What is the maximum payment a person may receive from the recovery fund for claims arising out of a single transaction Texas?

What happens if a client sues an agent or broker and wins, but the license holder can’t pay the awarded damages? Clients who find themselves in that situation can apply to the Texas Real Estate Commission, which maintains two “funds of last resort” to cover out-of-pocket damages.

The Real Estate Recovery Trust Account covers damages caused by brokers, sales agents, easement/right-of-way agents, or a license holder’s employees. Payments are capped at $50,000 per transaction with a maximum of $100,000 per license holder for multiple transactions.

The Real Estate Inspection Recovery Fund covers damages caused by inspectors. Payments may not exceed $12,500 per transaction with a maximum of $30,000 per license holder for multiple transactions.

Only certain conduct qualifies for reimbursement:

• Recovery trust account criteria includes when a license holder engages in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in their own name, or for their spouse, parents, siblings, or children. Other criteria include negligence or incompetence, dishonesty or bad faith conduct, and material misrepresentation concerning a significant defect known to the license holder that would be a significant factor to a reasonable and prudent buyer in making a decision to purchase real property.
• Inspection recovery fund criteria includes negligence and accepting an assignment if the employment or a fee is contingent on reporting a specific, predetermined condition of the improvements to real property or specific findings other than what the inspector knows to be true when the assignment is accepted. Acting in a dishonest or fraudulent manner, or in a dual capacity as inspector and undisclosed principal or broker/sales agent, also qualifies.

Real estate consumers who seek TREC funds must take several legal steps before applying. They must file suit within two years of the events of the claim, receive a final judgment against the license holder for damages, obtain and file an abstract of judgment, and obtain a writ of execution demanding payment. Consumers may only apply if the license holder does not have the funds required to pay the damages.

Learn more at trec.texas.gov/public/real-estate-recovery-funds.

[PART II.  MORTGAGE LOAN RECOVERY FUND]

Revision Note

  Sections 454F-41 to 454F-47 designated as Part II pursuant to §23G-15.

     §454F-41  Mortgage loan recovery fund; use of fund; fees.  (a)  The commissioner shall establish and maintain a fund that shall be known as the mortgage loan recovery fund from which any person aggrieved by an act, representation, transaction, or conduct of a licensee involving fraud, misrepresentation, or deceit may recover by order of the circuit court or district court of the county where the violation occurred, an amount of not more than $25,000 per transaction, including court costs and fees as set by law and reasonable attorney fees as determined by the court, for damages sustained by the fraud, misrepresentation, or deceit of a licensee.

     (b)  In addition to application fees and any fees required by NMLS, a licensee shall pay to the division a mortgage loan recovery fund fee as follows for deposit in the mortgage loan recovery fund:

     (1)  The sum of $300 for each principal office location of a mortgage loan originator company or mortgage servicer company;

     (2)  The sum of $250 for each branch office location of a mortgage loan originator company; and

     (3)  The sum of $200 for each mortgage loan originator.

     (c)  Upon application for renewal of a license under this chapter, a licensee shall pay, in addition to the licensee's license renewal fee and fees required by NMLS, a mortgage loan recovery fund fee as follows for deposit in the mortgage loan recovery fund:

     (1)  The sum of $200 for each principal office location of a mortgage loan originator company or a mortgage servicer company;

     (2)  The sum of $100 for each branch office location of a mortgage loan originator company; and

     (3)  The sum of $100 for each mortgage loan originator.

     Mortgage loan recovery fees collected pursuant to this subsection shall be refundable upon the denial of a license renewal by the commissioner.

     (d)  When the mortgage loan recovery fund attains a funding level of $750,000, the commissioner may, by rule adopted pursuant to chapter 91, adjust the fees generated by renewals or may determine that payments made by renewing licensees shall cease.  If the funding level falls below $250,000 after the first five years of the establishment of the fund, the commissioner may adjust the fees to a reasonable level for the purpose of attaining a funding level of $750,000.

     (e)  The commissioner or the commissioner's designee, as the manager of the mortgage loan recovery fund, shall be authorized to expend moneys in the mortgage loan recovery fund to:

     (1)  Retain private legal counsel to represent the commissioner or the division in any action that involves or may result in payment from the mortgage loan recovery fund;

     (2)  Retain a certified public accountant for accounting and auditing of the mortgage loan recovery fund;

     (3)  Employ necessary personnel, not subject to chapter 76, to assist the commissioner in exercising the commissioner's powers and duties with respect to the mortgage loan recovery fund; and

     (4)  Retain a consultant to recover and collect any payments from the mortgage loan recovery fund plus interest from the judgment debtor. [L 2010, c 84, pt of §3; am L 2013, c 168, §19]