NEW LAWS FOR PROPERTY TAX LOANS & LENDING
On May 29, 2013 Governor Rick Perry signed into law SB 247, which imposed new rules and regulations for property tax lenders. This legislation was enacted, despite a favorable report released August 2012 from the Texas Finance Commission in which the commission made no additional legislative recommendations for laws governing property tax lending. The study also specifically suggested that market forces and sensible regulation appear to have driven down the interest rates and closing costs of property tax loans.
What’s even more amazing is the Texas legislature failed to pass even modest reforms to the payday lending industry, where annual percentage rates can exceed 391%. It just goes to show how a well-heeled and politically powerful billion-dollar industry, such as payday lending, can avoid modest regulation, while an industry like property tax lending, which offers a lower cost option as compared to tax assessor penalties, can be burdened with additional requirements that will in turn cost the consumer more.
THE KEY PROVISIONS OF SB 247 ARE SUMMARIZED BELOW. Download the enrolled final version of SB 247 here.
• Prohibits tax loans for non-delinquent taxes. Requires taxes be delinquent and incur penalties before a property tax loan can occur. Properties that are not encumbered by mortgages are still eligible to for a tax loan before they are delinquent on their property taxes (Prior law enabled a tax lender to complete a 2nd tax loan for an additional year of taxes before the taxes were delinquent, thus saving the property owner from the 7% penalty from the tax assessor on February 1st).
• Prohibits property tax loans for homestead properties owned by certain seniors 65 years or older.
• Prohibits property tax loans for properties subject to certain governmental loan programs.
• Requires enhanced disclosure of rates, fees and costs.
• Prohibits property owner waivers of certain rights.
• Prohibits false, misleading or deceptive solicitations.
• Prohibits “evergreen” provisions. This requirement will prohibit a property tax lender from including in its contract with the property owner the right for the tax loan company to pay future years taxes that are not delinquent or due.
• Prohibits sale of tax loans to an unlicensed person in the secondary market.
• Requires notice of possible availability of taxing entity installment plans in all solicitations.
• Provides for easier payoff and balance information for mortgage lenders.
• Requires judicial foreclosure by a property tax lender.
CHANGES EFFECTIVE IMMEDIATELY FOR NEW PROPERTY TAX LOANS
With this legislation going into effect immediately, property tax lenders must quickly adjust their practices to be compliant with the new rules and regulations. Overall, the legislative changes are very manageable and well run companies should implement the changes with ease. However, the new requirement that the property taxes must be delinquent will cost many property owners an unnecessary 7% tax penalty. To learn more about property tax loans contact Property Tax Funding at 877-776-7391.
