Texas SML licensing for mortgage servicers

A Texas SML license is the mortgage-servicer registration an entity needs to service a Texas residential mortgage loan as a business. Moat is a licensed Texas mortgage servicer, bonded, NMLS 1419346. It is a servicer, not an originator. For the origination side, see the Texas RMLO requirements page.

Who is the Texas SML?

The Texas Department of Savings and Mortgage Lending is the state agency that supervises mortgage servicers and certain mortgage originators that operate in Texas. It sits inside the Finance Commission of Texas and publishes its rules in Title 7 of the Texas Administrative Code. The SML licenses, examines, and disciplines registered servicers and brokers; it does not directly regulate banks or credit unions (those answer to other regulators), but most Texas private-investor servicing falls under its jurisdiction.

For private lenders, the SML matters because the rules it enforces shape what your servicer must do at every step of the loan life: how the borrower is notified at boarding, what the periodic statement looks like, what records are retained and for how long, how default work proceeds, and what happens when the servicer transfers the loan to another shop.

The November 2024 reorganization

Effective November 23, 2024, the SML moved its substantive mortgage-servicer rules from the previous home in 7 TAC Chapters 78 through 81 into the new Chapters 55 through 59. The reorganization was structural rather than substantive; the rules are largely the same, but the chapter numbering changed, several borrower-notice obligations were consolidated under common headings, and the recordkeeping standards were tightened.

For servicers that operated under the old chapter numbers, the practical effect was a compliance-manual rewrite and a chase to update any internal or borrower-facing document that cited a specific old rule number. Any materials still citing the old 7 TAC §78.x or §80.x rule numbers predate that update and should be refreshed to the Chapters 55-59 cites.

The 2026 electronic surety bond rule

Effective January 1, 2026, the rule at 7 TAC §58.107 requires Texas-regulated mortgage servicers to maintain their surety bond electronically through the Nationwide Multistate Licensing System (NMLS). Paper-bond filings are phased out; the electronic surety bond (ESB) becomes the default. Bond amounts vary by activity level and program; the schedule sits with NMLS and is referenced by the SML.

For most servicers the conversion is mechanical: identify the current bond, work with the surety to issue an ESB through NMLS, and retire the paper instrument by the effective date. The minor pitfall is timing: surety companies that have not historically issued ESBs for Texas may need a few weeks of lead time, and the SML expects compliance on day one. Moat carries the NMLS-tracked electronic surety bond required under the rule.

Who needs a Texas SML mortgage-servicer license?

The general rule, with exemptions, is that any person or entity that services a residential mortgage loan secured by Texas real estate as a business is required to register with the SML. The statutory exemptions sit in the Texas Residential Mortgage Loan Servicer Registration Act (Tex. Finance Code Chapter 158) and the implementing SML rules. The most common exemption private investors rely on is the non-business or incidental exemption: servicing one’s own portfolio rather than holding oneself out as a servicer for others.

The line between incidental and commercial is fact-specific. Owning a single seller-financed note and collecting payments yourself is unambiguously incidental. Holding a portfolio of 100 third-party-originated notes and charging fees for the servicing is unambiguously commercial. Most analyses sit somewhere between those extremes and turn on the number of loans, whether the activity is for fees from others, and how the operation is advertised. Consult a Texas regulatory attorney before you cross the line, not after.

How this affects Texas private lenders

If you self-service your own notes incidentally, the SML registration requirement may not apply. The federal small servicer exemption at 12 CFR §1026.41(e)(4) and the Texas non-business exemption can stack, but each has its own definition and the analysis turns on specific facts. If you grow past a self-service portfolio, add lender clients, or take on for-fee servicing for others, the licensing analysis changes.

If you use a licensed servicer like Moat for the operational layer, the borrower-facing regulatory burden under Chapters 55–59 sits with the servicer. The lender retains certain obligations specific to the lender (GLBA privacy notices delivered to the borrower at boarding, for instance) but does not carry the day-to-day SML registration overhead.

SML registration versus RMLO licensing

SML registration and RMLO licensing cover different activities. The SML mortgage-servicer registration covers ongoing administration of the loan: payment processing, statements, escrow, default and foreclosure work. The RMLO license, governed by Tex. Finance Code Chapter 180 (the Texas SAFE Act implementation), covers loan origination: taking the application, negotiating terms, presenting the loan to the borrower. One entity can hold both, but the activities and exam requirements are distinct. For more on the origination side, see the Texas RMLO requirements page.

How to verify a Texas servicer is licensed

The NMLS Consumer Access tool at nmlsconsumeraccess.org lets anyone look up a licensee by name or NMLS ID and confirm license type, status, and disciplinary history. The Texas SML also publishes a registered-servicer list on sml.texas.gov. Moat’s NMLS ID is 1419346; the public lookup confirms our license type and status.