Industry News: Texas Regulations for Lenders

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BM&G Managing Partner Thomas E. Black Jr. recently sat down with Housing Wire for an executive profile piece about doing business in Texas and what distinguishes the firm from others. Here is the first Q&A from that article:

HousingWire: What are some of the state-specific regulations that require lenders to do business differently in Texas?

Tom Black: From an industry perspective, there is one distinct area that sets Texas apart from the other states in the country. Section 83.001(a) of the Government Code provides “a person, other than a person described in Subsection (b), may not charge or receive, either directly or indirectly, any compensation for all or any part of the preparation of a legal instrument affecting title to real property, including a deed, deed of trust, note, mortgage, and transfer or release of lien.”

As to the “directly or indirectly” charging or receiving any compensation prohibition contained in Section 83.001 (a), the leading case on point is Hexter Title & Abstract Co., Inc. v. Grievance Committee, Fifth Congressional District, State Bar of Texas, 179 S.W. 2d 946 (Tex.1944). In the Hexter case, the Supreme Court of Texas was reviewing an order enjoining the title company from practicing law by preparing deeds, notes, deeds of trust and releases. “Receiving compensation” was an element of the unauthorized practice of law statute in effect at that time. The Title Company’s argument was that no separate charges were made for the services. The Title Company held itself out as furnishing legal services without charge.

In rejecting such argument, the Supreme Court stated, “The furnishing of such legal services constitutes a part of the cost of obtaining the business transacted by the defendant.  Evidently, it pays or the practice would be discontinued. It constitutes a part of the total services for which the customers pay. There is, therefore, “a consideration reward, or pecuniary benefit” flowing to the defendant for legal services so rendered.”

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