Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 4 - DEPARTMENT OF SAVINGS AND MORTGAGE LENDING › Chapter 78 - WRAP MORTGAGE LOANS › Subchapter D - WRAP LENDER AND SERVICER REQUIREMENTS › Section 78.301 - Fiduciary Duties; Required Accounting

Current through Reg. 49, No. 28; July 12, 2024
(a) Purpose. The purpose of this section is
				  to clarify and establish requirements related to the fiduciary duties owed to a
				  wrap borrower by a person who collects or receives a payment from a wrap
				  borrower under the terms of a wrap mortgage loan, as provided by Finance Code
				  § 159.152.
(b) Non-Delegation
				  of Duties. A wrap lender or other person collecting or receiving a payment from
				  a wrap borrower under the terms of a wrap mortgage loan may not delegate or
				  assign its fiduciary duties owed under Finance Code § 159.152 to another
				  person except as a result of the wrap lender selling, assigning, transferring,
				  or conveying the wrap mortgage loan. Any sale, assignment, transfer, or
				  conveyance by a wrap lender of a wrap mortgage loan is deemed to include an
				  assignment of the fiduciary duties owed by the wrap lender to the wrap borrower
				  under Finance Code § 159.152. A sale, assignment, transfer, or conveyance
				  by a wrap lender of a wrap mortgage loan does not extinguish the assigning wrap
				  lender's fiduciary duties to the wrap borrower in connection with amounts
				  collected or received by the wrap lender from the wrap borrower prior to the
				  effective date of the sale, assignment, transfer, or conveyance of the wrap
				  mortgage loan.
(c) Required
				  Accounting. The wrap lender must, either directly, or through use of a
				  third-party servicer it has contracted with, maintain, on a current basis,
				  separate written accountings for each wrap mortgage loan made by the wrap
				  lender sufficient to account for, track, and retrospectively trace all payments
				  received from the wrap borrower under the terms of the wrap mortgage loan, and
				  all disbursements, transfers, or assignments of such funds, including, but not
				  limited to, disbursements made to a superior lienholder, taxing authority, or
				  insurance company in connection with the residential real estate secured by the
				  wrap mortgage loan. The accounting required by this subsection must be
				  maintained by the wrap lender or its successor-in-interest until the
				  limitations period for the wrap borrower to bring any cause of action against
				  the wrap lender arising from a violation of law in connection with the wrap
				  mortgage loan transaction has lapsed. To the extent the wrap lender utilizes
				  the services of a third-party servicer, a wrap lender must establish and
				  maintain policies and procedures that are reasonably designed to acquire from
				  the third-party servicer any information or supporting documentation necessary
				  or prudent to ensure the wrap lender satisfies the accounting required by this
				  subsection. The accounting required by this subsection may be accomplished
				  through administration of and the retention of records in connection with a
				  trust account as provided by § 78.302 of this title (relating to Trust
				  Account; Maintenance of Funds Held in Trust).