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TX Senate Bill 43


State: Texas
Signed: May 24, 2021

Effective: January 01, 2022
Chapter: 76

Senate Bill 43 adds protections for “wrap mortgage loans,” one of which is that it must be closed by an attorney or title insurance company.
Adds Sections 159.001 – 159.301 to, and amends Sections 156.202, 157.0121, and 180.003 of, the Texas Finance Code.
  1. Defines "wrap mortgage loan" as a residential mortgage loan: (a) made to finance the purchase of residential real estate that will continue to be subject to an unreleased lien that attached to the residential real estate before the loan was made and secures a debt incurred by a person other than the wrap borrower that was not paid off at the time the loan was made; and (b) obligating the wrap borrower to the wrap lender for payment of a debt the principal amount of which includes the outstanding balance of the debt and any remaining amount of the purchase price financed by the wrap lender.
  2. Clarifies that a wrap mortgage loan may only be closed by an attorney or a title company.

According to the bill analysis for Senate Bill 43, “Recent years have seen a spike in the prevalence of a particularly insidious category of mortgage fraud involving wrap financing, in which a seller finances the sale of a residential property that already is subject to an outstanding lien, often without notifying the buyer of the senior lien, or the existing lienholder of the sale. If the seller fails to pay the senior mortgagee, the mortgagee can foreclose on the property, and the buyer, who often lives on the property, would be ousted without ever having missed a payment to the wrap seller. Worse, if the seller never recorded the conveyance, it can be difficult to establish that the buyer has any interest in the property.” Wrap mortgage financing lenders often target military personnel who must move often and quickly and must sell their homes, and other consumers who have difficulty obtaining traditional financing. A few years ago, the San Antonio Express-News ran a special report on wrap financing.

The NNA is reporting the enactment of Senate Bill 43 because Notary Signing Agents should be aware that one of the protections of Senate Bill 43 is that these wrap mortgage loans must be closed by an attorney or title insurance company. Thus, NSAs shouldn’t expect nor accept assignments on these types of loans.

Read Senate Bill 43.