An equity loan must not require the owner or the owner's spouse
to pay, in addition to any interest or any bona fide discount points
used to buy down the interest rate, any fees to any person that are
necessary to originate, evaluate, maintain, record, insure, or service
the extension of credit that exceed, in the aggregate, two percent
of the original principal amount of the extension of credit, excluding
fees for an appraisal performed by a third party appraiser, a property
survey performed by a state registered or licensed surveyor, a state
base premium for a mortgagee policy of title insurance with endorsements
established in accordance with state law, or a title examination report
if its cost is less than the state base premium for a mortgagee policy
of title insurance without endorsements established in accordance
with state law.
(1) Optional Charges. Charges paid by an owner or an
owner's spouse at their sole discretion are not fees subject to the
two percent limitation. Charges that are not imposed or required by
the lender, but that are optional, are not fees subject to the two
percent limitation. The use of the word "require" in Section 50(a)(6)(E)
means that optional charges are not fees subject to the two percent
limitation.
(2) Optional Insurance. Insurance coverage premiums
paid by an owner or an owner's spouse that are at their sole discretion
are not fees subject to the two percent limitation. Examples of these
charges may include credit life and credit accident and health insurance
that are voluntarily purchased by the owner or the owner's spouse.
(3) Charges that are Interest. Charges an owner or
an owner's spouse is required to pay that constitute interest under §153.1(12)
of this title (relating to Definitions) are not fees subject to the
two percent limitation.
(A) Per diem interest is interest and is not subject
to the two percent limitation.
(B) Bona fide discount points are interest and are
not subject to the two percent limitation. Discount points are bona
fide if the discount points truly correspond to a reduced interest
rate and are not necessary to originate, evaluate, maintain, record,
insure, or service the equity loan. A lender may rely on an established
system of verifiable procedures to evidence that the discount points
it offers are bona fide. This system may include documentation of
options that the owner is offered in the course of negotiation, including
a contract rate without discount points and a lower contract rate
based on discount points.
(4) Charges that are not Interest. Charges an owner
or an owner's spouse is required to pay that are not interest under §153.1(12)
of this title are fees subject to the two percent limitation.
(5) Charges Absorbed by Lender. Charges a lender absorbs,
and does not charge an owner or an owner's spouse that the owner or
owner's spouse might otherwise be required to pay are unrestricted
and not fees subject to the two percent limitation.
(6) Charges to Originate. Charges an owner or an owner's
spouse is required to pay to originate an equity loan that are not
interest under §153.1(12) of this title are fees subject to the
two percent limitation.
(7) Charges Paid to Third Parties. Charges an owner
or an owner's spouse is required to pay to third parties for separate
and additional consideration for activities relating to originating
an equity loan are fees subject to the two percent limitation. For
example, these charges include attorneys' fees for document preparation
to the extent authorized by applicable law. Charges that third parties
absorb, and do not charge an owner or an owner's spouse that the owner
or owner's spouse might otherwise be required to pay are unrestricted
and not fees subject to the two percent limitation.
(8) Charges to Evaluate. Charges an owner or an owner's
spouse is required to pay to evaluate the credit decision for an equity
loan, that are not interest under §153.1(12) of this title, are
fees subject to the two percent limitation. Examples of these charges
include fees collected to cover the expenses of a credit report, flood
zone determination, tax certificate, inspection, or appraisal management
services.
(9) Charges to Maintain. Charges paid by an owner or
an owner's spouse to maintain an equity loan that are not interest
under §153.1(12) of this title are fees subject to the two percent
limitation if the charges are paid at the inception of the loan, or
if the charges are customarily paid at the inception of an equity
loan but are deferred for later payment after closing.
(10) Charges to Record. Charges an owner or an owner's
spouse is required to pay for the purpose of recording equity loan
documents in the official public record by public officials are fees
subject to the two percent limitation.
(11) Charges to Insure an Equity Loan. Premiums an
owner or an owner's spouse is required to pay to insure an equity
loan are fees subject to the two percent limitation. Examples of these
charges include title insurance and mortgage insurance protection,
unless the premiums are otherwise excluded under paragraph (15) of
this section.
(12) Charges to Service. Charges paid by an owner or
an owner's spouse for a party to service an equity loan that are not
interest under §153.1(12) of this title are fees subject to the
two percent limitation if the charges are paid at the inception of
the loan, or if the charges are customarily paid at the inception
of an equity loan but are deferred for later payment after closing.
(13) Exclusion for Appraisal Fee. A fee for an appraisal
performed by a third party appraiser is not a fee subject to the two
percent limitation. The appraisal must be performed by a person who
is not an employee of the lender. The excludable appraisal fee is
limited to the amount paid to the appraiser for the completion of
the appraisal, and does not include an appraisal management services
fee described by Texas Occupations Code, §1104.158(a)(2).
(14) Exclusion for Property Survey Fee. A fee for a
property survey performed by a state registered or licensed surveyor
is not a fee subject to the two percent limitation. The property survey
must be performed by a person who is licensed or registered under
Texas Occupations Code, Chapter 1071.
(15) Exclusion for Title Insurance Premium. A state
base premium for a mortgagee policy of title insurance with endorsements
established in accordance with state law is not a fee subject to the
two percent limitation.
(A) The excludable premium is limited to the applicable
basic premium rate for title insurance published by the Texas Department
of Insurance, plus authorized premiums for applicable endorsements.
(B) Any mortgagee policy for the equity loan must be
provided by a company authorized to do business in this state.
(C) If additional premiums for endorsements are charged,
the endorsements must be applicable to the mortgagee policy for the
equity loan. Rules adopted by the Texas Department of Insurance govern
the applicability of endorsements and the authorized amount of the
premium for each endorsement.
(16) Exclusion for Title Examination Report Fee. A
fee for a title examination report is not a fee subject to the two
percent limitation if its cost is less than the state base premium
for a mortgagee policy of title insurance without endorsements established
in accordance with state law.
(A) The excludable fee must be less than the applicable
basic premium rate for title insurance published by the Texas Department
of Insurance, not including any additional premiums for endorsements.
(B) The fee for a title examination report may not
be excluded from the two percent limitation if the equity loan is
covered by a mortgagee policy of title insurance.
(C) The fee must comply with applicable law. If the
equity loan is a secondary mortgage loan under Texas Finance Code,
Chapter 342, then the fee is limited to a reasonable fee for a title
examination and preparation of an abstract of title by an attorney
who is not an employee of the lender, or a title company or property
search company authorized to do business in this state, as provided
by Texas Finance Code, §342.308(a)(1).
(17) Secondary Mortgage Loans. A lender making an equity
loan that is a secondary mortgage loan under Texas Finance Code, Chapter
342 may charge only those fees permitted in Texas Finance Code, §§342.307,
342.308, and 342.502. A lender must comply with the provisions of
Texas Finance Code, Chapter 342 and the constitutional restrictions
on fees in connection with a secondary mortgage loan made under Texas
Finance Code, Chapter 342.
(18) Escrow Funds. A lender may provide escrow services
for an equity loan. Because funds tendered by an owner or an owner's
spouse into an escrow account remain the property of the owner or
the owner's spouse those funds are not fees subject to the two percent
limitation. Examples of escrow funds include account funds collected
to pay taxes, insurance premiums, maintenance fees, or homeowner's
association assessments. A lender must not contract for a right of
offset against escrow funds pursuant to Cont'd... |