Section 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) 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(C) failing in the initial communication with the consumer to make a firm offer of credit as provided by the FCRA (12 U.S.C. §1681a(l) and §1681b(c)); or(10) 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 Chapters 156, 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 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.);(C) Regulation N (12 C.F.R. § 1014.1 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 159 and Chapter 59 of this title; and(J) 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 benefits 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;(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;(7) 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; or(8) 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 or registration in an inactive status.(c) Related Transactions. A mortgage company engages in fraudulent and dishonest dealings for purposes 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;(C) the mortgage company or sponsored originator knew or should have known of the fraudulent, 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).7 Tex. Admin. Code § 56.202
Adopted by Texas Register, Volume 49, Number 46, November 15, 2024, TexReg 9210, eff. 11/23/2024