by Ryan Bourgeois, Esq.
BDF Law Group
USFN Member (AZ, CA, CO, GA, NV, TX)

Texas Finance Code Sec. 342.106 was passed in 2011 and provides rules for provision of mortgage payoff statements, including when requested by a title company. Written requests for the payoff statement must include the name of the mortgagor, property address and the proposed closing date. Upon receipt of the request, the lender must provide a payoff quote within seven days that is valid through the proposed closing date It section also requires servicers to deliver any amended quotes to the title company at least two business days before closing, otherwise, the additional amounts could become unsecured or subordinate to a new mortgage. 

The statute requires the Texas Finance Commission to adopt rules along with a payoff statement form for mortgage companies to use when they receive requests for payoff statements from a title company. The Finance Commission is required to review its rules every four years. During its regular review this year, the Commission initially only proposed formatting changes to the payoff form. However, during the comment period, the Texas Land Title Association (TLTA) requested that the payoff statement include additional information in order to confirm the loan servicer has correctly identified the loan provided for in the payoff statement. Specifically, TLTA requested that payoff statement include the loan number and if not available, the original principal balance. The Finance Commission agreed with these suggestions and issued a final rule under 7 TAC Chapter 155, requiring these changes. 

The changes that provide for the loan number to be included in the payoff statement have caused concern on the part of many parties. Due to privacy concerns, many servicers now mask the full loan number on many documents, only providing the last four digits of the loan number. It remains unclear whether providing only the last four digits of the loan number would be sufficient to satisfy the requirements of the rule. Although the rule does allow for the servicer to provide the original principal balance  in lieu of the loan number if it is unavailable, it is unclear the servicer’s privacy concerns would satisfy the “unavailable” requirement of the rule and allow the mortgage company to provide only the original principal balance.

The safest approach for servicers to avoid violation of the new rule is to strictly comply with the law and provide the full loan number. However, if servicers have privacy concerns, a low risk compromise would be to provide both the last four of the loan number and the original principal balance. Since the purpose of the rule is to confirm the correct loan has been identified, this should provide sufficient information to a title company to confirm. 

The new rules took effect September 20, 2020 and the updated payoff form can be found here. 
 
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October 2020 e-Update