SECTION 90.502. Contract Provisions

(a) A Chapter 342, Subchapter G purchase money loan transaction may include, but is not limited to, the following contract provisions to the extent not prohibited by law or regulation. If the licensee desires to exercise its rights under one of the following provisions, it must include that provision in the contract. A licensee who does not desire to apply a provision is not required to include it in the contract. For example, a licensee who does not assess a fee for dishonored checks may omit the fee for dishonored check clause. A licensee may also exclude non-relevant portions of a model clause. For example, a licensee who does not routinely finance certain insurance coverages may omit those non-applicable portions of the model clause. A Chapter 342, Subchapter G second lien purchase money loan transaction may contain the following provisions:

(1) Identification of the parties, including the name and address of each party and specifying the pronouns that designate the borrower and the lender, and the property address;

(2) A promise to pay;

(3) A late charge provision;

(4) A provision for after maturity interest;

(5) A prepayment clause;

(6) A provision specifying the finance charge earnings and refund method;

(7) A provision contracting for a fee for a dishonored check;

(8) A provision specifying the conditions causing default;

(9) A provision regarding property insurance;

(10) A credit insurance disclosure box;

(11) A provision regarding the mailing of notices to the borrower;

(12) A provision regarding the due on sale clause, notice of intent to accelerate, and notice of acceleration;

(13) A provision expressing no waiver of the lender's rights;

(14) A collection expenses clause;

(15) A provision providing for joint liability;

(16) A usury savings clause;

(17) A savings clause stating that if any part of the loan agreement is invalid, the rest remains valid;

(18) An integration clause stating that the contract supersedes all prior agreements and that the contract may not be changed by oral agreement;

(19) A provision stating that the property described in the loan agreement is subject to the lien of the security document;

(20) A provision specifying that federal law and Texas law apply to the contract;

(21) OCCC notice;

(22) A provision describing the collateral; and

(23) Signature blocks.

(b) The security document for a Chapter 342, Subchapter G second lien purchase money loan contract may contain the following provisions:

(1) A definitions section;

(2) A provision regarding the secured nature of the agreement;

(3) A provision regarding the transfer of rights in the property;

(4) Borrower and Lender's promise;

(5) A provision regarding late charges and prepayment of principal and interest;

(6) A provision regarding the funds for escrow items;

(7) A provision regarding charges and liens;

(8) A provision regarding property insurance;

(9) A provision regarding preservation, maintenance, protection, and inspection of the property;

(10) A provision regarding protection of the lender's interest in the property and rights under the security document;

(11) A provision regarding the assignment of miscellaneous proceeds and forfeiture;

(12) A provision specifying that the borrower is not released from liability if the licensee modifies the payment schedule;

(13) A provision regarding joint and several liability and specifying that the person who signs the contract grants ownership in the homestead and binds the person's successors and assigns;

(14) A provision regarding the extension of credit charges;

(15) A provision regarding the delivery of notices;

(16) A provision regarding the law governing the contract, stating that if any part of the contract is invalid, the rest of the contract remains valid;

(17) A provision regarding rules of clause construction;

(18) A provision specifying that the licensee will give the borrower a copy of all signed documents at the time the loan agreement is made;

(19) A provision regarding a transfer of interest in the property;

(20) A provision regarding the borrower's right to reinstate after acceleration;

(21) A provision regarding the sale of the loan, change of loan servicer, notice of grievance, and the lender's right to comply;

(22) A provision regarding hazardous substances;

(23) A provision regarding acceleration and remedies;

(24) A provision regarding the assignment of rents, appointment of receiver, and the lender in possession;

(25) A provision regarding the power of sale;

(26) A provision regarding the release of the lien securing the loan agreement;

(27) A provision regarding the lender's rights and the borrower's responsibilities;

(28) A provision regarding trustees and trustee liability;

(29) A default provision;

(30) A provision regarding subrogation;

(31) A provision regarding what happens if the sum secured and other charges violate applicable law;

(32) A request for notice of default and foreclosure under superior mortgages or security documents provision;

(33) Signature blocks;

(34) An acknowledgment; and

(35) A provision regarding notice of confidentiality rights.

(c) The provisions described in this section are separate from the TILA-RESPA integrated disclosures required under Regulation Z, 12 C.F.R. §§1026.19, 1026.37 and 1026.38.

Source Note: The provisions of this §90.502 adopted to be effective August 31, 2006, 31 TexReg 6687; amended to be effective September 9, 2010, 35 TexReg 8104; amended to be effective November 5, 2015, 40 TexReg 7635