Texas Adopts New Rules Governing Mortgage Companies and MLOs

The Texas Department of Savings and Mortgage Lending (SML) recently adopted new comprehensive rules governing mortgage loan companies, mortgage bankers, individual residential mortgage loan originators, and mortgage servicers.  The text of the final rules may be found here.

Notably, the adopted rules:

• Clarify that an MLO may be sponsored by more than one mortgage company or mortgage banker, so long as the originator complies with a number of requirements that affect the application, disclosures, and representations;
• Remove the requirement that the disclosure required by Finance Code §156.004(a) or §157.0021(a) be signed by the MLO and the applicant;
• When using a trigger lead, makes failing to make a number of specific disclosures in the initial communication with the consumer, among other things, a fraudulent, misleading, or deceptive practice;
• Requires that the contact information for the Qualified Individual for a mortgage company match the principal address of the mortgage company in NMLS;
• Establishes additional data points for the mortgage transaction log a mortgage company is required to maintain; and
• Requires a mortgage company to maintain books and records concerning home equity line of credit transactions and home equity loans, and requires a mortgage company to maintain a loan processing and underwriting log to track loan processing and underwriting services.

The adopted rules also establish requirements for mortgage companies (including mortgage bankers and mortgage servicers) to report certain information to SML when the mortgage company experiences a “security event” or a “catastrophic event.”  The report is required to include a detailed description of the nature and circumstances of the incident; the number of Texas residents affected or potentially affected by the reportable incident; the measures taken by the mortgage company to resolve or address the reportable incident; the measures the mortgage company plans to take to resolve or address the reportable incident; and the point of contact designated by the mortgage company for inquiries by SML about the reportable incident.

The majority of the rules became effective November 23, 2024.  Certain rules affecting the Texas Residential Mortgage Loan Company Licensing and Registration Act, the Mortgage Banker Registration and Residential Mortgage Loan Originator Act, and the Residential Mortgage Loan Servicer Registration Act will become effective on January 1, 2026.