| (a) Generally. These model clauses are the plain language
rendition of contract clauses that have typically been stated in technical
legal terms. Nothing in this regulation prohibits a contract from
including provisions that provide more favorable results for the borrower
than those that would result from the use of a model clause.
(b) Model clauses for a Chapter 342, Subchapter G second
lien home improvement loan contract for use in a transaction that
does not allow for withdrawals or multiple advances.
(1) Identification. The model identification clause
reads:
Attached Graphic
(2) Definitions. The model definitions section reads:
(A) "Owner" means (name of Owner), whose address is
(address of Owner, including county). If Owner and Maker are not the
same person, the word "Owner" includes Maker. "I" or "me" means the
Owner.
(B) "Contractor" means (name of Contractor), whose
address is (address of Contractor, including county) and includes
those to whom the Contractor has assigned or transferred Contractor's
rights and remedies. "You" or "your" means the Contractor.
(C) "Lender" means (name of Lender), whose address
is (address of Lender, including county) and includes those to whom
the Lender has assigned or transferred Lender's rights and remedies.
The Lender's NMLS ID is (NMLS ID of Lender). The loan originator's
name is (name of loan originator with primary responsibility for the
origination). The loan originator's NMLS ID is (NMLS ID of originator).
(D) "Trustee" means (name of Trustee), whose address
is (address of Trustee, including county).
(E) "Property" means the Property at (list address
of the Property), whose legal description is (list legal description
of the Property).
(F) "Work" means the construction project as agreed
to in writing between the Owner and Contractor.
(G) "Completion Date" means (date on which the Work
will be completed).
(H) "Contract" means this Texas Home Improvement Mechanic's
Lien Contract for Improvement and Power of Sale.
(3) Construction of improvements. The model clause
regarding construction of improvements reads: "You agree to furnish
and pay for all labor and material needed to complete the Work within
_____ days from the date of this Contract. The Work will be performed
on the Property in a good and workmanlike manner."
(4) Contract price. The model clause establishing the
contract price reads: "I agree to pay, or cause to be paid, to you,
or to your order, the sum of ___________________ dollars (U.S. $_____________________)
when the Work is completed."
(5) Transfer of lien. The model clause regarding the
transfer of the lien reads: "You transfer to Lender all of your rights
and interests in this Contract."
(6) Completion by contractor, but not lender. The model
clause specifying that the lender is not responsible for completing
the construction reads: "You will complete the Work by the Completion
Date. Lender is not responsible for completing the Work. Lender is
not a guarantor of your performance. You will indemnify and hold Lender
harmless against all claims related to the Work."
(7) Partial lien. The model clause regarding a partial
lien reads: "If you do not complete the Work by the Completion Date
in a good and workmanlike manner, then Lender will have a valid lien
for the contract price, less the amount reasonably necessary to complete
the Work. As an alternative, Lender may choose to complete the Work
and the lien will be valid for the contract price."
(8) Changes and extras. The model clause regarding
changes and extras reads: "All labor or material furnished outside
of this Contract must be agreed upon in writing or it will be considered
as performed under the original Contract and you will receive no extra
money."
(9) Receipts and releases. The model clause regarding
receipts and releases reads: "If I ask, you will give me valid receipts
and releases for the Work from any subcontractor, worker, and supplier."
(10) No work commenced. The model clause specifying
that no work has commenced prior to execution of the contract reads:
"This Contract is executed, acknowledged, and delivered before any
labor has been performed and any material has been furnished for the
Work."
(11) Trustee's duties. The model clause regarding the
trustee's duties reads:
Attached Graphic
(12) Preservation of claims and defenses. In accordance
with the Federal Trade Commission's Holder in Due Course Rule, 16
C.F.R. §433.2, it is an unfair or deceptive act or practice to
take or receive a consumer credit contract in connection with the
sale or lease of goods or services to consumers that does not include
the following notice. The notice regarding the preservation of claims
and defenses reads: "NOTICE. ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT
IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT
AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR
WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT
EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."
(13) Owner and contractor responsible. Texas Property
Code, §41.007 specifies that a home improvement contract must
contain a notice specifying that the owner and the contractor are
responsible for meeting the terms of the contract. This notice must
appear either in this contract or in the residential construction
contract. The Property Code requires that the notice must be conspicuously
printed, stamped, or typed in a font size equal to at least 10-point
boldfaced type or computer equivalent and appear next to the owner's
signature line on the contract. The wording of the notice is specified
by the Property Code, which uses the pronouns "you" and "your" to
refer to the owner. Licensees are encouraged to explain in the contract,
prior to the notice, that "you" and "your" refer to the owner in this
notice. The parties' signatures must be notarized. The licensee may
use a different notary acknowledgment without having to submit the
contract to the agency as a non-standard contract. The notice specifying
that the owner and the contractor are responsible for meeting the
terms of the contract, the model explanatory clause regarding the
use of "you" and "your" in the notice, and the signature blanks read:
Attached Graphic
(14) Assignment. The parties may use a different assignment
or a separate document for the assignment without having to submit
the contract to the agency as a non-standard contract. The model assignment
in which the contractor transfers and assigns the lien to the licensee
reads:
Attached Graphic
(15) Notice of confidentiality rights disclosure. The
security document must incorporate a "Notice of Confidentiality Rights"
disclosure. The disclosure or notice must:
(A) appear on the top of the first page of the security
document;
(B) be in at least 12-point boldfaced type or 12-point
uppercase lettering; and
(C) be substantially similar to the required notice
or disclosure under Texas Property Code, §11.008(b). The model
notice of confidentiality rights reads: "NOTICE OF CONFIDENTIALITY
RIGHTS: I MAY REMOVE OR STRIKE MY SOCIAL SECURITY NUMBER OR MY DRIVER'S
LICENSE NUMBER FROM THIS DOCUMENT BEFORE IT IS FILED IN THE PUBLIC
RECORDS."
(c) Model clauses for a Chapter 342, Subchapter G second
lien home improvement loan promissory note for use in a transaction
that does not allow for withdrawals or multiple advances.
(1) Identification.
(A) The model identification clause lists the account
or contract number, the name and address of the lender, the date of
the note, the name and address of the borrower, the property address,
the principal amount, and the terms of payment. It also lists the
following items that must be included on the promissory note under
Regulation Z, 12 C.F.R. §1026.36(g):
(i) the lender's Nationwide Mortgage Licensing System
and Registry identification number (labeled "Creditor/Lender NMLS
ID");
(ii) the name of the individual residential mortgage
loan originator with primary responsibility for the origination (labeled
"Loan Originator"); and
(iii) the originator's Nationwide Mortgage Licensing
System and Registry identification number (labeled "Loan Originator
NMLS ID").
(B) The model identification clause reads:
Attached Graphic
(2) Security for payment. The model clause relating
to the security for payment reads: "Liens created in the Contract
secure this Note. You will have a security interest in the following
described property: (property description)"
(3) Definitions. The model definitions section reads:
(A) "Owner" means (name of Owner), whose address is
(address of Owner, including county). If Owner and Maker are not the
same person, the word "Owner" includes Maker.
Cont'd... |
