Texas Attorney General Proposes New Rules Affecting Mortgage Lenders Under Foreign Property Ownership Law

The Texas Office of the Attorney General has proposed strengthened rules implementing Senate Bill 17 (SB 17), the state’s law restricting certain foreign individuals and entities from purchasing or acquiring interests in Texas real property. SB 17, which became effective September 1, 2025, generally prohibits certain individuals and entities associated with designated foreign adversaries, including China, Russia, Iran, and North Korea, from acquiring Texas real estate, subject to statutory exceptions. The newly proposed regulations, published in the October 9, 2026, Texas Register, provide additional enforcement procedures and clarify potential responsibilities for mortgage lenders, title companies, and other real estate professionals.

Key Provisions Affecting Mortgage Lenders

1. Mandatory Reporting of Suspected Violations
Under proposed 1 TAC §67.4, mortgage lenders, title companies, and other “facilitating entities” would be required to report transactions that they know or should have known, after reasonable due diligence, violate SB 17.
Failure to report such a violation could result in referral to the appropriate licensing or professional disciplinary authority.

2. Due Diligence Protections
The proposed rules provide an important protection for lenders and other facilitating entities that conduct appropriate due diligence.
Entities that follow applicable regulatory guidelines or standards adopted in good faith by recognized industry groups, and do not discover a violation, would not be deemed to have known or should have known of the violation.

3. Expanded Review of Entity Ownership
The proposed regulations clarify that prohibited acquisitions may include indirect transfers of real property ownership through changes in control of entities holding Texas real estate.

The rules also establish certain ownership and management thresholds for determining control, potentially increasing the importance of reviewing entity ownership structures.

4. Proposed Public Property Registry
The Attorney General’s Office may develop a publicly accessible online database identifying certain Texas properties associated with designated foreign individuals or entities. The proposed registry could include properties acquired before SB 17 became effective.

What Should Lenders Do?

Although the regulations remain proposed, Texas mortgage lenders should consider reviewing their existing procedures for identifying potentially restricted purchasers, evaluating entity ownership, documenting due diligence, and escalating suspected violations. Importantly, SB 17 contains exceptions, including protections for U.S. citizens, lawful permanent residents, and certain qualifying residential homestead purchases. Not every transaction involving a foreign national is prohibited.

The proposed regulations are subject to a 30-day public comment period following their October 9, 2026, publication.
DocsDirect will continue monitoring these developments and provide updates as the rules are finalized.
Sources: Texas Attorney General’s Office | Proposed Rules – October 9, 2026 Texas Register
This alert is provided for informational purposes only and does not constitute legal advice.