Texas enforces trigger lead disclosures, OKs LO dual sponsorship

A Texas regulator recently passed a number of rules that will beef up borrower protections in the state.

Most notably, the Texas Department of Savings and Mortgage Lending has enforced more stringent requirements for home lenders relying on trigger leads to find clients.

As of Nov. 23, lenders are required to disclose how they found the borrower they are contacting and inform them that the purpose of their communication is to solicit new business. 

Mortgage lenders and brokers using trigger leads will also have to notify borrowers that they are not connected to the original company the consumer was working with, per DSML's rule changes. Failure to do so would be considered a "deceptive practice."

This change coincides with mounting calls on a federal level to reign in trigger leads. A trigger leads bill was included with the National Defense Authorization Act, but pulled at the last minute due to a slimming down of the legislation. Mortgage stakeholders are hopeful the legislation will be passed sometime next year.

Another notable change in the Lone Star State is that originators can now be sponsored by multiple mortgage companies. Although now permitted, it remains unclear how it will be implemented in practice.

Loan officers, often seen as valuable assets by lenders, are typically restricted from working for competitors through non-solicitation clauses and noncompete agreements. Violations often lead to costly and time-consuming litigation.

The Texas Department of Savings and Mortgage Lending did not immediately respond to a request for comment.

Other changes that will impact both mortgage servicers and lenders includes the DSML becoming more scrupulous about asking lenders to report "unauthorized access to an information system or customer information, or a catastrophic event."

The regulator will require companies to report incidents to the department within 30 days and submit a detailed account within 120 days. The report should outline how Texas residents may have been affected, steps taken to address the issue and a contact for further inquiries.

This move mirrors similar regulations from the Federal Housing Administration and Ginnie Mae in reaction to an unprecedented increase in cybersecurity incidents.