Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 5 - OFFICE OF CONSUMER CREDIT COMMISSIONER › Chapter 90 - CHAPTER 342, PLAIN LANGUAGE CONTRACT PROVISIONS › Subchapter F - SECOND LIEN HOME IMPROVEMENT CONTRACTS (SUBCHAPTER G) › Section 90.603 - Model Clauses

Current through Reg. 49, No. 28; July 12, 2024
(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:
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					 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, §
											RSA
				  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, §
												RSA
				  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."