SB 762 relating to the transfer of an ad valorem tax lien passed during the 82nd Legislature regular session. The act was signed by the Governor July 17th, 2011 and took effect September 1, 2011. The bill clarifies and cleans up some of the ambiguity contained in HB 2138, which provided for the creation and regulation of property tax lenders and passed during the 80th Legislature session.
We’ve highlighted two key provisions below that will benefit consumers by shortening funding times and clarifying allowable post closing charges.
Property Tax Lending - Changes in Right to Cancel Rules
The bill clarifies that the 3 day right to cancel of a property tax loan only applies to residential property that is used by the property owner for personal, family, or household purposes. This change allows a property tax lender to immediately fund, after closing, all property tax loans for commercial properties, non-owner occupied residential properties (not used for personal, family, or household purposes), and investment properties.
Property Tax Lending – New Post Closing Fees Rules
The bill also specifies which post closing fees a property tax lender may charge. There are currently limitations on interest and closing fees in Texas Tax Code, Section 32.06, as well as Texas Administrative Code, Title 7, Section 89.601. By contrast, this bill applies to fees that a property tax lender may charge after closing.
The post-closing fees authorized under the bill are listed below:
- a fee for filing the release of the tax lien,
- a fee for providing a payoff statement to a bank,
- a fee for providing balance information,
- attorney’s fees for legally required actions to perform a foreclosure, or to respond to a taxing authority’s foreclosure suit under Chapter 33,
- post-petition fees if the homeowner files for bankruptcy,
- a fee for title examination,
- a non-sufficient-funds fee,
- a fee for collateral protection insurance,
- a prepayment penalty for properties not owned and used by the property owner for personal, family, or household purposes,
- recording expenses for loan modification,
- a fee for extra copies of loan documents requested by the homeowner (apart from two copies that the homeowner is entitled to).
These fees are the only allowable fees which a property tax lender may charge after closing a loan. Additionally, the fees must be reasonable in nature where defined in the administrative code.