March 31, 2023

In This Issue:

88th Texas Legislature: AG Files Lawsuit Against Covenant Clearinghouse and Other Developments in Private Transfer Fee Discussions, Hearing on NTRAPS Bill, and More
Title Industry Explainer: New Opinion from Texas Attorney General re: Corporate Entities Serving as Substitute Trustee for Purposes of Conducting Mortgage Foreclosure Sales
FedNow Payment Solution to Launch in July
CFPB Independent Funding Constitutional, Second Circuit Rules

88th Texas Legislature: AG Files Lawsuit Against Covenant Clearinghouse and Other Developments in Private Transfer Fee Discussions, Hearing on NTRAPS Bill, and More

TLTA | March 29, 2023
The Texas House is scheduled to hear the House's version of the state budget for the upcoming biennium (HB 1) on the House floor next Thursday. The Senate Finance Committee adopted the Senate's version of the budget on Monday of this week.

80 days of the 140-day legislative session have passed, and legislative activity in the state Capitol percolates around the clock. This is considered the mid stretch of the legislative session, with the final, hard push to the session's conclusion ramping up in the weeks following Easter.

There are 58 days remaining in the Texas Legislature's 88th Session.

Private Transfer Fee Developments – AG Files Lawsuit Against Covenant Clearinghouse

Two recent developments are impacting legislative discussions regarding statutory enhancement of Private Transfer Fee prohibitions. Last week, the Attorney General filed a lawsuit against Covenant Clearinghouse. Additionally, in another related lawsuit filed by Highland Homes against Covenant Clearinghouse, a summary judgement was handed down in favor of Highland Homes. See the two cases here:

Texas AG Files Petition Against Covenant Clearinghouse
Motion of Summary Judgement in Highland Homes Case

Out of deference to the suit filed by the Attorney General and other similar pending litigation, TLTA is pausing progress on the private transfer fee bill that was part of our affirmative agenda in order to closely monitor the status of these legal proceedings and evaluate what impact they might have on the current statute.

Update on NTRAPS Bill (Right-to-List Agreements)

House Bill 4126, which would codify right-to-list agreements (or Non-Title Recording Agreements for Personal Services (NTRAPS)), was heard in committee Wednesday.

Some background on this issue: Since 2018 real estate brokerage firms have been offering homeowners as little as $300 in exchange for signing decades-long listing agreements. These NTRAPS agreements are filed in property records, which can produce unreasonable restraints on future ability to sell or refinance property due to unwarranted transactional costs -- a system contrary to our industry's continued support for certainty of landownership, and the reason why ALTA and TLTA have been so vocal on this bill.

The agreements that would be codified if HB 4126 was passed are harmful to consumers in many ways, including the following:

Creation of unreasonably long contractual obligations
Cost of cancellation or non-compliance 5, 10 or 15 years later is 3% of property value
Penalties significantly greater than upfront payment
Binding of future successors (who were not a part of the original agreement)

House Bill 4126 is outlier legislation that runs counter to bills in over 15 other states seeking to ban or limit the use of long-term listing agreements.

Former TLTA President Dawn Moore testified at yesterday's hearing on behalf of our industry and Texas consumers. Also providing testimony and national perspective on this issue was Elizabeth Blosser, ALTA's Vice President of Government Affairs. We appreciate our advocates who travelled to Austin to provide testimony about our strong concerns with this bill.

Additional development on this issue worth noting: North Carolina is now the fifth state to sue brokerage firm over right-to-list agreements.

TLTA's Affirmative Legislative Agenda: Bills We're Working to Pass

TLTA's advocacy team is supporting passage of the following bills during the 88th Legislative Session. These affirmative legislative agenda items were approved by TLTA's Board of Directors as recommended by our Legislative Committee, which is chaired by Steve Streiff. These statutory changes would improve real estate transactions statewide:

Trust as Grantee Clarification
SB 801 (Sen. Hughes) | HB 4281 (Rep. Longoria)
Review TLTA's One-Pager
Status: Passed by Texas Senate, Referred to House B&I Committee

Remote Ink Notarization
SB 1780 (Sen. Parker) | HB 5004 (Rep. Capriglione)
Review TLTA's One-Pager
Status: Referred to Senate Jurisprudence Committee, Referred to House Judiciary and Civil Jurisprudence Committee

TLTA is Actively Working on These Bills That Could Impact Our industry

While we are monitoring more than 100 bills this session that could impact our industry or the state's real estate marketplace (see Other Bills TLTA Is Monitoring blurb below), some of the bills on that list require active engagement by our advocacy team. Review list of bills TLTA is working on that could impact our industry.

We are working with the bill authors and other stakeholders to address concerns and seek improvements to these bills to avoid unintended consequences and preserve our daily functions as title agents and underwriters.

Other Bills TLTA Is Monitoring

TLTA's legislative team reviews all bills filed during the session and monitors those that might impact our industry or the state's real estate marketplace. If these bills begin to move through the process and TLTA takes official positions on them, we’ll provide more detailed information about our stance and how they might affect you and your business.

Review Current Bills to Watch List »

Questions About TLTA's Legislative Process?

TLTA's Legislative Committee, Local Legislative Liaisons, our industry's grassroots network and the TLTA PAC Board of Governors are all part of TLTA's team of engaged legislative advocates.

Learn More About TLTA's Legislative Process and How You Can Get Involved »

Title Industry Explainer: New Opinion from Texas Attorney General re: Corporate Entities Serving as Substitute Trustees for Purposes of Conducting Mortgage Foreclosure Sales

Leslie Johnson, TLTA Judiciary Committee Chair | March 29, 2023
On Feb. 6, 2023, Texas Attorney General Ken Paxton issued Attorney General Opinion No. KP-0424, addressing the question of whether an entity – as opposed to a natural person – can serve as a substitute trustee and conduct a non-judicial foreclosure sale under Texas Property Code Chapter 51. The Opinion noted that while Chapter 51 does not define “person,” entities are accepted as mortgagees and mortgage servicers, and the Code Construction Act (part of the Texas Government Code) includes legal entities in its definition of “person.” The Opinion also reviewed two federal cases which held that an artificial person may “serve as Trustee or Substitute Trustee.” In re AMRCO, Inc., 496 B.R. 442, 445 (W.D. Tex. 2013); see also Pate v. Zientz, No. 4-09-CV-643, 2011 WL 1576943, at *5 (E.D. Tex. Mar. 9, 2011). Based on this authority, the Attorney General determined that “a court would likely conclude that a corporate entity is a ‘person’ and thus may serve as a substitute trustee for purposes of conducting a mortgage foreclosure sale under Property Code chapter 51.”

If relied upon, the Opinion gives support to foreclosure law firms and other entities to serve as substitute trustees in deed of trust foreclosures. Instead of including a list of individuals affiliated with the foreclosure firm that could serve as substitute trustee and circling the name of the individual that actually conducts the foreclosure, the foreclosure firm could simply identify the firm as the substitute trustee. Thus, any authorized agent of the firm could conduct the foreclosure and sign the substitute trustee’s deed and supporting affidavit without concern for which individual was appointed as substitute trustee. Such practice could also decrease the frequency of foreclosure errors caused by a discrepancy between the individual originally appointed as substitute trustee and the individual that conducted the foreclosure and signed the substitute trustee’s deed.

However, an Attorney General Opinion is not the equivalent of a Texas Supreme Court or appellate court opinion. It does not create new provisions in the law or correct unintended, undesirable effects of the law. Rather, it is office of the Attorney General’s written interpretation of existing law.

FedNow Payment Solution to Launch in July

ALTA | March 23, 2023
The first week of April, the Federal Reserve will begin the formal certification of participants for launch of the service. Early adopters will complete a customer testing and certification program, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system.

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CFPB Independent Funding Constitutional, Second Circuit Rules

Bloomberg Law | March 23, 2023
The Consumer Financial Protection Bureau’s independent funding through the Federal Reserve is constitutional, the Second Circuit ruled ahead of a US Supreme Court review on the issue.

The unanimous Thursday ruling from a three-judge panel of the US Court of Appeals for the Second Circuit stems from a New York debt collection law firm’s attempt to escape the CFPB’s 2017 civil subpoena. A lower court ruled in the CFPB’s favor in August 2020.

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