Legal Ease

As of 3/15/2010

In response to your question, Texas has adopted the Uniform Electronic Transactions Act (UETA); see Business and Commerce Code Chapter 322.  This makes imaged documents the equivalent of the original paper documents.  Also, under UETA, imaged documents are the equivalent of paper documents for evidentiary purposes.  Therefore, after original documents are imaged, they may be destroyed. 
 
There is one exception to the image-and-destroy process of which you should be aware, and that concerns processed checks.  As you know, Section 4.406 of the UCC (TX Business and Commerce Code) requires depositors to examine their monthly statements with "reasonable promptness" and notify the bank of any unauthorized checks.  Court decisions have construed "reasonable promptness" to mean two months after the date of the statement.  If the customer promptly notifies the bank of an unauthorized check (forgery), then they get an immediate refund; if they delay reporting the unauthorized check, then the bank returns the check in question to the customer, and they have to attempt to get reimbursed from the wrongdoer on their own.  The problem is with the unauthorized check, whether the bank has to try to get reimbursement from the wrong-doer or whether the customer has to try to get reimbursement from the wrong-doer.  In spite of what UETA says about imaged documents being equivalent to the original paper documents for evidentiary purposes, county prosecutors refuse to work with an imaged copy--they insist on having the original paper check.  They say they need it to dust for fingerprints and because they think it is harder to do a handwriting analysis with an imaged copy.  I personally think this is a dubious claim, but that's they way it is.  IBAT has attempted to negotiate with the state association of county prosecutors on this issue, to no avail.  So, I recommend that with regard to processed checks, banks hold off on their image-and-destroy process for two months from the date of the statement, so as to be able to use the original for investigative and prosecutorial purposes or to assign the check back to the customer for collection.  After two months from the date of statement, no claim of forgery can be asserted against the bank, and then the checks can be imaged and destroyed.
 
Doesn't it seem odd that it takes longer to explain the exception that to explain the general rule?

As of 3/8/2010

The constitutional restriction that says there may only be one home equity loan at a time follows the property, not the borrower. In other words, there may only be one home equity loan at a time secured by the same homestead property.  You can make the home equity loan secured by this homestead property because it doesn't have a home equity loan secured by it (unless the new wife closed a home equity loan on that homestead within a year of closing this one you are considering.)

Before you make this loan, make sure that you check the county records to make sure that the man really is divorced.  The fact that there are loose ends like this remaining in the divorce makes me a little wary of this second loan.  The man is still on the note, but there is no personal recourse against him. However, if the divorce lawyers didn't take care of getting the house and all debts secured by it into the wife's name, they probably didn't do their jobs properly.  As a result, the home equity loan on his ex-wife's house is going to affect his credit and should be considered in your underwriting if he's to be a signer on the new loan.  The bottom line in this one is:  be careful and consult with your legal counsel because it doesn't sound like the divorce attorneys took care of all the loose ends of the divorce.

See Texas Constitution, Article XVI, Section 50, (a)(6)(K) below…
(6)  an extension of credit that:
…snip…
 (K)  is the only debt secured by the homestead at the time the extension of credit is made unless the other debt was made for a purpose described by Subsections (a)(1)-(a)(5) or Subsection (a)(8) of this section;

Because these are considered permanent residence, yes, they are HMDA reportable.  This is from the FFIEC Web site, entitled CRA/HMDA Reporter, September 2000:

Q. Are nursing homes, dormitories, fraternity/sorority houses, assisted living and retirement homes to be reported on HMDA?

A. Nursing homes, dormitories and sorority/fraternity houses are viewed as temporary housing and are not HMDA  reportable since they were not built for permanent residency. In addition, a nursing home is more like a hospital in that it provides medical care, which is usually constant and extensive. Assisted living and retirement homes are viewed as  dwellings that individuals reside in permanently and are HMDA-reportable. In fact, in most cases the “home place” has been sold by the individuals who choose these homes as their new “permanent” dwellings.

If a person is 65 years of age or older or is disabled, they can defer their property taxes pursuant to Texas Tax Code §33.06.  However, your contract with the borrower seems to prevent the senior from opting for deferral of the taxes.  Your deed of trust requires that the borrower keep the taxes current.  That means that the borrower has voluntarily agreed to pay the taxes when due.  If the borrower defers the taxes, then the taxes aren't paid when due.  Your deed of trust most likely allows you to pay the taxes that are due and unpaid, add them to the balance of the note, and charge interest on that amount.   The borrower's failure to pay the taxes is also likely an event of default.  You could always agree in writing to allow the borrower to defer the taxes, but then there would be growing taxes and interest due on the property. Most lenders would not do that.  One thing to be aware of:  Some tax appraisal districts are not accepting payments from lenders on deferred taxes. So, call the tax appraisal office before sending them a check to pay the taxes.  Most importantly, communicate with your borrower. They weren't trying to pull anything on you; they were merely trying to save some money by deferring their taxes until they no longer own and occupy the house.  I also encourage you to contact the bank's legal counsel before taking any action on this loan.