REVIEW OF AGENCY RULES

Proposed Rule Reviews

State Board for Educator Certification

Title 19, Part 7

The State Board for Educator Certification (SBEC) proposes the review of Title 19, Texas Administrative Code (TAC), Chapter 227, Provisions for Educator Preparation Candidates, pursuant to the Texas Government Code, §2001.039. The rules being reviewed by the SBEC in 19 TAC Chapter 227 are organized under the following subchapters: Subchapter A, Admission to Educator Preparation Programs; and Subchapter B, Preliminary Evaluation of Certification Eligibility.

As required by the Texas Government Code, §2001.039, the SBEC will accept comments as to whether the reasons for adopting 19 TAC Chapter 227 continue to exist.

The comment period on the review of 19 TAC Chapter 227 begins September 1, 2017, and ends October 2, 2017. The SBEC will take registered oral and written comments on the review of 19 TAC Chapter 227 at the October 6, 2017, meeting in accordance with the SBEC board operating policies and procedures. Comments regarding this rule review may be submitted to Cristina De La Fuente-Valadez, Rulemaking, Texas Education Agency, 1701 North Congress Avenue, Austin, Texas 78701-1494. Comments may also be submitted electronically to sbecrules@tea.texas.gov. Comments should be identified as "SBEC Rule Review."

TRD-201703223

Cristina De La Fuente-Valadez

Director, Rulemaking

State Board for Educator Certification

Filed: August 21, 2017


The State Board for Educator Certification (SBEC) proposes the review of Title 19, Texas Administrative Code (TAC), Chapter 228, Requirements for Educator Preparation Programs, pursuant to the Texas Government Code, §2001.039.

As required by the Texas Government Code, §2001.039, the SBEC will accept comments as to whether the reasons for adopting 19 TAC Chapter 228 continue to exist.

The comment period on the review of 19 TAC Chapter 228 begins September 1, 2017, and ends October 2, 2017. The SBEC will take registered oral and written comments on the review of 19 TAC Chapter 228 at the October 6, 2017, meeting in accordance with the SBEC board operating policies and procedures. Comments regarding this rule review may be submitted to Cristina De La Fuente-Valadez, Rulemaking, Texas Education Agency, 1701 North Congress Avenue, Austin, Texas 78701-1494. Comments may also be submitted electronically to sbecrules@tea.texas.gov. Comments should be identified as "SBEC Rule Review."

TRD-201703224

Cristina De La Fuente-Valadez

Director, Rulemaking

State Board for Educator Certification

Filed: August 21, 2017


Adopted Rule Reviews

Office of Consumer Credit Commissioner

Title 7, Part 5

The Finance Commission of Texas (commission) has completed the review of Texas Administrative Code, Title 7, Part 5, Chapter 89, concerning Property Tax Lenders. Chapter 89 contains Subchapter A, concerning General Provisions (§89.101 and §89.102); Subchapter B, concerning Authorized Activities (§§89.201 - 89.208); Subchapter C, concerning Application Procedures (§§89.301 - 89.312); Subchapter D, concerning License (§§89.401 - 89.409); Subchapter E, concerning Disclosures (§§89.501 - 89.507); Subchapter F, concerning Costs and Fees (§§89.601 - 89.603); Subchapter G, concerning Transfer of Tax Lien (§89.701 and §89.702); and Subchapter H, concerning Payoff Statements (§§89.801 - 89.804). The rule review was conducted pursuant to Texas Government Code, §2001.039.

Notice of the review of 7 TAC, Part 5, Chapter 89 was published in the Texas Register, as required on June 16, 2017, (42 TexReg 3167). The commission received four written comments in response to that notice. The comments were submitted by Hunter-Kelsey of Texas, LLC, Propel Financial Services, Sombrero Capital, and the Texas Property Tax Lienholders Association. The commenters make several recommendations for amendments to the rules in Chapter 89.

In §89.207(3)(B), one commenter recommends removing the provision requiring a property tax lender to maintain the notice of the right of rescission, in light of the Fifth Circuit's decision in Billings v. Propel Financial Services L.L.C., 821 F.3d 608 (5th Cir. 2016). The commission disagrees with this recommendation. Although the Fifth Circuit held that the Truth in Lending Act generally does not apply to Texas property tax lenders, the court acknowledged that certain sections of the Tax Code incorporate provisions of federal law, and these federal provisions apply to property tax lenders. Billings, 821 F.3d at 611. The right of rescission applies to a residential property tax loan under Texas Tax Code, §32.06(d-1). For this reason, the requirement to maintain a copy of the notice is not affected by the Fifth Circuit's decision.

In §89.207(3)(H), one commenter recommends clarifying that the requirement to maintain a copy of the release of lien does not apply to a lien that has been foreclosed. In response to this comment, the commission is proposing an amendment to §89.207(3)(H), published elsewhere in this issue of the Texas Register, specifying that if a property tax loan is satisfied through a foreclosure, the property tax lender must maintain the foreclosure deed.

In §89.208, one commenter recommends changes regarding advertisements and solicitations. First, the commenter recommends amending §89.208(b)(3) and (c) to allow the advertisement to state the name of a licensed affiliate of the property tax lender. The commission disagrees with this recommendation. These provisions currently require a property tax loan advertisement to state the name of the property tax lender. The name of the property tax lender is an important piece of information that helps to avoid confusion on the part of the borrower, and the advertisement is misleading if it does not state the property tax lender's name. Second, the commenter recommends amending §89.208(b)(9), which prohibits a property tax lender from representing that the borrower will be sued by the taxing unit unless the property tax lender has verified this fact. The commenter states that "delinquent taxpayers will be sued 100% of the time if they never pay their taxes." The commission disagrees with this recommendation. Property tax lender advertisements should not contain unverified information, particularly information that will intimidate or confuse borrowers.

In §89.310, one commenter recommends an 18% increase in licensing fees charged by the Office of Consumer Credit Commissioner (OCCC), given the inflation index and increased costs of living. This is outside the scope of the amendments proposed elsewhere in this issue of the Texas Register, but the agency will consider re-evaluating the licensing fees as part of a future rule action.

In §89.312, two commenters recommend specifying that certain activities do not require an individual to be licensed as a residential mortgage loan originator. One of these commenters requests that the commission "clarify that person processing account need not be licensed if renewal is processed under the same terms at the original account and the application is completed online." The other commenter requests that the commission "clarify that an unlicensed individual may deliver a quote/terms to prospective borrowers if those terms have been prepared by a licensed individual. In this scenario, the non-licensed person is simply delivering quotes/terms that have prepared by a licensed agent and the non-licensed person cannot negotiate further." The commission disagrees with these recommendations. Under Texas Finance Code, §180.002(19), a residential mortgage loan originator is "an individual who for compensation or gain or in the expectation of compensation or gain: (i) takes a residential mortgage loan application; or (ii) offers or negotiates the terms of a residential mortgage loan . . ." If an individual acts as a residential mortgage loan originator for a property tax loan, then the individual must be licensed under Texas Finance Code, §351.0515. Both of the situations presented by the commenters appear to involve individuals offering terms for a loan, and therefore require the individual to be licensed.

One commenter recommends that the commission review property tax lending disclosure rules to "[e]nsure that consumers receive adequate notices regarding the cost and terms of the underlying transaction," and to provide "[s]tandardization of the forms and calculation methods for certain terms (e.g., APR) to ensure consumers can make well-informed choices." Another commenter recommends re-evaluating current rules related to disclosures. The commission agrees with these recommendations and is proposing amendments to §§89.502, 89.503, 89.504, and 89.506, published elsewhere in this issue of the Texas Register, with amended disclosure requirements for property tax loans.

In §89.601(a), two commenters recommend limiting the scope of the closing cost rule's limitations to homestead property. In response to this recommendation, the commission is proposing an amendment to §89.601(a), published elsewhere in this issue of the Texas Register, that amends the scope of the rule's closing cost limitations.

In §89.601(c)(4), three commenters recommend allowing additional closing costs for each additional parcel of commercial property, for property tax loans that cover both residential and commercial property. In response to these comments, the commission is proposing amendments to §89.601(c)(4), published elsewhere in this issue of the Texas Register, that remove language limiting the current additional $100 authorization to residential parcels.

In §89.602, two commenters recommend increasing the allowable fees to process a release of lien due to inflation and increased actual costs. As part of a stakeholder meeting, the agency asked for specific information from stakeholders regarding the costs to file a release of lien. Although stakeholders provided general cost ranges, the agency does not believe that it has obtained sufficiently specific cost information that supports a change in the fee for filing a release of lien at this time. Stakeholders are welcome to submit specific cost information related to this issue for consideration in a future rule action.

In §89.603, one commenter recommends increasing the payoff statement fee from $10 to $12. The commenter did not identify any specific costs associated with this fee. The commission disagrees with this recommendation, and believes that amending the payoff statement fee is unnecessary at this time.

In §89.701(a)(13), which contains the form for the borrower's sworn document authorizing the tax lien transfer, one commenter states: "This section was never updated for the 2013 restriction on making a loan after a homestead owners turns 65. This should be changed to '. . . and I am 65 years or older, or disabled, I may be . . .'" The commission disagrees with this recommendation. Under Texas Tax Code, §32.06(a-3), a person who is 65 years of age or older may not authorize a property tax loan if the person is authorized to claim a homestead exemption. The legislature added this provision to the statute in 2013. That same year, the commission amended the form of the sworn document to remove the phrase "either age 65 or older or" before "disabled." This amendment conformed to the 2013 statutory amendment. The statement regarding individuals 65 or older should not be included on the sworn document, because these individuals are prohibited from obtaining a property tax loan.

In §89.702, regarding the certified statement signed by the taxing unit, one commenter recommends allowing the citation to Texas Tax Code, §32.06 to be changed for transfers that occur under Texas Tax Code, §33.445. In response to this comment, the commission is proposing new §89.702(d)(3), published elsewhere in this issue of the Texas Register, that allows the citation to be replaced in this situation.

Two commenters recommend that the commission adopt rules clarifying Texas Tax Code, §32.06(a-8)(1), which prohibits a property tax loan on property that "has been financed, wholly or partly, with a grant or below market rate loan provided by a governmental program or nonprofit organization and is subject to the covenants of the grant or loan." As part of a stakeholder meeting, the agency asked stakeholders to provide information about the types of real property financed by governmental or nonprofit loans they have encountered, what rates they have encountered, and whether it is unclear if these rates are below market rate. Although some stakeholders provided recommended rule text, they did not provide specific rate information about governmental or nonprofit loans they have encountered. The agency does not believe that it has obtained sufficiently specific rate information that supports a rule on this issue. Stakeholders are welcome to submit specific rate information on this issue for consideration in a future rule action.

Three commenters recommend that the commission authorize additional costs for the modification of a property tax loan. Two of these commenters characterize modification costs as "closing costs." The commission disagrees with this recommendation. Modification costs are post-closing costs, because they occur after the loan is closed. Post-closing costs are expressly limited by Texas Finance Code, §351.0021, which specifies certain narrow types of post-closing costs a property tax lender can charge for a modification. For example, §351.0021(a)(10) allows a property tax lender to charge "recording expenses incurred in connection with a modification necessary to preserve a borrower's ability to avoid a foreclosure proceeding." Section 351.0021(c)(1) explains that a property tax lender may not charge any post-closing fees except for the charges expressly authorized by the section. Because post-closing costs are already specified by statute, the commission believes that a rule on this issue is unnecessary.

One commenter requests "[e]laboration and/or clarification of permissible post-closing fees." Another commenter recommends that the commission "Enforce and Clarify Post-Closing Fees." The commenters do not identify which post-closing fees should be clarified. As discussed earlier, because post-closing costs are already specified by statute, the commission believes that a rule on this issue is unnecessary.

One commenter recommends that the commission "narrowly evaluate certain fee rules, especially those related to modifications and renewals of existing accounts." The commenter does not specify which rules are being referred to. As discussed earlier, the commission is proposing amendments to §89.601, published elsewhere in this issue of the Texas Register, dealing with closing costs. As discussed earlier, the commission believes that a rule authorizing costs for modification is unnecessary.

One commenter recommends that the commission "clarify that reasonable attorney's fees are not directly correlated to the loan balance but instead, calculated on actual work performed." The commenter explains: "Certain judges/tax masters have claimed legal fees are unreasonable when compared to some [tax lien transfer] balances (ie $1,000 property tax loan with $3,000 attorney's fees." The commission disagrees with this recommendation. Whether attorney's fees are reasonable depends on a variety of facts that should be considered on a case-by-case basis. See, e.g., Tex. Disciplinary Rules Prof'l Conduct R. 1.04(b) (providing a nonexclusive list of eight factors that may be considered in determining whether a fee is reasonable, for purposes of disciplinary rules governing attorneys). Typically, a court will determine whether attorney's fees are reasonable in a particular case. See Tex. Civ. Prac. & Rem. Code ch. 38; Fed. R. Civ. P. 54(d)(2) (describing procedural requirements for attorney's fee claims). For this reason, the commission does not believe that it would be appropriate to adopt a rule excluding certain facts from the consideration of whether attorney's fees are reasonable. Under the current recordkeeping rule at §89.207(3)(A)(ix) and (3)(I)(ii), property tax lenders are required to maintain invoices for attorney's fees that specifically describe the services performed by the attorney. Property tax lenders should also maintain evidence showing that their attorney's fees are reasonable, so that they can provide this evidence when a court questions their fee claims.

One commenter requests that the commission "[s]pecify if escrow accounts are allowable, and if so, adopt rules regarding their usage." Another commenter states: "The OCCC should also clarify that escrow accounts are optional. Escrow accounts can benefit consumers but the OCCC must ensure escrow accounts do not accrue interest, except if the PTL is due uncollected insurance premiums. However, an escrow account for property taxes must be free of finance charges or interest." The commission disagrees with these recommendations. Section 32.06 of the Tax Code and Chapter 351 of the Finance Code do not expressly mention escrow accounts. Whether an escrow account is permissible depends on how the account is used in a particular transaction. A property tax lender may not use an escrow account in a way that violates a legal requirement (e.g., exceeding the limitation on funds advanced in Texas Tax Code, §32.06(e), or engaging in unlicensed lending). Whether there is a violation depends on the particular transaction. The requirements of the Tax Code and Finance Code apply generally, whether or not the property tax lender uses an escrow account. The commission believes that a rule specifying that these requirements apply to property tax loans with escrow accounts is unnecessary.

One commenter requests "[c]larification that any insurance premiums charged count in the closing cost calculation." The commission disagrees with this recommendation. The funds advanced for a property tax loan are expressly limited under Texas Tax Code, §32.06(e), which does not authorize a property tax lender to advance insurance premiums. Fees for collateral protection insurance are authorized as a post-closing cost under Texas Finance Code, §351.0021(a)(8). The commission believes that a rule on this issue is unnecessary.

One commenter requests that the commission "[a]llow for and specify reasonable closing costs associated with . . . the processing of any force pay related to paying off a county tax suit made after our loans." The commission disagrees with this recommendation. It appears that the commenter is describing a post-closing cost, not a closing cost. As discussed earlier, because post-closing costs are already specified by statute, the commission believes that a rule on this issue is unnecessary.

One commenter requests that the commission "[p]ermit PTLs charge a nominal fee to accept credit cards." The commission disagrees with this recommendation. A fee for accepting credit card payment is a post-closing cost that is not authorized by Texas Finance Code, §351.0021.

One commenter requests that the commission "clarify that services must be performed by a person that is not an employee of the property tax lender in order to prevent creation of affiliated entities to circumvent [Texas Finance Code, §351.0021(d)]." The commission disagrees with this recommendation. Texas Finance Code, §351.0021(d) already provides that certain post-closing costs must be performed by a person who is not an employee of the property tax lender. The current recordkeeping rule at §89.207(3)(I)(iii) and (7) requires a property tax lender to maintain records of amounts paid to affiliated businesses, as well as records describing the property tax lender's relationship with any affiliated businesses. The current disclosure rule at §89.504(f) requires a property tax lender to disclose the names of affiliated businesses to which post-closing costs may be paid. The commission believes that additional rules on this issue are unnecessary at this time.

One commenter states that the commenter "has observed inconsistencies across the industry regarding business practices involving affiliated entities and believes clarifying certain rules on this topic would better protect consumers." The commenter does not specify which rules are being referred to. The commission is proposing amendments to §89.502(3), published elsewhere in this issue of the Texas Register, specifying that costs paid to affiliated businesses are included in the finance charge for purposes of calculating the annual percentage rate.

One commenter requests that the commission "clarify scenarios where a PTL may waive the 3 Day Right to Rescind. Suggested scenarios: a. The waiver prevents a foreclosure due to tax sale, or; b. The waiver prevents customer from being subject to a significant financial penalty: i. June to July increase; or, ii. January to February increase (properties not subject to a preexisting mortgage)." The commission disagrees with this recommendation. Texas Tax Code, §32.06(d-1), provides: "A right of rescission described by 12 C.F.R. Section 226.23 applies to a transfer under this section of a tax lien on residential property owned and used by the property owner for personal, family, or household purposes." The situations where a borrower may waive the right of rescission are described in Regulation Z, 12 C.F.R. §226.23(e)(1) and §1026.23(e), which provide: "The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer shall give the creditor a dated written statement that describes the emergency, specifically modifies or waives the right to rescind, and bears the signature of all the consumers entitled to rescind. Printed forms for this purpose are prohibited . . . ." Because Regulation Z and its official commentary specify the situations where the right of rescission may be waived, the commission believes that additional rules on this issue are unnecessary at this time.

As a result of the comments submitted and internal review by the agency, the commission has determined that certain revisions are appropriate and necessary. The commission is concurrently proposing amendments to 7 TAC Chapter 89 published elsewhere in this issue of the Texas Register.

Subject to the proposed amendments to Chapter 89, the commission finds that the reasons for initially adopting these rules continue to exist, and readopts this chapter in accordance with the requirements of Texas Government Code, §2001.039. This concludes the review of 7 TAC, Part 5, Chapter 89.

TRD-201703208

Leslie L. Pettijohn

Commissioner

Office of Consumer Credit Commissioner

Filed: August 18, 2017