Precomment Notice - Mortgage Regulation Rule Review (June 5, 2024)

NOTICE OF PRECOMMENT DRAFT AND STAKEHOLDERS WEBINAR

Mortgage Regulation Rule Review

June 5, 2024 Pre-comment Draft

The Department of Savings and Mortgage Lending (SML) is considering changes to 7 Texas

Administrative Code (TAC): Chapter 78, concerning Wrap Mortgage Loans; Chapter 79,

concerning Residential Mortgage Loan Servicers; Chapter 80, concerning Residential Mortgage

Loan Companies; and Chapter 81, concerning Mortgage Bankers and Residential Mortgage Loan

Originators.

SML will hold a stakeholders webinar on Friday, June 7, 2024, at 1:00 p.m. (CDT) to discuss the

pre-comment draft of the rule changes. (Note: the webinar will also be recorded and posted on

SML’s website to stream on demand.)

SML will also accept informal written pre-comments until June 9, 2024 at 5:00 p.m. (CDT).

SML plans to present the rule changes for consideration by the Finance Commission at its June

21, 2024, meeting.

Participating in the Webinar

The webinar will be conducted using the Teams platform by Microsoft. Registration is required to

participate: Webinar Registration Link.

Submission of Informal Pre-comments

Informal written pre-comments regarding the SML’s draft rules may be submitted by email to

[email protected]. Informal pre-comments must be received by 5:00 p.m.

(CDT) on June 9, 2024 to be considered in advance of the June 21, 2024, Finance

Commission meeting.

Overview of Changes:

Changes Concerning the Reorganization (Relocation) of Chapters 78-81 into New Chapters 56-

59. SML’s mortgage regulation rules are currently located in 7 TAC Chapters 78-81. SML has

determined that it would be advantageous to relocate the rules to Chapters 56-59, which will

largely coincide with chapter number of the statutes under which the rules are adopted and will

allow for greater ease of use. Specifically:

• the s

ubject matter for the rules in Chapter 78, concerning Wrap Mortgage Loans

, and

adopted und

er Finance Code Chapter 159, would be relocated to new Chapter 59;

Mortgage Regulation Rule Review

June 5, 2024 Pre-comment Draft

• the subject matter for the rules in Chapter 79, concerning Residential Mortgage Loan

Servicers, and adopted under Finance Code Chapter 158, would be relocated to new

Chapter 58;

• the subject matter for the rules in Chapter 80, concerning Residential Mortgage Loan

Companies, and adopted under Finance Code Chapter 156, would be relocated to new

Chapter 56;

• the subject matter for the rules in Chapter 81, concerning Mortgage Bankers and

Residential Mortgage Loan Originators, and adopted partially under Finance Code

Chapter 157, would be relocated to new Chapter 57 (see below concerning the individual

residential mortgage loan originator rules); and

• all existing rules in Chapters 78-81 would be repealed.

Changes Concerning the Reorganization of Residential Mortgage Loan Originator Rules from

Chapter 81 into a New Chapter 55. SML’s existing rules in 7 TAC Chapter 81 affect mortgage

bankers registered with SML and individual residential mortgage loan originators licensed by

SML. The rule changes, if adopted, would:

• create new rules in Chapter 55 tailored to individual residential mortgage loan originators,

largely patterned after the existing rules in Chapter 81 applicable to individual residential

mortgage loan originators; and

• result in the rules mentioned above in new Chapter 57 being tailored to mortgage bankers

registered with SML.

Changes Concerning General Provisions. The rule changes include new rules of general

applicability including:

• rules concerning standard formatting requirements for disclosures sent by a regulated

entity;

• rules concerning the electronic delivery and signature of disclosures sent by a regulated

entity; and

• rules concerning computation of time concerning deadlines measured in calendar days.

Changes Concerning Licensing/Registration. The rule changes include various provisions

concerning licensing/registration, including:

• clarifying when a license or registration is required;

• clarifying the application process for a license or registration;

• clarifying the requirements of temporary authority for individual residential mortgage loan

originators;

• clarifying when a conditional license may be issued, if applicable;

• clarifying when a license or registration may be surrendered; and

• clarifying sponsorship requirements for residential mortgage loan originators.

Mortgage Regulation Rule Review

June 5, 2024 Pre-comment Draft

Changes Concerning Duties and Responsibilities. The rule changes include various changes

concerning the duties and responsibilities of a regulated entity, including:

• clarifying the disclosures a regulated entity is required to make (including revising certain

disclosure forms adopted by rule);

• clarifying what actions are deemed to be fraudulent, misleading, or deceptive practices

and improper dealings (including as it relates to the use of trigger leads by a mortgage

company, mortgage banker, or individual residential mortgage loan originator);

• clarifying advertising requirements (including the use of team names by a mortgage

company, mortgage banker, or individual residential mortgage loan originator);

• clarifying requirements concerning the books and records mortgage companies and

mortgage bankers are required to maintain (including transaction logs, and records related

to home equity loans, home equity lines of credit, and wrap mortgage loans);

• clarifying requirements related to mortgage call reports filed by a mortgage company or

mortgage banker (including use of the State-Specific Supplemental Form); and

• creating requirements for the regulated entity to report certain significant incidents

affecting its operations to SML (e.g., data breaches).

Changes Concerning Compliance and Enforcement. The rule changes include various changes

concerning supervisory and enforcement matters, including:

• clarifying examination requirements (including requiring use of the State Examination

System, and establishing authority to accept and leverage examinations conducted by

other states accredited by CSBS);

• clarifying requirements related to investigations conducted by SML (primarily related to

consumer complaints);

• clarifying what information is considered to be confidential in connection with an

examination, investigation, or inspection conducted by SML (including clarifying that

corrective action taken by a regulated entity within an examination, investigation,

inspection setting is confidential);

• clarifying the types of corrective action SML may direct the regulated entity to take arising

from an examination, investigation, or inspection (including requirements concerning the

payment of refunds to the consumers);

• clarifying the handling of unclaimed funds;

• clarifying deadlines to file appeals of enforcement actions; and

• clarifying requirements related to adjudicative hearings.

Other Modernization and Update Changes. The rule changes, if adopted, would make changes

to modernize and update the rules, including: adding and replacing language for clarity and to

improve readability; removing unnecessary or duplicative provisions; and updating terminology.

Text of the Rule Changes:

TITLE 7 BANKING AND SECURITIES

PART 4 DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 55 RESIDENTIAL MORTGAGE LOAN ORIGINATORS

{{All existing rules affecting residential mortgage loan originators in Chapter 81 will be repealed

and replaced with new rules in Chapter 55 (the existing rules in Chapter 81 affecting mortgage

bankers will be replaced with new rules in Chapter 57)}}

SUBCHAPTER A GENERAL PROVISIONS

§55.1 Purpose and Applicability

This chapter governs SML’s administration and enforcement of Finance Code Chapter 157, the Mortgage

Banker Registration and Residential Mortgage Loan Originator License Act (other than Subchapter C),

and Chapter 180, the Texas Secure and Fair Enforcement for Mortgage Licensing Act of 2009 (Texas

SAFE Act), concerning the licensing and conduct of residential mortgage loan originators. This chapter

applies to individuals licensed by SML as a residential mortgage loan originator or those required to be

licensed, except for individuals engaged in authorized activity subject to the authority of the regulatory

official under Finance Code §180.251(c).

§55.2 Definitions

For purposes of this chapter, and in SML's administration and enforcement of Finance Code Chapters 157

(other than Subchapter C) and 180, the following definitions apply, unless the context clearly indicates

otherwise:

(1) "Application," as used in Finance Code §157.002(6) and §180.002(19), and paragraphs (7) and

(18) of this section means a request, in any form, for an offer (or a response to a solicitation of an offer) of

residential mortgage loan terms, and the information about the mortgage applicant that is customary or

necessary in a decision on whether to make such an offer, including, but not limited to, a mortgage

applicant’s name, income, social security number to obtain a credit report, property address, an estimate

of the value of the real estate, or the mortgage loan amount.

(2) "Commissioner" means the savings and mortgage lending commissioner appointed under Finance

Code Chapter 13.

(3) "Compensation" includes salaries, bonuses, commissions, and any financial or similar incentive.

(4) "Dwelling" means a residential structure that contains one to four units and is attached to

residential real estate. The term includes an individual condominium unit, cooperative unit, or

manufactured home, if it is used as a residence.

(

) "E

-Sign Act" refers to the federal Electronic Signature in Global and National Commerce Act (15

U.S.C. §7001 et seq.).

(

) "M

aking a residential mortgage loan," or any similar derivative or variation of that term, means

when a person determines the credit decision to provide the residential mortgage loan, or the act of

funding the residential mortgage loan or transferring money to the borrower. A person whose name

appears on the loan documents as the payee of the note is considered to have "made" the residential

mortgage loan.

(7) "Mortgage applicant" means an applicant for a residential mortgage loan or a person who is

solicited to obtain a residential mortgage loan and includes a person who has not completed or started

completing a formal loan application on the appropriate form (e.g., the Fannie Mae Form 1003 Uniform

Residential Loan Application), but has submitted financial information constituting an application, as

provided by paragraph (1) of this section.

(8) "Mortgage banker" has the meaning assigned by Finance Code §157.002.

(9) "Mortgage company" means, for purposes of this chapter, a "residential mortgage loan company,"

as defined by Finance Code §157.002.

(10) "Nationwide Multistate Licensing System" or "NMLS" has the meaning assigned by Finance Code

§157.002 and §180.002 in defining "Nationwide Mortgage Licensing System and Registry."

(11) "Offers or negotiates the terms of a residential mortgage loan," as used in Finance Code

§157.002(6) and §180.002(19), means, among other things, when an individual:

(A) arranges or assists a mortgage applicant or prospective mortgage applicant in obtaining or

applying to obtain, or otherwise secures an extension of consumer credit for another person, in

connection with obtaining or applying to obtain a residential mortgage loan;

(B) presents for consideration by a mortgage applicant or prospective mortgage applicant particular

residential mortgage loan terms (including rates, fees, and other costs); or

applicant for the purpose of reaching a mutual understanding about particular residential mortgage loan

terms.

(12) "Originator" has the meaning assigned by Finance Code §157.002 and §180.002 in defining

"residential mortgage loan originator." Paragraphs (11) and (18) of this section do not affect the

applicability of such statutory definition. Individuals who are specifically excluded under such statutory

definition, as provided by Finance Code §180.002(19)(B), are excluded under this definition and for

purposes of this chapter. Persons who are exempt from licensure as provided by Finance Code §180.003

are exempt for purposes of this chapter, except as otherwise provided by Finance Code §180.051.

(13) "Person" has the meaning assigned by Finance Code §180.002.

(14) "Residential mortgage loan" has the meaning assigned by Finance Code §157.002 and §180.002

and includes new loans and renewals, extensions, modifications, and rearrangements of such loans. The

term does not include a loan secured by a structure that is suitable for occupancy as a dwelling but is

used for a commercial purpose such as a professional office, salon, or other non-residential use, and is

not used as a residence.

(15) "Residential real estate" has the meaning assigned by Finance Code §180.002 and includes both

improved or unimproved real estate or any portion of or interest in such real estate on which a dwelling is

or will be constructed or situated.

(16) "SML" means the Department of Savings and Mortgage Lending.

(17) "State Examination System" or "SES" means an online, digital examination system developed by

the Conference of State Bank Supervisors that securely connects regulators and regulated entities on a

nationwide basis to facilitate the examination process.

(18) "Takes a residential mortgage loan application," as used in Finance Code §157.002(6) and

§180.002(19) in defining "residential mortgage loan originator" means when an individual receives a

residential mortgage loan application for the purpose of facilitating a decision on whether to extend an

offer of residential mortgage loan terms to a mortgage applicant or prospective mortgage applicant,

whether the application is received directly or indirectly from the mortgage applicant or prospective

mortgage applicant, and regardless of whether or not a particular lender has been identified or selected.

(19) "Trigger Lead" means information concerning a consumer’s credit worthiness (consumer report)

compiled by a credit reporting agency (consumer reporting agency), obtained in accordance with the

federal Fair Credit Reporting Act (15 U.S.C. §1681b(c)(1)(B)) that is not initiated by the consumer but,

instead, is triggered by an inquiry to a consumer reporting agency in response to an application for credit

initiated by the consumer in a separate transaction. The term does not include a consumer report

obtained by a mortgage company licensed by SML or a mortgage banker registered with SML in response

to an application for credit made by a consumer with that mortgage company or mortgage banker or that

is otherwise authorized by the consumer.

(20) "UETA" refers to the Texas Uniform Electronic Transactions Act, Business & Commerce Code

Chapter 322.

§55.3 Formatting Requirements for Notices

Any notice or disclosure (notice) required by Finance Code Chapters 157 or 180, or this chapter, must be

made in at least 12-point font using an easily readable typeface. A font point generally equates to 1/72 of

an inch. If Finance Code Chapters 157 or 180, or this chapter, prescribes a form for the notice, the notice

must closely follow the font types used in the form. For example, where the form uses bolded, underlined,

or "all caps" font type, the notice must be made using those font types. The following typefaces are

deemed to be easily readable for purposes of this section (list is not exhaustive and other typefaces may

be used; provided, the typeface is easily readable):

(1) Arial;

(2) Aptos;

(3) Calibri;

(4) Century Schoolbook;

(5) Garamond;

(6) Georgia;

(7) Lucinda Sans;

(8) Times New Roman;

(9) Trebuchet; and

(10) Verdana.

§55.4 Electronic Delivery and Signature of Notices

Any notice or disclosure required by Finance Code Chapters 157 or 180, or this chapter, may be provided

and signed in accordance with state and federal law governing electronic signatures and delivery of

electronic documents. The UETA and E-Sign Act include requirements for electronic signatures and

delivery.

§55.5 Computation of Time

The calculation of any time period measured in days by Finance Code Chapters 157 or 180, or this

chapter, is made using calendar days, unless clearly stated otherwise. In computing a period of calendar

days, the first day is excluded and the last day is included. If the last day of any period is a Saturday,

Sunday, or legal holiday, the period is extended to include the next day that is not a Saturday, Sunday, or

legal holiday, unless clearly stated otherwise.

§55.6 Enforceability of Liens

A violation of Finance Code Chapters 157 or 180, or this chapter, does not render an otherwise lawfully

taken lien invalid or unenforceable.

SUBCHAPTER B LICENSING

§55.100 Licensing Requirements

(a) License Required. An individual, unless exempt as provided by Finance Code §157.0121 or §180.003,

or acting under temporary authority as provided by Finance Code §180.0511 and §55.109 of this title

(relating to Temporary Authority), is required to be licensed as an originator under Finance Code Chapter

157 if the individual acts or attempts to act in the capacity of an originator concerning a loan or

prospective loan secured or designed to be secured by residential real estate located in Texas, including,

but not limited to:

(1) representing or holding that individual out to the public through advertising or other means of

communication as a "loan officer," "mortgage consultant," "loan modification/refinance consultant,"

"mortgage broker," or "residential mortgage loan originator," or otherwise representing that the individual

can or will perform residential mortgage loan origination services as an originator;

(2) signing a residential mortgage loan application as the originator (e.g., signing the "Loan Originator

Information" section of the Fannie Mae Form 1003 Uniform Residential Loan Application; which is deemed

to be a certification by the originator that he or she took the residential mortgage loan application);

(3) providing disclosures to a mortgage applicant or prospective mortgage applicant or discussing or

explaining such disclosures (an individual who prepares a disclosure at the direction and under the

supervision of a licensed originator who does not send the disclosure to or discuss the disclosure with the

mortgage applicant or prospective mortgage applicant and does not sign the disclosure is deemed not to

have provided a disclosure for purposes of this paragraph), including:

(A) the disclosures required by Finance Code §156.004 or §157.0021, and §55.200(a) of this title

(relating to Required Disclosures);

(B) the good faith estimate (Regulation X, 12 C.F.R. §1024.7), integrated loan estimate disclosure

(Regulation Z, 12 C.F.R. §1026.37), or similar; and

agent, or attorney, as described by Finance Code §157.024(a)(10);

(4) determining the lender or investor to which the prospective residential mortgage loan will be

submitted;

(5) issuing or signing a conditional pre-qualification letter or conditional approval letter, or similar, as

specified by Finance Code §156.105 and §157.02012, and §55.201 of this title (relating to Conditional

Pre-Qualification and Conditional Approval Letters); and

(6) being a loan processor or underwriter who is an independent contractor, as provided by Finance

Code §180.051(b). An individual working for a mortgage company licensed by SML or a mortgage banker

registered with SML, whose compensation for federal income tax purposes is not reported on a W-2 form

(e.g., a self-employed worker who is issued an IRS Form 1099-NEC), that acts as a loan processor or

underwriter, is deemed to be an independent contractor loan processor or underwriter for purposes of

Finance Code §180.051(b) and must be licensed as an originator. All individuals working for a mortgage

company that is an independent loan processor underwriter company, regardless of how their income is

documented (including W-2 employees), who act as a loan processor or underwriter or otherwise perform

work in connection with the provision of loan processing or underwriting services by the company, are

deemed to be independent contractors for purposes of Finance Code §180.051(b) and must be licensed

as an originator.

§55.101 Applications for Licensure

(a) NMLS. Applications for licensure must be submitted through NMLS and must be made using the

current form prescribed by NMLS. SML has published application checklists on the NMLS Resource

Center website (nationwidelicensingsystem.org; viewable on the "State Licensing Requirements"

webpage) which outline the requirements to submit an application. Applicants must comply with

requirements in the checklist in making the application.

(b) Supplemental Information. SML may require additional, clarifying, or supplemental information or

documentation as deemed necessary or appropriate to determine that the licensing requirements of

Finance Code Chapters 157 and 180 have been met.

supporting documentation is included and all required fees are received. If an application is incomplete,

SML will send written notice to the applicant specifying the additional information, documentation, or fee

required to render the application complete. The application may be deemed withdrawn and any fee paid

will be forfeited if the applicant fails to provide the additional information, documentation, or fee within 30

days after the date written notice is sent to the applicant as provided by this subsection.

§55.102 Fees

(a) License Fees. The license fee is determined by the Commissioner in an amount not to exceed the

maximum amount specified by Finance Code §157.013(b)(1), exclusive of fees charged by NMLS, as

described in subsection (b) of this section, and exclusive of the recovery fund fee required by Finance

Code §157.013(b)(2). The Commissioner may establish different fee amounts for a new license versus

renewal of the license. The current fee is set in NMLS and posted on SML’s website (sml.texas.gov). The

Commissioner may change the fee at any time; provided, any fee increase is not effective until notice has

been posted on SML’s website for at least 30 days. The license fee must be paid in NMLS.

(b) NMLS Fees. NMLS charges various fees to process the application. Such fees are determined by

NMLS and must be paid by the applicant at the time he or she files the application. The current fees are

set in NMLS and posted on the NMLS Resource Center website (nationwidelicensingsystem.org).

Specifically, NMLS charges the following types of fees:

(1) application processing fee;

(2) credit report fee; and

(3) criminal background check fee.

(d) Insufficient Funds Fee. The Commissioner may collect a fee in an amount determined by the

Commissioner not to exceed $50 for any returned check, credit card chargeback, or failed automated

clearing house (ACH) payment. A fee assessed under this subsection will be invoiced in NMLS and must

be paid in NMLS.

§55.103 Renewal of the License

(a) A license may be renewed on:

(1) timely submission of a completed renewal application (renewal request) in NMLS together with

payment of all required fees;

(2) a determination by SML that the originator continues to meet the minimum requirements for

licensure, including the requirements of Finance Code §§157.012(c), 157.015(g), and 180.055; and

(3) Completion of the continuing education required by Finance Code §180.060 and §55.108 of this

title (relating to Required Education) as reflected in NMLS.

(b) Application of §55.101. A renewal request is a license application subject to the requirements of

§55.101 of this title (relating to Applications for Licensure). A renewal request withdrawn under §55.101(c)

of this title will be rejected in NMLS.

in his or her sole discretion, approve a renewal request with one or more deficiencies the Commissioner

deems to be relatively minor and allow the originator to continue conducting regulated activities while the

originator works diligently to resolve the deficiencies. A renewal request approved by the Commissioner

under this subsection will be assigned the NMLS license status "Approved - Deficient." Approval under

this subsection does not relieve the originator of the obligation to resolve the deficiencies. A license

approved under this subsection is deemed to be a conditional license for which the originator, in order to

maintain the license, must resolve the deficiencies within 30 days after the date the license is approved,

unless an extension of time is granted by the Commissioner. Failure to timely resolve the deficiencies

constitutes grounds for the Commissioner to suspend or revoke the license.

(d) Reinstatement. This section applies to an individual seeking reinstatement of an expired license

(assigned the license status "Terminated - Failed to Renew") during the reinstatement period described by

Finance Code §157.016 and must be construed accordingly. An originator license cannot be renewed

beyond the reinstatement period; instead, the individual must apply for a new license and comply with all

current requirements and procedures governing issuance of a new license.

§55.104 NMLS Records; Notices Sent to the Originator

(a) NMLS License Status. SML is required to assign a status to the license in NMLS. The license status is

displayed in NMLS and on the NMLS Consumer Access website (nmlsconsumeraccess.org). SML is

limited to the license status options available in NMLS. The NMLS Resource Center website

(nationwidelicensingsystem.org) describes the available license status options and their meaning.

(b) Amendments to License Records Required. Unless Finance Code §157.019 applies and requires

additional notice, an originator must amend his or her NMLS license records (MU4 filing) within 10 days

after the date of any material change affecting any aspect of the MU4 filing, including, but not limited to:

(1) name (which must be accompanied by supporting documentation submitted to SML establishing

the name change);

(2) phone number;

(3) email address (including his or her NMLS account email address, as described by subsection

(d)(1) of this section);

(4) mailing address:

(5) residential history;

(6) employment history; and

(7) answers to disclosure questions (which must be accompanied by explanations for each such

disclosure, together with supporting documentation concerning such disclosure).

(b) Amendments Requiring New Credit History Check. An originator amending his or her MU4 filing to

make a financial disclosure is deemed to have authorized SML to retrieve a current copy of his or her

credit report, as provided by Finance Code §157.0132 and §55.111 of this title (relating to Background

Checks), and the originator must further amend his or her MU4 filing to formally consent to and request

such credit report in NMLS, if requested by SML.

to make a criminal disclosure is deemed to have authorized SML to perform an additional criminal

background check in accordance with Finance Code §157.0132 and §55.111 of this title and the originator

must further amend his or her MU4 filing to formally consent to and request such criminal background

check in NMLS, if requested by SML.

(d) Notices Sent to the Originator. Any correspondence, notification, alert, message, official notice or other

written communication from SML will be sent to the originator in accordance with this subsection using the

originator’s current contact information of record in NMLS unless another method is required by other

applicable law.

(1) Service by Email. Service by email is made using the email address the originator has designated

for use with his or her NMLS account (a/k/a the "NMLS account email address" or "individual account

email address"). The NMLS account email address is the same email address to which NMLS-generated

notifications are sent. Service by email is complete on transmission of the email to the license holder's

email service provider; provided, SML does not receive a "bounce back" notification, or similar, from the

email service provider indicating that delivery was not effective. An originator must monitor the email

account designated as his or her NMLS account email address and ensure that emails from SML or

system notifications from NMLS are not lost in a "spam folder" or similar, or undelivered due to

intervention by a "spam filter" or similar. An originator is deemed to have constructive notice of any emails

sent by SML to the email address described by this paragraph. An originator is further deemed to have

constructive notice of any NMLS system notifications sent to him or her by email.

(2) Service by Mail. Service by mail is complete on deposit of the document, postpaid and properly

addressed, in the mail or with a commercial delivery service. If service is made on the originator by mail

and the document communicates a deadline by or a time during which the originator must perform some

act, such deadline or time period for action is extended by three days. However, if service was made by

another method prescribed by this subsection, such deadline or time period will be calculated based on

the earliest possible deadline or shortest applicable time period.

§55.105 Conditional License

(a) Conditional License; Terms and Conditions. The Commissioner may, in his or her sole discretion,

issue a license on a conditional basis. A conditional license will be assigned the license status "Approved

- Conditional" in NMLS. Reasonable terms and conditions for a conditional license include:

(1) requiring the originator to undergo additional credit checks or provide evidence of satisfaction

concerning a debt, judgment, lien, child support obligation, or other financial delinquency affecting his or

her financial condition;

(2) requiring the originator to undergo additional criminal background checks or provide information on

a periodic basis or upon request concerning the status of a pending criminal proceeding that might affect

his or her eligibility for the license;

(3) requiring the originator to take other specific action or provide other specified information to

address a previously-noted deficiency; and

(4) requiring the originator to surrender the license upon the occurrence of an event that would render

the originator ineligible for the license.

(b) Probated Suspensions and Revocations. A license subject to a probated suspension or revocation is

deemed to be a conditional license.

lieu of seeking denial of the license where the Commissioner determines the individual applying for the

license has the capacity to resolve the deficiency serving as grounds for the denial in a reasonable period

of time. The granting of a license under this subsection is a voluntarily forbearance from seeking denial of

the license and does not operate as a waiver by the Commissioner of any grounds he or she has to seek

denial of the license. The Commissioner is under no obligation to continue the license on a conditional

basis and may seek denial in the future based on the same or similar circumstances that existed at the

time the conditional license was granted.

§55.106 Surrender of the License

(a) Surrender Request. An originator may seek surrender of the license by filing a license surrender

request (request) in NMLS. The request must be made using the current form prescribed by NMLS. SML

will review the request and determine whether to grant it. SML may not grant the request if, among other

reasons:

(1) the originator is the subject of a pending or contemplated examination, inspection, investigation, or

disciplinary action;

(2) the originator is in violation of an order of the Commissioner; or

(3) the originator has failed to pay any administrative penalty, fee, charge, or other indebtedness owed

to SML

(b) Inactive Status Pending Surrender. If SML does not grant the request or requires additional time to

consider the request, the request will be left pending while the issue preventing SML from granting the

request is resolved or lapses. During this time, the originator’s license will be assigned the license status

"Approved - Inactive" in NMLS.

§55.107 Sponsorship of Originator

(a) Sponsorship Required. In order to act in the capacity of an originator, an originator's license must be

sponsored in NMLS by a mortgage company licensed by SML or a mortgage banker registered with SML.

To establish sponsorship by a mortgage company or mortgage banker, the originator must amend his or

her NMLS license record (MU4 filing) to reflect employment by such mortgage company or mortgage

banker and grant such mortgage company or mortgage banker access to his or her license records to

allow the mortgage company or mortgage banker to register a relationship with the originator in NMLS.

The mortgage company or mortgage banker must make corresponding filings in NMLS to establish such

sponsorship. Sponsorship is not effective until the mortgage company's or mortgage banker's sponsorship

request has been reviewed and approved by SML. An originator must not act or attempt to act in the

capacity of an originator on behalf of a mortgage company or mortgage banker until sponsorship with

such mortgage company or mortgage banker has been established and is effective. Information about

how to file for sponsorship is available on the NMLS Resource Center website

(nationwidelicensingsystem.org).

(b) Number of Sponsorships. An originator may be sponsored by more than one mortgage company or

mortgage banker if:

(1) the originator clearly identifies to the mortgage applicant the sponsoring entity or entities on whose

behalf the originator is acting prior to taking an application;

(2) the application clearly states the sponsoring entity on whose behalf the originator is acting (e.g., in

the "Loan Originator Information" section of the Fannie Mae 1003 Uniform Residential Loan Application).

The mortgage applicant may apply with more than one sponsoring entity, provided, there are separate

applications for each such entity that clearly identifies the sponsoring entity to which the application was

submitted;

(3) the authorization forms, disclosures, loan estimates, pre-qualification letters, conditional approval

letters, closing disclosures, and other materials provided to the mortgage applicant clearly identify the

mortgage company or mortgage banker providing residential mortgage loan origination services in the

transaction;

(4) the originator does not misrepresent or misconstrue to the mortgage applicant the mortgage

company or mortgage banker providing residential mortgage loan origination services in the transaction;

(5) the originator discloses to his or her sponsoring entities the existence the originator’s multiple

sponsorships;

(6) the originator does not steer the mortgage applicant to a sponsoring entity offering terms less

favorable to the mortgage applicant and that might have the effect of increasing the originator’s

compensation; and

(7) the originator is only compensated for services actually performed and does not share or split any

fee.

status if the applicant complies with all requirements for licensure except the requirement that the

originator be sponsored by an appropriate entity, as provided by Finance Code §157.012(a)(1). While in

an inactive status, an originator must not act in the capacity of an originator and must continue to meet the

minimum requirements for licensure. A license in an inactive status is assigned the license status

"Approved - Inactive" in NMLS.

(d) Termination of Sponsorship. Sponsorship may be terminated by the mortgage company or mortgage

banker, or the originator. If sponsorship is terminated, the party terminating the sponsorship must

immediately notify SML of the termination by making a filing in NMLS to show the sponsorship as

terminated in the system, as provided by Finance Code §156.211 and §157.019.

(e) Failure to Maintain Sponsorship; Inactive Status. If an originator’s license does not maintain

sponsorship by a mortgage company or mortgage banker, the license will revert to an inactive status

(“Approved - Inactive”) until a new sponsorship becomes effective, during which time the originator must

not act or attempt to act in the capacity of an originator. An originator may voluntarily place his or her

license in an inactive status by terminating all sponsorships as described by subsection (d) of this section.

§55.108 Required Education

(a) Pre-Licensing Education and Examination. As provided by Finance Code §180.056, an individual

applying for an originator’s license (applicant) must complete the pre-licensing education and coursework

prescribed by the federal S.A.F.E. Mortgage Licensing Act (federal SAFE Act) and approved by NMLS.

Such education and coursework must include 3 hours of instruction relating to the applicable laws, rules,

and practice considerations governing residential mortgage loan origination in Texas. As provided by

Finance Code §180.057, an applicant must pass a written test prescribed by the federal SAFE Act and

approved by NMLS.

(b) Lapsing of Pre-Licensing Education and Examination. An applicant other than a current license holder

seeking renewal under §55.103 of this title (relating to Renewal of the License; i.e., an individual seeking

a new license) must have completed the required pre-licensing education and coursework described by

subsection (a) within the 3 years preceding the date of application; otherwise, the applicant must take the

pre-licensing education and coursework approved and offered at the time of the application. Additionally, if

an applicant for a new license did not pass the National Component with Uniform State Content

examination approved by NMLS on after April 1, 2013, the applicant must pass the current pre-licensing

examination approved by NMLS in order to satisfy the requirements of Finance Code §180.057

(examinations taken prior to April 1, 2013, will not satisfy such requirements).

§180.056, SML will recognize pre-licensing education coursework taken in another jurisdiction subject to

the requirements of the federal SAFE Act; provided, it is approved by NMLS for that purpose and

otherwise meets the requirements of the federal SAFE Act, and Finance Code Chapter 180. However,

SML will not recognize those hours of pre-licensing education taken in another jurisdiction the content of

which was specific to that jurisdiction and that comprised the 12-hour undefined electives portion of such

pre-licensing education and coursework. An applicant may take coursework that is of limited duration and

limited in scope to the applicable laws, rules, and practice considerations governing residential mortgage

loan origination in Texas in order to supplement and remedy a shortfall in hours derived from non-

recognition of pre-licensing education taken in another jurisdiction, as provided by this subsection.

(d) Continuing Education. As provided by Finance Code §180.060 and §55.103 of this title, an originator

must complete, on an annual basis, continuing education and coursework approved by NMLS in order to

renew the license.

§55.109 Temporary Authority

(a) Purpose. The purpose of this section is to specify how an originator licensed in another jurisdiction or

by a different licensing authority, or who is a "registered mortgage loan originator" (as defined by Finance

Code §180.002), may avail himself or herself of the ability to act in the capacity of an originator in Texas

temporarily while he or she seeks licensure by SML, as provided by Finance Code §180.0511.

(b) Application Required. An individual seeking to act under temporary authority must comply with the

requirements of Finance Code §180.0511. Among other requirements, Finance Code §180.0511 requires

that the individual file an application with SML seeking licensure to be recognized as having temporary

authority. An individual must not act or attempt to act in the capacity of an originator until the application

has been filed and the individual has been assigned an NMLS license status by SML recognizing such

temporary authority (see §55.104 of this title (relating to NMLS License Records; Notices Sent to the

Originator)). An individual may confirm his or her temporary authority status by reviewing his or her

license status in NMLS or on the NMLS Consumer Access website (nmlsconsumeraccess.org).

Licensure), providing for the deemed withdrawal of an application that is not complete, do not apply to an

application for which temporary authority status is conferred.

(d) Maximum Duration. Pursuant to Finance Code §180.0511, the maximum duration for temporary

authority is 120 days. When an originator has received the cumulative benefit of 120 days of temporary

authority, no further temporary authority is allowed. An originator acting under temporary authority who

has exceeded the 120-day maximum duration will have his or license status conferring temporary

authority removed. An individual making an application for licensure who previously received the benefit of

120 days of temporary authority will not be conferred temporary authority status.

§55.110 Licensing of Military Service Members, Military Veterans, and Military Spouses

(a) Purpose. This section specifies licensing requirements for military service members, military veterans,

and military spouses, in accordance with Occupations Code Chapter 55.

(b) Definitions. In this section, the terms "military service member," "military spouse," and "military

veteran" have the meanings assigned by Occupations Code §55.001.

from any increased fee or other penalty for failing to renew his or her originator license in a timely manner

if the individual establishes to the satisfaction of the Commissioner that he or she failed to timely renew

the license because the individual was serving as a military service member. A military service member

who fails to timely renew his or her originator license must seek reinstatement of the license within the

time period specified by Finance Code §157.016; otherwise, the individual must obtain a new license,

including complying with the requirements and procedures then in existence for obtaining an original

license (see §55.103 of this title (relating to Renewal of the License)).

(d) Expedited Review and Processing. Occupations Code §55.005 provides that a military service

member, military veteran, or military spouse is entitled to expedited review and processing of his or her

application for an originator license. A military service member, military veteran, or military spouse

seeking expedited review of his or her application must, after applying for the license in NMLS, make a

written request for expedited review using the current form prescribed by SML and posted on its website

(sml.texas.gov), including providing the supporting documentation specified in the form, to enable SML to

verify the individual's status as a military service member, military veteran, or military spouse. SML, within

30 days after the date it receives a complete application and request for expedited review from a

qualifying applicant who is a military service member, military veteran, or military spouse, will process the

application, and, provided the applicant is otherwise eligible to receive the license, issue a license to the

applicant, if the applicant:

(1) is licensed as an originator in another jurisdiction with substantially equivalent licensing

requirements; or

(2) was licensed as an originator in Texas within the 5 years preceding the date of the application.

(e) Temporary Authority for Military Service Member or Military Spouse. Occupations Code §55.0041

provides that a military service member or military spouse may engage in a business or occupation for

which a license is required without obtaining the license if the military service member or military spouse

is currently licensed in good standing in another jurisdiction with substantially equivalent licensing

requirements. However, federal law imposes specific, comprehensive requirements governing when and

under what circumstances an individual licensed to act as an originator in another jurisdiction may act

under temporary authority in this state (the Secure and Fair Enforcement for Mortgage Licensing Act of

2008 (federal SAFE Act), 12 U.S.C. §5117 (relating to Employment Transition of Loan Originators)).

Occupations Code §55.0041(c) further requires that a military service member or military spouse "comply

with all other laws and regulations applicable to the business or occupation." As a result, a military service

member or military spouse seeking to avail himself or herself of the temporary authority conferred by

Occupations Code §55.0041 must apply for and seek temporary authority in accordance with Finance

Code §180.0511 and §55.109 of this title (relating to Temporary Authority).

(f) Substantial Equivalency. For purposes of this section and Occupations Code §55.004, an originator

license issued in another jurisdiction is substantially equivalent to a Texas originator license if it is issued

in accordance with the requirements of the federal SAFE Act (12 U.S.C. §§5501-5117). SML will verify a

license issued in another jurisdiction in NMLS.

(g) Credit for Military Experience. As provided by Occupations Code §55.007, with respect to an applicant

who is a military service member or military veteran, SML will credit verified military service, training, or

education toward the requirements for an originator license by considering the service, training, or

education as part of the applicant's employment history. The following items cannot be substituted for

military service, training, or education:

(1) the pre-licensing education and coursework specified by Finance Code §180.056 and §55.108(a)

of this title (relating to Required Education);

(2) the pre-licensing examination specified by Finance Code §180.057 and §55.108(a) of this title; and

(3) continuing education and coursework specified by Finance Code §180.060 and §55.108(c) of this

title.

§55.111 Background Checks

(a) NMLS Background Check; Fingerprints Required. An individual applying for an originator license

(applicant) must provide fingerprints as prescribed by NMLS in order to facilitate a criminal background

check through the Federal Bureau of Investigation. Additionally, an applicant must amend his her license

records (MU4 filing) to provide authorization for SML to obtain the criminal background check in NMLS.

(b) Background Checks by SML. Pursuant to Finance Code §157.0132 and Government Code

§411.1385, SML is authorized to conduct a criminal background check through the Texas Department of

Public Safety (DPS). If requested by SML, applicant must submit to the DPS criminal background check

process upon request by SML, including providing fingerprints and paying any applicable fees to DPS or

its designated third-party fingerprint processor to complete the criminal background check process.

authorization for SML to obtain a copy of the applicant's credit report concerning the applicant's credit

history from a credit reporting agency (credit bureau) in NMLS.

(d) Supplemental Information. An applicant must provide information related to any administrative, civil, or

criminal findings or proceedings by a governmental jurisdiction, including any information required by

§55.112 of this title (relating to Procedures for Review of Background Checks) to SML. The information

must be uploaded to NMLS.

§55.112 Procedures for Review of Background Checks

(a) Purpose. This section establishes procedures used by SML to perform background checks and review

an individual's criminal background and credit history to determine his or her fitness and eligibility for

licensure in accordance with Finance Code §157.0132.

(b) Supporting Information/Documentation for Criminal Background Check. An individual applying for an

originator license (applicant) with a criminal history, when requested by SML, must provide the following

information concerning each conviction or other criminal proceeding identified by SML:

(1) a detailed explanation, in writing, of the events and circumstances for each conviction or other

criminal proceeding required to be self-disclosed in his or her application, signed and dated by the

individual seeking licensure; and

(2) copies of court records or other documentation reflecting:

(A) the nature of the criminal offense (including the statutory provisions violated, and the severity or

classification of the offense);

(B) the individual's plea (including any terms or other arrangements for the plea);

(D) the sentence imposed;

(E) any probation or community supervision imposed (including evidence of compliance); and

(F) any other action in the proceeding causing final disposition of the case to be deferred.

SML, must provide the following information concerning each financial disclosure made in his or her

application and each credit account on his or her credit report identified by SML:

(1) a detailed explanation, in writing, of the background and circumstances surrounding each financial

disclosure made or credit account identified, signed and dated by the individual seeking licensure;

(2) if a bankruptcy proceeding is disclosed, a copy of the order of discharge from such proceeding, or

if the proceeding is ongoing, the current bankruptcy petition, and the current the financial schedules filed

in the proceeding;

(3) if a judgment or lien is disclosed, a copy of such judgment or lien filing; and

(4) if delinquent child support is disclosed, a copy of the most recent statement of account or other

documentation reflecting the current amount due, and if the individual is in a payment plan or has

otherwise entered into terms for repayment, a copy of such plan or terms.

(d) Effect of Providing Supporting Documentation. By providing documentation to SML in accordance with

subsections (b) and (c) of this section, the applicant certifies that he or she has a good faith belief that

such documents are true and correct copies of documents issued by the person that originally created the

document that SML may rely on in making a decision on the application. By providing such supporting

documentation, the applicant consents to such documentation being admissible at an adjudicative hearing

if the Commissioner seeks to deny the application, resulting in a contested case, and the applicant is

deemed to have waived any objections concerning the admissibility of such documentation into the

administrative record at such adjudicative hearing.

(e) Certified Documents. Notwithstanding subsection (d) of this section, the applicant, at his or her own

cost, must obtain and provide SML with certified or exemplified copies of any documents described in

subsections (b) and (c) of this section, upon written request by SML.

§55.113 Criminal Conviction Guidelines

(a) Purpose. This section establishes the criteria used by SML to review an individual’s criminal history to

determine his or her eligibility and fitness to be licensed by SML as an originator. This section implements

the requirements of Occupations Code §53.025, requiring SML to establish guidelines related to such

reviews, including designating particular crimes and offenses SML considers to be directly related to the

duties and responsibilities of acting as an originator and may constitute grounds for denial of licensure.

The Commissioner's authority to deny an application for licensure based on an individual's criminal history

under the Occupations Code is in addition to and augments that arising from the Finance Code. This

section also describes the Commissioner's other statutory authority arising from the Finance Code for

denial of licensure based on an individual's criminal history, including outlining certain offenses deemed

by this section to be grounds for denial under the Finance Code.

(b) Ineligibility by Operation of Law. The following individuals are ineligible for licensure by operation of

law due to his or her criminal history:

(1) an individual who, within the 7 years preceding the date of the application, has been convicted of,

or pled guilty or nolo contendere (no contest) to, a felony in a court of this state, another state or territory

of the United States, a federal court of the United States, or other foreign, or military court, in accordance

with Finance Code §180.055(a); and

(2) an individual who, at any time, has been convicted of, or pled guilty or nolo contendere to, a felony

offense involving an act of fraud, dishonesty, breach of trust, or money laundering, in accordance with

Finance Code §180.055(a). Any felony offense listed in the schedule contained in subsection (e) of this

section having a nexus to residential mortgage loan origination arising from the categories of criminal

offenses related to residential mortgage loan origination under subsection (d)(1) or (2) of this section

(concerning crimes involving fraud, falsification, dishonesty, deception and breach of trust, and theft or

embezzlement, respectively) is deemed to constitute a crime involving an act of fraud, dishonesty, breach

of trust, or money laundering for purposes of Finance Code §180.055(a).

intermediary between the consumer seeking a residential mortgage loan and the lender or underwriter

that determines whether the consumer qualifies for the loan. The originator may assist the consumer in

reviewing his or her income, expenses, and credit worthiness to determine whether he or she will qualify

for a loan, and on what terms he or she might qualify. The originator may assist the consumer in

completing the loan application, and sometimes directs the consumer to present his or her financial

information in the manner to which the lender or underwriter is accustomed. A residential mortgage loan

often takes place in the context of a real estate transaction, and as a result, an originator sometimes

advises the consumer of his or her financial ability to purchase residential real estate, including providing

a conditional pre-qualification letter to establish the consumer's purchasing power while shopping in the

marketplace. Once the loan has entered the underwriting process, the originator may assist the consumer

in resolving any outstanding conditions of the underwriter to qualify for the loan and obtain approval,

including addressing items of concern on a consumer's credit report, immigration/residency status,

available cash-on-hand for the transaction, and income which may not be readily established by

documentary evidence such as that of an independent contractor. The originator communicates to the

consumer the ever-changing loan terms as interest rates in the marketplace fluctuate and is often a key

figure in advising the consumer of when and how he or she may "lock" the loan in advance of closing to

solidify the loan terms. The originator may serve as communications liaison between the consumer and

various parties to the transaction, including the lender, the underwriting department or a third-party

underwriter, real estate brokers and sales agents, appraisers, surveyors, insurance providers,

closing/settlement agents, and the representatives of various taxing authorities. In performing his or her

duties, an originator has access to sensitive information of the consumer, including his or her social

security number, date of birth, immigration/residency status, and all the personal financial details of the

consumer, including employment, income, assets, and expenses.

(d) Categories of Offenses Related to Residential Mortgage Loan Origination. The Finance Commission of

Texas and the Commissioner have determined the following categories of criminal offenses are directly

related to the duties and responsibilities of acting as an originator:

(1) criminal offenses involving fraud, falsification, dishonesty, deception, and breach of trust;

(2) criminal offenses involving theft or embezzlement; and

(3) criminal offenses involving intoxication by drugs or alcohol.

(e) Schedule of Criminal Offenses Determined to be Directly Related. The Finance Commission of Texas

and the Commissioner have determined the criminal offenses in the following schedule meet one or more

of the categories deemed to relate to residential mortgage loan origination by subsection (d) of this

section and are directly related to the duties and responsibilities of an individual licensed by SML to act as

an originator. The schedule includes those criminal offenses most likely to be encountered by SML and is

made from the perspective of the criminal laws of the State of Texas and the United States federal

government. However, the schedule is not an exhaustive review of all offenses and does not limit SML

from considering a criminal offense not specifically listed in the schedule. The schedule should be

construed to include any criminal offense meeting one or more of the categories deemed to relate to

residential mortgage loan origination, as provided by subsection (d) of this section. The schedule should

further be construed to include the substantially similar or functionally equivalent crime of any state or

territory of the United States, violations of the Texas Code of Military Justice (Government Code Chapter

432), violations of the Uniform Code of Military Justice (10 U.S.C. §801 et seq.), or crimes of a foreign

country or governmental subdivision thereof. In determining whether a criminal offense of another

jurisdiction is substantially similar or functionally equivalent, an inquiry will be made comparing the subject

offense with an offense on the schedule to determine whether the subject offense has similar elements,

including intent and classification of punishment, and whether the crime would have been punishable had

the acts been committed in Texas.

Figure: 7 TAC §55.113(e)

(f) Factors. Unless the individual is ineligible for licensure by operation of law as provided by subsection

(b) of this section, in determining whether a criminal offense is directly related to the duties and

responsibilities of an individual licensed by SML to act as an originator, SML will consider:

(1) the nature and seriousness of the crime;

(2) the relationship of the crime to the purposes for requiring a license to act as an originator;

(3) the extent to which an originator license might offer an opportunity for the individual to engage in

further criminal activity of the same type as that in which the individual has previously been involved;

(4) the relationship of the crime to the ability, capacity, or fitness required to perform the duties and

discharge the responsibilities of a licensed originator; and

(5) any correlation between the elements of the crime and the duties and responsibilities of licensed

originator.

(g) In addition to the factors in subsection (f) of this section, the Commissioner, in determining whether an

individual who has been convicted of a crime (as determined by Finance Code §157.0131 and subsection

(h) of this section) is unfit and ineligible for licensure, will consider:

(1) the extent and nature of the individual's past criminal activity;

(2) the age of the individual when the crime was committed;

(3) the amount of time that has elapsed since the individual's criminal activity;

(4) the amount of time that has elapsed since the individual's release from incarceration;

(5) the conduct and work activity of the individual before and after the criminal activity;

(6) evidence of the individual's rehabilitation or rehabilitative efforts;

(7) letters of recommendation, signed and dated, by a current employer, if the individual is employed,

or a previous employer, stating that the employer has specific and complete knowledge of the individual's

criminal history and the reasons the employer is recommending that the individual be considered fit to be

licensed by SML; and

(8) any other letters of recommendation, signed and dated, by an individual familiar with the applicant

and his or her character and fitness, with specific and complete knowledge of the individual's criminal

history, able to offer competent information about the nature and extent of the applicant's rehabilitative

efforts.

(h) Convictions Considered. The determination of whether a criminal proceeding is considered to have

resulted in a conviction for purposes of this section will be made in accordance with Finance Code

§157.0131, which states that an individual is considered to have been convicted of a criminal offense if:

(1) a sentence is imposed on the individual;

(2) the individual received probation or community supervision, including deferred adjudication or

community service; or

(3) the court deferred final disposition of the individual's case.

(i) Consideration of Disciplinary Actions. Unless the individual is ineligible for licensure by operation of law

as provided by subsection (b) of this section, in addition to the individual's criminal history, the

Commissioner may consider the individual's past history of disciplinary actions with SML, or another

regulatory body or official of another jurisdiction regulating residential mortgage loan origination or other

financial services, which may serve as separate grounds for license ineligibility, or as an aggravating

factor rendering the individual ineligible for licensure.

(j) Consideration of Financial Responsibility, Character and General Fitness. Unless the individual is

ineligible for licensure by operation of law as provided by subsection (b) of this section, in addition to the

individual's criminal history, the Commissioner may consider the individual's financial responsibility, and

other evidence of character and general fitness, which may serve as separate grounds for license

ineligibility, or as an aggravating factor rendering the individual ineligible for licensure. A conviction for a

criminal offense having a nexus to residential mortgage loan origination arising from the categories of

criminal offenses deemed to relate to residential mortgage loan origination under subsection (d) of this

section is indicative of a failure to demonstrate requisite character and general fitness to command the

confidence of the community in accordance with Finance Code §180.055(a)(3), and honesty,

trustworthiness and integrity in accordance with Finance Code §157.012(c)(1).

§55.114 Request for Criminal History Eligibility Determination

(a) Purpose and Applicability. This section establishes the procedures by which an individual may seek a

preliminary review of his or her eligibility to be licensed by SML with respect to his or her criminal history

prior to formally applying with SML for licensure, as authorized by Occupations Code Chapter 53.

Pursuant to Occupations Code §53.102, this section applies to an individual who has reason to believe he

or she is ineligible to be licensed by SML due to a conviction or deferred adjudication for a felony or

misdemeanor offense, and who is enrolled or is planning to enroll in an educational program that prepares

an individual to be licensed by SML. The Commissioner will not offer advisory opinions concerning

criminal convictions or sentences that have not actually occurred.

(b) Request for Preliminary Eligibility Determination; Supporting Documentation. The request must be

made using the current form prescribed by SML and posted on its website (sml.texas.gov). The fee to

make a request under this section is determined by the Commissioner and posted on SML’s website. The

Commissioner may change the fee at any time; provided, any fee increase is not effective until notice has

been posted on SML’s website for at least 30 days.

SML to determine the requestor's eligibility using the same procedures for review of an individual's

criminal history when making an application for licensure and is subject to SML's criminal conviction

guidelines set forth in §55.113 of this title (relating to Criminal Conviction Guidelines). As a result, the

requestor, in making the request, must list all offenses that actually resulted in a criminal conviction or that

otherwise constitute a criminal conviction for purposes of Finance Code §157.0131 and §55.113 of this

title. The requestor's incarcerated status that would render the individual ineligible for licensure pursuant

to Occupations Code §53.021(b) will be disregarded; however, SML will consider the implications of the

requestor's anticipated release from incarceration in making its determination.

(d) Determination of Eligibility. Within 90 days after the date the fully-completed request is received, SML

will notify the requestor of his or her eligibility to receive a license issued under Finance Code Chapters

157 and 180.

(e) Effect of Determination. In the absence of new evidence known but not disclosed by the requestor, or

not reasonably available to SML in consideration of the disclosures made by the requestor, the

Commissioner's decision regarding eligibility of the requestor concerning his or her criminal history will be

determinative for purposes of reviewing a subsequent application for licensure from the requestor.

However, the Commissioner's decision regarding eligibility will not be determinative to the extent the

request for preliminary eligibility determination contained fraudulent or misleading information or

supporting documentation or otherwise failed to list a criminal conviction of the requestor that was not

otherwise discovered by SML in investigating the request, regardless of whether or not the requestor was

aware of the conviction at the time of the request, and including any subsequent conviction received by

the requestor. A decision that the requestor is eligible will not be determinative if the requestor is

determined to be ineligible for licensure by operation of law as provided by Finance Code §180.055(a)

and §55.113 of this title.

SUBCHAPTER C DUTIES AND RESPONSIBILITIES

§55.200 Required Disclosures

(a) Specific Notice to Applicant. An originator sponsored by a mortgage company licensed by SML must

provide a mortgage applicant with the notice required by §56.200(b) of this title (relating to Required

Disclosures). An originator sponsored by a mortgage banker registered with SML must provide a

mortgage applicant with the notice required by §57.200(b) of this title (relating to Required Disclosures).

The notice must be sent at the time the originator takes the initial application for a residential mortgage

loan. The notice must be signed by the originator and the mortgage applicant.

(b) Posted Notice on Websites. An originator sponsored by a mortgage company licensed by SML must

comply with the requirements of §56.200(c) of this title. An originator sponsored by a mortgage banker

registered with SML must comply with the requirements of §57.200(c) of this title.

correspondence sent to a mortgage applicant:

(1) the name of the mortgage company or mortgage banker sponsoring the originator and its NMLS

ID;

(2) the mortgage company’s or mortgage banker’s website address, if it has a website; and

(3) the name of the originator and his or her NMLS ID.

§55.201 Conditional Pre-Qualification and Conditional Approval Letters

(a) Compliance with Mortgage Company and Mortgage Banker Rules. An originator sponsored by a

mortgage company licensed by SML must comply with the requirements of §56.201 of this title (relating to

Conditional Pre-Qualification and Conditional Approval Letters). An originator sponsored by a mortgage

banker registered with SML must comply with the requirements of §57.201 of this title (relating to

Conditional Pre-Qualification and Conditional Approval Letters).

(b) Issuance by the Originator. A conditional pre-qualification letter or conditional approval letter must be

issued and signed by the originator.

letter must be accurate and reflect the actual information that the originator considered in issuing the

letter. An originator is cautioned that the issuance of an inaccurate, erroneous, or a negligently-issued

conditional pre-qualification letter or conditional approval letter constitutes a violation as provided by

§55.202 of this title (relating to Fraudulent, Misleading, or Deceptive Practices, and Improper Dealings)

and may result in disciplinary action against the originator. Additionally, if an inaccurate, erroneous, or a

negligently-issued conditional pre-qualification letter or conditional approval letter is relied on by the

mortgage applicant to incur out-of-pocket costs in connection with the prospective mortgage loan, it may

subject the originator to recovery claims made under Finance Code Chapter 156, Subchapter F.

§55.202 Fraudulent, Misleading, or Deceptive Practices and Improper Dealings

(a) Fraudulent, Misleading, or Deceptive Practices. The following conduct by an originator constitutes

fraudulent and dishonest dealings for purposes of Finance Code §157.024(a)(3), deceptive practices for

purposes of Finance Code §180.153(2), a scheme to defraud a person for purposes of Finance Code

§180.153(1), and a false or deceptive statement or representation for purposes of Finance Code

§180.153(11):

(1) knowingly misrepresenting the originator's relationship to a mortgage applicant or any other party

to a residential mortgage loan transaction or prospective residential mortgage loan transaction;

(2) knowingly misrepresenting or understating any cost, fee, interest rate, or other expense to a

mortgage applicant or prospective mortgage applicant in connection with a residential mortgage loan;

(3) knowingly overstating, inflating, altering, amending or disparaging any source or potential source of

residential mortgage loan funds in a manner which disregards the truth or makes any knowing and

material misstatement or omission;

(4) knowingly misrepresenting the lien position of a residential mortgage loan or prospective residential

mortgage loan;

(5) knowingly participating in or permitting the submission of false or misleading information of a

material nature to any person in connection with a decision by that person whether to make or acquire a

residential mortgage loan;

(6) as provided by Regulation X (12 C.F.R. §1024.14), brokering, arranging, or making a residential

mortgage loan for which the originator receives compensation for services not actually performed or

where the compensation received bears no reasonable relationship to the value of the services actually

performed;

(7) recommending or encouraging default or delinquency or the continuation of an existing default or

delinquency by a mortgage applicant on any existing indebtedness prior to closing a residential mortgage

loan which refinances all or a portion of such existing indebtedness;

(8) altering any document produced or issued by SML, unless otherwise permitted by statute or a rule

of SML.

(9) acting as an originator when the originator is licensed but not sponsored by a mortgage company

or mortgage banker, or the license is otherwise in an inactive status (which is deemed to constitute

unlicensed activity);

(10) using a trigger lead in misleading or deceptive manner by, among other things:

(A) failing to state in the initial communication with the consumer:

(i) the originator’s name and mortgage company or mortgage banker on behalf of which the

originator is acting;

(ii) a brief explanation of how the originator or his or her sponsoring mortgage company or

mortgage banker obtained the consumer’s contact information to make the communication (i.e., an

explanation of trigger leads);

(iii) that the originator and his or her sponsoring mortgage company or mortgage banker is not

affiliated with the creditor to which the consumer made the credit application that resulted in the trigger

lead; and

(iv) that the purpose of the communication is to solicit new business for the mortgage company or

mortgage banker sponsoring the originator;

(B) contacting a consumer who has opted out of prescreened offers of credit under the federal Fair

Credit Reporting Act (FCRA; 12 U.S.C. §1681b(e)); or

by the FCRA (12 U.S.C. §1681a(l) and §1681b(c));

(11) engaging in any other practice which the Commissioner, by published interpretation, has

determined is fraudulent, misleading, or deceptive.

(b) Improper and Unfair Dealings. The following conduct by an originator constitutes improper dealings for

purposes of Finance Code §157.024(a)(3) and unfair practices for purposes of Finance Code

§180.153(2):

(1) Acting negligently in performing an act requiring a license under Finance Code Chapters 157 or

180;

(2) Violating any provision of a local, State of Texas, or federal constitution, statute, rule, ordinance,

regulation, or final court decision that governs the same or a closely related activity, transaction, or subject

matter that is governed by the provisions of Finance Code Chapters 157 or 180, or this chapter, including,

but not limited to:

(A) Consumer Credit Protection Act, Equal Credit Opportunity Act (15 U.S.C. §1691 et seq.) and

Regulation B (12 C.F.R. §1002.1 et seq.);

(B) Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. §5101 et seq.) and

Regulation H (12 C.F.R. §1008.1 et seq.);

(D) Gramm-Leach-Bliley Act (GLBA; 15 U.S.C. §6801 et seq.), Regulation P (12 C.F.R. §1016.1 et

seq.), and the Federal Trade Commission's (FTC) Privacy of Consumer Financial Information rules (16

C.F.R. §313.1 et seq.);

(E) Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) and Regulation V (12 C.F.R. §1022.1 et

seq.);

(F) Real Estate Settlement Procedures Act (12 U.S.C. §2601 et seq.) and Regulation X (12 C.F.R.

1024.1 et seq.);

(G) Consumer Credit Protection Act, Truth in Lending Act (15 U.S.C. §1601 et seq.) and

Regulation Z (12 C.F.R. §1026.1 et seq.);

(H) the FTC's Standards for Safeguarding Customer Information rule (16 C.F.R. §314.1 et seq.);

(I) Finance Code Chapter 158 and Chapter 58 of this title;

(J) Finance Code Chapter 159 and Chapter 59 of this title; and

(K) Texas Constitution, Article XVI, §50 and Chapter 153 of this title;

(3) soliciting by phone a consumer who has placed his or her contact information on the national do-

not-call registry maintained by the Federal Trade Commission (FTC), unless otherwise allowable under

the FTC’s Telemarketing Sales Rule (16 C.F.R. §310.4(b)(iii)(B));

(4) Issuing a conditional pre-qualification letter or conditional approval letter under §55.201 of this title

(relating to Conditional Pre-Qualification and Conditional Approval Letters) that does not comply with the

required form for the letter or is inaccurate, erroneous, or negligently-issued;

(5) Representing to a mortgage applicant that a charge or fee which is payable to the originator or the

mortgage company or mortgage banker sponsoring the originator is a "discount point" or otherwise

confers a financial benefit on the mortgage applicant unless the loan closes and:

(A) the mortgage company or mortgage banker sponsoring the originator is making the residential

mortgage loan (lender); or

(B) the mortgage company or mortgage banker sponsoring the originator is not the lender but

demonstrates by clear and convincing evidence that the lender has charged or collected discount points

or other fees which the mortgage company or mortgage banker sponsoring the originator has actually

paid to the lender on behalf of the mortgage applicant to buy down the interest rate on the residential

mortgage loan;

(6) Failing to accurately respond within a reasonable time to reasonable questions from a mortgage

applicant or prospective mortgage applicant concerning the scope and nature of the originator's services

and any costs.

Finance Code §157.024(a)(3), deceptive practices for purposes of Finance Code §180.153(2), and a

scheme to defraud a person for purposes of Finance Code §180.153(1) when, in connection with the

origination of a residential mortgage loan:

(1) the originator:

(A) offers other goods or services to a mortgage applicant in a separate but related transaction;

and

(B) the originator engages in fraudulent, misleading, or deceptive acts in the related transaction; or

(2) the originator:

(A) affiliates with another person that provides goods or services to a mortgage applicant in a

separate but related transaction;

(B) the affiliated person engages in fraudulent, misleading, or deceptive acts in that transaction;

the affiliated person; and

(D) the originator failed to take appropriate steps to prevent or limit the fraudulent, misleading, or

deceptive acts.

(d) Sharing or Splitting Origination Fees with the Mortgage Applicant. An originator must not offer or agree

to share or split any loan origination fees with a mortgage applicant, rebate all or a part of an origination

fee to a mortgage applicant, reduce their established compensation to benefit a mortgage applicant, or

otherwise provide money, a cash equivalent, or anything of value to a mortgage applicant in connection

with performing residential mortgage loan origination services unless otherwise allowable under

Regulation X (12 C.F.R. §1024.14) and Regulation Z (12 C.F.R. §1026.36(d)). An originator acting in the

dual capacity of an originator and real estate sales broker or agent licensed under Occupations Code

Chapter 1101 may rebate their fees legitimately earned and derived from their real estate brokerage or

sales agent services to the extent allowable under applicable law governing real estate brokers or sales

agents; provided, the payment or other transfer described by this subsection occurs as a part of closing

and is properly reflected in the closing disclosure. If a payment or other transfer described by this

subsection occurs after closing, a rebuttable presumption exists that the payment or transfer is derived

from the originator's fees for residential mortgage loan origination services and constitutes an improper

sharing or splitting of fees with the mortgage applicant. The rebuttable presumption may only be

overcome by clear and convincing evidence established by the originator that the payment or transfer is

instead derived from fees for real estate brokerage or sales agent services. A violation of this subsection

is be deemed to constitute improper dealings for purposes of Finance Code §157.024(a)(3) and unfair

practices for purposes of Finance Code §180.153(2).

(e) Education Fraud. The following conduct in connection with pre-licensing education or examination, or

continuing education required by §55.108 of this title (relating to Required Education) constitutes a false

or deceptive statement or representation for purposes of Finance Code §180.153(11) and a false

statement or omission of material fact for purposes of Finance Code §180.153(12):

(1) claiming credit for a pre-licensing education course, pre-licensing examination, or continuing

education course the individual did not actually take; or

(2) taking a pre-licensing education course, pre-licensing examination, or continuing education course

on behalf of another individual.

§55.203 Advertising

An originator sponsored by a mortgage company licensed by SML must comply with the advertising

requirements in §56.203 of this title (relating to Advertising). An originator sponsored by a mortgage

banker registered with SML must comply with the advertising requirements in §57.203 of this title (relating

to Advertising).

§55.204 Books and Records

An originator sponsored by a mortgage company licensed by SML must comply with the books and

records requirements in §56.204 of this title (relating to Books and Records). An originator sponsored by a

mortgage banker registered with SML must comply with the books and records requirements in §57.204

of this title (relating to Books and Records). An originator fulfills the requirements of §56.204 of this title

and §57.204 of this title, as applicable, if his or her sponsoring mortgage company or mortgage banker

maintains the required books and records on behalf of the originator. An originator must work diligently

and cooperatively with his or her sponsoring mortgage company or mortgage banker to ensure that the

records arising from the originator’s work are properly maintained by the mortgage company or mortgage

banker sponsoring his or her license.

§55.205 Mortgage Call Reports

(a) Purpose. This section clarifies and establishes requirements related to the mortgage call reports an

originator is required to file under Finance Code §180.101.

(b) Fulfillment by Mortgage Company or Mortgage Banker. Mortgage companies licensed by SML and

mortgage bankers registered with SML are required to file mortgage call reports. An originator is not

expected to and should not attempt to file his or her own mortgage call reports. Instead, the originator’s

activity must be included in the mortgage call reports filed by the mortgage company or mortgage banker

sponsoring the originator. An originator fulfills the requirements of Finance Code §180.101 if his or her

sponsoring mortgage company or mortgage banker files mortgage call reports that include the originator’s

activity. An originator must work diligently and cooperatively with his or her sponsoring mortgage company

or mortgage banker to ensure that the originator’s activity is included in a mortgage call report filed by his

or her sponsoring mortgage company or mortgage banker in compliance with §56.205 of this title (relating

to Mortgage Call Reports), applicable to mortgage companies licensed by SML, and §57.205 of this title

(relating to Mortgage Call Reports), applicable to mortgage bankers registered with SML.

SUBCHAPTER D SUPERVISION AND ENFORCEMENT

§55.300 Examinations

(a) Purpose. This section clarifies and establishes requirements related to examinations of an originator

conducted by SML under Finance Code §157.021.

(b) State Examination System (SES). Examinations are conducted in SES (stateexaminationsystem.org).

The mortgage company or mortgage banker sponsoring the originator must use SES to facilitate the

examination.

conducted by another state agency or regulatory authority if that state agency’s or regulatory authority’s

mortgage regulation program is accredited by the Conference of State Bank Supervisors.

(d) Notice of Examination. Except when SML determines that giving advance notice would impair the

examination, SML will give the primary contact person of the mortgage banker or mortgage company

sponsoring the originator listed in NMLS or a person designated by the primary contact person advance

notice of each examination. Such notice will be sent to the primary contact person's or designated

person's mailing address or email address of record with NMLS and will specify the date on which SML's

examiners are scheduled to begin the examination. Failure to receive the notice will not be grounds for

delay or postponement of the examination. The notice will include a list of the documents and records that

must be produced or made available to facilitate the examination.

180, and this chapter, and will specifically address whether:

(1) all persons are properly licensed and sponsored;

(2) all office locations are properly licensed or registered, as provided by §56.206 of this title (relating

to Office Locations; Remote Work) and §57.206 of this title (relating to Office Locations; Remote Work);

(3) all required books and records are being maintained in accordance with §56.204 of this title

(relating to Books and Records) and §57.204 of this title (relating to Books and Records);

(4) legal and regulatory requirements applicable to the originator and the mortgage banker or

mortgage company sponsoring the originator are being properly followed (including, but not limited to, the

requirements described in §55.202(b)(2) of this title (relating to Fraudulent, Misleading, or Deceptive

Practices and Improper Dealings); and

(5) other matters as SML and its examiners deem necessary or advisable to carry out the purposes of

Finance Code Chapters 156, 157, and 180.

(d) The examiners will review a sample of residential mortgage loan files identified by the examiners from

the mortgage transaction log required by §56.204(c)(1) or (d)(1) of this title, applicable to mortgage

companies licensed by SML, or §57.204(c)(1) or (d)(1) of this title, applicable to mortgage bankers

registered with SML. The examiner may expand the number of files to be reviewed if, in his or her

discretion, conditions warrant.

(e) The examiners may require an originator, at his or her own cost, to make copies of loan files or such

other books and records as the examiners deem appropriate for the preparation of or inclusion in the

examination report.

(f) Failure to Cooperate; Disciplinary Action. Failure by an originator to cooperate with the examination or

failure to grant the examiners access to books, records, documents, operations, and facilities may result

in disciplinary action including, but not limited to, imposition of an administrative penalty.

(h) Reimbursement for Costs. When SML’s examiners must travel outside of Texas to conduct an

examination of an originator because the required records are maintained at a location outside of Texas,

SML will require reimbursement for the actual costs incurred in connection with such travel including, but

not limited to, transportation, lodging, meals, communications, courier service and any other reasonably

related costs. Any such costs will be assessed against the originator in NMLS and must be paid in NMLS.

§55.301 Investigations

(a) Purpose. This section clarifies and establishes requirements related to investigations of an originator

conducted by SML under Finance Code §157.021.

(b) Reasonable Cause. SML will conduct an investigation if it has reasonable cause to do so. Reasonable

cause is deemed to exist if SML receives or discovers information from a source SML has no reason to

believe is other than creditable indicating that a violation of law more likely than not occurred that is within

SML’s authority to take action to address. The absence of reasonable cause to initiate an investigation

does not constitute grounds to challenge and does not invalidate an action taken by SML to address a

violation found during the course of an investigation.

relevant facts and circumstances then known. An investigation may include:

(1) review of documentary evidence;

(2) interviews with complainants, respondents, and third parties, and the taking of sworn written

statements;

(3) obtaining information from other state or federal agencies, regulatory authorities, or self-regulatory

organizations;

(4) requiring complainants or respondents to provide explanatory, clarifying, or supplemental

information; and

(5) other lawful investigative methods SML deems necessary or appropriate.

§55.302 Confidentiality of Examination, Investigation, and Inspection Information

(a) Purpose. This section clarifies and establishes requirements related to the confidentiality of information

obtained by SML during an examination, investigation, or inspection, as provided by Finance Code

§157.021.

(b) Confidential Information. All information obtained by SML during an examination, investigation, or

inspection is confidential and cannot be released except as required or expressly permitted by law. The

Finance Commission of Texas and the Commissioner have determined that the following information is

confidential under Finance Code §156.301 (list is not exhaustive):

(1) any documents, data, data compilations, work papers, notes, memoranda, summaries, recordings,

or other information, in whatever form or medium, obtained, compiled, or created during an examination,

investigation, or inspection;

(2) information that is derived from or is the product of the confidential information described by

paragraph (1) of this subsection, including any reports or other information chronicling or summarizing the

results, conclusions, or other findings of an examination, investigation, or inspection, including assertions

of any violations, deficiencies, or issues identified, or any directives, mandates, or recommendations for

action by the regulated entity to address, correct, or remediate the violations, deficiencies, issues, or other

findings identified during the examination, investigation, or inspection; including, but not limited to, any

corrective or remedial action directed by SML or taken by the originator entity under §55.303 of this title

(relating to Corrective Action);

(3) information that is derived from or is the product of the confidential information described by

paragraphs (1) and (2) of this subsection, including any communications, documentary evidence, or other

information concerning the regulated entity’s compliance with any directives, mandates, or

recommendations for action by the mortgage company and any corrective or remedial action taken by the

regulated entity to address, correct, or remediate the violations, deficiencies, issues, or other findings

identified during the examination, investigation, or inspection.

confidential to the extent the information becomes publicly available in a disciplinary or enforcement

action that is a contested case (i.e., information made part of the administrative record during an

adjudicative hearing that is open to the public).

§55.303 Corrective Action

(a) Corrective Action, Generally; Purpose. During an examination, investigation, or inspection, SML may

determine that violations, deficiencies, or compliance issues (collectively, violations) occurred. Within the

confidential environment of the examination, investigation, or inspection, and typically in lieu of possible

disciplinary or enforcement action against the originator that is not confidential, SML may direct the

originator to take corrective action to address the violations identified during the examination,

investigation, or inspection. This section clarifies and establishes requirements related to such corrective

action.

(b) Internal Reviews. If SML determines during an examination, investigation, or inspection that a violation

may be systemic, SML may direct the originator to conduct his or her own review to self-identify any other

violations, compile information concerning such violations, and report his or her findings to SML. SML may

direct the originator to take corrective action for any violations identified

violation. Any refund must comply with this subsection. The Commissioner, in his or her sole discretion,

may waive or modify the requirements of this subsection to achieve appropriate, practical, and workable

results. A refund must be made by one of the following methods:

(1) Certified Funds. The refund may be made by certified funds (cashier’s check or money order) sent

to the mortgage applicant at his or her last known address. The mortgage company must use reasonable

diligence to determine the last known address of the mortgage applicant. The payment must be sent in a

manner that includes tracking information and confirmation of delivery (e.g., certified mail return receipt

requested, or commercial delivery service with tracking). The mortgage company must capture and

maintain records evidencing the payment, including a copy of the payment instrument, any

correspondence accompanying the payment, tracking information, and delivery confirmation; or

(2) Wire Transfer or ACH. The refund may be made by wire transfer or automated clearing house

(ACH) payment to the mortgage applicant’s verified bank account. The mortgage company must capture

and maintain records evidencing the payment, including any transaction receipt, confirmation page, or

similar, reflecting:

(A) name of the sender and any relevant contact information;

(B) sender’s bank information (institution, routing number, and account number);

(D) recipient’s bank information (routing number and account number); and

(E) the transaction reference number or confirmation code.

§55.310 Appeals

(a) Purpose. Finance Code Chapter 157 provides that certain decisions of the Commissioner adverse to

an originator or other individual may be appealed and offers the opportunity for an adjudicative hearing to

challenge the decision. This section establishes various deadlines by which an originator or other

individual must appeal the decision before it becomes final and non-appealable.

(b) The following appeal deadlines apply:

(1) License Denials. A license denial under Finance Code §157.017 must be appealed within 10 days

after the date notice of the Commissioner’s decision is received by the individual seeking the license.

(2) Order of Suspension for Violation of Final Order. An order of suspension issued by the

Commissioner under Finance Code §156.303(h) must be appealed within 15 days after the date the order

is issued.

(3) Notice of Suspension for Criminal Offense Involving Fraud, Theft, or Dishonesty. A notice of

suspension issued under Finance Code §156.303(k) must be appealed within 15 days after the date the

notice is issued.

(4) Notice of Disciplinary Action. A notice of disciplinary action issued under Finance Code §§

157.023(a), 157.024(a), or 157.024(b) must be appealed within 30 days after the date the notice is issued.

(5) Order for Disciplinary Action (Order to Take Affirmative Action or Order to Cease and Desist). An

order of the Commissioner issued under Finance Code §157.024(c) or §157.031(b) must be appealed

within 30 days after the date the order is issued. This deadline does not apply to an order for disciplinary

action issued by the Commissioner under Finance Code §§ 157.023(a), 157.024(a), or 157.024(b) that

was preceded by notice issued under paragraph (4) of this subsection.

(6) Other Deadlines. Any appeal not otherwise addressed by this section must be made within 30 days

after the date the notice or order is issued.

deadline. An appeal may be sent by mail (Attn: Legal Division, 2601 N. Lamar Blvd., Suite 201, Austin,

Texas 78705) or by email (enforce[email protected].gov).

(d) Effect of Not Appealing. An originator or other individual who does not timely appeal the

Commissioner’s decision is deemed to have irrevocably waived any right he or she had to challenge the

decision or request an adjudicative hearing on the decision and is deemed not to have exhausted all

administrative remedies available to him or her for purposes of judicial review of the Commissioner’s

decision under Government Code §2001.171. The failure to appeal an order of the Commissioner results

in the order becoming final and non-appealable. The failure to appeal a notice of the Commissioner’s

decision means the Commissioner can issue a final, non-appealable order at any time without further

notice or opportunity for a hearing to the originator.

§55.311 Hearings

(a) Hearings, Generally. Adjudicative hearings conducted under Finance Code Chapters 157 and 180 are

governed by the rules in Chapter 9 of this title (concerning Rules of Procedure for Contested Hearings,

Appeals, and Rulemakings). Contested cases referred to the State Office of Administrative Hearings

(SOAH) are also governed by SOAH’s rules in 1 TAC Chapter 155 (concerning Rules of Procedure). All

hearings are held in Austin, Texas. Any appeal for judicial review under Government Code §2001.171

must be brought in a district court in Travis County, Texas.

(b) Hearing Costs for License Denials. Hearing costs assessed against an individual under Finance Code

§157.017(f) include:

(1) filing fees;

(2) the costs of a court reporter;

(3) the costs of the administrative law judge (ALJ) or hearings officer presiding over the hearing;

(4) the expense of SML’s staff to prepare for and attend the hearing or any ancillary proceedings (i.e.,

the hearing of motions, status conferences, etc.), and any related travel expenses;

(5) the cost of any outside counsel retained to represent SML; and

(6) the cost of any expert witness retained by SML.

fact or conclusions of law concerning the hearing costs described by subsection (b)(3) of this section,

such costs are deemed to be $500. Hearing costs described by subsection (b)(4) of this section are

measured based on the diversion of productivity of such staff away from their typical duties and toward

the hearings process and are calculated by multiplying the number of hours spent by each staff member

in furtherance of the hearings process (measured in increments of 1/10 of an hour) by their current hourly

compensation rate. The Commissioner may rely on affidavit testimony of such staff members to make

appropriate findings of fact and conclusions of law concerning the hearing costs described by subsection

(b)(4) of this section.

Figure: 7 TAC §55.113(e)

Schedule of Criminal Offenses Determined to be Directly Related to Residential Mortgage Loan Origination

Texas Offenses:

Offense

Statutory Reference

Nexus to Residential Mortgage

Loan Origination

(reference to Rule §55.110(e))

Abuse of Official Capacity

Tex. Pen. Code §39.02

(1), (2)

Acceptance of Gift/Honorarium by Public

Servant

Tex. Pen. Code §§36.07, 36.08

(1)

Agreement to Abduct Child

Tex. Pen. Code §25.031

(2)

Burglary, in furtherance of theft; Burglary of

Vehicle

Tex. Pen. Code §§30.02, 30.04

(2)

Breach of Computer Security

Tex. Pen. Code §33.02

(1), (2)

Bribery

Tex. Pen. Code §36.02

(1)

Bribery, Commercial

Tex. Pen. Code §32.43

(1)

Coercion of Public Servant or Voter

Tex. Pen. Code §36.03

(1)

Counterfeiting Trademark

Tex. Pen. Code §32.23

(1)

Credit Card or Debit Card Abuse

Tex. Pen. Code §32.31

(1), (2)

Credit Card Transaction Record Laundering

Tex. Pen. Code §32.35

(1)

Criminal Attempt, Solicitation, or Conspiracy

Tex. Pen. Code §§15.01, 15.02, 15.03,

15.031

See offense attempted, solicited or

conspired

Criminal Simulation

Tex. Pen. Code §32.22

(1)

Criminally Negligent Homicide, arising from

intoxication

Tex. Pen. Code §19.05

(3)

Deceptive Business Practices

Tex. Pen. Code §32.42

(1)

Driving/Boating/Flying while Intoxicated

Tex. Pen. Code §§49.04, 49.05, 49.06,

49.09

(3)

Driving while Intoxicated with Child Passenger

Tex. Pen. Code §49.045

(3)

Drug Offenses

Tex. Health & Safety Code Chs. 481, 482,

483

(3)

Escape from Custody

Tex. Pen. Code §38.06

(1)

Figure: 7 TAC §55.113(e)

Evading Arrest or Detention

Tex. Pen. Code §38.04

(1)

Exploitation of Child/Elderly/Disabled

Tex. Pen. Code §32.53

(1), (2)

False Report of Emergency

Tex. Pen. Code §42.06

(1)

False Report to Law Enforcement

Tex. Pen. Code §37.08

(1)

False Statement to Obtain Property, Credit or

Services

Tex. Pen. Code §32.32

(1), (2)

Forgery

Tex. Pen. Code §32.21

(1), (2)

Fraudulent Court Record

Tex. Pen. Code §37.13

(1)

Fraudulent Destruction, Removal, or

Concealment of Writing

Tex. Pen. Code §32.47

(1)

Fraudulent Filing of Financing Statement

Tex. Pen. Code §37.101

(1)

Fraudulent or Fictitious Military Record

Tex. Pen. Code §32.54

(1)

Fraudulent Use or Possession of Identifying

Information

Tex. Pen. Code §32.51

(1)

Fraudulent, Substandard, or Fictitious Degree

Tex. Pen. Code §32.52

(1)

Fraudulent Transfer of a Motor Vehicle

Tex. Pen. Code §32.34

(1)

Hindering Apprehension or Prosecution

Tex. Pen. Code §38.05

(1)

Hindering Secured Creditors

Tex. Pen. Code §32.33

(1), (2)

Impersonating Lawyer

Tex. Pen. Code §38.122

(1)

Impersonating Public Servant

Tex. Pen. Code §37.11

(1)

Impersonating Peace Officer

Tex. Pen. Code §37.12

(1)

Improper Gift to Public Servant

Tex. Pen. Code §36.09

(1)

Improper Influence

Tex. Pen. Code §36.04

(1)

Insurance Fraud

Tex. Pen. Code §35.02

(1)

Intoxication Assault

Tex. Pen. Code §49.07

(3)

Intoxication Manslaughter

Tex. Pen. Code §49.08

(3)

Manslaughter, arising from intoxication

Tex. Pen. Code §19.04

(3)

Medicaid Fraud

Tex. Pen. Code §35A.02

(1), (2)

Misapplication of Fiduciary Property or Property

of Financial Institution

Tex. Pen. Code §32.45

(1), (2)

Misuse of Official Information

Tex. Pen. Code §39.06

(1)

Money Laundering

Tex. Pen. Code §34.02

(1), (2)

Figure: 7 TAC §55.113(e)

Official Oppression by Public Servant

Tex. Pen. Code §39.03

(1)

Online Impersonation

Tex. Pen. Code §33.07

(1)

Organized Criminal Activity

Tex. Pen. Code §71.02

See underlying offense

Perjury; Aggravated Perjury

Tex. Pen. Code §§37.02, 37.03

(1)

Prohibited Substances and Items in Correctional

Facility

Tex. Pen. Code §38.11

(1), (3)

Robbery; Aggravated Robbery

Tex. Pen. Code §§29.02, 29.03

(2)

Securing Execution of Document by Deception

Tex. Pen. Code §32.46

(1), (2)

Simulating Legal Process

Tex. Pen. Code §32.48

(1)

Smuggling of Persons; Continuous Smuggling of

Persons

Tex. Pen. Code §§20.05, 20.06

(1)

Stealing or Receiving Stolen Check

Tex. Pen. Code §32.24

(1), (2)

Tampering of Electronic Data

Tex. Pen. Code §33.023

(1)

Tampering with Consumer Product

Tex. Pen. Code §22.09

(1)

Tampering with Governmental Record

Tex. Pen. Code §37.10

(1)

Tampering with Identification Numbers

Tex. Pen. Code §31.11

(1)

Tampering with or Fabricating Physical Evidence

Tex. Pen. Code §37.09

(1)

Tampering with Witness

Tex. Pen. Code §36.05

(1)

Theft

Tex. Pen. Code §31.03

(2)

Theft – Organized Retail Theft

Tex. Pen. Code §31.16

(2)

Theft of Cargo

Tex. Pen. Code §31.18

(2)

Theft of Petroleum Product

Tex. Pen. Code §31.19

(2)

Theft of Service

Tex. Pen. Code §31.04

(1), (2)

Trafficking of Persons; Continuous Trafficking of

Persons

Tex. Pen. Code §§20A.02, 20A.03

(1)

Unauthorized Absence from Corrections Facility

Tex. Pen. Code §38.113

(1)

Unauthorized Acquisition or Transfer of

Financial Information

Tex. Pen. Code §31.17

(1), (2)

Unauthorized Use of a Vehicle

Tex. Pen. Code §31.07

(1), (2)

Unlawful Access to Stored Communications

Tex. Pen. Code §16.04

(1), (2)

Unlawful Interception, Use, or Disclosure of

Wire, Oral or Electronic Communications

Tex. Pen. Code §16.02

(1)

Figure: 7 TAC §55.113(e)

Unlawful Use of Criminal Instrument or

Mechanical Security Device

Tex. Pen. Code §16.01

(1)

Unlawful Use of Pen Register or Trap and Trace

Device

Tex. Pen. Code §16.03

(1)

Federal Offenses:

Offense

Statutory Reference

Nexus to Residential Mortgage

Loan Origination

(reference to Rule §55.110(e))

Bankruptcy Fraud

18 U.S.C. §§151-158

(1)

Bribery, Graft and Conflicts of Interest

18 U.S.C. §§201-227

(1)

Conspiracy to Commit Offense or Defraud

18 U.S.C. §§371-373

(1); See also conspired offense, if

applicable

Counterfeiting and Forgery

18 U.S.C. §§470-514

(1)

Customs Fraud

18 U.S.C. §§541-555

(1)

Drug Offenses

21 U.S.C. §§841-865

(3)

False Claims Affecting Government

18 U.S.C. §§281-293

(1)

Fraud, False Statements, Identity Theft

18 U.S.C. §§1001-1070

(1)

Mail Fraud, and other fraud offenses (Wire Fraud,

bank fraud, health care fraud,

securities/investment fraud)

18 U.S.C. §§1341-1351; 15 U.S.C. §§

78ff(a), 78j, 77x, 80b-17, 80a-48, 77yyy

(1), (2)

Obstruction of Justice / Tampering with

Government Records

18 U.S.C. §§1501-1521; 2071-2076

(1)

Passport/Visa Fraud

18 U.S.C. §§1541-1547

(1)

Perjury

18 U.S.C. §§1621-1623

(1)

Racketeering/RICO Offenses/ Money Laundering

Offenses

18 U.S.C. §§1951-1990

(1), (2)

Robbery and Burglary

18 U.S.C. §§2111-2119

(2)

Tax Fraud

26 U.S.C. §§7201-7230

(1), (2)

Theft, Embezzlement

18 U.S.C. §§641-670

(2)

TITLE 7 BANKING AND SECURITIES

PART 4 DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 56 RESIDENTIAL MORTGAGE LOAN COMPANIES

{{All existing rules affecting residential mortgage loan companies in Chapter 80 will be repealed and

replaced with new rules in Chapter 56}}

SUBCHAPTER A GENERAL PROVISIONS

§56.1 Purpose and Applicability

This chapter governs the SML's administration and enforcement of Finance Code Chapter 156, the

Residential Mortgage Loan Company Licensing and Registration Act (other than Subchapters F and G),

concerning the licensing, registration, and operations of mortgage companies, financial services companies,

credit union subsidiary organizations, auxiliary mortgage loan activity companies, and independent

contractor loan processor or underwriter companies (each a residential mortgage loan company). This

chapter applies to persons licensed by SML as a residential mortgage loan company or those required to

be licensed. Pursuant to Finance Code §156.2012(d) a person registered with SML as a financial services

company is subject to the requirements of this chapter as if the company were licensed by SML as a

residential mortgage loan company and the rules in this chapter must be construed accordingly.

§56.2 Definitions

For purposes of this chapter, and in SML's administration and enforcement of Finance Code Chapter 156

(other than Subchapters F and G), the following definitions apply, unless the contest clearly indicates

otherwise:

(1) "Application," as used in Finance Code §156.002(14) and paragraphs (9) and (22) of this section

means a request, in any form, for an offer (or a response to a solicitation of an offer) of residential mortgage

loan terms, and the information about the mortgage applicant that is customary or necessary in a decision

on whether to make such an offer, including, but not limited to, a mortgage applicant's name, income, social

security number to obtain a credit report, property address, an estimate of the value of the real estate, or

the mortgage loan amount.

(2) "Commissioner" means the savings and mortgage lending commissioner appointed under Finance

Code Chapter 13.

(3) "Compensation" includes salaries, bonuses, commissions, and any financial or similar incentive.

(4) "Control person" means an individual that directly or indirectly exercises control over a mortgage

company. Control is defined by the power, directly or indirectly, to direct the management or policies of a

mortgage company, whether through ownership of securities, by contract, or otherwise. Control person

includes any person that:

(A) is a director, general partner, or executive officer;

(B) directly or indirectly has the right to vote 10% or more of a class of a voting security or has the

power to sell or direct the sale of 10% or more of a class of voting securities;

(D) in the case of a partnership, has the right to receive upon dissolution, or has contributed, 10% or

more of the partnership's capital assets.

(5) "Dwelling" means a residential structure that contains one to four units and is attached to residential

real estate. The term includes an individual condominium unit, cooperative unit, or manufactured home, if it

is used as a residence.

(6) "E-Sign Act" refers to the federal Electronic Signature in Global and National Commerce Act (15

U.S.C. §7001 et seq.).

(7) "Engage in or conduct the business of a mortgage company" or "engage in or conduct the business

of residential mortgage loan origination," or any similar derivative or variation of those terms, means to

contract for (as provider), provide, or offer to contract for or provide, residential mortgage loan origination

services for compensation or gain or with the expectation of compensation or gain.

(8) "Making a residential mortgage loan," or any similar derivative or variation of that term, means when

a person determines the credit decision to provide the residential mortgage loan, or the act of funding the

residential mortgage loan or transferring money to the borrower. A person whose name appears on the loan

documents as the payee of the note is considered to have "made" the residential mortgage loan.

(9) "Mortgage applicant" has the meaning assigned by Finance Code §156.002 and includes a person

who contacts a mortgage company or its sponsored originator in response to a solicitation to obtain a

residential mortgage loan, and a person who has not completed or started completing a formal loan

application on the appropriate form (e.g., Fannie Mae's Form 1003 Uniform Residential Loan Application),

but has submitted financial information constituting an application, as provided by paragraph (1) of this

section.

(10) "Mortgage banker" has the meaning assigned by Finance Code §156.002.

(11) "Mortgage company" means, for the purposes of this chapter, a "residential mortgage loan

company" as is defined by Finance Code §156.002.

(12) "Nationwide Multistate Licensing System" or "NMLS" has the meaning assigned by Finance Code

§156.002 in defining "Nationwide Mortgage Licensing System and Registry."

(13) "Offers or negotiates the terms of a residential mortgage loan," as used in Finance Code

§156.002(14), means, among other things, when an individual:

(A) arranges or assists a mortgage applicant or prospective mortgage applicant in obtaining or

applying to obtain, or otherwise secures an extension of consumer credit for another person, in connection

with obtaining or applying to obtain a residential mortgage loan;

(B) presents for consideration by a mortgage applicant or prospective mortgage applicant particular

residential mortgage loan terms (including rates, fees, and other costs); or

for the purpose of reaching a mutual understanding about particular residential mortgage loan terms.

(14) "Originator" has the meaning assigned by Finance Code §156.002 in defining "residential mortgage

loan originator." Paragraphs (13) and (22) of this section do not affect the applicability of such statutory

definition. Individuals who are specifically excluded under such statutory definition, as provided by Finance

Code §180.002(19)(B), are excluded under this definition and for purposes of this chapter. Persons who

are exempt from licensure as provided by Finance Code §180.003 are exempt for purposes of this chapter,

except as otherwise provided by Finance Code §180.051.

(15) "Person" has the meaning assigned by Finance Code §180.002.

(16) "Qualifying Individual" or "Qualified Individual" has the meaning assigned by Finance Code

§156.002 in defining "qualifying individual."

(17) "Residential mortgage loan" has the meaning assigned by Finance Code §180.002 and includes

new loans and renewals, extensions, modifications, and rearrangements of such loans. The term does not

include a loan secured by a structure that is suitable for occupancy as a dwelling but is used for a

commercial purpose such as a professional office, salon, or other non-residential use, and is not used as a

residence.

(18) "Residential real estate" has the meaning assigned by Finance Code §156.002 and includes both

improved or unimproved real estate or any portion of or interest in such real estate on which a dwelling is

or will be constructed or situated.

(19) "Social media site" means any digital platform accessible by a mortgage applicant or prospective

mortgage applicant where the mortgage company or sponsored originator does not typically own the hosting

platform but otherwise exerts editorial control or influence over the content within their account, profile, or

other space on the digital platform, from which the mortgage company or sponsored originator posts

commercial messages or other content designed to solicit business.

(20) "SML" means the Department of Savings and Mortgage Lending.

(21) "State Examination System" or "SES" means an online, digital examination system developed by

the Conference of State Bank Supervisors that securely connects regulators and regulated entities on a

nationwide basis to facilitate the examination process.

(22) "Takes a residential mortgage loan application," as used in Finance Code §156.002(14) in defining

"residential mortgage loan originator," means when an individual receives a residential mortgage loan

application for the purpose of facilitating a decision on whether to extend an offer of residential mortgage

loan terms to a mortgage applicant or prospective mortgage applicant, whether the application is received

directly or indirectly from the mortgage applicant or prospective mortgage applicant, and regardless of

whether or not a particular lender has been identified or selected.

(23) "Trigger Lead" means information concerning a consumer's credit worthiness (consumer report)

compiled by a credit reporting agency (consumer reporting agency), obtained in accordance with the federal

Fair Credit Reporting Act (15 U.S.C. §1681b(c)(1)(B)) that is not initiated by the consumer but, instead, is

triggered by an inquiry to a consumer reporting agency in response to an application for credit initiated by

the consumer in a separate transaction. The term does not include a consumer report obtained by a

mortgage company licensed by SML or a mortgage banker registered with SML in response to an

application for credit made by a consumer with that mortgage company or mortgage banker or that is

otherwise authorized by the consumer.

(24) "UETA" refers to the Texas Uniform Electronic Transactions Act, Business & Commerce Code

Chapter 322.

(25) "Wrap lender" has the meaning assigned by Finance Code §159.001.

(26) "Wrap mortgage loan" has the meaning assigned by Finance Code §159.001.

§56.3 Formatting Requirements for Notices

Any notice or disclosure (notice) required by Finance Code Chapter 156, or this chapter, must be made in

at least 12-point font using an easily readable typeface. A font point generally equates to 1/72 of an inch. If

Finance Code Chapter 156, or this chapter, prescribes a form for the notice, the notice must closely follow

the font types used in the form. For example, where the form uses bolded, underlined, or "all caps" font

type, the notice or disclosure must be made using those font types. The following typefaces are deemed to

be easily readable for purposes of this section (list is not exhaustive and other typefaces may be used;

provided, the typeface is easily readable):

(1) Arial;

(2) Aptos;

(3) Calibri;

(4) Century Schoolbook;

(5) Garamond;

(6) Georgia;

(7) Lucinda Sans;

(8) Times New Roman;

(9) Trebuchet; and

(10) Verdana.

§56.4 Electronic Delivery and Signature of Notices

Any notice or disclosure required by Finance Code Chapter 156, or this chapter, may be provided and

signed in accordance with state and federal law governing electronic signatures and delivery of electronic

documents. The UETA and E-Sign Act include requirements for electronic signatures and delivery.

§56.5 Computation of Time

The calculation of any time period measured in days by Finance Code Chapter 156, or this chapter, is made

using calendar days, unless clearly stated otherwise. In computing a period of calendar days, the first day

is excluded and the last day is included. If the last day of any period is a Saturday, Sunday, or legal holiday,

the period is extended to include the next day that is not a Saturday, Sunday, or legal holiday, unless clearly

stated otherwise.

§56.6 Enforceability of Liens

A violation of Finance Code Chapter 156, or this chapter, does not render an otherwise lawfully taken lien

invalid or unenforceable.

SUBCHAPTER B LICENSING

§56.100 Licensing Requirements

(a) License Required. A person, unless exempt as provided by Finance Code §156.202, is required to be

licensed as a mortgage company under Finance Code Chapter 156 if the person engages in or conducts

the business of a mortgage company or advertises or holds that person out to the public as engaging in or

conducting the business of residential mortgage loan origination concerning a loan or prospective loan

secured or designed to be secured by residential real estate located in Texas, including, but not limited to:

(1) representing or holding that person out to the public through advertising or other means of

communication as a mortgage company; and

(2) receiving compensation for engaging in or conducting the business of residential mortgage loan

origination (a person must be licensed at the time it receives compensation even if the compensation relates

to services provided when the person was licensed).

(b) Branch Office License Required. A mortgage company must apply for and obtain a branch office license

for each office constituting a branch office of the mortgage company for purposes of §56.206 of this title

(relating to Office Locations; Remote Work).

a wrap lender making a wrap mortgage loan, or the maker of a secondary mortgage loan subject to the

requirements of Finance Code Chapter 342, is not required to be licensed as a mortgage company if the

lender secures the services of a licensed mortgage company or registered mortgage banker authorized to

originate the loan and that mortgage company or mortgage banker, and not the lender, fulfills the functions

of origination by actually providing residential mortgage loan origination services in connection with the loan.

However, if the lender owns the residential real estate securing the loan and has exceeded the limit for

exempt transactions as provided by Finance Code §156.202(a-1)(3), the lender must be licensed under

Finance Code Chapter 156, regardless of whether the lender has secured the services of an originator as

provided by this subsection.

§56.101 Applications for Licensure

(a) NMLS. Applications for licensure must be submitted through NMLS and must be made using the current

form prescribed by NMLS. SML has published application checklists on the NMLS Resource Center website

(nationwidelicensingsystem.org; viewable on the "State Licensing Requirements" webpage) which outline

the requirements to submit an application. Applicants must comply with requirements in the checklist in

making the application.

(b) Supplemental Information. SML may require additional, clarifying, or supplemental information or

documentation as deemed necessary or appropriate to determine that the licensing requirements of Finance

Code Chapter 156 have been met.

supporting documentation is included and all required fees are received. If an application is incomplete,

SML will send written notice to the applicant specifying the additional information, documentation, or fee

required to render the application complete. The application may be deemed withdrawn and any fee paid

will be forfeited if the applicant fails to provide the additional information, documentation, or fee within 30

days after the date written notice is sent to the applicant as provided by this subsection.

§56.102 Fees

(a) License Fees. The license fee is determined by the Commissioner in an amount not to exceed the

maximum amount specified by Finance Code §156.203(b), exclusive of fees charged by NMLS, as

described in subsection (b) of this section. The Commissioner may establish different fee amounts for a

new license versus renewal of the license. The current fee is set in NMLS and posted on SML’s website

(sml.texas.gov). The Commissioner may change the fee at any time; provided, any fee increase is not

effective until notice has been posted on SML's website for at least 30 days. The license fee must be paid

in NMLS.

(b) NMLS Fees. NMLS charges a fee to process the application. Such fee is determined by NMLS and must

be paid by the applicant at the time it files the application. The current fee is set in NMLS and posted on the

NMLS Resource Center website (nationwidelicensingsystem.org).

(d) Insufficient Funds Fee. The Commissioner may collect a fee in an amount determined by the

Commissioner not to exceed $50 for any returned check, credit card chargeback, or failed automated

clearinghouse (ACH) payment. A fee assessed under this subsection will be invoiced in NMLS and must be

paid in NMLS.

§56.103 Renewal of the License

(a) A license may be renewed on:

(1) timely submission of a completed renewal application (renewal request) in NMLS together with

payment of all required fees; and

(2) a determination by SML that the mortgage company continues to meet the minimum requirements

for licensure, including the requirements of Finance Code §§156.2041(a), 156.2042(a), 156.2042(a),

156.2043(a), or 156.2044(a), as applicable, and 156.208(a-1).

(b) Application of §56.101. A renewal request is a license application subject to the requirements of §56.101

of this title (relating to Applications for Licensure). A renewal request withdrawn under §56.101(c) of this

title will be rejected in NMLS.

in his or her sole discretion, approve a renewal request with one or more deficiencies the Commissioner

deems to be relatively minor and allow the mortgage company to continue conducting regulated activities

while the mortgage company works diligently to resolve the deficiencies. An application approved by the

Commissioner under this subsection will be assigned the NMLS license status "Approved - Deficient."

Approval under this subsection does not relieve the mortgage company of the obligation to resolve the

deficiencies. A license approved under this subsection is deemed to be a conditional license for which the

mortgage company, in order to maintain the license, must resolve the deficiencies within 30 days after the

date the license is approved unless an extension of time is granted by the Commissioner. Failure to timely

resolve the deficiencies constitutes grounds for the Commissioner to suspend or revoke the license.

(d) Reinstatement. This section applies to a person seeking reinstatement of an expired license (assigned

the license status "Terminated - Failed to Renew") during the reinstatement period described by Finance

Code §156.2081 and must be construed accordingly. A mortgage company license cannot be renewed

beyond the reinstatement period; instead, the person must apply for a new license and comply with all

current requirements and procedures governing issuance of a new license.

§56.104 NMLS License Records; Notices Sent to the Mortgage Company

(a) NMLS License Status. SML is required to assign a status to the license in NMLS. The license status is

displayed in NMLS and on the NMLS Consumer Access website (nmlsconsumeraccess.org). SML is limited

to the license status options available in NMLS. The NMLS Resource Center

(nationwidelicensingsystem.org) describes the available license status options and their meaning.

(b) Amendments to NMLS Records Required. A mortgage company must amend its NMLS license records

(MU1 filing) within 10 days after the date of any material change affecting any aspect of the MU1 filing,

including, but not limited to:

(1) name (which must be accompanied by supporting documentation submitted to SML establishing the

name change);

(2) the addition or elimination of an assumed name (a/k/a trade name or "doing business as" name;

which must be accompanied by a certificate of assumed business name or other documentation establishing

or abandoning the assumed name);

(3) the contact information under "Identifying Information":

(4) the contact information under "Resident/Registered Agent";

(5) the contact information under "Contact Employee Information"; and

(6) answers to disclosure questions (which must be accompanied by explanations for each such

disclosure, together with supporting documentation concerning such disclosure).

required to register an association with the mortgage company (control persons and Qualified Individuals)

to make the proper filings in NMLS using the current form prescribed by NMLS (MU2 filing) and must ensure

such associations are amended within 10 days after the date of any material change affecting such

associations.

(d) Notices Sent to the Mortgage Company. Any correspondence, notification, alert, message, official notice

or other written communication from SML will be sent to the mortgage company in accordance with this

subsection using the mortgage company's current contact information of record in NMLS unless another

method is required by other applicable law.

(1) Service by Email. Service by email is made using the email address the mortgage company has

designated in its MU1 filing under "Contact Employee Information" for the contact designated as the

"Primary Company Contact." Service by email is complete on transmission of the email to the mortgage

company's email service provider; provided, SML does not receive a "bounce back" notification, or similar,

from the email service provider indicating that delivery was not effective. The mortgage company must

monitor such email account and ensure that emails sent by SML are not lost in a "spam folder" or similar,

or undelivered due to intervention by a "spam filter" or similar. A mortgage company is deemed to have

constructive notice of any emails sent by SML to the email address described by this paragraph. A mortgage

company is further deemed to have constructive notice of any NMLS system notifications sent to it by email.

(2) Service by Mail. Service by mail is made using the address the mortgage company has designated

in its MU1 filing under "Contact Employee Information" for the contact designated as the "Primary Company

Contact." Service by mail is complete on deposit of the document, postpaid and properly addressed, in the

mail or with a commercial delivery service. If service is made on the mortgage company by mail and the

document communicates a deadline by or a time during which the mortgage company must perform some

act, such deadline or time period for action is extended by 3 days. However, if service was made by another

method prescribed by this subsection, such deadline or time period will be calculated based on the earliest

possible deadline or shortest applicable time period.

§56.105 Conditional License

(a) Conditional License; Terms and Conditions. The Commissioner may, in his or her sole discretion, issue

a license on a conditional basis. A conditional license will be assigned the license status "Approved -

Conditional" in NMLS. Reasonable terms and conditions for a conditional license include:

(1) requiring the mortgage company to undergo additional credit checks or provide evidence of

satisfaction concerning a debt, judgment, lien, child support obligation, or other financial delinquency

affecting its financial condition;

(2) requiring the mortgage company to undergo additional criminal background checks or provide

information on a periodic basis or upon request concerning the status of a pending criminal proceeding that

might affect its eligibility for licensure;

(3) requiring the mortgage company to take other specific action or provide other specified information

to address a previously-noted deficiency; and

(4) requiring the mortgage company to surrender the license upon the occurrence of an event that would

render the mortgage company ineligible for the license.

(b) Probated Suspensions and Revocations. A license subject to a probated suspension or revocation is

deemed to be a conditional license.

lieu of seeking denial of the license where the person applying for the license has the capacity to resolve

the deficiency serving as grounds for the denial in a reasonable period of time. The granting of a license

under this subsection is a voluntarily forbearance from seeking denial of the license and does not operate

as a waiver by the Commissioner of any grounds he or she has to seek denial of the license. The

Commissioner is under no obligation to continue the license on a conditional basis and may seek denial in

the future based on the same or similar circumstances that existed at the time the

§56.106 Surrender of the License

(a) Surrender Request. A mortgage company may seek surrender of the license by filing a license surrender

request (request) in NMLS. The request must be made using the current form prescribed by NMLS. SML

will review the request and determine whether to grant it. SML may not grant the request if, among other

reasons:

(1) the mortgage company is the subject of a pending or contemplated examination, inspection,

investigation, or disciplinary action;

(2) the mortgage company is in violation of an order of the Commissioner;

(3) the mortgage company has failed to pay any administrative penalty, fee, charge, or other

indebtedness owed to SML; or

(4) the mortgage company has failed to file mortgage call reports as required by §56.205 of this title

(relating to Mortgage Call Reports).

(b) Inactive Status Pending Surrender. If SML does not grant the request or requires additional time to

consider the request, the request will be left pending while the issue preventing SML from granting the

request is resolved or lapses. During this time, the mortgage company's license will be assigned the license

status "Approved - Inactive" in NMLS.

§56.107 Sponsorship of Originator; Responsibility for Originator's Actions

(a) Sponsorship Required. A mortgage company acts through one or more originators who must be

sponsored by the mortgage company in NMLS. To sponsor an originator, the mortgage company must first

company may then file a request in NMLS to establish sponsorship of the originator. An originator must

make corresponding filings in NMLS to establish such sponsorship. Sponsorship is not effective until the

sponsorship request has been reviewed and approved by SML. A mortgage company must not allow an

individual to act on its behalf in the capacity of an originator until such sponsorship has been established

and is effective. Information about how to file for sponsorship is available on the NMLS Resource Center

website (nationwidelicensingsystem.org).

(b) Responsibility for Originator's Actions. By sponsoring an originator, or otherwise allowing an individual

to act on its behalf in the capacity of an originator, the mortgage company and the Qualified Individual for

the mortgage company each assumes responsibility for the actions of such originator or individual acting in

the capacity of an originator. As provided by Finance Code §156.201, all violations of law by an originator

or individual acting in the capacity of an originator are deemed to be attributable and imputed to the

mortgage company sponsoring the originator or for which the individual acting as an originator was allowed

to act, and the Commissioner may seek disciplinary action against the mortgage company, the Qualified

Individual for the mortgage company, and the originator simultaneously for the same conduct giving rise to

the violation. As a result, a mortgage company and its Qualified Individual are both charged with knowledge

of and must ensure compliance by their sponsored originators with the requirements of Finance Code

Chapters 157 and 180, and of SML's rules concerning originators in Chapter 55 of this title (relating to

Residential Mortgage Loan Originators).

sponsored originator. If sponsorship is terminated, the party terminating the sponsorship must immediately

notify SML of the termination by making a filing in NMLS to show the sponsorship as terminated in the

system, as provided by Finance Code §156.211 and §157.019.

(d) Failure to Maintain Sponsored Originator; Inactive Status. If a mortgage company does not have

sponsored originators that are licensed, the license will revert to an inactive status ("Approved - Inactive")

until a new sponsorship becomes effective, during which time the mortgage company must not conduct

regulated activities.

§56.108 Qualified Individual

(a) Qualified Individual Required. A mortgage company must appoint at least one licensed originator to be

the mortgage company's Qualified Individual. As provided by Finance Code §156.002, the Qualified

Individual is a personal representative of the mortgage company and is deemed to have authority to bind

the mortgage company concerning its operations in Texas. To serve as the Qualified Individual, the

originator must hold his or her license in a status which enables him or her to engage in regulated activities

with the license and must be sponsored by the mortgage company for which he or she serves as the

Qualified Individual. The contact information for the Qualified Individual listed by the mortgage company in

its license records (MU1 filing), in the "Qualifying Individuals" section, must match the principal address

(main address) of the mortgage company listed in the “Identifying Information” section of the MU1 filing. A

mortgage company may appoint more than one originator as Qualified Individual. If a mortgage company

appoints more than one Qualified Individual, each Qualified Individual is deemed to serve concurrently and

is responsible for all of the originators sponsored by the mortgage company or other individuals acting on

its behalf in the capacity of an originator.

(b) Consent Required. The appointment of the Qualified Individual must be consented to by the originator.

The originator must acknowledge and confirm his or her consent by making a corresponding filing in NMLS

to reflect such appointment, using the current form prescribed by NMLS.

SUBCHAPTER C DUTIES AND RESPONSIBILITIES

§56.200 Required Disclosures

(a) Purpose. This section clarifies and establishes requirements related to the disclosure a mortgage

company is required to make under Finance Code §156.004.

(b) Specific Notice to Applicant. A mortgage company must send written notice to a mortgage applicant

concerning SML's regulatory oversight. The notice must be sent at the time the mortgage company and its

sponsored originator receives the initial application for a residential mortgage loan. The notice must be

signed by the mortgage company's sponsored originator that took the application and the mortgage

applicant. The notice must be in the following form:

Figure: 7 TAC §56.200(b)

oversight on each website of the mortgage company, other than a social media site, that is accessible by a

mortgage applicant or prospective mortgage applicant and either used to conduct residential mortgage loan

origination business or from which the mortgage company advertises to solicit such business, as provided

by §56.203 of this title (relating to Advertising). The notice must be in the current form prescribed by SML

and posted on its website (sml.texas.gov). The notice must be displayed on the initial or home page of the

website (typically the base-level domain name) or contained in a linked webpage with the link to such

webpage displayed on the initial or home page.

(d) Disclosures in Correspondence. All correspondence sent to a mortgage applicant must include:

(1) the mortgage company's name and NMLS ID; and

(2) the mortgage company's website address, if it has a website.

§56.201 Conditional Pre-Qualification and Conditional Approval Letters

(a) Conditional Pre-Qualification Letter. Except as provided by subsection (c) of this section, when provided

to a mortgage applicant or prospective mortgage applicant, written confirmation of conditional pre-

qualification (conditional pre-qualification letter) must include the information in Form A, Figure: 7 TAC

§56.201(a). The information must be provided using Form A or an alternate form approved by the mortgage

company that includes all of the information found on Form A. There is no requirement to issue a conditional

pre-qualification letter. Form A or an alternate form may be modified by adding any of the following as

needed:

Figure: 7 TAC §56.201(a)

(1) Any additional aspects of the loan as long as not misleading;

(2) Any additional items that the originator has reviewed in determining conditional qualifications; or

(3) Any additional terms, conditions, and requirements.

(b) Conditional Approval Letter. When provided to a mortgage applicant or prospective mortgage applicant,

written notification of conditional loan approval on the basis of credit worthiness, but not on the basis of

collateral (conditional approval letter), must include the information in Form B, Figure: 7 TAC §56.201(b).

The information can be provided using Form B or an alternate form approved by the mortgage company

that includes all of the information found on Form B. There is no requirement to issue a conditional approval

letter. Form B or an alternate form may be modified by adding the additional information permitted by

subsection (a)(1) - (3) of this section, or a disclosure of fees charged. A disclosure of fees charged, on Form

B or an alternate form, does not serve as a substitute for any fee disclosure required by state or federal

laws or regulations. A conditional approval letter must not be issued unless the mortgage company or its

sponsored originator has verified that, absent any material changes prior to closing, the mortgage applicant

or prospective mortgage applicant has satisfied all loan requirements related to credit, income, assets, and

debts. Verification may be conducted manually or by electronic means.

Figure: 7 TAC §56.201(b)

is defined by 15 U.S.C. §1681a(l).

(d) Issuance by the Originator. A conditional pre-qualification letter or conditional approval letter must be

issued and signed by the mortgage company's sponsored originator acting on behalf of the mortgage

company to originate the prospective residential mortgage loan.

§56.202 Fraudulent, Misleading, or Deceptive Practices and Improper Dealings

(a) Fraudulent, Misleading, or Deceptive Practices. The following conduct by a mortgage company or its

sponsored originators constitutes fraudulent and dishonest dealings for purposes of Finance Code

§156.303(a)(3):

(1) knowingly misrepresenting the mortgage company's or sponsored originator's relationship to a

mortgage applicant or any other party to a residential mortgage loan transaction or prospective residential

mortgage loan transaction;

(2) knowingly misrepresenting or understating any cost, fee, interest rate, or other expense to a

mortgage applicant or prospective mortgage applicant in connection with a residential mortgage loan;

(3) knowingly overstating, inflating, altering, amending, or disparaging any source or potential source of

residential mortgage loan funds in a manner which disregards the truth or makes any knowing and material

misstatement or omission;

(4) knowingly misrepresenting the lien position of a residential mortgage loan or prospective residential

mortgage loan;

(5) knowingly participating in or permitting the submission of false or misleading information of a material

nature to any person in connection with a decision by that person whether to make or acquire a residential

mortgage loan;

(6) as provided by Regulation X (12 C.F.R. §1024.14), brokering, arranging, or making a residential

mortgage loan for which the mortgage company or sponsored originator receives compensation for services

not actually performed or where the compensation received bears no reasonable relationship to the value

of the services actually performed;

(7) recommending or encouraging default or delinquency or the continuation of an existing default or

delinquency by a mortgage applicant on any existing indebtedness prior to closing a residential mortgage

loan which refinances all or a portion of such existing indebtedness;

(8) altering any document produced or issued by SML, unless otherwise permitted by statute or a rule

of SML;

(9) Allowing a licensed originator to act on behalf of the mortgage company when the originator is not

sponsored by the mortgage company or otherwise holds his or her license in an inactive status (which is

deemed to constitute unlicensed activity);

(10) using the services of a mortgage company or mortgage banker to provide loan processing services

when the mortgage company or mortgage banker providing the services holds its license in an inactive

status (which is deemed to constitute unlicensed activity);

(11) using a trigger lead in a misleading or deceptive manner by, among other things:

(A) failing to state in the initial communication with the consumer:

(i) the mortgage company's name;

(ii) a brief explanation of how the mortgage company obtained the consumer's contact information

to make the communication (i.e., an explanation of trigger leads);

(iii) that the mortgage company is not affiliated with the creditor to which the consumer made the

credit application that resulted in the trigger lead; and

(iv) that the purpose of the communication is to solicit new business for the mortgage company;

(B) contacting a consumer who has opted out of prescreened offers of credit under the federal Fair

Credit Reporting Act (FCRA; 12 U.S.C. §1681b(e)); or

by the FCRA (12 U.S.C. §1681a(l) and §1681b(c));

(12) engaging in any other practice which the Commissioner, by published interpretation, has

determined is fraudulent, misleading, or deceptive.

(b) Improper or Unfair Dealings. The following conduct by a mortgage company or its sponsored originators

constitutes improper dealings for purposes of Finance Code §156.303(a)(3):

(1) acting negligently in performing an act requiring a license under Finance Code Chapter 156, or

Chapters 157 and 180;

(2) violating any provision of a local, State of Texas, or federal constitution, statute, rule, ordinance,

regulation, or final court decision that governs the same or a closely related activity, transaction, or subject

matter that is governed by the provisions of Finance Code Chapters 156, 157, or 180, including, but not

limited to:

(A) Consumer Credit Protection Act, Equal Credit Opportunity Act (15 U.S.C. §1691 et seq.) and

Regulation B (12 C.F.R. §1002.1 et seq.);

(B) Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. §5101 et seq.) and

Regulation H (12 C.F.R. §1008.1 et seq.);

(D) Gramm-Leach-Bliley Act (GLBA; 15 U.S.C. §6801 et seq.), Regulation P (12 C.F.R. §1016.1 et

seq.), and the Federal Trade Commission's (FTC) Privacy of Consumer Financial Information rules (16

C.F.R. §313.1 et seq.);

(E) Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) and Regulation V (12 C.F.R. §1022.1 et

seq.);

(F) Real Estate Settlement Procedures Act (12 U.S.C. §2601 et seq.) and Regulation X (12 C.F.R.

1024.1 et seq.);

(G) Consumer Credit Protection Act, Truth in Lending Act (15 U.S.C. §1601 et seq.) and Regulation

Z (12 C.F.R. §1026.1 et seq.);

(H) the FTC's Standards for Safeguarding Customer Information rule (16 C.F.R. §314.1 et seq.);

(I) Finance Code Chapter 158 and Chapter 58 of this title;

(J) Finance Code Chapter 159 and Chapter 59 of this title; and

(K) Texas Constitution, Article XVI, §50 and Chapter 153 of this title;

(3) soliciting by phone a consumer who has placed his or her contact information on the national do-not-

call registry maintained by the Federal Trade Commission (FTC), unless otherwise allowable under the

FTC's Telemarketing Sales Rule (16 C.F.R. §310.4(b)(iii)(B));

(4) Issuing a conditional pre-qualification letter or conditional approval letter under §56.201 of this title

(relating to Conditional Pre-Qualification and Conditional Approval Letters) that does not comply with the

required form for the letter or is inaccurate, erroneous, or negligently-issued;

(5) representing to a mortgage applicant that a charge or fee which is payable to the mortgage company

or sponsored originator is a "discount point" or otherwise confers a financial benefit on the mortgage

applicant unless the loan closes and:

(A) the mortgage company is making the residential mortgage loan (lender); or

(B) the mortgage company is not the lender but demonstrates by clear and convincing evidence that

the lender has charged or collected discount points or other fees which the mortgage company actually paid

to the lender on behalf of the mortgage applicant to buy down the interest rate on the residential mortgage

loan; and

(6) failing to accurately respond within a reasonable time period to reasonable questions from a

mortgage applicant concerning the scope and nature of the mortgage company's services and any costs.

of Finance Code §156.303(a)(3) when, in connection with the origination of a residential mortgage loan:

(1) the mortgage company or sponsored originator:

(A) offers other goods or services to a mortgage applicant in a separate but related transaction; and

(B) the mortgage company or sponsored originator engages in fraudulent, misleading, or deceptive

acts in the related transaction; or

(2) the mortgage company or sponsored originator:

(A) affiliates with another person that provides goods or services to a mortgage applicant in a

separate but related transaction;

(B) the affiliated person engages in fraudulent, misleading, or deceptive acts in that transaction;

misleading, or deceptive acts of the affiliated person; and

(D) the mortgage company or sponsored originator failed to take appropriate steps to prevent or limit

the fraudulent, misleading, or deceptive acts.

(d) Sharing or Splitting Origination Fees with the Mortgage Applicant. A mortgage company and its

sponsored originators must not offer or agree to share or split any residential mortgage loan origination fees

with a mortgage applicant, rebate all or part of an origination fee to a mortgage applicant, reduce their

established compensation to benefit a mortgage applicant, or otherwise provide money, a cash equivalent,

or anything of value to a mortgage applicant in connection with providing residential mortgage loan

origination services unless otherwise allowable under Regulation X (12 C.F.R. §1024.14) and Regulation Z

(12 C.F.R. §1026.36(d)). A sponsored originator acting in the dual capacity of an originator and real estate

broker or sales agent licensed under Occupations Code Chapter 1101 may rebate their fees legitimately

earned and derived from their real estate brokerage or sales agent services to the extent allowable under

applicable law governing real estate brokers or sales agents; provided, the payment or other transfer

described by this subsection occurs as a part of closing and is properly reflected in the closing disclosure.

If a payment or other transfer described by this subsection occurs after closing, a rebuttable presumption

exists that the payment or transfer is derived from the originator's fees for residential mortgage loan

origination services and constitutes an improper sharing or splitting of fees with the mortgage applicant. The

rebuttable presumption may only be overcome by clear and convincing evidence established by the

mortgage company or sponsored originator that the payment or transfer is instead derived from fees for real

estate brokerage or sales agent services. A violation of this subsection is deemed to constitute improper

dealings for purposes of Finance Code §156.303(a)(3).

§56.203 Advertising

(a) Definitions. For purposes of this section, the following definitions apply, unless the context clearly

indicates otherwise:

(1) “Advertisement” means a commercial message in any medium that promotes, directly or indirectly,

a residential mortgage loan transaction or is otherwise designed to solicit residential mortgage loan

origination business for the mortgage company or its sponsored originators. The term includes “flyers,”

business cards, or other handouts, and messages or posts made on a social media site. The term does not

include:

(A) any advertisement which indirectly promotes a residential mortgage loan transaction and

contains only the name of the mortgage company or sponsored originator and not any contact information

with the exception of a website address, such as on cups, pens or pencils, shirts or other clothing (including

company uniforms and sponsored youth league jerseys), or other promotional items of nominal value;

(B) any rate sheet, pricing sheet, or similar proprietary information provided to realtors, builders, and

other commercial entities that is not intended for distribution to consumers; or

of this title (relating to Office Locations; Remote Work).

(2) “Team logo” means a logo, symbol, or other graphic used to identify the group using a team name.

(3) “Team name” means a name other than the mortgage company's legal name or a properly registered

assumed name typically used by a geographically or administratively distinct group of employees working

for the mortgage company as a division or team within the larger organization (e.g., the employees of a

branch office).

(b) Compliance with Federal Law. A mortgage company or sponsored originator that advertises rates, terms,

or conditions must comply with the requirements of Regulation N (12 C.F.R. §1014.1 et seq.), and

Regulation Z (12 C.F.R. §1026.24).

contain:

(1) the mortgage company's name and NMLS ID;

(2) the mortgage company's website address, if it has a website; and

(3) the sponsored originator's name and NMLS ID.

(d) Advertising Directly by a Mortgage Company. A mortgage company may advertise directly to the public

and is not required to advertise through a sponsored originator. The requirements of subsection (c)(3) of

this section do not apply to an advertisement made directly by a mortgage company.

(e) Advertising on Social Media Sites. If the mortgage company or sponsored originator is advertising on a

social media site, the requirements of subsection (c) of this section may be met by prominently displaying

the required information on the home page, profile page, or similar, on such social media site so that the

viewer can quickly discern the information without reviewing various historical content posted by the

mortgage company or sponsored originator on the social media site.

(f) Use of Team Names and Team Logos. A mortgage company and its sponsored originators may use

team names and team logos in advertisements if the following requirements are met:

(1) Team names and team logos are permitted for advertising purposes only. A team name or team logo

may not be used to conduct residential mortgage loan origination business. For clarity, a team name or

team logo may not appear on any documentation sent to the mortgage applicant in connection with a

residential mortgage loan or on any documentation in the residential mortgage loan file a mortgage company

is required to maintain under §56.204(c)(2) of this title (relating to Books and Records).

(2) The mortgage company's legal name or an assumed name of the mortgage company and its NMLS

ID must be used with the team name or team logo, in substantially equivalent prominence, and must be

connected with an explanatory word or phrase that clearly links the two (e.g., “(team name) of (mortgage

company name and NMLS ID)” or “(team name) powered by (mortgage company name and NMLS ID”)).

The information must be presented in a manner that makes it readily apparent to the viewer what mortgage

company is making the advertisement. The mortgage company may not obscure the information by, among

other things, using graphics, shading, or coloration to deemphasize or mask the appearance of the

mortgage company's name and NMLS ID. If the advertisement is made on a social media site, the

requirements of this paragraph may be met by prominently displaying the information on the home page,

profile page, or similar, on such social media site so that the viewer can quickly discern the information

without reviewing various historical content posted by the mortgage company or sponsored originator on

the social media site.

(3) If a team logo is used, it must be used with the team name, unless the team name is contained in

the team logo, and if so, the team logo may be used without the team name.

§56.204 Books and Records

(a) Purpose and Applicability. This section clarifies and establishes requirements related to the books and

records a mortgage company and its sponsored originators are required to keep under Finance Code

§156.301. Subsection (c) of this section applies to a mortgage company and its sponsored originators in

connection with the origination of residential mortgage loans. Subsection (d) of this section applies to a

mortgage company and its sponsored originators in connection with the provision of third-party loan

processing or underwriting services (including independent loan processor or underwriter companies).

(b) Maintenance of Records, Generally. In order to ensure a mortgage company and its sponsored

originators have all records necessary to facilitate an inspection (including an examination) by SML of the

mortgage company and its sponsored originators, enable SML to investigate complaints against a mortgage

company or its sponsored originators, and otherwise ensure compliance with the requirements of Finance

Code Chapter 156, and this chapter, a mortgage company and its sponsored originators must maintain

records as prescribed by this section.

(1) Format. The records required by this section may be maintained using a physical, electronic, or

digitally-imaged recordkeeping system, or a combination thereof. The records must be accurate, complete,

current, legible, and readily accessible and sortable.

(2) Location. A mortgage company and its sponsored originators must ensure the records required by

this section (or true and correct copies thereof) are maintained at or are otherwise readily accessible from

either the main office of the mortgage company or the location the mortgage company has designated in its

MU1 filing under "Books and Records Information" in NMLS. (For purposes of this section "main office" has

the meaning assigned by §56.206 of this title (relating to Office Locations; Remote Work.)

(3) Production of Records; Disciplinary Action. All records required by this section must be maintained

in good order and produced to SML upon request. Failure by a mortgage company or its sponsored

originators to produce records upon request after a reasonable time for compliance may result in disciplinary

action against the mortgage company or its sponsored originators, including, but not limited to, suspension

or revocation of the mortgage company's or sponsored originator's license.

(4) Retention Period. All records required by this section must be maintained for 3 years or such longer

period as may be required by other applicable law. If a mortgage company terminates operations, the

mortgage company must, within 10 days after the date the mortgage company terminates operations,

provide SML with written notice of where the records required by this section will be maintained for the

required period. If such records are transferred to another mortgage company licensed by the Department,

the transferee must provide the Department with written notice within 10 days after the date it receives such

records.

(5) Maintenance by the Mortgage Company. A mortgage company is required to maintain records on

behalf of the originators it sponsors in connection with work performed by the originator for that mortgage

company.

(6) Conflicting Law. If the requirements of other applicable law governing recordkeeping by the mortgage

company or its sponsored originators differ from the requirements of this section, such other applicable law

prevails only to the extent this section conflicts with the requirements of this section.

following items in connection with the origination of residential mortgage loans by the mortgage company:

(1) Mortgage Transaction Log. A mortgage transaction log maintained on a current basis (meaning all

entries must be made within 7 days after the date on which the events they relate to occurred, and updated

as the information changes) setting forth, at a minimum (the log may include additional information,

provided, the information is readily sortable as required by subsection (b)(1) of this section):

(A) full name of each mortgage applicant (last name, first name);

(B) application/loan identification number assigned by the mortgage company;

paragraph;

(D) date of the initial loan application;

(E) address of the subject property (street address, city, state, zip code);

(F) interest rate;

(G) description of the purpose for the loan (e.g., purchase, refinance, construction, home equity,

home improvement, land lot loan, wrap mortgage loan, etc.);

(H) loan product (conventional, FHA, VA, reverse, etc.);

(I) full name of the lender that initially funded or acquired the loan and their NMLS ID, if applicable;

(J) full name of the originator who took the initial loan application and his or her NMLS ID;

(K) closing date;

(L) lien position (e.g., first lien, second lien, or wrap mortgage);

(M) description of the owner's or prospective owner's intended occupancy of the real estate secured

or designed to be secured by the loan (e.g., primary residence (including real estate (land lot) or a dwelling

not suitable for occupancy at the time the loan is consummated but that the owner intends to occupy as

their primary residence after consummation of the loan), secondary residence, or investment property (no

intent to occupy as their residence)); and

(N) description of the current status or disposition of the loan application (e.g., in-process, withdrawn,

closed, or denied);

(2) Residential Mortgage Loan File. For each residential mortgage loan transaction or prospective

residential mortgage loan transaction, a residential mortgage loan file containing, at a minimum:

(A) All Transactions. For all transactions, the following records:

(i) the initial and any final loan application (including any attachments, supplements, or addendum

thereto), signed and dated by each mortgage applicant and the sponsored originator, and any other written

or recorded information used in evaluating the application, as required by Regulation B (12 C.F.R.

§1002.4(c));

(ii) the initial and any revised good faith estimate (Regulation X, 12 C.F.R. §1024.7), integrated

loan estimate disclosure (Regulation Z, 12 C.F.R. §1026.37), or similar, provided to the mortgage applicant;

(iii) the final settlement statement (Regulation X, 12 C.F.R §1024.8), closing statement, or

integrated closing disclosure (Regulation Z, 12 C.F.R. §1026.19(f) and §1026.38);

(iv) the disclosure statement required by Finance Code §156.004 and §56.200(b) of this title

(relating to Required Disclosures), signed and dated by each mortgage applicant and the sponsored

originator;

(v) if provided to a mortgage applicant or prospective mortgage applicant, the conditional pre-

qualification letter, or similar, as specified by Finance Code §156.105 and §56.201 of this title (relating to

Conditional Pre-Qualification and Conditional Approval Letters);

(vi) if provided to a mortgage applicant or prospective mortgage applicant, the conditional

approval letter, or similar, as specified by Finance Code §156.105 and §56.201 of this title;

(vii) each item of correspondence, all evidence of any contractual agreement or understanding,

and all notes and memoranda of conversations or meetings with a mortgage applicant or any other party in

connection with the loan application or its ultimate disposition (e.g., fee agreements, rate lock agreements,

or similar documents);

(viii) if the loan is a "home loan" as defined by Finance Code §343.001, the notice of penalties

for making a false or misleading written statement required by Finance Code §343.105, signed at closing

by each mortgage applicant;

(ix) if the transaction is a purchase money or wrap mortgage loan transaction, the real estate

sales contract or real estate purchase agreement for the sale of the residential real estate;

(x) consumer reports or credit reports obtained in connection with the residential mortgage loan

or prospective residential mortgage loan, and if a fee is paid by or imposed on the mortgage applicant for

such consumer report or credit report, invoices and proof of payment for the purchase of the consumer

report or credit report;

(xi) appraisal reports or written valuation reports used to determine the value of the residential

real estate secured or designed to be secured by the loan, and if a fee is paid by or imposed on the mortgage

applicant for such appraisal report or written valuation report, invoices and proof of payment for the appraisal

report or written valuation report;

(xii) invoices and proof of payment for any third-party fees paid by or imposed on the mortgage

applicant;

(xiii) refund checks issued to the mortgage applicant;

(xiv) if applicable, the risk-based pricing notice required by Regulation V (12 C.F.R. §1022.72);

(xv) if applicable, invoices for independent loan processors or underwriters;

(xvi) if the mortgage company or sponsored originator acts in a dual capacity as the loan

originator and real estate broker, sales agent, or attorney in the transaction, the disclosure of multiple roles

in a consumer real estate transaction, signed and dated by each mortgage applicant, as required by Finance

Code §156.303(a)(13) and §157.024(a)(10);

(xvii) the initial privacy notice required by Regulation P (12 C.F.R. §1016.4) or the Federal Trade

Commission's Privacy of Consumer Financial Information rules (16 C.F.R. §313.4);

(xviii) the mortgage applicant's written authorization to receive electronic documents as required

by the E-Sign Act and Regulation Z (12 C.F.R. §1026.17(a)(1));

(xix) records reflecting compensation paid to employees or independent contractors in

connection with the transaction;

(xx) any other agreements, notices, disclosures, or affidavits required by federal or state law in

connection with the transaction; and

(xxi) any written agreements or other records governing the origination of the residential

mortgage loan or prospective residential mortgage loan;

(B) Lender Transactions. For transactions where the mortgage company made the loan (lender), the

following records:

(i) the promissory note, loan agreement, or repayment agreement, signed by the borrower

(mortgage applicant);

(ii) the recorded deed of trust, contract, security deed, security instrument, or other lien transfer

document, signed by the borrower (mortgage applicant);

(iii) any verifications of income, employment, or deposits obtained in connection with the loan;

(iv) copies of any title insurance policies with endorsements or title search reports obtained in

connection with the loan, and if a fee is paid by or imposed on the mortgage applicant for such title insurance

policies or title search reports, invoices and proof of payment for the title insurance policy or title search

report; and

(v) if applicable, the flood determination certificate obtained in connection with the loan, and if a

fee is paid by or imposed on the mortgage applicant for such flood certificate, invoices and proof of payment

for the flood determination certificate;

U.S.C. §1601 et seq.) and Regulation Z (12 C.F.R. §1026.1 et seq.), the following records:

(i) the initial Truth-in-Lending statement for home equity line of credit and reverse mortgage

transactions required by Regulation Z (12 C.F.R. §1026.19);

(ii) if the transaction is an adjustable rate mortgage transaction, the adjustable rate mortgage

program disclosures;

(iii) records relating to the mortgage applicant's ability to repay the loan, as required by Regulation

Z, (12 C.F.R. §1026.43(c));

(iv) if the mortgage applicant is permitted to shop for a settlement service, the written list of

providers required by Regulation Z (12 C.F.R. §1026.19(e)(1)(vi)(C));

(v) the notice of intent to proceed with the transaction required by Regulation Z (12 C.F.R.

§1026.19(e)(2)(i)(A));

(vi) if applicable, records related to a changed circumstance required by Regulation Z (12 C.F.R.

§1026.19(e)(3)(iv));

(vii) the notice of right to rescission required by Regulation Z (12 C.F.R. §1026.15 or §1026.23);

(viii) for high-cost mortgage loans, the disclosures required by Regulation Z (12 C.F.R.

§1026.32(c));

(ix) for high-cost mortgage loans, the certification of counseling required by Regulation Z (12

C.F.R. §1026.34(a)(5)(i));

(x) for home equity line of credit transactions:

(I) the account-opening disclosure required by Regulation Z (12 C.F.R. §1026.6(a));

(II) the early disclosure statement required by Regulation Z (12 C.F.R. §1026.40(d));

(III) the Home Equity Line of Credit Brochure required by Regulation Z (12 C.F.R.

§1026.40(e)); and

(xi) any other notice or disclosure required by TILA or Regulation Z;

(D) Real Estate Settlement Procedures Act (RESPA). For transactions that are subject to the

requirements of RESPA (12 U.S.C. §2601 et seq.) and Regulation X (12 C.F.R. §1024.1 et seq.), the

following records:

(i) records reflecting delivery of the special information booklet required by Regulation X (12

C.F.R. §1024.6);

(ii) any affiliated business arrangement disclosure statement provided to the mortgage applicant

in accordance with Regulation X (12 C.F.R. §1024.15);

(iii) records reflecting delivery of the list of homeownership counseling organizations required by

Regulation X (12 C.F.R. §1024.20); and

(iv) any other notice or disclosure required by RESPA or Regulation X;

(E) Equal Credit Opportunity Act - Transactions Not Resulting in Approval. For residential mortgage

loan applications where a notice of incompleteness is issued, a counteroffer is made, or adverse action is

taken, as provided by Regulation B (12 C.F.R. §1002.1 et seq.), the following records, as applicable:

(i) the notice of incompleteness required by Regulation B (12 C.F.R. §1002.9(c)(2));

(ii) the counteroffer letter sent to the mortgage applicant in accordance with Regulation B (12

C.F.R. §1002.9); and

(iii) the adverse action notification (a/k/a turndown letter) required by Regulation B (12 C.F.R.

§1002.9(a));

(F) Home Equity Transactions. For home equity loan transactions or home equity line of credit

transactions, the following records (references in this subparagraph to Section 50 refer to Article XVI,

Section 50, Texas Constitution; see also subparagraph (C)(x) of this paragraph):

(i) the preclosing disclosures required by Section 50(a)(6)(M)(ii) and §153.13 of this title (relating

to Preclosing Disclosures: Section 50(a)(6)(M)(ii); as provided by such section, the closing disclosure or

account-opening disclosures required by Regulation Z fulfills this requirement);

(ii) the consumer disclosure required by Section 50(g) and §153.51 of this tile (relating to

Consumer Disclosure: Section 50(g));

(iii) if an attorney-in-fact executes the closing documents on behalf of the owner or owner's

spouse, a copy of the executed power of attorney and any other documents evidencing execution of such

power of attorney at the permanent physical address of an office of the lender, an attorney at law, or a title

company, as required by §153.15 of this title (relating to Location of Closing: Section 50(a)(6)(N));

(iv) if the borrower (mortgage applicant) uses the proceeds of the loan to pay off a non-homestead

debt with the same lender, a written statement, signed by the mortgage applicant, indicating the proceeds

of the home equity loan were voluntarily used to pay such debt (see Section 50(a)(6)(Q)(i));

(v) notice of the right of rescission, as required by Section 50(a)(6)(Q)(viii) (as provided by

§153.25 of this title (relating to Right of Rescission: Section 50(a)(6)(Q)(viii)), the notice of right of rescission

required by TILA and Regulation Z fulfills this requirement);

(vi) the written acknowledgement as to the fair market value of the homestead property, as

required by Section 50(a)(6)(Q)(ix) and §153.26 of this title (relating to Acknowledgement of Fair Market

Value: Section 50(a)(6)(Q)(ix));

(vii) any discount point acknowledgement form used by the lender to substantiate that the

discount points are bona fide as required by §153.5 of this title (relating to Two Percent Fee Limitation:

Section 50(a)(6)(E);

(viii) the Texas Home Equity Affidavit and Agreement (Fannie Mae Form 3185), or similar;

(ix) for home equity lines of credit, the Texas Home Equity Line of Credit Agreement or repayment

agreement;

(x) if the home equity loan is refinanced into a non-home equity loan, the Texas Notice

Concerning Refinance of Existing Home Equity to Non-Home Equity Loan, as required by Section

50(f)(2)(D) and §153.45 of this title (relating to Refinance of an Equity Loan: Section 50(f));

(G) Wrap Mortgage Loans. For wrap mortgage loan transactions subject to the requirements of

Finance Code Chapter 159, the following records:

(i) the disclosure statement required by Finance Code §159.101 and §78.101 of this title (relating to

Required Disclosure), signed and dated by each mortgage applicant, and any foreign language disclosure

statement required by Finance Code §159.102;

(ii) the disclosure statement required by Property Code §5.016, provided to each existing lienholder

(the disclosure statement required by Finance Code §159.101 and §78.101 of this title (relating to Required

Disclosure) referenced in clause (i) of this subparagraph fulfills this requirement if it was provided to each

existing lienholder); and

(iii) documents evidencing that the wrap mortgage loan was closed by an attorney or a title company,

as required by Finance Code §159.105;

(H) Home Improvement Loans. For home improvement transactions (including repair, renovation,

and new construction), the following records:

(i) the mechanic's lien contract;

(ii) documents evidencing the transfer of lien from the contractor to the lender;

(iii) the residential construction contract;

(iv) notice of the right of rescission required by Section 50(a)(5)(C) (the notice of right of

rescission required by TILA and Regulation Z fulfills this requirement); and

(v) any other notice or disclosure required by Texas Property Code Chapter 53;

(I) Reverse Mortgages. For reverse mortgage transactions, the following records:

(i) the disclosure required by Section 50(k)(9);

(ii) the certificate of counseling required by Section 50(k)(8);

(iii) the servicing disclosure statement required by Regulation X (12 C.F.R. §1024.33(a));

(iv) the disclosures required by Regulation Z (12 C.F.R. §1026.33(b)); and

(v) any other notice or disclosure required by federal or state law to originate a reverse mortgage.

(d) Required Records (Loan Processing and Underwriting). A mortgage company and its sponsored

originators must maintain the following items in connection with the provision of third-party loan processing

and underwriting services by the mortgage company to a mortgage company licensed by SML or a

mortgage banker registered with SML:

(1) Loan Processing and Underwriting Log. A loan processing and underwriting log, maintained on a

current basis (meaning all entries must be made within 7 days after the date on which the events they relate

to occurred, and updated as the information changes) setting forth, at a minimum (the log may include

additional information, provided, the information is readily sortable as required by subsection (b)(1) of this

section):

(A) full name of each mortgage applicant (last name, first name);

(B) application/loan identification number assigned by the mortgage company;

to which the mortgage company is providing loan processing or underwriting services, if different than

subparagraph (B) of this paragraph;

(D) loan identification number assigned by the lender, if different than subparagraphs (B) or (C) of

this paragraph;

(E) address of the subject property (street address, city, state, zip code);

(F) full name and NMLS ID of the mortgage company or mortgage banker to which the mortgage

company is providing loan processing or underwriting services;

(G) the name, NMLS ID, and employment status (e.g., W-2 or 1099) of each individual loan processor

or underwriter performing loan processing or underwriting services on behalf of the mortgage company;

(H) closing date;

(I) description of the owner's or prospective owner's intended occupancy of the real estate secured

or designed to be secured by the loan (e.g., primary residence (including real estate (land lot) or a dwelling

not suitable for occupancy at the time the loan is consummated but that the owner intends to occupy as

their primary residence after consummation of the loan), secondary residence, or investment property (no

intent to occupy as their residence));

(J) description of the current status or disposition of the loan application (e.g., in-process, withdrawn,

closed, or denied);

(K) dollar amount invoiced, assessed, charged, collected, and/or paid by the mortgage applicant for

the loan processing or underwriting services provided by the mortgage company; and

(L) description of whether the fee for the loan processing or underwriting services was included on

the Closing Disclosure as a fee paid directly to the mortgage company at closing (e.g., on CD, or not on

CD).

(e) Other Records Required by Federal Law. A mortgage company and its sponsored originators must

maintain such other books and records as may be required to evidence compliance with applicable federal

laws and regulations, including, but not limited to:

(1) the Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) and Regulation V (12 C.F.R. §1022.1 et

seq.);

(2) the Gramm-Leach-Bliley Act (15 U.S.C. §6801 et seq.) and Regulation P (12 C.F.R. §1016.1 et seq.),

and the Federal Trade Commission's (FTC) Privacy of Consumer Financial Information rules (16 C.F.R.

§313.1 et seq.);

(3) the Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. §5101 et seq.) and

Regulation H (12 C.F.R. §1008.1 et seq.); an

(4) Regulation N (12 C.F.R. §1014.1 et seq.), and

(5) the FTC's Standards for Safeguarding Customer Information rule (16 C.F.R. §314.1 et. Seq.)

(f) General Business Records. General business records include:

(1) all checkbooks, check registers, bank statements, deposit slips, withdrawal slips, and cancelled

checks (or copies thereof) relating to residential mortgage loan origination business;

(2) complete records (including invoices and supporting documentation) for all expenses and fees paid

on behalf of a mortgage applicant, including a record of the date and amount of all such payments actually

made by each mortgage applicant;

(3) all federal tax withholding forms, reports of income for federal taxation, and evidence of payments to

all mortgage company employees, independent contractors and all others compensated by the mortgage

company in connection with residential mortgage loan origination business;

(5) all written complaints or inquiries (or summaries of any verbal complaints or inquiries) along with any

correspondence, notes, responses, and documentation relating thereto and the disposition thereof;

(6) all contractual agreements or understandings with third parties in any way relating to a residential

mortgage loan transaction including, but not limited to, any delegations of underwriting authority, any

agreements for pricing of goods or services, investor contracts, or employment agreements;

(7) all reports of audits, examinations, inspections, reviews, investigations, or similar, performed by any

third party, including any regulatory or supervisory authorities;

(8) all advertisements in the medium (e.g., recorded audio, video, Internet or social media site posting,

or print) in which they were published or distributed; and

(9) policies and procedures related to the origination of residential mortgage loans by the mortgage

company and its sponsored originators, including, but not limited to:

(A) identity theft prevention program (red flags rule; 16 C.F.R. §681.1(d));

(B) anti-money laundering program (31 C.F.R. §1029.210);

(D) ability-to-repay underwriting policies, if any, under Regulation Z (12 C.F.R. §1026.43(c));

(E) quality control policy, if any;

(F) compliance manual, if any; and

(G) personnel administration/employee policies, if any;

(g) Records Concerning Administrative Offices. A mortgage company must maintain a list reflecting any

office constituting an "administrative office" of the mortgage company for purposes of §56.206 of this title

(relating to Office Locations; Remote Work);

(h) Records Concerning Remote Work. A mortgage company must maintain records reflecting its

compliance with the requirements for remote work, as provided by §56.206 of this title;

(i) Records Concerning Corrective Action. A mortgage company must maintain records showing compliance

with §56.304 of this title (relating to Corrective Action);

(j) Records Concerning Unclaimed Funds. A mortgage company must maintain records showing

compliance with §56.305 of this title (relating to Unclaimed Funds); and

(k) Other Records Designated by SML. A mortgage company and its sponsored originators must maintain

such other books and records as SML may, from time to time, specify in writing.

§56.205 Mortgage Call Reports

(a) Purpose. This section clarifies and establishes requirements related to the mortgage call reports a

mortgage company is required to file under Finance Code §156.213.

(b) NMLS Filing Requirements. Mortgage call reports must be filed in NMLS by the deadlines established

by NMLS. The mortgage call report must be filed using the current form prescribed by NMLS. Information

about how to file the mortgage call report and applicable filing deadlines is available on the NMLS Resource

Center website (nationwidelicensingsystem.org).

(1) Residential Mortgage Loan Activity (RMLA);

(2) State-Specific Supplemental Form (SSSF); and

(3) Statement of Financial Condition.

(d) Partial Reporting Periods; Periods of Inactivity. A mortgage call report must be filed for all reporting

periods during which the mortgage company is licensed, including partial periods, and periods during which

the mortgage company has no reportable activity.

(e) Extensions of Time. The Commissioner, in his or her sole discretion, may grant an extension of time to

file the mortgage call report. A request for an extension of time must be made in writing and approved by

the Commissioner.

(f) Duty to File Complete and Accurate Reports. The mortgage call report must contain complete and

accurate information at the time it is filed. A mortgage call report containing incomplete or inaccurate

information is deemed to be a failure to file the report. A mortgage company must act diligently to compile

the information necessary to complete the mortgage call report in advance of the deadline to file the

mortgage call report. For clarity, the filing of incomplete or inaccurate information, even on a temporary

basis with the intent to amend the filing with complete and accurate information, constitutes a violation of

Finance Code §156.213, and this section, and may result in disciplinary action as described by subsection

(g) of this section.

(g) Failure to File; Disciplinary Action. Failure to file a mortgage call report may result in disciplinary action,

including, but not limited to, denial, suspension, or revocation of the license, or the imposition of an

administrative penalty.

§56.206 Office Locations; Remote Work

(a) Definitions. For purposes of this section, the following definitions apply, unless the context clearly

indicates otherwise:

(1) "Administrative office" means any office of a mortgage company that is separate and distinct from its

main office or a branch office, whether located in Texas or not, at which the mortgage company conducts

residential mortgage loan business in Texas. The term does not include a "remote location" as defined by

this section. The term includes:

(A) an office or location at which the employees of the mortgage company act solely in the capacity

of a "loan processor or underwriter," as that term is defined by Finance Code §180.002;

(B) an office or location at which the employees of the mortgage company perform solely

administrative or clerical tasks on behalf of an individual licensed as an originator, as provided by Finance

Code §180.002(19)(B)(i); or

(A) or (B) of this paragraph.

(2) "Branch office" means any office a mortgage company maintains that is separate and distinct from

its main office, whether located in Texas or not, at which it conducts residential mortgage loan origination

business with mortgage applicants or prospective mortgage applicants in Texas or concerning residential

real estate located in Texas. The term does not include:

(A) an office or location at which the employees of the mortgage company act solely in the capacity

of a "loan processor or underwriter," as that term is defined by Finance Code §180.002;

(B) an office or location at which the employees of the mortgage company perform solely

administrative or clerical tasks on behalf of an individual licensed as an originator, as provided by Code

§180.002(19)(B)(i);

subparagraphs (A) and (B) of this paragraph; or

(D) a "remote location" as defined by this section.

(3) "Licensed office" means a physical office of the mortgage company that is licensed by the

Department as its main office or a branch office.

(4) "Main office" means the office the mortgage company has listed in its NMLS license records (MU1

filing) as its "main address" (principal address) under "identifying information," and is therefore licensed by

the Department through the mortgage company's license.

(5) "Remote location" means a location other than a licensed office or an administrative office of the

mortgage company from which the employees or sponsored originators of the mortgage company conduct

residential mortgage loan business as provided by subsection (c) of this section.

(b) Office Requirements. A mortgage company must obtain a license for any office constituting the main

office or a branch office of the mortgage company. A mortgage company must also obtain a license for any

office or location it advertises or promotes to the general public as an office or location at which the mortgage

company's sponsored originators meet in-person with mortgage applicants or prospective mortgage

applicants. A licensed office must be a physical office and have a permanent physical or street address (a

post office box or other similar arrangement is not sufficient). The main office or a branch office must be

established by the mortgage company. A sponsored originator cannot establish his or her own office other

than an office or location from which he or she performs remote work as provided by subsection (c) of this

section. A branch office must be licensed by the Department prior to conducting operations. A mortgage

company must amend its MU3 filing to surrender the branch office license within 10 days after the date the

branch office closes.

may conduct business and work from a remote location to the same extent as if such employees or

originators were physically present at a licensed office of the mortgage company; provided, the mortgage

company:

(1) maintains appropriate safeguards for the mortgage company and its consumer data, information,

and records, including the use of secure virtual private networks and data storage encryption (including

cloud storage) where appropriate;

(2) employs appropriate risk-based monitoring and oversight processes for work performed from a

remote location and maintains records of those processes;

(3) ensures that physical records containing consumer information are not maintained at a remote

location (as defined by this section) and any electronic records containing consumer information located at

or accessible from the remote location are secured;

(4) ensures that consumer information and records of the mortgage company, including written

procedures and training for work from remote locations authorized under this section, are accessible and

available to SML on request;

(5) provides appropriate training to its employees and sponsored originators to ensure that remote

employees or sponsored originators work in an environment conducive and appropriate to consumer

privacy; and

(6) adopts, maintains, and follows written procedures to ensure that:

(A) the mortgage company and its employees and sponsored originators comply with this section;

and

(B) the employees and sponsored originators do not perform an activity from a remote location that

would be prohibited at a licensed office or administrative office of the mortgage company.

§56.210 Reportable Incidents

(a) Definitions. For purposes of this section, the following definitions apply, unless the context clearly

indicates otherwise:

(1) "Catastrophic event" means an event, other than a security event, that is unforeseen and results in

extraordinary levels of damage or disruption to operations (e.g., the destruction of a principal office or data

center).

(2) "Reportable incident" means an incident or situation that presents a material risk, financial or

otherwise, to a mortgage company's operations or its customers. A reportable incident includes the following

items, provided, it presents a material risk:

(A) a "catastrophic event" as defined by this subsection

(B) a "security event" as defined by this subsection;

(D) the termination or curtailment of a service provided to the mortgage company by a third-party

service provider.

(3) "Root cause analysis report" means a written report concerning the results or findings of an audit or

investigation to determine the origin or root cause of a security event, identify strategic measures to

effectively contain and limit the impact of a security event, and to prevent a future security event.

(4) "Security event" means an event resulting in unauthorized access to, or disruption or misuse of, an

information system, information stored on such information system, or customer information held in physical

form. It includes information that is encrypted, if the person with unauthorized access to the information can

decrypt the data.

(b) Incident Report. Except as provided by subsection (c) of this section, a mortgage company must submit

a written report to SML concerning any reportable incident within 30 days after the date the mortgage

company becomes aware of the reportable incident. The report must include:

(1) a detailed description of the nature and circumstances of the reportable incident;

(2) the number of Texas residents affected or potentially affected by the reportable incident;

(3) the measures taken by the mortgage company to resolve or address the reportable incident;

(4) the measures the mortgage company plans to take to resolve or address the reportable incident; and

(5) the point of contact designated by the mortgage company for inquires by SML about the reportable

incident.

following notifications sent to other agencies at the time it makes the notification. Except as provided by

subsection (d) of this section, a notification provided to SML under this subsection satisfies the requirement

to file a report under subsection (b) of this section:

(1) the notification to the Federal Trade Commission (FTC) required by Section 314.4(j) of the FTC's

Standards for Safeguarding Customer Information rules (16 C.F.R. §314.4(j)); and

(2) the notification to the Office of the Attorney General of Texas required by Business and Commerce

Code §521.053(i).

(d) Root Cause Analysis for Data Breaches. For any security event triggering a notification described by

subsection (c) of this section (data breach), the mortgage company must provide SML with a root cause

analysis report within 120 days after the date the mortgage company becomes aware that the data breach

occurred.

(e) Supplemental Information. SML may require additional, clarifying, or supplemental information or

documentation related to a reportable incident as SML deems necessary or appropriate.

(f) Confidentiality. Information reported under subsection (b) or (d) of this section is deemed to be

confidential information obtained by SML during an examination, investigation, or inspection, as provided

by Finance Code §156.301 and §56.302 of this title (relating to Confidentiality of Examination, Investigation,

and Inspection Information).

SUBCHAPTER D SUPERVISION AND ENFORCEMENT

§56.300 Examinations

(a) Purpose. This section clarifies and establishes requirements related to examinations of a mortgage

company and its sponsored originators conducted by SML under Finance Code §156.301.

(b) State Examination System (SES). Examinations are conducted in SES (stateexaminationsystem.org).

A mortgage company must use SES to facilitate the examination.

conducted by another state agency or regulatory authority if that state agency's or regulatory authority's

mortgage regulation program is accredited by the Conference of State Bank Supervisors.

(d) Notice of Examination. Except when SML determines that giving advance notice would impair the

examination, SML will give the primary contact person of the mortgage company listed in NMLS or a person

designated by the primary contact person advance notice of each examination. Such notice will be sent to

the primary contact person's or designated person's mailing address or email address of record with NMLS

and will specify the date on which SML's examiners are scheduled to begin the examination. Failure to

receive the notice will not be grounds for delay or postponement of the examination. The notice will include

a list of the documents and records that must be produced or made available to facilitate the examination.

(e) Examinations will be conducted to determine compliance with Finance Code Chapters 156, 157, and

180, and this chapter, and will specifically address whether:

(1) all persons are properly licensed and sponsored;

(2) all office locations are properly licensed, as provided by §56.206 of this title (relating to Office

Locations; Remote Work);

(3) all required books and records are being maintained in accordance with §56.204 of this title (relating

to Books and Records);

(4) legal and regulatory requirements applicable to the mortgage company and its sponsored originators

are being properly followed (including, but not limited to, the requirements described in §56.202(b)(2) of this

title (relating to Fraudulent, Misleading, or Deceptive Practices and Improper Dealings)); and

(5) other matters as SML and its examiners deem necessary or advisable to carry out the purposes of

Finance Code Chapters 156, 157, and 180.

(f) The examiners will review a sample of residential mortgage loan files identified by the examiners from

the mortgage company's mortgage transaction log required by §56.204(c)(1) of this title or the loan

processing or underwriting log required by §56.204(d)(1) of this title. The examiner may expand the number

of files to be reviewed if, in his or her discretion, conditions warrant.

(g) The examiners may require a mortgage company, at its own cost, to make copies of loan files or such

other books and records as the examiners deem appropriate.

(h) Failure to Cooperate; Disciplinary Action. Failure by a mortgage company or sponsored originator to

cooperate with the examination or failure to grant the examiners access to books, records, documents,

operations, and facilities may result in disciplinary action including, but not limited to, imposition of an

administrative penalty.

(i) Reimbursement for Costs. When the Department must travel outside of Texas to conduct an examination

of a mortgage company or its sponsored originators because the required records are maintained at a

location outside of Texas, the Department will require reimbursement for the actual costs incurred by the

Department in connection with such travel including, but not limited to, transportation, lodging, meals,

communications, courier service and any other reasonably related costs. Costs assessed under this

subsection will be invoiced in NMLS and must be paid in NMLS.

§56.301 Investigations

(a) Purpose. This section clarifies and establishes requirements related to investigations of a mortgage

company and its sponsored originators conducted by SML under Finance Code §156.301.

(b) Reasonable Cause. SML will conduct an investigation if it has reasonable cause to do so. Reasonable

cause is deemed to exist if SML receives or discovers information from a source SML has no reason to

believe is other than credible indicating that a violation of law more likely than not occurred that is within

SML's authority to take action to address. The absence of reasonable cause to initiate an investigation does

not constitute grounds to challenge and does not invalidate action taken by SML to address a violation found

during the course of an investigation.

relevant facts and circumstances then known. An investigation may include:

(1) review of documentary evidence;

(2) interviews with complainants, respondents, and third parties, and the taking of sworn written

statements;

(3) obtaining information from other state or federal agencies, regulatory authorities, or self-regulatory

organizations;

(4) requiring complainants or respondents to provide explanatory, clarifying, or supplemental

information; and

(5) other lawful investigative methods SML deems necessary or appropriate.

§56.302 Confidentiality of Examination, Investigation, and Inspection Information

(a) Purpose. This section clarifies and establishes requirements related to the confidentiality of information

obtained by SML during an examination, investigation, or inspection, as provided by Finance Code

§156.301.

(b) Confidential Information. All information obtained by SML during an examination, investigation, or

inspection is confidential and cannot be released except as required or expressly permitted by law. The

Finance Commission of Texas and the Commissioner have determined that the following information is

confidential under Finance Code §156.301 (list is not exhaustive):

(1) any documents, data, data compilations, work papers, notes, memoranda, summaries, recordings,

or other information, in whatever form or medium, obtained, compiled, or created during an examination,

investigation, or inspection;

(2) information that is derived from or is the product of the confidential information described by

paragraph (1) of this subsection, including any reports or other information chronicling or summarizing the

results, conclusions, or other findings of an examination, investigation, or inspection, including assertions

of any violations, deficiencies, or issues identified, or any directives, mandates, or recommendations for

action by the regulated entity to address, correct, or remediate the violations, deficiencies, issues, or other

findings identified during the examination, investigation, or inspection; including, but not limited to, any

corrective or remedial action directed by SML or taken by the regulated entity under §56.303 of this title

(relating to Corrective Action);

(3) information that is derived from or is the product of the confidential information described by

paragraphs (1) and (2) of this subsection, including any communications, documentary evidence, or other

information concerning the regulated entity's compliance with any directives, mandates, or

recommendations for action by the mortgage company and any corrective or remedial action taken by the

regulated entity to address, correct, or remediate the violations, deficiencies, issues, or other findings

identified during the examination, investigation, or inspection.

subsection is not confidential to the extent the information becomes publicly available in a disciplinary or

enforcement action that is a contested case (i.e., information made part of the administrative record during

an adjudicative hearing that is open to the public).

§56.303 Corrective Action

(a) Corrective Action, Generally; Purpose. During an examination, investigation, or inspection, SML may

determine that violations, deficiencies, or compliance issues (collectively, violations) occurred. Within the

confidential environment of the examination, investigation, or inspection, and typically in lieu of possible

disciplinary or enforcement action against the mortgage company or its sponsored originators that is not

confidential, SML may direct the mortgage company to take corrective action to address the violations

identified during the examination, investigation, or inspection. This section clarifies and establishes

requirements related to such corrective action.

(b) Internal Reviews. If SML determines during an examination, investigation, or inspection that a violation

may be systemic, SML may direct the mortgage company to conduct its own internal review to self-identify

any other violations, compile information concerning such violations, and report its findings to SML. SML

may direct the mortgage company to take corrective action for any violations identified during the review.

adopt policies and procedures and institutional controls designed to prevent or mitigate future violations.

(d) Refunds to Consumers. SML may direct the mortgage company to make refunds to consumers affected

by the violation. Any refund must comply with this subsection. The Commissioner, in his or her sole

discretion, may waive or modify the requirements of this subsection to achieve appropriate, practical, and

workable results. A refund must be made by one of the following methods:

(1) Certified Funds. The refund may be made by certified funds (cashier's check or money order) sent

to the mortgage applicant at his or her last known address. The mortgage company must use reasonable

diligence to determine the last known address of the mortgage applicant. The payment must be sent in a

manner that includes tracking information and confirmation of delivery (e.g., certified mail return receipt

requested, or commercial delivery service with tracking). The mortgage company must capture and maintain

records evidencing the payment, including a copy of the payment instrument, any correspondence

accompanying the payment, tracking information, and delivery confirmation;

(2) Corporate Check. The refund may be made by issuing a check to the mortgage applicant. The check

must be drawn on a bank account owned by the mortgage company. The check must be sent to the

mortgage applicant at his or her last known address. The mortgage company must use reasonable diligence

to determine the last known address of the mortgage applicant. The mortgage company must capture and

maintain records evidencing the payment, including a copy of the check, any correspondence

accompanying the check, and evidence that the check was successfully negotiated (i.e., cancelled check).

If the mortgage applicant fails to cash the check, the mortgage company must comply with requirements of

§56.304 of this title (relating to Unclaimed Funds);

(3) Wire Transfer or ACH. The refund may be made by wire transfer or automated clearing house (ACH)

payment to the mortgage applicant's verified bank account. The mortgage company must capture and

maintain records evidencing the payment, including any transaction receipt, confirmation page, or similar,

reflecting:

(A) name of the sender and any relevant contact information;

(B) sender's bank information (institution, routing number, and account number);

(D) recipient's bank information (routing number and account number); and

(E) the transaction reference number or confirmation code; or

(4) Credit Against Indebtedness. If the mortgage company is the lender or holds the mortgage servicing

rights to the residential mortgage loan related to the refund, the mortgage company may issue a credit

against the indebtedness equal to the refund; however, if the refund is related to an improper charge or

proceeds improperly held by the mortgage company on which interest was charged, the credit must be

applied to the unpaid principal balance as of the date of such improper charge or the date the mortgage

company began improperly holding the proceeds (typically inception of the residential mortgage loan). The

mortgage company must capture and maintain records evidencing application of the credit, including the

payment history reflecting application of the credit and any subsequent adjustments to principal and interest

as a result of the credit being applied.

§56.304 Unclaimed Funds

(a) Escheat Suspense Account; Escheat Log. Funds owed to or held for the benefit of a mortgage applicant

or other customer of the mortgage company for more than one year (i.e., unclaimed funds) must be

transferred to an escheat suspense account. The mortgage company must maintain a log of all transfers

made to the escheat suspense account, including, at a minimum:

(1) date of transfer to the escheat suspense account;

(2) date the obligation to pay the funds arose;

(3) full name and last known contact information of the mortgage applicant or other customer to whom

funds are owed; and

(4) amount of unclaimed funds.

(b) Required Records. The mortgage company must maintain records reflecting bona fide attempts to pay

the funds to the mortgage applicant or customer.

of Public Accounts as provided by Property Code §72.101, or as provided by such other state law governing

the unclaimed funds.

(d) Records Retention. Records required by this section must be retained for 10 years beginning on the

date the obligation to pay the unclaimed funds arose.

§56.310 Appeals

(a) Purpose. Finance Code Chapter 156 provides that certain decisions of the Commissioner adverse to a

mortgage company or other person may be appealed and offers the opportunity for an adjudicative hearing

to challenge the decision. This section establishes various deadlines by which a mortgage company or other

person must appeal the decision before it becomes final and non-appealable.

(b) The following appeal deadlines apply:

(1) License Denials. A license denial under Finance Code §156.209 must be appealed within 10 days

after the date notice of the Commissioner's decision is received by the person seeking the license.

(2) Notice of Administrative Penalty for Violation of Final Cease and Desist Order. A notice of

administrative penalty issued under Finance Code §156.303(e) must be appealed within 10 days after the

date the notice is issued.

(3) Order of Suspension for Violation of Final Order. An order of suspension issued by the Commissioner

under Finance Code §156.303(g) must be appealed within 15 days after the date the order is issued.

(4) Order of Suspension for Criminal Offense Involving Fraud, Theft, or Dishonesty. An order of

suspension issued by the Commissioner under Finance Code §156.303(j) must be appealed within 15 days

after the date the order is issued.

(5) Notice of Disciplinary Action. A notice of disciplinary action issued under Finance Code §§

156.302(a), 156.303(a), or 156.303(a-1) must be appealed within 30 days after the date the notice is issued.

(6) Order for Disciplinary Action (Order to Take Affirmative Action or Order to Cease and Desist). An

order of the Commissioner issued under Finance Code §156.303(b) or §156.406(c) must be appealed within

30 days after the date the order is issued. This deadline does not apply to an order for disciplinary action

issued by the Commissioner under Finance Code §§ 156.302(a), 156.303(a), or 156.303(a-1) that was

preceded by notice issued under paragraph (5) of this subsection.

(7) Other Deadlines. Any appeal not otherwise addressed by this section must be made within 30 days

after the date notice or order is issued.

deadline. An appeal may be sent by mail (Attn: Legal Division, 2601 N. Lamar Blvd., Suite 201, Austin,

Texas 78705) or by email (enforce[email protected].gov).

(d) Effect of Not Appealing. A mortgage company or other person that does not timely appeal the

Commissioner's decision is deemed to have irrevocably waived any right it had to challenge the decision or

request an adjudicative hearing on the decision and is deemed not to have exhausted all administrative

remedies available to it for purposes of judicial review of the Commissioner's decision under Government

Code §2001.171. The failure to appeal an order of the Commissioner results in the order becoming final

and non-appealable. The failure to appeal a notice of the Commissioner's decision means the

Commissioner can issue a final, non-appealable order at any time without further notice or opportunity for

a hearing to the mortgage company or other person.

§56.311 Hearings

(a) Adjudicative hearings conducted under Finance Code Chapter 156 are governed by the rules in Chapter

9 of this title (concerning Rules of Procedure for Contested Hearings, Appeals, and Rulemakings).

Contested cases referred to the State Office of Administrative Hearings (SOAH) are also governed by

SOAH's rules in 1 TAC Chapter 155 (concerning Rules of Procedure). All hearings are held in Austin, Texas.

Any appeal for judicial review under Government Code §2001.171 must be brought in a district court in

Travis County, Texas.

(b) Hearing Costs for License Denials. Hearing costs assessed against a person under Finance Code

§156.209(f) include:

(1) filing fees;

(2) the costs of a court reporter;

(3) the costs of the administrative law judge (ALJ) or hearings officer presiding over the hearing and any

ancillary proceedings;

(4) the expense of SML's staff to prepare for and attend the hearing or any ancillary proceedings, and

any related travel expenses;

(5) the cost of any outside counsel retained to represent SML; and

(6) the cost of any expert witness retained by SML.

or conclusions of law concerning the hearing costs described by subsection (b)(3) of this section, such costs

are deemed to be $500. Hearing costs described by subsection (b)(4) of this section are measured based

on the diversion of productivity of such staff away from their normal duties and toward the hearings process

and are calculated by multiplying the number of hours spent by each staff member in furtherance of the

hearings process (measured in increments of 1/10 of an hour) by their current hourly compensation rate.

The Commissioner may rely on affidavit testimony of such staff members to make appropriate findings of

fact and conclusions of law concerning the hearing costs described by subsection (b)(4) of this section.

Figure: 7 TAC §56.200(b)

TEXAS MORTGAGE COMPANY DISCLOSURE

Pursuant to Texas Finance Code Section 156.004, you are notified of the following:

• We will either submit your loan application to a participating lender or make your

loan ourselves. In connection with this mortgage loan, we are acting as an

independent contractor and not as your agent.

• We will be compensated in compliance with the federal Truth in Lending Act and

Regulation Z (see 12 C.F.R. § 1026.36(d)) (if applicable).

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE COMPANY

OR RESIDENTIAL MORTGAGE LOAN ORIGINATOR LICENSED IN TEXAS, OR TO

FILE A CLAIM AGAINST A RESIDENTIAL MORTGAGE LOAN ORIGINATOR

LICENSED IN TEXAS SHOULD SEND A COMPLETED COMPLAINT FORM OR CLAIM

APPLICATION TO THE DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

(SML): 2601 N. LAMAR BLVD., SUITE 201, AUSTIN, TEXAS 78705; TEL: 1-877-276-

5550. INFORMATION AND FORMS ARE AVAILABLE ON SML’s WEBSITE:

SML.TEXAS.GOV.

ISSUED BY:

Mortgage Company

Legal Name:

NMLS ID:

Residential Mortgage Loan Originator

Name:

NMLS ID:

Method of Transmission

☐ Email: ___________________________________________________________

☐ Fax: ___________________________________________________________

☐ Mail: ___________________________________________________________

☐ Hand Delivered

Signature Date

Figure: 7 TAC §56.200(b)

ACKNOWLEDGMENT BY MORTGAGE APPLICANT(S):

Signature Date

Printed Name

Signature Date

Printed Name

Figure: 7 TAC §56.201(a)

Form A

Conditional Pre-Qualification Letter

This is not a loan approval or commitment to lend

Date:

Prospective Applicant(s)/ Applicant(s):

Mortgage Company:

NMLS ID #:

Loan Details

Loan Amount:

Qualifying Interest Rate:

Term:

Maximum Loan-to-Value Ratio:

Loan Type and Description:

Mortgage company has has not reviewed the prospective applicant's/ applicant’s credit report and credit

score

The prospective applicant(s) /applicant(s) have provided the mortgage company with the following information:

Income Yes No Not applicable

Available cash to close Yes No Not applicable

Debts Yes No Not applicable

Assets Yes No Not applicable

Based on the information that the prospective applicant(s) / applicant(s) have provided, the mortgage company has

determined that the prospective applicant(s) / applicant(s) is eligible and qualified to meet the financial requirements

of the loan.

This is not a loan approval or a commitment to lend on the terms described in the Loan Details section.

Approval of the loan requires:

Receipt of a complete loan application and all supporting documents requested;

Figure: 7 TAC §56.201(a)

Lender verification of the information that the prospective applicant(s) / applicant(s) has provided;

The prospective applicant’s / applicant’s financial status and credit report to remain substantially the same until

the loan closes;

The collateral for the loan to satisfy the lender’s requirements;

The loan, as described, to remain available in the market;

The prospective applicant(s) / applicant(s) to execute all documents the lender requires;

The following additional items (list):

This conditional pre-qualification expires on:

Residential Mortgage Loan Originator Name

Mailing address

Phone number

e-mail address

NMLS ID #

Figure: 7 TAC §56.201(b)

Form B

Conditional Approval Letter

Date:

Prospective Applicant(s) / Applicant(s):

Mortgage Company:

NMLS ID #:

Loan Details:

Loan Amount:

Interest Rate*:

Term:

Interest Rate Lock Expires (if applicable):

Maximum Loan-to-Value Ratio:

Loan Type and Program:

*Interest rate is subject to change unless it has been locked

Has a subject property been identified? Yes No

Mortgage company has:

Reviewed prospective applicant’s / applicant’s credit report and credit score Yes Not applicable

Verified prospective applicant’s / applicant’s income Yes Not applicable

Verified prospective applicant’s / applicant’s available cash to close Yes Not applicable

Verified prospective applicant’s / applicant’s debts and other assets Yes Not applicable

Prospective applicant(s) / applicant(s) is approved for the loan provided that creditworthiness and financial

position do not materially change prior to closing and provided that:

The subject property is appraised for an amount not less than $

The lender receives an acceptable title commitment

The lender receives an acceptable survey

The subject property’s condition meets lender’s requirements

Figure: 7 TAC §56.201(b)

The subject property is insured in accordance with lender's requirements

The prospective applicant(s) / applicant(s) executes all the documents lender requires and

The following additional conditions are complied with (list):

This conditional approval expires on

Residential Mortgage Loan Originator Name

Mailing address

Phone number

e-mail address

NMLS ID #

TITLE 7 BANKING AND SECURITIES

PART 4 DEPARTMENT OF SAVINGS AND MORTGAGE LENDING

CHAPTER 57 MORTGAGE BANKERS

{{All existing rules affecting mortgage bankers in Chapter 81 will be repealed and replaced with new

rules in Chapter 57 (the rules in Chapter 81 affecting residential mortgage loan originators will be

replaced with new rules in Chapter 55)}}

SUBCHAPTER A GENERAL PROVISIONS

§57.1 Purpose and Applicability

This chapter governs SML’s administration and enforcement of Finance Code Chapter 157, the Mortgage

Banker Registration and Residential Mortgage Loan Originator License Act (other than Subchapter D),

concerning the registration, and operations of mortgage bankers. This chapter applies to persons registered

with SML as a mortgage banker or those required to be registered.

§57.2 Definitions

For purposes of this chapter, and in SML’s administration and enforcement of Finance Code Chapter 157

(other than Subchapter D), the following definitions apply, unless the context clearly indicates otherwise:

(1) "Application," as used in Finance Code §157.002(6) and paragraphs (8) and (20) of this section

means a request, in any form, for an offer (or a response to a solicitation of an offer) of residential mortgage

loan terms, and the information about the mortgage applicant that is customary or necessary in a decision

on whether to make such an offer, including, but not limited to, a mortgage applicant's name, income, social

security number to obtain a credit report, property address, an estimate of the value of the real estate, or

the mortgage loan amount.

(2) "Commissioner" means the savings and mortgage commissioner appointed under Finance Code,

Chapter 13.

(3) "Compensation" includes salaries, bonuses, commissions, and any financial or similar incentive.

(4) "Control person" means an individual that directly or indirectly exercises control over a mortgage

banker. Control is defined by the power, directly or indirectly, to direct the management or policies of a

mortgage banker, whether through ownership of securities, by contract, or otherwise. Control person

includes any person that:

(A) is a director, general partner, or executive officer;

(B) directly or indirectly has the right to vote 10% or more of a class of a voting security or has the

power to sell or direct the sale of 10% or more of a class of voting securities;

(D) in the case of a partnership, has the right to receive upon dissolution, or has contributed, 10% or

more of the partnership's capital assets.

(5) "Dwelling" means a residential structure that contains one to four units and is attached to residential

real estate. The term includes an individual condominium unit, cooperative unit, or manufactured home, if it

is used as a residence.

(6) "E-Sign Act" refers to the federal Electronic Signature in Global and National Commerce Act (15

U.S.C. §7001 et seq.).

(7) "Making a residential mortgage loan," or any similar derivative or variation of that term, means when

a person determines the credit decision to provide the residential mortgage loan, or the act of funding the

residential mortgage loan or transferring money to the borrower. A person whose name appears on the loan

documents as the payee of the note is considered to have "made" the residential mortgage loan.

(8) "Mortgage applicant" means an applicant for a residential mortgage loan or a person who is solicited

(or contacts a mortgage banker or originator in response to a solicitation) to obtain a residential mortgage

loan, and includes a person who has not completed or started completing a formal loan application on the

appropriate form (e.g., Fannie Mae's Form 1003 Uniform Residential Loan Application), but has submitted

financial information constituting an application, as provided by paragraph (1) of this section.

(9) "Mortgage banker" has the meaning assigned by Finance Code §157.002.

(10) "Mortgage company" means, for the purposes of this chapter, a "residential mortgage loan

company" as is defined by Finance Code §157.002.

(11) "Nationwide Multistate Licensing System" or "NMLS" has the meaning assigned by Finance Code

§157.002 in defining “Nationwide Mortgage Licensing System and Registry."

(12) "Offers or negotiates the terms of a residential mortgage loan," as used in Finance Code

§157.002(6) means, among other things, when an individual:

(A) arranges or assists a mortgage applicant or prospective mortgage applicant in obtaining or

applying to obtain, or otherwise secures an extension of consumer credit for another person, in connection

with obtaining or applying to obtain a residential mortgage loan;

(B) presents for consideration by a mortgage applicant or prospective mortgage applicant particular

residential mortgage loan terms (including rates, fees and other costs); or

for the purpose of reaching a mutual understanding about particular residential mortgage loan terms.

(13) "Originator" has the meaning assigned by Finance Code §157.002 in defining "residential mortgage

loan originator." Paragraphs (12) and (20) of this section do not affect the applicability of such statutory

definition. Individuals who are specifically excluded under such statutory definition, as provided by Finance

Code §180.002(19)(B), are excluded under this definition and for purposes of this chapter. Persons who

are exempt from licensure as provided by Finance Code §180.003 are exempt for purposes of this chapter,

except as otherwise provided by Finance Code §180.051.

(14) "Person" has the meaning assigned by Finance Code §180.002.

(15) "Residential mortgage loan" has the meaning assigned by Finance Code §157.002 and includes

new loans and renewals, extensions, modifications, and rearrangements of such loans. The term does not

include a loan secured by a structure that is suitable for occupancy as a dwelling but is used for a

commercial purpose such as a professional office, salon, or other non-residential use, and is not used as a

residence.

(16) "Residential real estate" has the meaning assigned by Finance Code §180.002 and includes both

improved or unimproved real estate or any portion of or interest in such real estate on which a dwelling is

or will be constructed or situated.

(17) "Social media site" means any digital platform accessible by a mortgage applicant or prospective

mortgage applicant where the mortgage banker or sponsored originator does not typically own the hosting

platform but otherwise exerts editorial control or influence over the content within their account, profile, or

other space on the digital platform, from which the mortgage banker or sponsored originator posts

commercial messages or other content designed to solicit business.

(18) "SML" means the Department of Savings and Mortgage Lending.

(19) "State Examination System" or "SES" means an online, digital examination system developed by

the Conference of State Bank Supervisors that securely connects regulators and regulated entities on a

nationwide basis to facilitate the examination process.

(20) "Takes a residential mortgage loan application," as used in Finance Code §157.002(6) in defining

"residential mortgage loan originator" means when an individual receives a residential mortgage loan

application for the purpose of facilitating a decision on whether to extend an offer of residential mortgage

loan terms to a mortgage applicant or prospective mortgage applicant, whether the application is received

directly or indirectly from the mortgage applicant or prospective mortgage applicant, and regardless of

whether or not a particular lender has been identified or selected.

(21) "Trigger Lead" means information concerning a consumer’s credit worthiness (consumer report)

compiled by a credit reporting agency (consumer reporting agency), obtained in accordance with the federal

Fair Credit Reporting Act (15 U.S.C. §1681b(c)(1)(B)), that is not initiated by the consumer but, instead,

instead triggered by an inquiry to a consumer reporting agency in response to an application for credit

initiated by the consumer in a separate transaction. The term does not include a consumer report obtained

by a mortgage company licensed by SML or a mortgage banker registered with SML in response to an

application for credit made by a consumer with that mortgage company or mortgage banker or that is

otherwise authorized by the consumer.

(22) "UETA" refers to the Texas Uniform Electronic Transactions Act, Business & Commerce Code

Chapter 322.

(23) "Wrap lender" has the meaning assigned by Finance Code §159.001.

(24) "Wrap mortgage loan" has the meaning assigned by Finance Code §159.001.

§57.3 Formatting Requirements for Notices

Any notice or disclosure (notice) required by Finance Code Chapter 157, or this chapter, must be made in

at least 12-point font using an easily readable typeface. A font point generally equates to 1/72 of an inch. If

Finance Code Chapter 157 or this chapter prescribes a form for the notice, the notice must closely follow

the font types used in the form. For example, where the form uses bolded, underlined, or "all caps" font

type, the notice must be made using those font types. The following typefaces are deemed to be easily

readable for purposes of this section (list is not exhaustive and other typefaces may be used; provided, the

typeface is easily readable):

(1) Arial;

(2) Aptos;

(3) Calibri;

(4) Century Schoolbook;

(5) Garamond;

(6) Georgia;

(7) Lucinda Sans;

(8) Times New Roman;

(9) Trebuchet; and

(10) Verdana.

§57.4 Electronic Delivery and Signature of Notices

Any notice or disclosure required by Finance Code Chapter 157, or this chapter, may be provided and

signed in accordance with state and federal law governing electronic signatures and delivery of electronic

documents. The UETA and E-Sign Act include requirements for electronic signatures and delivery.

§57.5 Computation of Time

The calculation of any time period measured in days by Finance Code Chapter 157, or this chapter, is made

using calendar days, unless clearly stated otherwise. In computing a period of calendar days, the first day

is excluded and the last day is included. If the last day of any period is a Saturday, Sunday, or legal holiday,

the period is extended to include the next day that is not a Saturday, Sunday, or legal holiday, unless clearly

stated otherwise.

§57.6 Enforceability of Liens

A violation of Finance Code Chapter 157, or this chapter, does not render an otherwise lawfully taken lien

invalid or unenforceable.

SUBCHAPTER B REGISTRATION

§57.100 Registration Requirements

(a) Registration Required. A person, unless exempt as provided by Finance Code §157.004, is required to

be registered with SML as a mortgage banker under Finance Code Chapter 157 if the person engages in

or conducts the business of a mortgage banker or advertises or holds that person out to the public as

engaging in or conducting the business of a mortgage banker concerning a loan or prospective loan secured

or designed to be secured by residential real estate located in Texas, including, but not limited to:

(1) representing or holding that person out to the public through advertising or other means of

communication as a mortgage banker; and

(2) receiving compensation for engaging in or conducting the business of a mortgage banker (a person

must be registered at the time it receives compensation even if the compensation relates to services

provided when the person was registered).

(b) Branch Office Registration Required. A mortgage banker must register each office constituting a branch

office of the mortgage banker for purposes of §57.206 of this title (relating to Office Locations; Remote

Work).

§57.101 Applications for Registration

(a) NMLS. Applications for registration must be submitted through NMLS and must be made using the

current form prescribed by NMLS. SML has published application checklists on the NMLS Resource Center

website (nationwidelicensingsystem.org; viewable on the "State Licensing Requirements" webpage) which

outline the requirements to submit an application. Applicants must comply with requirements in the checklist

in making the application.

(b) Supplemental Information. SML may require additional, clarifying, or supplemental information or

documentation as deemed necessary or appropriate to determine that the registration requirements of

Finance Code Chapter 157 have been met.

supporting documentation is included and all required fees are received. If an application is incomplete,

SML will send written notice to the applicant specifying the additional information, documentation, or fee

required to render the application complete. The application may be deemed withdrawn and any fee paid

will be forfeited if the applicant fails to provide the additional information, documentation, or fee within 30

days after the date written notice is sent to the applicant as provided by this subsection.

§57.102 Fees

(a) Registration Fees. The registration fee is determined by the Commissioner in an amount not to exceed

the maximum amount specified by Finance Code §157.006, exclusive of fees charged by NMLS, as

described in subsection (b) of this section. The Commissioner may establish different fee amounts for a

new registration versus renewal of the registration versus reinstatement of the registration. The current fee

is set in NMLS and posted on SML’s website (sml.texas.gov). The Commissioner may change the fee at

any time; provided, any fee increase is not effective until notice has been posted on SML’s website for at

least 30 days. The registration fee must be paid in NMLS.

(b) NMLS Fees. NMLS charges a separate fee to process the application. Such fee is determined by NMLS

and must be paid by the applicant at the time it files the application. The current fee is set in NMLS and

posted on the NMLS website (nationwidelicensingsystem.org).

§57.103 Renewal of the Registration

(a) A registration may be renewed on:

(1) timely submission of a completed renewal application (renewal request) in NMLS together with

payment of all required fees; and

(2) a determination by SML that the mortgage banker continues to meet the minimum requirements for

registration, including the requirements of Finance Code §157.003(b).

(b) Commissioner's Discretion to Approve with a Deficiency. The Commissioner may, in her or her sole

discretion, approve a renewal request with one or more deficiencies the Commissioner deems to be

relatively minor and allow the mortgage banker to continue conducting regulated activities while the

mortgage banker works diligently to resolve the deficiencies. A renewal request approved by the

Commissioner under this subsection will be assigned the NMLS license status "Approved - Deficient."

Approval under this subsection does not relieve the mortgage banker of the obligation to resolve the

deficiencies. A mortgage banker approved under this subsection must resolve the deficiencies within 30

days after the date the license is approved, unless an extension of time is granted by the Commissioner.

Failure to timely resolve the deficiencies constitutes grounds for the Commissioner to suspend or revoke

the registration.

the registration status "Terminated - Failed to Renew") described by Finance Code §157.0062 and must be

construed accordingly. A mortgage banker registration cannot be renewed beyond the reinstatement period;

instead, the person must apply for a new registration and comply with all current requirements and

procedures governing issuance of a new registration.

§57.104 NMLS Records; Notices Sent to the Mortgage Banker

(a) NMLS Registration Status. SML is required to assign a status to the registration in NMLS. The

registration status is displayed in NMLS and on the NMLS Consumer Access website

(nmlsconsumeraccess.org). SML is limited to the registration status options available in NMLS. The NMLS

Resource Center website (nationwidelicensingsystem.org) describes the available registration status

options and their meaning.

(b) Amendments to NMLS Records Required. A mortgage banker must amend its NMLS registration records

(MU1 filing) within 10 days after the date of any material change affecting any aspect of the MU1 filing,

including, but not limited to:

(1) name (which must be accompanied by supporting documentation submitted to SML establishing the

name change);

(2) the addition or elimination of an assumed name (also known as a trade name or "doing business as"

name; which must be accompanied by a certificate of assumed business name or other documentation

establishing or abandoning the assumed name);

(3) the contact information under "Identifying Information":

(4) the contact information under "Resident/Registered Agent";

(5) the contact information under "Contact Employee Information"; and

(6) answers to disclosure questions (which must be accompanied by explanations for each such

disclosure, together with supporting documentation concerning such disclosure).

required to register an association with the mortgage banker (control persons) to make the proper filings in

NMLS using the current form prescribed by NMLS (MU2 filing) and must ensure such associations are

amended within 10 days after the date of any material change affecting such associations.

(d) Notices Sent to the Mortgage Banker. Any correspondence, notification, alert, message, official notice

or other written communication from SML will be sent to the mortgage banker in accordance with this

subsection using the mortgage banker’s current contact information of record in NMLS unless another

method is required by other applicable law.

(1) Service by Email. Service by email is made using the email address the mortgage banker has

designated in its MU1 filing under "Contact Employee Information" for the contact designated as the

"Primary Company Contact." Service by email is complete on transmission of the email to mortgage

banker’s email service provider; provided, SML does not receive a "bounce back" notification, or similar,

from the email service provider indicating that delivery was not effective. A mortgage banker must monitor

such email account and ensure that emails sent by SML are not lost in a "spam" or similar folder, or

undelivered due to intervention by a "spam filter" or similar service. A mortgage banker is deemed to have

constructive notice of any emails sent by SML to the email address described by this paragraph. A mortgage

banker is further deemed to have constructive notice of any NMLS system notifications sent to it by email.

(2) Service by Mail. Service by mail is made using the address the mortgage banker has designated in

its MU1 filing under "Contact Employee Information" for the contact designated as the "Primary Company

Contact." Service by mail is made using the address the mortgage banker has designated in its MU1 filing

under "Contact Employee Information" for the contact designated as the "Primary Company Contact."

Service by mail is complete on deposit of the document, postpaid and properly addressed, in the mail or

with a commercial delivery service. If service is made on the mortgage banker by mail and the document

communicates a deadline by or a time during which the mortgage banker must perform some act, such

deadline or time period for action is extended by 3 days. However, if service was made by another method

prescribed by this subsection, such deadline or time period will be calculated based on the earliest possible

deadline or shortest applicable time period.

§57.106 Surrender of the Registration

(a) Surrender Request. A mortgage banker may seek surrender of the registration by filing a registration

surrender request (request) in NMLS. The request must be made using the current form prescribed by

NMLS. SML will review the request and determine whether to grant it. SML may not grant the request if,

among other reasons:

(1) the mortgage banker is the subject of a pending or contemplated investigation or enforcement action;

(2) the mortgage banker is in violation of an order of the Commissioner;

(3) the mortgage banker has failed to pay any fee, charge, or other indebtedness owed to SML; or

(4) the mortgage banker has failed to file mortgage call reports required by §57.205 of this title (relating

to Mortgage Call Reports).

(b) Inactive Status Pending Surrender. If SML does not grant the request or requires additional time to

consider the request, the request will be left pending while the issue preventing SML from granting the

request is resolved or lapses. During this time, the mortgage banker’s registration will be assigned the

license status “Approved - Inactive” in NMLS.

§57.107 Sponsorship of Originator; Responsibility for Originator's Actions

(a) Sponsorship Required. A mortgage banker conducts origination activity through one or more originators

who must be sponsored by the mortgage banker in NMLS. To sponsor an originator, the mortgage banker

must first register a relationship with the originator in NMLS. When a relationship has been registered, the

mortgage banker may then file a request in NMLS to establish sponsorship of the originator. An originator

must make filings in NMLS to establish such sponsorship. Sponsorship is not effective until the sponsorship

request has been reviewed and approved by SML. A mortgage banker must not allow an individual to act

on its behalf in the capacity of an originator until such sponsorship has been established and is effective.

Information about how to file for sponsorship is available on the NMLS Resource Center website

(nationwidelicensingsystem.org).

(b) Responsibility for Originator's Actions. By sponsoring an originator, or otherwise allowing an individual

to act on its behalf in the capacity of an originator, the mortgage banker assumes responsibility for the

actions of such originator or individual acting in the capacity of an originator. All violations of law by an

originator or individual acting in the capacity of an originator are deemed to be attributable and imputed to

the mortgage banker sponsoring the originator or for which the individual acting as an originator was allowed

to act, and the Commissioner may take action against the mortgage banker under Finance Code §157.009

and seek disciplinary action against the originator simultaneously for the same conduct giving rise to the

violation. As a result, a mortgage banker is charged with knowledge of and must ensure compliance by their

sponsored originators with the requirements of Finance Code Chapters 157 and 180, and of SML's rules in

Chapter 55 of this title (relating to Residential Mortgage Loan Originators).

or the sponsored originator. If sponsorship is terminated, the party terminating the sponsorship must

immediately notify SML of the termination by making a filing in NMLS to terminate the sponsorship, as

provided by Finance Code §157.019.

(d) Failure to Maintain Sponsored Originator; Inactive Status. If a mortgage banker does not have any

licensed and sponsored originators, the license will be assigned the status "Approved - Inactive," during

which time the mortgage banker must not conduct regulated activities.

SUBCHAPTER C DUTIES AND RESPONSIBILITIES

§57.200 Required Disclosures

(a) Purpose. This section clarifies and establishes requirements related to the disclosures a mortgage

banker is required to make under Finance Code §157.0021.

(b) Specific Notice to Applicant (Origination Notice). A mortgage banker must send written notice to a

mortgage applicant concerning SML’s regulatory oversight. The notice must be sent at the time the

mortgage banker and its sponsored originator receives the initial application for a residential mortgage loan.

The notice must be signed by the mortgage banker’s sponsored originator that took the application and the

mortgage applicant. The notice must in the following form:

Figure: 7 TAC §57.200(b)

oversight on each website of the mortgage banker, other than a social media site, that is accessible by a

mortgage applicant or prospective mortgage applicant and either used to conduct residential mortgage loan

origination business or from which the mortgage banker advertises to solicit such business, as provided by

§57.203 of this title (relating to Advertising). The notice must be in the current form prescribed by SML and

posted on its website (sml.texas.gov). The notice must be displayed on the initial or home page of the

website (typically the base-level domain name) or contained in a linked webpage with the link to such

webpage displayed on the initial or home page.

(d) Disclosures in Correspondence. All correspondence sent to a mortgage applicant or borrower must

include:

(1) the mortgage banker’s name and NMLS ID; and

(2) the mortgage banker’s website address, if it has a website.

(e) Specific Notice to Borrower (Servicing Notice). A mortgage banker that acts as a residential mortgage

loan servicer must send written notice to the borrower concerning SML’s regulatory oversight within 30 days

after the date it begins servicing a residential mortgage loan. The notice must be in the current form

prescribed by the SML and posted on its website. The notice must be included in the first notice sent to the

borrower that notifies the borrower of the mortgage banker’s role in servicing the loan, including any notice

required by Regulation X (12 C.F.R. §1024.33(b)). This subsection applies to the servicing of residential

mortgage loans secured by real property located in Texas. Mortgage bankers servicing a residential

mortgage loan not secured by real property located in Texas must not provide the notice described by this

subsection.

§57.201 Conditional Pre-Qualification and Conditional Approval Letters

(a) Conditional Pre-Qualification Letter. Except as provided by subsection (c) of this section, when provided

to a mortgage applicant or prospective mortgage applicant, written confirmation of conditional pre-

qualification (conditional pre-qualification letter) must include the information in Form A, Figure: 7 TAC

§57.201(a). The information must be provided using Form A or an alternate form approved by the mortgage

banker that includes all of the information found on Form A. There is no requirement to issue a conditional

pre-qualification letter. Form A or an alternate form may be modified by adding any of the following as

needed:

Figure: 7 TAC §57.201(a)

(1) Any additional aspects of the loan as long as not misleading;

(2) Any additional items that the originator has reviewed in determining conditional qualifications; or

(3) Any additional terms, conditions, and requirements.

(b) Conditional Approval Letter. When provided to a mortgage applicant or prospective mortgage applicant,

written notification of conditional loan approval on the basis of credit worthiness, but not on the basis of

collateral (conditional approval letter), must include the information in Form B, Figure 7: TAC §57.201(b).

The information can be provided using Form B or an alternate form approved by the mortgage banker that

includes all of the information found on Form B. There is no requirement to issue a conditional approval

letter. Form B or an alternate form may be modified by adding the additional information permitted by

subsection (a)(1) - (3) of this section, a or disclosure of fees charged. A disclosure of fees charged, on Form

B or an alternate form, does not serve as a substitute for any fee disclosure required by state or federal

laws or regulations. A conditional approval letter must not be issued unless the mortgage banker or its

sponsored originator has verified that, absent any material changes prior to closing, the mortgage applicant

or prospective mortgage applicant has satisfied all loan requirements related to credit, income, assets, and

debts. Verification may be conducted manually or by electronic means.

Figure: 7 TAC §57.201(b)

by 15 U.S.C. §1681a(l).

(d) Issuance by the Originator. A conditional pre-qualification letter or conditional approval letter must be

issued and signed by the mortgage banker’s sponsored originator acting on behalf of the mortgage banker

to originate the prospective residential mortgage loan.

§57.202 Fraudulent, Misleading, or Deceptive Practices and Improper Dealings

(a) Fraudulent, Misleading, or Deceptive Practices. The following conduct by a mortgage banker or its

sponsored originators constitutes fraudulent and dishonest dealings for purposes of Finance Code

§157.009(d):

(1) knowingly misrepresenting the mortgage banker's or sponsored originator's relationship to a

mortgage applicant or any other party to a residential mortgage loan transaction or prospective residential

mortgage loan transaction;

(2) knowingly misrepresenting or understating any cost, fee, interest rate, or other expense to a

mortgage applicant or prospective mortgage applicant in connection with a residential mortgage loan;

(3) knowingly overstating, inflating, altering, amending or disparaging any source or potential source of

residential mortgage loan funds in a manner which disregards the truth or makes any knowing and material

misstatement or omission;

(4) knowingly misrepresenting the lien position of a residential mortgage loan or prospective residential

mortgage loan;

(5) knowingly participating in or permitting the submission of false or misleading information of a material

nature to any person in connection with a decision by that person whether to make or acquire a residential

mortgage loan;

(6) as provided by Regulation X (12 C.F.R. §1024.14), brokering, arranging, or making a residential

mortgage loan for which the mortgage banker or sponsored originator receives compensation for services

not actually performed or where the compensation received bears no reasonable relationship to the value

of the services actually performed;

(7) recommending or encouraging default or delinquency or the continuation of an existing default or

delinquency by a mortgage applicant on any existing indebtedness prior to closing a residential mortgage

loan which refinances all or a portion of such existing indebtedness;

(8) altering any document produced or issued by SML, unless otherwise permitted by statute or a rule

of SML;

(9) allowing a licensed originator to act on behalf of the mortgage banker when the originator is not

sponsored by the mortgage banker or otherwise holds his or her license in an inactive status (which is

deemed to constitute unlicensed activity);

(10) using the services of mortgage company or mortgage banker to provide loan processing services

when the mortgage company or mortgage banker providing the services holds its license in an inactive

status (which is deemed to constitute unlicensed activity);

(11) using a trigger lead in misleading or deceptive manner by, among other things:

(A) failing to state in the initial communication with the consumer:

(i) the mortgage banker’s name;

(ii) a brief explanation of how the mortgage banker obtained the consumer’s contact information

to make the communication (i.e., an explanation of trigger leads);

(iii) that the mortgage banker is not affiliated with the creditor to which the consumer made the

credit application that resulted in the trigger lead; and

(iv) that the purpose of the communication is to solicit new business for the mortgage banker;

(B) contacting a consumer who has opted out of prescreened offers of credit under the federal Fair

Credit Reporting Act (FCRA; 12 U.S.C. §1681b(e)); or

by the FCRA (12 U.S.C. §1681a(l) and §1681b(c));

(12) engaging in any other practice which the Commissioner, by published interpretation, has

determined is fraudulent, misleading, or deceptive.

(b) Improper or Unfair Dealings. The following conduct by a mortgage banker or its sponsored originators

constitutes improper dealings for purposes of Finance Code §157.009(d):

(1) acting negligently in performing an act requiring a registration under Finance Code Chapter 157 or

a license under Finance Code Chapters 157 and 180;

(2) violating any provision of a local, State of Texas, or federal constitution, statute, rule, ordinance,

regulation, or final court decision that governs the same or a closely related activity, transaction, or subject

matter that is governed by the provisions of Finance Code Chapters 156, 157 or 180, including, but not

limited to:

(A) Consumer Credit Protection Act, Equal Credit Opportunity Act (15 U.S.C. §1691 et seq.) and

Regulation B (12 C.F.R. §1002.1 et seq.);

(B) Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. §5101 et seq.) and

Regulation H (12 C.F.R. §1008.1 et seq.);

(D) Gramm-Leach-Bliley Act (GLBA; 15 U.S.C. §6801 et seq.), Regulation P (12 C.F.R. §1016.1 et

seq.), and the Federal Trade Commission's (FTC) Privacy of Consumer Financial Information rules (16

C.F.R. §313.1 et seq.);

(E) Fair Credit Reporting Act (15 U.S.C. §1681 et seq.) and Regulation V (12 C.F.R. §1022.1 et

seq.);

(F) Real Estate Settlement Procedures Act (12 U.S.C. §2601 et seq.) and Regulation X (12 C.F.R.

1024.1 et seq.);

(G) Consumer Credit Protection Act, Truth in Lending Act (15 U.S.C. §1601 et seq.) and Regulation

Z (12 C.F.R. §1026.1 et seq.);

(H) the FTC's Standards for Safeguarding Customer Information rule (16 C.F.R. §314.1 et seq.);

(I) Finance Code Chapter 158 and Chapter 58 of this title;

(J) Finance Code Chapter 159 and Chapter 59 of this title; and

(K) Texas Constitution, Article XVI, §50 and Chapter 153 of this title;

(3) soliciting by phone a consumer who has placed his or her contact information on the national do-not-

call registry maintained by the Federal Trade Commission (FTC), unless otherwise allowable under the

FTC’s Telemarketing Sales Rule (16 C.F.R. §310.4(b)(iii)(B));

(4) Issuing a conditional pre-qualification letter or conditional approval letter under §57.201 of this title

(relating to Conditional Pre-Qualification and Conditional Approval Letters) that does not comply with the

required form for the letter or is inaccurate, erroneous, or negligently-issued;

(5) Representing to a mortgage applicant that a charge or fee which is payable to the mortgage banker

or sponsored originator is a "discount point" or otherwise confers a financial benefit on the mortgage

applicant unless the loan closes and:

(A) the mortgage banker is making the residential mortgage loan (lender); or

(B) the mortgage banker is not the lender but demonstrates by clear and convincing evidence that

the lender has charged or collected discount points or other fees which the mortgage banker has actually

paid to the lender on behalf of the mortgage applicant to buy down the interest rate on the residential

mortgage loan.

(6) Failing to accurately respond within a reasonable time period to reasonable questions from a

mortgage applicant concerning the scope and nature of the mortgage banker's services and any costs.

Finance Code §157.009(d) when, in connection with the origination of a residential mortgage loan:

(1) The mortgage banker or sponsored originator:

(A) offers other goods or services to a mortgage applicant in a separate but related transaction; and

(B) the mortgage banker or sponsored originator engages in fraudulent, misleading, or deceptive

acts in the related transaction; or

(2) The mortgage banker or its sponsored originator:

(A) affiliates with another person that provides goods or services to a mortgage applicant in a

separate but related transaction;

(B) the affiliated person engages in fraudulent, misleading, or deceptive acts in that transaction;

misleading, or deceptive acts of the affiliated person; and

(D) the mortgage banker or sponsored originator failed to take appropriate steps to prevent or limit

the fraudulent, misleading, or deceptive acts.

(d) Sharing or Splitting Origination Fees with the Mortgage Applicant. A mortgage banker and its sponsored

originators must not offer or agree to share or split any loan origination fees with a mortgage applicant,

rebate all or a part of an origination fee to a mortgage applicant, reduce their established compensation to

benefit a mortgage applicant, or otherwise provide money, a cash equivalent, or anything of value to a

mortgage applicant in connection with providing residential mortgage loan origination services unless

otherwise allowable under Regulation X (12 C.F.R. §1024.14) and Regulation Z (12 C.F.R. §1026.36(d)). A

sponsored originator acting in the dual capacity of an originator and real estate broker or sales agent

licensed under Occupations Code Chapter 1101 may rebate his or her fees legitimately earned and derived

from his or her real estate brokerage or sales agent services to the extent allowable under applicable law

governing real estate brokers or sales agents; provided, the payment or other transfer described by this

subsection occurs as a part of closing and is properly reflected in the closing disclosure. If a payment or

other transfer described by this subsection occurs after closing, a rebuttable presumption exists that the

payment or transfer is derived from the originator's fees for residential mortgage loan origination services

and constitutes an improper sharing or splitting of fees with the mortgage applicant. The rebuttable

presumption may only be overcome by clear and convincing evidence established by the mortgage banker

or sponsored originator that the payment or transfer is instead derived from fees for real estate brokerage

or sales agent services. A violation of this subsection is deemed to constitute improper dealings for purposes

of Finance Code §157.009(d).

§57.203 Advertising

(a) Definitions. For purposes of this section, the following definitions apply, unless the context clearly

indicates otherwise:

(1) “Advertisement” means a commercial message in any medium that promotes, directly or indirectly,

a residential mortgage loan transaction or is otherwise designed to solicit residential mortgage loan

origination business for the mortgage banker or its sponsored originators. The term includes “flyers,”

business cards, or other handouts, and messages or posts made on a social media site. The term does not

include:

(A) any advertisement which indirectly promotes a residential mortgage loan transaction and

contains only the name of the mortgage banker or sponsored originator and not any contact information

with the exception of a website address, such as on cups, pens or pencils, shirts or other clothing (including

company uniforms and sponsored youth league jerseys), or other promotional items of nominal value;

(B) any rate sheet, pricing sheet, or similar proprietary information provided to realtors, builders, and

other commercial entities that is not intended for distribution to consumers; or

of this title (relating to Office Locations; Remote Work).

(2) “Team logo” means a logo, symbol, or other graphic used to identify the group using a team name.

(3) “Team name” means a name other than the mortgage banker’s legal name or a properly registered

assumed name typically used by a geographically or administratively distinct group of employees working

for the mortgage banker as a division or team within the larger organization (e.g., the employees of a branch

office).

(b) Compliance with Federal Law. A mortgage banker or sponsored originator that advertises rates, terms,

or conditions must comply with the requirements of Regulation N (12 C.F.R. §1014.1 et seq.) and Regulation

Z (12 C.F.R. §1026.24).

contain:

(1) the mortgage banker’s name and NMLS ID;

(2) the mortgage banker’s website address, if it has a website; and

(3) the sponsored originator’s name and NMLS ID.

(d) Advertising Directly by a Mortgage Banker. A mortgage banker may advertise directly to the public and

is not required to advertise through a sponsored originator. The requirements of subsection (c)(3) of this

section do not apply to an advertisement made directly by a mortgage banker.

(e) Advertising on Social Media Sites. If the mortgage banker or sponsored originator is advertising on a

social media site, the requirements of subsection (c) of this section may be met by prominently displaying

the required information on the home page, profile page, or similar, on such social media site so that the

viewer can quickly discern the information without reviewing various historical content posted by the

mortgage banker or sponsored originator on the social media site.

(f) Use of Team Names and Team Logos. A mortgage banker and its sponsored originators may use team

names and team logos in advertisements if the following requirements are met:

(1) Team names and team logos are permitted for advertising purposes only. A team name or team logo

may not be used to conduct residential mortgage loan origination business. For clarity, a team name or

team logo may not appear on any documentation sent to the mortgage applicant in connection with a

residential mortgage loan or on any documentation in the residential mortgage loan file a mortgage banker

is required to maintain under §57.204(c)(2) of this title (relating to Books and Records).

(2) The mortgage banker’s legal name or an assumed name of the mortgage banker and its NMLS ID

must be used with the team name or team logo, in substantially equivalent prominence, and must be

connected with an explanatory word or phrase that clearly links the two (e.g., “(team name) of (mortgage

banker name and NMLS ID)” or “(team name) powered by (mortgage banker name and NMLS ID”). The

information must be presented in a manner that makes it readily apparent to the viewer what mortgage

banker is making the advertisement. The mortgage banker may not obscure the information by, among

other things, using graphics, shading, or coloration to deemphasize or mask the appearance of the

mortgage banker’s name and NMLS ID. If the advertisement is made on a social media site, the

requirements of this paragraph may be met by prominently displaying the information on the home page,

profile page, or similar, on such social media site so that the viewer can quickly discern the information

without reviewing various historical content posted by the mortgage banker or sponsored originator on the

social media site.

(3) If a team logo is used, it must be used with the team name, unless the team name is contained in

the team logo, and if so, the team logo may be used without the team name.

§57.204 Books and Records

(a) Purpose and Applicability. This section clarifies and establishes requirements related to the books and

records a mortgage banker and its sponsored originators are required to keep under Finance Code

§157.021. Subsection (c) of this section applies to a mortgage banker and its sponsored originators in

connection with the origination of residential mortgage loans. Subsection (d) of this section applies to a

mortgage banker and its sponsored originators in connection with the provision of third-party loan

processing or underwriting services.

(b) Maintenance of Records, Generally. In order to ensure a mortgage banker and its sponsored originators

have all records necessary to facilitate an inspection (including an examination) by SML of the mortgage

banker’s sponsored originators, enable SML to investigate complaints against a mortgage banker or its

sponsored originators, and otherwise ensure compliance with the requirements of Finance Code Chapter

157, and this chapter, a mortgage banker and its sponsored originators must maintain records as

prescribed by this section in connection with the mortgage banker’s origination of residential mortgage loans

or the provision of third-party loan processing or underwriting services by the mortgage banker.

(1) Format. The records required by this section may be maintained using a physical, electronic, or

digitally-imaged recordkeeping system, or a combination thereof. The records must be accurate, complete,

current, legible, and readily accessible and sortable.

(2) Location. A mortgage banker and its sponsored originators must ensure the records required by this

section (or true and correct copies thereof) are maintained at or are otherwise readily accessible from either

the main office of the mortgage banker or the location the mortgage banker has designated in its MU1 filing

under "Books and Records Information" in NMLS. (For purposes of this section "main office" has the

meaning assigned by §57.206 of this title (relating to Office Locations; Remote Work.)

(3) Production of Records; Disciplinary Action. All records required by this section must be maintained

in good order and produced to SML upon request. Failure by a mortgage banker’s sponsored originator to

produce records upon request after a reasonable time for compliance may result in disciplinary action

against the originator, including, but not limited to, suspension or revocation of the originator’s license.

Failure by a mortgage banker to produce records upon request after a reasonable time for compliance in

response to a complaint investigation conducted by SML may be treated as a failure by the mortgage banker

to provide evidence in violation of the requirements of Finance Code §157.0022(b).

(4) Retention Period. All records required by this section must be maintained for 3 years or such longer

period as may be required by other applicable law. If a mortgage banker terminates operations, the

mortgage banker, within 10 days after the date the mortgage banker terminates operations, must provide

SML with written notice of where the records required by this section will be maintained for the required

period. If such records are transferred to another mortgage banker registered with SML, the transferee must

provide SML with written notice within 10 days after the date it receives such records.

(5) Maintenance by the Mortgage Banker. A mortgage banker is required to maintain records on behalf

of the originators it sponsors in connection with work performed by the originator for that mortgage banker.

(6) Conflicting Law. If the requirements of other applicable law governing recordkeeping by the mortgage

banker or its sponsored originators differ from the requirements of this section, such other applicable law

prevails only to the extent this section conflicts with the requirements of this section.

maintain the following items in connection with the origination of residential mortgage loans by the mortgage

banker:

(1) Mortgage Transaction Log. A mortgage transaction log maintained on a current basis (meaning all

entries must be made within 7 days after the date on which the events they relate to occurred, and updated

as the information changes) setting forth, at a minimum (the log may include additional information,

provided, the information is readily sortable as required by subsection (b)(1) of this section):

(A) full name of each mortgage applicant (last name, first name);

(B) application/loan identification number assigned by the mortgage banker;

paragraph;

(D) date of the initial loan application;

(E) address of the subject property (street address, city, state, zip code);

(F) interest rate;

(G) description of the purpose for the loan (e.g., purchase, refinance, construction, home equity,

home improvement, land lot loan, wrap mortgage loan, etc.);

(H) loan product (conventional, FHA, VA, reverse, etc.);

(I) full name of the lender that initially funded or acquired the loan and their NMLS ID, if applicable;

(J) full name of the originator who took the initial loan application and his or her NMLS ID;

(K) closing date;

(L) lien position (e.g., first lien, second lien, or wrap mortgage);

(M) description of the owner's or prospective owner's intended occupancy of the real estate secured

or designed to be secured by the loan (e.g., primary residence (including real estate (land lot) or a dwelling

not suitable for occupancy at the time the loan is consummated but that the owner intends to occupy as

their primary residence after consummation of the loan), secondary residence, or investment property (no

intent to occupy as their residence)); and

(N) description of the current status or disposition of the loan application (e.g., in-process, withdrawn,

closed, or denied);

(2) Residential Mortgage Loan File. For each residential mortgage loan transaction or prospective

residential mortgage loan transaction, a residential mortgage loan file containing, at a minimum:

(A) All Transactions. For all transactions, the following records:

(i) the initial and any final loan application (including any attachments, supplements, or addendum

thereto), signed and dated by each mortgage applicant and the sponsored originator, and any other written

or recorded information used in evaluating the application, as required by Regulation B (12 C.F.R.

§1002.4(c));

(ii) the initial and any revised good faith estimate (Regulation X, 12 C.F.R. §1024.7), integrated

loan estimate disclosure (Regulation Z, 12 C.F.R. §1026.37), or similar, provided to the mortgage applicant;

(iii) the final settlement statement (Regulation X, 12 C.F.R §1024.8), closing statement, or

integrated closing disclosure (Regulation Z, 12 C.F.R. §1026.19(f) and §1026.38);

(iv) the disclosure statement required by Finance Code §157.0021 and §57.200(b) of this title

(relating to Required Disclosures), signed and dated by each mortgage applicant and the sponsored

originator;

(v) if provided to a mortgage applicant or prospective mortgage applicant, the conditional pre-

qualification letter, or similar, as specified by Finance Code §157.02012 and §57.201 of this title (relating to

Conditional Pre-Qualification and Conditional Approval Letters);

(vi) if provided to a mortgage applicant or prospective mortgage applicant, the Conditional

Approval Letter, or similar, as specified by Finance Code §156.105 and §57.201 of this title;

(vii) each item of correspondence, all evidence of any contractual agreement or understanding,

and all notes and memoranda of conversations or meetings with a mortgage applicant or any other party in

connection with the loan application or its ultimate disposition (e.g., fee agreements, rate lock agreements,

or similar documents);

(viii) if the loan is a "home loan" as defined by Finance Code §343.001, the notice of penalties

for making a false or misleading written statement required by Finance Code §343.105, signed at closing

by each mortgage applicant;

(ix) if the transaction is a purchase money or wrap mortgage loan transaction, the real estate

sales contract or real estate purchase agreement for the sale of the residential real estate;

(x) consumer reports or credit reports obtained in connection with the residential mortgage loan

or prospective residential mortgage loan, and if a fee is paid by or imposed on the mortgage applicant for

such consumer report or credit report, invoices and proof of payment for the purchase of the consumer

report or credit report;

(xi) appraisal reports or written valuation reports used to determine the value of the residential

real estate secured or designed to be secured by the loan, and if a fee is paid by or imposed on the mortgage

applicant for such appraisal report or written valuation report, invoices and proof of payment for the appraisal

report or written valuation report;

(xii) invoices and proof of payment for any third-party fees paid by or imposed on the mortgage

applicant;

(xiii) refund checks issued to the mortgage applicant;

(xiv) if applicable, the risk-based pricing notice required by Regulation V (12 C.F.R. §1022.72);

(xv) if applicable, invoices for independent loan processors or underwriters;

(xvi) if the mortgage banker or sponsored originator acts in a dual capacity as the loan originator

and real estate broker, sales agent, or attorney in the transaction, the disclosure of multiple roles in a

consumer real estate transaction, signed and dated by each mortgage applicant, as required by Finance

Code §157.024(a)(10);

(xvii) the initial privacy notice required by Regulation P (12 C.F.R. §1016.4) or the Federal Trade

Commission’s Privacy of Consumer Financial Information rules (16 C.F.R. §313.4);

(xviii) the written authorization to receive electronic documents as required by the E-Sign Act and

Regulation Z (12 C.F.R. §1026.17(a)(1));

(xix) records reflecting compensation paid to employees or independent contractors in

connection with the transaction;

(xx) any other agreements, notices, disclosures, or affidavits required by federal or state law in

connection with the transaction; and

(xxi) any written agreements or other records governing the origination of the residential

mortgage loan or prospective residential mortgage loan;

(B) Lender Transactions. For transactions where the mortgage banker made the loan (lender), the

following records:

(i) the promissory note, loan agreement, or repayment agreement, signed by the borrower

(mortgage applicant);

(ii) the recorded deed of trust, contract, security deed, security instrument, or other lien transfer

document, signed by the borrower (mortgage applicant);

(iii) any verifications of income, employment, or deposits obtained in connection with the loan;

(iv) copies of any title insurance policies with endorsements or title search reports obtained in

connection with the loan, and if a fee is paid by or imposed on the mortgage applicant for such title insurance

policies or title search reports, invoices and proof of payment for the title insurance policy or title search

report; and

(v) if applicable, the flood determination certificate obtained in connection with the loan, and if a

fee is paid by or imposed on the mortgage applicant for such flood certificate, invoices and proof of payment

for the flood determination certificate;

U.S.C. §1601 et seq.) and Regulation Z (12 C.F.R. §1026.1 et seq.), the following records:

(i) the initial Truth-in-Lending statement for home equity line of credit and reverse mortgage

transactions required by Regulation Z (12 C.F.R. §1026.19);

(ii) if the transaction is an adjustable rate mortgage transaction, the adjustable rate mortgage

program disclosures;

(iii) records relating to the mortgage applicant's ability to repay the loan, as required by Regulation

Z (12 C.F.R. §1026.43(c));

(iv) if the mortgage applicant is permitted to shop for a settlement service, the written list of

providers required by Regulation Z (12 C.F.R. §1026.19(e)(1)(vi)(C));

(v) the notice of intent to proceed with the transaction required by Regulation Z (12 C.F.R.

§1026.19(e)(2)(i)(A));

(vi) if applicable, records related to a changed circumstance required by Regulation Z (12 C.F.R.

§1026.19(e)(3)(iv));

(vii) the notice of right to rescission required by Regulation Z (12 C.F.R. §1026.15 or §1026.23);

(viii) for high-cost mortgage loans, the disclosures required by Regulation Z (12 C.F.R.

§1026.32(c));

(ix) for high-cost mortgage loans, the certification of counseling required by Regulation Z (12

C.F.R. §1026.34(a)(5)(i));

(x) for home equity line of credit transactions:

(I) the account-opening disclosure required by Regulation Z (12 C.F.R. §1026.6(a));

(II) the early disclosure statement required by Regulation Z (12 C.F.R. §1026.40(d));

(III) the Home Equity Line of Credit Brochure required by Regulation Z (12 C.F.R.

§1026.40(e)); and

(xi) any other notice or disclosure required by TILA or Regulation Z;

(D) Real Estate Settlement Procedures Act (RESPA). For transactions that are subject to the

requirements of RESPA (12 U.S.C. §2601 et seq.) and Regulation X (12 C.F.R. §1024.1 et seq.), the

following records:

(i) records reflecting delivery of the special information booklet required by Regulation X (12

C.F.R. §1024.6);

(ii) any affiliated business arrangement disclosure statement provided to the mortgage applicant

in accordance with Regulation X (12 C.F.R. §1024.15);