Section 59.006: Licensing Requirements for Mortgage Brokers in Texas

Section 59.006 of the Texas Finance Code is a crucial provision outlining the licensing requirements for individuals and entities operating as mortgage brokers within the state. This section is a cornerstone of the Texas SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act), designed to protect consumers and ensure responsible lending practices within the mortgage industry.

At its core, Section 59.006 mandates that anyone acting as a mortgage broker in Texas must obtain and maintain a license from the Texas Department of Savings and Mortgage Lending (TDSML). The term “mortgage broker” is broadly defined to include individuals or entities who, for compensation or gain, solicit, negotiate, or offer to negotiate mortgage loans; or who take a residential mortgage loan application.

The licensing requirement isn’t merely a formality. Applicants must meet specific qualifications to be deemed eligible. These include:

• Background Checks: Extensive criminal background checks are conducted to ensure applicants possess the integrity and trustworthiness required to handle consumers’ sensitive financial information.
• Financial Responsibility: Applicants must demonstrate financial responsibility, typically through a credit report review. This helps ensure stability and reduces the risk of fraudulent activities.
• Education and Testing: Completing pre-licensing education courses and passing a national mortgage licensing exam are mandatory. This ensures brokers possess the necessary knowledge of mortgage laws, regulations, and ethical practices. Continuing education is also required to maintain the license.
• Surety Bond: Obtaining a surety bond provides a level of financial protection for consumers in case the broker engages in misconduct or violates applicable laws.

Section 59.006 also details exemptions from the licensing requirement. These exemptions are typically granted to institutions already heavily regulated, such as banks, credit unions, and their subsidiaries. Employees of these institutions are usually exempt when acting within the scope of their employment. However, these employees may still need to register with the Nationwide Mortgage Licensing System and Registry (NMLS).

Furthermore, the section outlines the application process, fees, and renewal procedures associated with mortgage broker licensing. It also empowers the TDSML to investigate complaints against licensees and take disciplinary actions, which can range from fines and license suspension to revocation, for violations of the Finance Code or related regulations.

The intent of Section 59.006 is to create a more transparent and accountable mortgage industry in Texas. By requiring mortgage brokers to be licensed and regulated, the law aims to reduce the risk of predatory lending practices, ensure that consumers receive accurate and unbiased information, and promote fair and ethical dealings in mortgage transactions. Consumers can verify if a mortgage broker is properly licensed through the NMLS Consumer Access website, providing an additional layer of protection.

Compliance with Section 59.006 is crucial for anyone engaging in mortgage brokering activities in Texas. Failure to obtain and maintain a valid license can result in significant penalties, including fines, legal action, and the inability to conduct business legally.