On May 24, 2021, Texas Senate Bill (SB) 43 was signed into law. The bill enacts Chapter 159 of the Texas Finance Code, creating rules for purchase loans using wrap mortgage loan financing. A “wrap around” transaction leaves an unreleased lien on the property being purchased. The borrower obtains a “wrap mortgage loan” that finances the purchase of the residential real estate and secures the prior unreleased lien.
Subchapter C. of Chapter 159 creates a disclosure requirement for wrap lenders to provide a disclosure regarding the conveyance of a residential property encumbered by a lien (Texas Fin. Code § 159.101). A wrap lender is required to provide the disclosure to the wrap borrower on or before the seventh day prior to the wrap mortgage agreement being signed. A wrap borrower may rescind a wrap mortgage loan agreement and related purchase agreement up to seven days after the receipt of the disclosure statement, which must be signed and dated. Also, if an agreement is negotiated in a language other than English, the wrap lender must provide a copy of the written disclosure in that language (Texas Fin. Code § 159.101).
If the disclosure is provided after the closing of the wrap mortgage loan, and before a wrap borrower provides a notice of rescission, the wrap borrower has twenty-one days after receipt of the disclosure to rescind the mortgage loan agreement and purchase agreement.
Texas SB 43, which becomes effective on January 1, 2022, directs the Texas Finance Commissioner to adopt a model disclosure statement that meets all applicable requirements. DocMagic will provide the required wrap mortgage disclosure, following the model form requirements, as of the effective date.
