H.L. Mencken famously said, “For every complex problem there is an answer that is neat, simple, and wrong.” A wise politician, whose name evades me, paraphrased the quote as, “For every problem there is a solution that is simple, easy to implement, inexpensive, and wrong.” SB 1994 is a wonderful example of such an erroneous solution, although I’m not too sure about the “inexpensive” part.
Just to be blunt, with SB 1994, Senators Zaffirini, Rodríguez, and Watson have only one purpose. They intend to make it illegal to wrap mortgages. Although they don’t state this purpose on the description in Zaffirini’s press release, the caption of the billed filled with the Senate states clearly, “Relating to the financing of residential real estate purchases by means of a wrap mortgage loan; creating an offense.” The press release obfuscates a little:
SB 1994 (Zaffirini) provides that a wrap loan is void and unenforceable unless it is made with the prior, written consent of all existing lienholders and is closed at a title company’s office. This provision is intended to eliminate wrap lenders’ incentive to hide transactions from the original lienholder, who may have a due on sale clause. SB 1994 also creates a fiduciary obligation and constructive trust for all payments a new owner makes to a wrap lender, ensuring these payments are used for their intended purpose. Finally, SB 1994 gives a homeowner several remedies if a wrap lender violates the law, including the remedies in the Texas Deceptive Trade Practices Act.
If you only read the press release, you might think they simply want to make wrapping impossible, so I suggest you read the full bill. There are many scary provisions in this one.Hermann says please like and share!