Commissioner is entitled to obtain from the Department the criminal history record information it maintains that relates to a person who is:
- An applicant for or holder of a license, charter, or other authority granted or issued by the Commissioner for:
- Savings and Loan Associations;
- Savings Banks;
- Residential Mortgage Loan Companies (Chapter 156 of Finance Code)
- Mortgage Bankers and Residential Mortgage Loan Originators (Chapter 157);
- Residential Mortgage Loan Servicers (Chapter 158); or
- Residential Mortgage Loan Originators (Chapter 180);
- An employee or volunteer, an applicant for employment or internship, or a contractor or subcontractor of the Department of Savings and Mortgage Lending.
The criminal history record information obtained by the Commissioner may be released or disclosed only with regard to Residential Mortgage Loan Companies, as specifically provided in that licensing statute. Otherwise, the Commissioner may not release or disclose criminal history record information obtained unless:
- The information is obtained from a fingerprint-based search; and
- The information is released or disclosed:
- On court order;
- To the person who is the subject of the information; or
- With the consent of the person who is the subject of the information.
TEXAS SENATE BILL 2150
The current law permits a transfer on death deed where, on the death of the transferor, the interest in the real property transfers to the designated beneficiary only if such person survives the transferor by 120 hours.
The amendment provides that the share of any designated beneficiary that fails to survive the transferor by 120 hours lapses, and is subject to and passes in accordance with the laws relating to interpretation of wills where a grant or devise fails (such as in the case of a deceased beneficiary).
The statutory form of a Revocable Transfer on Death Deed is amended to incorporate the change above and to allow an election for anti-lapse language to be incorporated.