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  HOME EQUITY LOANS

 Best of Texas Home Equity Hot Links:

REVISED 8-27-05: Welcome to the Texas mortgage loan license page. I am enclosing my list of Home Equity Hot Links:
1. FINANCE COMMISSION OF TEXAS
(a) Full text of Constitutional Amendment
(b) Interpretations of Home Equity Law-Chapter 153
(c) Home Equity Examination Procedures
(d) Attorney General Opinion
(e) Home Equity Modification Interpretation Letter

2. Texas: Constitutional Amendment Adopted by Voters: In addition to authorizing home equity lines of credit, mortgage brokers were added to the list of persons authorized to make home equity loans. Previously, in order to make home equity loans, mortgage brokers had to obtain a second lien license from the Office of the Consumer Credit Commissioner. Under the constitutional amendment, brokers can make home equity loans without holding an OCCC license. Effective 9/1/03, applicants for a TX Mortgage Broker or Loan Officer licenses are required to pass an exam and fees increase to $280 for mortgage brokers & $155 for loan officers & a $20 fee to the Mortgage Broker Recovery Fund & a $39 fee to cover the cost of an FBI / DPS criminal background history check; also, Mortgage Bankers currently exempt must file a Registration and pay a $500 fee to stay exempt. Registration is , via new on-line Internet registration system for mortgage bankers. The Act requires companies or business entities to register. It does not require loan originators of Mortgage Bankers to obtain individual licenses. homas Law Firm Mortgage/Home Equity Library
(a) Full Text of Constitutional Amendment

3. Mortgage Bankers Association
(a) Home Equity Lending Rules

4. Texas Mortgage Bankers Association: Home Equity Loans

5. Texas Savings and Loan Department Regulates Texas Mortgage Brokers and Mortgage Bankers

6. Office of the Consumer Credit Commissioner
New Home Equity Law Interpretations
Another set of administrative interpretations of the Home Equity Lines of Credit (HELOC) Law was adopted at the February 20 Finance Commission meeting. The first set of interpretations was adopted concurrently by the Finance Commission and the Credit Union Commission on December 18, 2003.(Home Equity Line of Credit Interpretations
The OCCC is working in conjunction with the other Finance Commission agencies (Department of Banking and Savings & Loan Department) and with the Credit Union Commission to develop administrative interpretations of the Home Equity Lines of Credit (HELOC) Law. The constitutional amendment allowing HELOCs was voted in by Texans on September 13, 2003. For more information, please see the meeting packet for the concurrent meeting of the Texas Finance Commission and the Texas Credit Union Commission.

Complete Set of Interpretations: Includes rules adopted, repealed, or amended through October 22, 2004.

Adopted June 17, 2005

7 TAC, §§152.1, 152.3, 152.5, 152.7, and 152.15, Concerning Home Improvement Loans. The Finance Commission of Texas and the Texas Credit Union Commission ("Commissions") jointly propose new 7 TAC, §§152.1, 152.3, 152.5, 152.7, and 152.15 (Chapter 152), concerning interpretations related to a lien on a homestead for home improvement. The interpretations address the requirements to establish a constitutional lien on a homestead for work and materials used to construct new improvements and to repair and renovate existing improvements. The interpretations address consent required of spouses and the locations required for execution of contracts for work and materials used to repair or renovate existing improvements.

Adopted February 18, 2005

7 TAC, §153.93, Concerning Methods of Notification for Home Equity Lending. The Finance Commission of Texas and the Texas Credit Union Commission ("Commissions") jointly adopt new 7 TAC §153.93, concerning interpretations of the nature of and process by which a lender or holder ("lender") of a home equity loan may cure its failure to fully comply with its obligations under the Texas Constitution, Article XVI, §50 (Section 50)

7 TAC, §153.93, Concerning Methods of Notification for Home Equity Lending. The Finance Commission of Texas and the Texas Credit Union Commission ("Commissions") jointly adopt new 7 TAC §153.93, concerning interpretations of the nature of and process by which a lender or holder ("lender") of a home equity loan may cure its failure to fully comply with its obligations under the Texas Constitution, Article XVI, §50 (Section 50)
Interpretation Adopted October 22, 2004

7 TAC §§153.91-153.92 and 153.94-153.96, Concerning Home Equity Lending Cure Provisions.

Interpretation Adopted February 20, 2004
7 TAC §§153.82, 153.84-153.88, Concerning Interpretation of the Home Equity Lines of Credit Provision

7.TX Dept. of InsuranceForm T-42.1 Equity Loan Mortgage Endorsement for Title Policies

8. http://www.sos.state.tx.us/texreg/index.html Texas Register
Source of most recent Attorney General Opinions, OCCC, Dept. of Banking, Dept. of Insurance Secretary of State and Comptroller decisions

9. Andrews Kurth Law Firm on Home Equity Loans

10. Best of the Web Lender Sites: Excellent Mortgage Corporation

9. Fannie Mae http://www.fanniemae.com/Lender/MonthlyDig/wn_lendletter.html
Cash Out Refinancing Announcement

HOME EQUITY CONSTITUTIONAL AMENDMENT APPROVED BY TEXAS VOTERS NOVEMBER 4, 1997

TEXAS HOME EQUITY LOANS PERMITTED AFTER JANUARY 1, 1998

For 150 years, Texas has banned home equity loans. On November 4, 1997, the voters of Texas overturned this ban on home equity loans by approving a Constitutional Amendment to the Texas Constitution. Beginning January 1, 1998, home equity loans were permitted in Texas. Texas is the last state in the Union to permit home equity loans. Texas is the second-most-populous state and Texans have more than $200 billion of equity in their homes. Many home equity lenders are aggressively entering the Texas home equity loan market. Other than banks, savings and loans, savings banks, credit unions and under certain circumstances HUD approved lenders, home equity loans may only be made by mortgage companies licensed in Texas with a Texas Regulated Lending License. Since Texas is the last state in the Union to offer home equity loans, the potential growth for the second mortgage business is enormous.

LATEST NEWS FROM THE FINANCE COMMISSION OF TEXAS ON TEXAS HOME EQUITY LOANS

78th Legislature
The 78th Legislature passed SJR 42 and HJR 23 significantly changing Texas home equity law. These two laws were approved by Texas voters on September 13, 2003 as Propositions 16 and 6, respectively. Constitutional amendments authorized home equity lines of credit, allowed lenders under certain conditions to cure violations of the home equity lending law, and enabled borrowers to refinance home equity loans with reverse mortgages. The amendments also permitted the Finance Commission and Credit Union Commission to issue interpretations of home equity lending provisions at the request of an interested party or on their own motion.

Line of credit [HELOC] is a significant change. In the past, borrowers needing staggered funding of a home equity loan, say for instance for the construction of a back yard swimming pool, were required to draw the full amount of the loan at origination. This constitutional change allows borrowers to make draws on their home equity loans. Unique conditions apply: A minimum draw of $4,000 is required, additional advances are not allowed if the principal amount of the loan exceeds 50% of the fair market value of the property, and advances are not permitted through credit card, debit card, or preprinted solicitation checks.

Prior to 2003, the absence of a cure provision caused many Texas lenders to stay out of the home equity lending market rather than risk forfeiting all principal and interest on a non complying loan. The cure provision allows lenders within 60 days after notification by the borrower of any noncompliance to pay any overcharge, deliver documents, obtain missing signatures, adjust the account, and send written notice of any amount, percentage, term or other provision that is not in compliance.

If the noncompliance cannot be cured, the lender may pay the borrower $1,000 and offer the refinance at no cost. A lender who does not cure noncompliance risks losing all principal and interest.

Home equity loans, as authorized in 1998, required a resulting refinanced loan to also be a home equity loan. This prevented many older borrowers from converting their existing home equity loans into reverse mortgages. The 2003 constitutional amendment allows a borrower who has an existing home equity loan to refinance the loan so that the resulting loan is a reverse mortgage.

Prior to 2003, no state agency had authority to interpret the home equity loans and reverse mortgages constitutional provisions. The 2003 constitutional amendment allows the Legislature by statute to delegate to one or more state agencies the power to interpret these provisions.

An act or omission of a person does not violate the Constitution if it complies with an interpretation in effect at the time. The legislature delegated interpretative authority to the Credit Union Commission as to credit unions and to the Finance Commission of Texas as to all other lenders.

An interagency working group was formed to develop proposed interpretations for presention to the Credit Union Commission (CUC) and Finance Commission (FC). The interagency workgroup completed a proposed interpretative rule based primarily upon substantive provisions of the 1998 Regulatory Commentary. The interagency workgroup submitted a "pre-comment" draft to interested parties and the commission members in mid-September. A proposed rule/interpretation that specifies the procedures to be followed to request an interpretation was also development. These two rules were presented to the Finance Commission and Credit Union Commission which voted on October 23, 2003, to publish for comment.

At the December 18, 2003 concurrent meetings, the FC and CUC adopted 7 TAC §§153.1 - 153.5, 153.7 - 153.18, 153.20, 153.22, 153.24, 153.25, 153.41, 153.51 as the initial interpretations of Section 50 and 7 TAC §§151.1-151.8 as the process for dealing with requests for interpretations.

At the concurrent meetings held on February 20, 2004, the FC and CUC adopted 7 TAC §§153.82, 153.84-153.88 dealing with home equity lines of credit.

At the October 22, 2004, concurrent meetings, the FC and CUC adopted 7 TAC §§153.91, 153.92, 153.94 - 153.96, interpreting cure provisions in Section 50. (Because comments received indicated changes were necessary to the cure interpretation proposed in 7 TAC §153.93, the FC and CUC chose to re-propose this section for possible adoption at the February 11, 2005 concurrent meeting). The sections adopted at the October 22, 2004, meeting provide the following interpretations:

Section 153.91 details the minimum information necessary to constitute adequate notice from a borrower to a lender that the lender has failed to comply with its obligations under the home equity extension of credit.
Section 153.92 explains that the 60-day cure period starts on the day following receipt of the notice and ends at midnight on the 60th day unless the 60th day is a Sunday or federal legal public holiday, then the deadline is midnight on the following day that is not a Sunday or federal legal public holiday.
Section 153.94 informs the lender of the actions it must take by the 60th day after the date it receives notice from the owner of the lender's failure.
Section 153.95 explains that a lender who timely corrects a failure to comply with the Constitution has not invalidated the lien.
Section 153.96 informs the lender of the actions it must take by the 60th day after the date it receives notice from the owner of the lender's failure when the lender cannot cure the failure under Section 50(a)(6)(x)(a) – (e). The lender has the option to refund or credit the borrower the $1,000. A borrower and lender may refinance by complying with Section 50(a)(6) or it may modify the terms of the existing equity loan. Although the lender may choose a method of delivery not specified, if agreed to by the borrower after the lender receives notice of the failure to comply, the lender has the burden of proving its compliance.
At the October 22, 2004 concurrent meetings, the FC and CUC also voted to publish proposed 7 TAC §§152.9, 152.11, and 152.13, dealing with Section 50(a)(5) on home improvement lending. The proposal was intentionally limited to offer the HEWG the appropriate time to study and draft proposed interpretations on the remaining portions of Section 50(a)(5). The proposal offers the following initial interpretations of Section 50(a)(5) for possible adoption at the February 11, 2005 concurrent meetings:

Section 152.9 specifies the method for counting the days for the five day waiting period that must elapse between the date the owner makes written application for a loan for work and materials and the execution of the contract for work and materials by the owner and the owner’s spouse.
Section 152.11 specifies the method for counting the three days the owner has to rescind the contract for work and materials after it is executed by all parties.
Section 152.13 prescribes the procedures for waiver by the owner of either the 5-day waiting or 3-day rescission period.
The Credit Union Commissioner and the Consumer Credit Commissioner were delegated authority, at the June 18, 2004 concurrent meetings, to conduct public meetings on behalf of the Commissions for the purpose of receiving oral comments, views, and/or testimony concerning proposed interpretations. Based on that authority, the commissioners scheduled a public meeting at the State Finance Commission Building on January 6, 2005, to accept oral comments on proposed 7 TAC §§152.9, 152.11, and 152.13.

At the February 11, 2005 concurrent meeting, the FC and CUC adopted:

7 TAC §§152.9, 152.11, and 152.13 (Chapter 152), administrative interpretations of subsection (t), Section 50, Article XVI, Texas Constitution. Sections 152.11 and 152.13 were adopted with non-substantive changes to the proposal as published in the November 5, 2004, issue of the Texas Register (29 TexReg 10195). Section 152.9 is adopted without changes and was not republished.
7 TAC §153.93, concerning interpretations of the nature of and process by which a lender or holder ("lender") of a home equity loan may cure its failure to fully comply with its obligations under the Texas Constitution, Article XVI, §50 (Section 50). The rule is adopted with non-substantive changes to the proposal published in the November 5, 2004, issue of the Texas Register (29 TexReg 10196).
Also at the February 11, 2005 concurrent meeting, the FC and CUC voted to publish:

7 TAC §§152.1, 152.3, 152.5 152.7, and 152.15 concerning interpretations related to a lien on a homestead for home improvement under Texas Constitution, Article XVI, §50(a)(5) (Section 50(a)(5)).
Other Home Equity Changes
Another restriction originally placed on home equity loans was a limitation on the types of lenders eligible to make the loans. The constitutional amendment adds regulated mortgage brokers to the list of eligible lenders.

Prior to the constitutional amendment, a home equity loan borrower was required to repay the loan in regular monthly payments. To provide more flexibility, the constitutional amendment allows a borrower and lender to agree to a payment schedule with payments due not more often than every 14 days nor less often than monthly.

The constitutional amendment adds one additional restriction not included when home equity loans were originally authorized. At least one day before a loan is closed, the lender is required to provide the borrower an itemized good faith estimate of the fees, points, interest, costs, and charges that the borrower is required to pay at closing.

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