(a) Applicability. The fee limitations contained in
this section are applicable to a residential property tax loan described
by §89.102(10) of this title (relating to Definitions).
(b) Closing costs for which fees may be charged, contracted
for, or received.
(1) Scope of closing costs. For purposes of this section,
the term "closing costs" includes costs incurred by a property tax
lender from the time of application through the time of closing.
(2) Examples of closing costs. The following is a non-comprehensive
list of examples of closing costs for which a property tax lender
may charge, contract for, or receive fees in connection with a property
tax loan. Other law may limit the ability to charge these and other
fees. Examples of some allowable fees for closing costs include the
following:
(A) an application fee;
(B) an appraisal or inspection fee;
(C) a title examination fee;
(D) a property survey fee;
(E) a fee for flood and plat determinations;
(F) a document preparation fee;
(G) a closing or escrow fee;
(H) a fee for a tax certificate or tax payoff determination;
(I) a loan processing fee;
(J) an underwriting fee;
(K) a fee for obtaining credit reports;
(L) a fee for courier and delivery services.
(c) Total maximum fees for closing costs.
(1) Maximum fees include funds received by third parties
or retained by property tax lender. The maximum fees provided for
by this section encompass fees related to closing costs, whether the
charge is paid by a property owner directly to a third party, paid
to a third party through a property tax lender, or paid by a property
owner directly to and retained by a property tax lender. A property
tax lender may absorb any closing costs and may pay third parties
out of the total compensation paid to it by a property owner.
(2) Maximum fee limits for closing costs. A property
owner may not be charged, directly or indirectly, by a property tax
lender an amount related to closing costs in excess of the amounts
authorized by this section. A property tax lender may not directly
or indirectly charge, contract for, or receive any amount related
to closing costs from a property owner in excess of the amounts authorized
by this section.
(3) General maximum fee limit. The general maximum
fee for closing costs is $900.
(4) Cost for additional parcels of real property. If
a property tax loan includes the payment of taxes for more than one
parcel of real property, then the property tax lender may charge up
to $100 for each additional parcel of property, in addition to the
general maximum fee limit described in paragraph (3) of this subsection.
(5) Cost for preparing documents to address title defect.
If one or more documents must be prepared in order to address a defect
in title on the real property subject to the property tax loan, then
the property tax lender may charge a reasonable fee for costs directly
incurred in preparing, executing, and recording any necessary documents,
in addition to the general maximum fee limit described in paragraph
(3) of this subsection. The fee for preparing documents is limited
to recording costs paid to a governmental entity (or a private entity
designated by a governmental entity for electronic recording) and
reasonable attorney's fees paid to a person who is not an employee
of the property tax lender. In order for the fee for these documents
to be authorized, any documents must comply with all applicable laws,
including recording requirements. In particular, any affidavit of
heirship must comply with the substantive and procedural requirements
of Texas Estates Code, Chapter 203, and must be recorded in the deed
records of a county as provided in Texas Estates Code, §203.001(a)(2).
For attorney's fees, the property tax lender must provide a statement
to the property owner describing the nature of the title defect and
the work performed by the attorney. The fee for preparing documents
is not authorized under this paragraph if the fee includes any of
the following:
(A) recording costs that are not paid to a governmental
entity or a private entity designated by a governmental entity for
electronic recording;
(B) attorney's fees that are not reasonable;
(C) costs that are not necessary in order to address
a defect in title on the real property; or
(D) costs that are not substantiated by receipts or
invoices that are maintained under §89.207(3)(A)(ix) of this
title (relating to Files and Records Required).
(6) Reasonable closing costs. The maximum fees contained
in paragraphs (3), (4), and (5) of this subsection constitute "reasonable
closing costs" under Texas Tax Code, §32.06.
(d) Discount points. Legitimate discount points are
prepaid interest and are not subject to the general maximum fee limit
described by subsection (c) of this section.
(1) Discount points are legitimate if:
(A) the discount points truly correspond to a reduced
interest rate;
(B) the discount points are not necessary to originate
the loan; and
(C) before closing, the property tax lender provides
the property owner with a written proposal describing the options
offered to the property owner, including all of the following:
(i) an offer of a property tax loan that includes a
contract rate without discount points and a corresponding annual percentage
rate, calculated in accordance with Regulation Z, 12 C.F.R. §1026.22,
and §89.502(2) of this title (relating to Definitions);
(ii) an offer of a property tax loan that includes
a lower contract rate based on discount points and a corresponding
annual percentage rate, calculated in accordance with Regulation Z,
12 C.F.R. §1026.22, and §89.502(2) of this title;
(iii) the difference between the contract rate without
discount points and the lower contract rate, expressed as a percentage
or as a number of points;
(iv) the cost of the discount points expressed as a
dollar amount;
(v) the percentage amount equal to the cost of the
discount points divided by the principal balance of the loan; and
(vi) a statement that discount points are voluntary
and not required to be paid in order to obtain the loan.
(2) If a property tax lender directly or indirectly
charges, contracts for, or receives a discount point or other origination
fee at closing that is not a legitimate discount point under paragraph
(1) of this subsection, then the point or fee is subject to the maximum
fee limit described by subsection (c) of this section. A property
tax lender may not use the term "discount point" to describe a fee
other than a legitimate discount point.
(3) To determine whether a property tax loan exceeds
the 18% maximum effective rate of interest described in Texas Tax
Code, §32.06(e), legitimate discount points must be included
in the calculation of the effective rate. Upon prepayment in full,
a property tax lender must spread legitimate discount points in accordance
with Texas Finance Code, §302.101.
(4) All legitimate discount points must be paid by
the property owner by cash, check, or electronic funds transfer before
or at closing of a property tax loan. Discount points may not be included
in the funds advanced described by Texas Tax Code, §32.06(e),
or in the principal balance upon which interest is calculated.
(5) A property tax lender may not finance any discount
points through a separate promissory note or contract, if the note
or contract is payable to the property tax lender or to an affiliated
business of the property tax lender.
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Source Note: The provisions of this §89.601 adopted to be effective January 3, 2008, 32 TexReg 9949; amended to be effective March 15, 2015, 40 TexReg 1068; amended to be effective July 9, 2015, 40 TexReg 4347; amended to be effective November 9, 2017, 42 TexReg 6131 |