7.3 Administrative Penalties, Cease-and-Desist Orders, & Recovery Fund Claims

Finance Code § 180.201 is the one-page enforcement map. A regulatory official may deny, suspend, revoke, condition, or decline to renew a license for a Chapter 180, rule, or order violation; may do the same if the person fails Subchapter B qualifications or withholds information or makes a material misstatement; may order restitution; may impose an administrative penalty subject to § 180.202; and may issue § 180.203 orders, including immediate temporary cease-and-desist orders and orders to cease engaging in business under a license granted in error. Chapters 156 and 157 add company- and originator-specific penalty, C&D, restitution, and Recovery Fund machinery. SML's consumer enforcement page (sml.texas.gov/consumers/enforcement) publishes current orders, an online penalty-payment portal, and order categories such as exam deficiency, exam failure, exam inadequacy, recovery-fund payout, and unlicensed activity.

$25,000 per violation—not $25,000 per day

Open the penalty sections. § 156.302(a)–(b) (person licensed under Chapter 156): after notice and opportunity for hearing, the Commissioner may impose an administrative penalty that may not exceed $25,000 for each violation. § 157.023(a)–(b) (individual licensed or required to be licensed as an RMLO): the same $25,000 for each violation, and the person can be penalized for violating Chapter 157, Chapter 156, or a rule or order under either. § 180.202(a)–(b) (originator or other person subject to Chapter 180): the penalty may not exceed $25,000 for each violation. None of those three sections says "$25,000 per day."

The amount in each of those sections shall be based on six factors:

1. seriousness of the violation, including nature, circumstances, extent, and gravity;
2. economic harm to property caused by the violation;
3. history of previous violations;
4. the amount necessary to deter a future violation;
5. efforts to correct the violation; and
6. any other matter that justice may require.

Stay of enforcement pending judicial review requires paying the penalty into court or filing a supersedeas bond, unless the person files a cannot-afford affidavit (§ 156.302(c), § 157.023(c)). The attorney general may sue to collect. An appeal is a Government Code Chapter 2001 contested case.

The $1,000-per-day figures are different statutes. If a person violates a cease-and-desist order, § 156.303(e) and § 157.024(f) allow an administrative penalty not to exceed $1,000 for each day of the violation, plus a district-court injunction (no bond required of the Commissioner). For unlicensed activity, a C&D issued under § 156.406(c) or § 157.031(b) may itself assess up to $1,000 per day for each violation and may require the person to pay the applicant any compensation received in violation of the chapter. Mixing the $25,000-per-violation ceiling with the $1,000-per-day C&D clock is the classic overlay miss.

If a final penalty goes unpaid or a final order is ignored, § 156.303(g) and § 157.024(h) let the Commissioner, on not less than 10 days' notice and without a prior hearing, suspend the license until the person complies or pays. During that suspension the person may not originate, and compensation received is subject to forfeiture under the unlicensed-activity damage provisions. A revocation order may also bar affiliation with the origination business without the Commissioner's prior written consent (§ 156.303(i); § 157.024(j) also bars serving as employee, officer, director, manager, shareholder, member, agent, contractor, or processor of a banker, company, or originator). An indictment or information alleging fraud, theft, or dishonesty supports suspension until dismissal or acquittal (§ 156.303(j); § 157.024(k)).

Cease-and-desist, 30-day default, and the § 55.310 / § 55.311 calendar

§ 156.303(a) and § 157.024(a) list the disciplinary predicates after notice and opportunity for hearing: license obtained by fraud; misleading ads; improper, fraudulent, or dishonest dealings; felony or moral-turpitude conviction (including deferred adjudication as a "conviction" under the statute); advance fees not used for the purpose paid; paying or associating with unlicensed persons; dual capacity without the applicant's knowledge and written consent; discrimination on listed bases; refusing examiner access or complaint information; violating the chapter, a rule, or an order; and providing false information during an investigation. § 156.303(a-1) and § 157.024(b) also allow discipline if, during the current term, the Commissioner learns a fact that would have been grounds to deny the original license.

Without notice and hearing, if the Commissioner has reasonable cause to believe the person has violated or is about to violate the C&D section, the Commissioner may issue an order to cease and desist from a particular action, an order to take affirmative action, or both (§ 156.303(b), § 157.024(c); see also § 180.203 temporary orders). The order must contain a reasonably detailed statement of facts. If the respondent requests a hearing, the Commissioner sets a Government Code Chapter 2001 hearing before the Commissioner or an administrative law judge. If a hearing is not requested not later than the 30th day after the order is made, the order is final and not appealable (§ 156.303(d), § 157.024(e)).

7 TAC § 55.310 (effective November 23, 2024) is the originator appeal-deadline table. Memorize the splits:

The appeal must be in writing and received by SML on or before the deadline, by mail to the Legal Division at 2601 N. Lamar Blvd., Suite 201, Austin, Texas 78705, or by email to enforcement@sml.texas.gov. Missing the deadline waives the hearing, means administrative remedies are not exhausted for Government Code § 2001.171 judicial review, and lets a notice mature into a final order without another hearing.

§ 55.311 hearings under Chapters 157 and 180 follow 7 TAC Chapter 9; SOAH-referred cases also follow 1 TAC Chapter 155. All hearings are held in Austin. Judicial review under § 2001.171 must be brought in a Travis County district court. License-denial hearing costs under § 157.017(f) include filing fees, court reporter, ALJ (deemed $500 unless the ALJ finds otherwise), SML staff time at hourly compensation for hearing preparation, outside counsel, and expert witnesses.

The Commissioner may rescind or vacate a previously issued order (§ 156.303(k), § 157.024(l)). Surrender of a license is not a topic to invent here; if a question asks whether walking away ends jurisdiction, stay inside the sections you can cite: unpaid final orders still support suspension, and Recovery Fund procedure still runs against the person whose licensed conduct caused the loss.

Recovery Fund versus Mortgage Grant Fund

§ 13.016 requires the Commissioner to establish, administer, and maintain one Recovery Fund for Chapters 156 and 157, administered under Chapter 156, Subchapter F, except as Subchapter G (Mortgage Grant Fund) provides. § 156.501 puts the money in trust. Use is limited to reimbursing residential mortgage loan applicants for actual damages—and the statute then limits use to out-of-pocket losses—caused by acts of an originator licensed under Chapter 157 when the act was committed, and only for violations of listed § 157.024(a) paragraphs—(2), (3), (5), (7), (8), (9), (10), (13), (16), (17), or (18)—or § 156.304(b). Lenders who made or acquired the loan cannot be paid (§ 156.501(b-1)). Other recovery from the originator, surety, insurer, or another restitution source reduces the fund payment (§ 156.501(e)).

§ 156.505 recovery limits (verified in the current Finance Code): reimbursement is of actual, out-of-pocket damages. Payment for claims arising out of the same transaction, including interest, is limited in the aggregate to $25,000, regardless of the number of claimants. Claims against a single person licensed as an originator arising out of separate transactions, including interest, are limited in the aggregate to $50,000 until the fund has been reimbursed for all amounts paid. Concurrent claims that exceed available amounts are prorated.

§ 156.503 is a four-year clock, not a two-year clock: an application "may not be filed after the fourth anniversary of the date of the alleged act or omission causing the actual damages or the date the act or omission should reasonably have been discovered." Subrogation claims by the Commissioner are outside that limit.

§ 156.504 procedure. The applicant files a written sworn application on the Commissioner's form. Knowingly making a false statement can be prosecuted as tampering with a governmental record (Penal Code § 37.10). The applicant must show facts allowing recovery under § 156.501 and that the applicant is not the originator's spouse; child, parent, grandchild, grandparent, or sibling (including adoption); a housemate, current or former employer, employee, or associate; a person who aided the illegal activity other than as a victim (or the originator's personal representative); or another licensed originator seeking compensation in the same deal. Staff notifies the license holder and any surety, investigates, and issues a preliminary determination. If nobody disputes in writing before the 31st day after notification, the determination becomes final and the Commissioner pays, subject to § 156.505. A timely dispute goes to a Chapter 2001 hearing.

§ 156.506 is the license consequence of a payout—and it is not "automatic revocation with no hearing" under a § 156.507 caption. § 156.507 is subrogation. Under § 156.506(a) the Commissioner may revoke or suspend a Chapter 157 license on proof that the Commissioner paid the fund toward a claim against that originator. The Commissioner may probate that order. The Commissioner may collect the amount paid plus investigation and collection costs plus interest at the current legal rate. The person is not eligible for a new license or to have a suspension lifted until the fund is repaid in full, plus that interest and those costs. Full reimbursement does not wipe other Chapter 157 discipline (§ 156.506(d)). § 157.0241 is the companion originator-captioned revocation/suspension-for-payout section. File through sml.texas.gov/consumers/recovery-fund-claims, which hosts the licensed-originator Recovery Fund checklist and the Mortgage Grant Fund checklist for unlicensed fraud.

Mortgage Grant Fund — unlicensed fraud. § 156.555 lets an applicant claim actual, out-of-pocket damages incurred because of fraud by an individual who acted as an originator but did not hold the required Chapter 157 license at the time. Eligibility and procedure follow § 156.504; the § 156.503 fourth-anniversary limit applies; payments are subject to the § 156.505 $25,000 / $50,000 limits. That is not the licensed-originator Recovery Fund. SML's claims page uses the same split: Recovery Fund for licensed originator violations; Grant Fund for unlicensed fraud.

Unlicensed origination is a criminal offense—cite the degree the Finance Code actually writes

SML's FAQ warns that unlicensed origination may bring sanctions, administrative penalties, and even criminal charges. The degrees are in the Finance Code, not in an invented felony chart.

§ 156.406(a): a person, unless exempt, commits an offense by conducting regulated Chapter 156 activities without the required license or registration. An offense under this subsection is a Class B misdemeanor. A second or subsequent conviction shall be punished as a Class A misdemeanor.

§ 157.031(a): an individual who is not exempt and who acts as an RMLO without first obtaining the required license commits an offense. Class B misdemeanor; second or subsequent conviction is a Class A misdemeanor.

Civil exposure sits beside the crime: the unlicensed actor who took a fee is liable for damages not less than the fee or profit and not more than three times that amount (§ 156.406(b), § 157.031(a-1)). This chapter does not assign a Penal Code felony degree to mortgage fraud; those charging decisions are outside the Finance Code sections opened here.

Worked example

An applicant paid a licensed RMLO $8,000 in "expedite" fees that were never applied to a third-party cost (§ 157.024(a)(5)). The originator is judgment-poor. Within the fourth anniversary the applicant files the Recovery Fund sworn form. Staff's preliminary determination is undisputed at day 31, so the Commissioner pays $8,000 (well under the $25,000 same-transaction cap). Under § 156.506 the Commissioner may suspend or revoke and may probate; the originator cannot obtain a new license until the $8,000 plus costs and legal-rate interest is repaid, and repayment does not cancel a parallel § 157.023 $25,000-per-violation penalty proceeding. If the same facts involved a person who never held a Chapter 157 license, the applicant uses the Mortgage Grant Fund form under § 156.555, and the unlicensed individual also faces a Class B charge under § 157.031 plus a $1,000-per-day unlicensed C&D. Independent enforcement study by OpenExamPrep is not a substitute for SML's claim forms.