Proposing a constitutional amendment to remove the requirement that a home equity loan be closed only at the office of the lender, an attorney at law, or a title company.

89(R) HJR 40 - Introduced version - Bill Text

89R67 SHH-F

By: Swanson

H.J.R. No. 40

A JOINT RESOLUTION

proposing a constitutional amendment to remove the requirement that

a home equity loan be closed only at the office of the lender, an

attorney at law, or a title company.

BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sections 50(a) and (g), Article XVI, Texas

Constitution, are amended to read as follows:

(a) The homestead of a family, or of a single adult person,

shall be, and is hereby protected from forced sale, for the payment

of all debts except for:

(1) the purchase money thereof, or a part of such

purchase money;

(2) the taxes due thereon;

(3) an owelty of partition imposed against the

entirety of the property by a court order or by a written agreement

of the parties to the partition, including a debt of one spouse in

favor of the other spouse resulting from a division or an award of a

family homestead in a divorce proceeding;

(4) the refinance of a lien against a homestead,

including a federal tax lien resulting from the tax debt of both

spouses, if the homestead is a family homestead, or from the tax

debt of the owner;

(5) work and material used in constructing new

improvements thereon, if contracted for in writing, or work and

material used to repair or renovate existing improvements thereon

if:

(A) the work and material are contracted for in

writing, with the consent of both spouses, in the case of a family

homestead, given in the same manner as is required in making a sale

and conveyance of the homestead;

(B) the contract for the work and material is not

executed by the owner or the owner's spouse before the fifth day

after the owner makes written application for any extension of

credit for the work and material, unless the work and material are

necessary to complete immediate repairs to conditions on the

homestead property that materially affect the health or safety of

the owner or person residing in the homestead and the owner of the

homestead acknowledges such in writing;

(C) the contract for the work and material

expressly provides that the owner may rescind the contract without

penalty or charge within three days after the execution of the

contract by all parties, unless the work and material are necessary

to complete immediate repairs to conditions on the homestead

property that materially affect the health or safety of the owner or

person residing in the homestead and the owner of the homestead

acknowledges such in writing; and

(D) the contract for the work and material is

executed by the owner and the owner's spouse only at the office of a

third-party lender making an extension of credit for the work and

material, an attorney at law, or a title company;

(6) an extension of credit that:

(A) is secured by a voluntary lien on the

homestead created under a written agreement with the consent of

each owner and each owner's spouse;

(B) is of a principal amount that when added to

the aggregate total of the outstanding principal balances of all

other indebtedness secured by valid encumbrances of record against

the homestead does not exceed 80 percent of the fair market value of

the homestead on the date the extension of credit is made;

(C) is without recourse for personal liability

against each owner and the spouse of each owner, unless the owner or

spouse obtained the extension of credit by actual fraud;

(D) is secured by a lien that may be foreclosed

upon only by a court order;

(E) does not require the owner or the owner's

spouse to pay, in addition to any interest or any bona fide discount

points used to buy down the interest rate, any fees to any person

that are necessary to originate, evaluate, maintain, record,

insure, or service the extension of credit that exceed, in the

aggregate, two percent of the original principal amount of the

extension of credit, excluding fees for:

(i) an appraisal performed by a third party

appraiser;

(ii) a property survey performed by a state

registered or licensed surveyor;

(iii) a state base premium for a mortgagee

policy of title insurance with endorsements established in

accordance with state law; or

(iv) a title examination report if its cost

is less than the state base premium for a mortgagee policy of title

insurance without endorsements established in accordance with

state law;

(F) is not a form of open-end account that may be

debited from time to time or under which credit may be extended from

time to time unless the open-end account is a home equity line of

credit;

(G) is payable in advance without penalty or

other charge;

(H) is not secured by any additional real or

personal property other than the homestead;

(I) (repealed);

(J) may not be accelerated because of a decrease

in the market value of the homestead or because of the owner's

default under other indebtedness not secured by a prior valid

encumbrance against the homestead;

(K) is the only debt secured by the homestead at

the time the extension of credit is made unless the other debt was

made for a purpose described by Subsections (a)(1)-(a)(5) or

Subsection (a)(8) of this section;

(L) is scheduled to be repaid:

(i) in substantially equal successive

periodic installments, not more often than every 14 days and not

less often than monthly, beginning no later than two months from the

date the extension of credit is made, each of which equals or

exceeds the amount of accrued interest as of the date of the

scheduled installment; or

(ii) if the extension of credit is a home

equity line of credit, in periodic payments described under

Subsection (t)(8) of this section;

(M) is closed not before:

(i) the 12th day after the later of the date

that the owner of the homestead submits a loan application to the

lender for the extension of credit or the date that the lender

provides the owner a copy of the notice prescribed by Subsection (g)

of this section;

(ii) one business day after the date that

the owner of the homestead receives a copy of the loan application

if not previously provided and a final itemized disclosure of the

actual fees, points, interest, costs, and charges that will be

charged at closing. If a bona fide emergency or another good cause

exists and the lender obtains the written consent of the owner, the

lender may provide the documentation to the owner or the lender may

modify previously provided documentation on the date of closing;

and

(iii) the first anniversary of the closing

date of any other extension of credit described by Subsection

(a)(6) of this section secured by the same homestead property,

except a refinance described by Paragraph (Q)(x)(f) of this

subdivision, unless the owner on oath requests an earlier closing

due to a state of emergency that:

(a) has been declared by the president

of the United States or the governor as provided by law; and

(b) applies to the area where the

homestead is located;

(N)
(repealed)
[
is closed only at the office of

the lender, an attorney at law, or a title company
];

(O) permits a lender to contract for and receive

any fixed or variable rate of interest authorized under statute;

(P) is made by one of the following that has not

been found by a federal regulatory agency to have engaged in the

practice of refusing to make loans because the applicants for the

loans reside or the property proposed to secure the loans is located

in a certain area:

(i) a bank, savings and loan association,

savings bank, or credit union doing business under the laws of this

state or the United States, including a subsidiary of a bank,

savings and loan association, savings bank, or credit union

described by this subparagraph;

(ii) a federally chartered lending

instrumentality or a person approved as a mortgagee by the United

States government to make federally insured loans;

(iii) a person licensed to make regulated

loans, as provided by statute of this state;

(iv) a person who sold the homestead

property to the current owner and who provided all or part of the

financing for the purchase;

(v) a person who is related to the homestead

property owner within the second degree of affinity or

consanguinity; or

(vi) a person regulated by this state as a

mortgage banker or mortgage company; and

(Q) is made on the condition that:

(i) the owner of the homestead is not

required to apply the proceeds of the extension of credit to repay

another debt except debt secured by the homestead or debt to another

lender;

(ii) the owner of the homestead not assign

wages as security for the extension of credit;

(iii) the owner of the homestead not sign

any instrument in which blanks relating to substantive terms of

agreement are left to be filled in;

(iv) the owner of the homestead not sign a

confession of judgment or power of attorney to the lender or to a

third person to confess judgment or to appear for the owner in a

judicial proceeding;

(v) at the time the extension of credit is

made, the owner of the homestead shall receive a copy of the final

loan application and all executed documents signed by the owner at

closing related to the extension of credit;

(vi) the security instruments securing the

extension of credit contain a disclosure that the extension of

credit is the type of credit defined by Subsection (a)(6) of this

section;

(vii) within a reasonable time after

termination and full payment of the extension of credit, the lender

cancel and return the promissory note to the owner of the homestead

and give the owner, in recordable form, a release of the lien

securing the extension of credit or a copy of an endorsement and

assignment of the lien to a lender that is refinancing the extension

of credit;

(viii) the owner of the homestead and any

spouse of the owner may, within three days after the extension of

credit is made, rescind the extension of credit without penalty or

charge;

(ix) the owner of the homestead and the

lender sign a written acknowledgment as to the fair market value of

the homestead property on the date the extension of credit is made;

(x) except as provided by Subparagraph (xi)

of this paragraph, the lender or any holder of the note for the

extension of credit shall forfeit all principal and interest of the

extension of credit if the lender or holder fails to comply with the

lender's or holder's obligations under the extension of credit and

fails to correct the failure to comply not later than the 60th day

after the date the lender or holder is notified by the borrower of

the lender's failure to comply by:

(a) paying to the owner an amount

equal to any overcharge paid by the owner under or related to the

extension of credit if the owner has paid an amount that exceeds an

amount stated in the applicable Paragraph (E), (G), or (O) of this

subdivision;

(b) sending the owner a written

acknowledgement that the lien is valid only in the amount that the

extension of credit does not exceed the percentage described by

Paragraph (B) of this subdivision, if applicable, or is not secured

by property described under Paragraph (H) of this subdivision, if

applicable;

(c) sending the owner a written notice

modifying any other amount, percentage, term, or other provision

prohibited by this section to a permitted amount, percentage, term,

or other provision and adjusting the account of the borrower to

ensure that the borrower is not required to pay more than an amount

permitted by this section and is not subject to any other term or

provision prohibited by this section;

(d) delivering the required documents

to the borrower if the lender fails to comply with Subparagraph (v)

of this paragraph or obtaining the appropriate signatures if the

lender fails to comply with Subparagraph (ix) of this paragraph;

(e) sending the owner a written

acknowledgement, if the failure to comply is prohibited by

Paragraph (K) of this subdivision, that the accrual of interest and

all of the owner's obligations under the extension of credit are

abated while any prior lien prohibited under Paragraph (K) remains

secured by the homestead; or

(f) if the failure to comply cannot be

cured under Subparagraphs (x)(a)-(e) of this paragraph, curing the

failure to comply by a refund or credit to the owner of $1,000 and

offering the owner the right to refinance the extension of credit

with the lender or holder for the remaining term of the loan at no

cost to the owner on the same terms, including interest, as the

original extension of credit with any modifications necessary to

comply with this section or on terms on which the owner and the

lender or holder otherwise agree that comply with this section; and

(xi) the lender or any holder of the note

for the extension of credit shall forfeit all principal and

interest of the extension of credit if the extension of credit is

made by a person other than a person described under Paragraph (P)

of this subdivision or if the lien was not created under a written

agreement with the consent of each owner and each owner's spouse,

unless each owner and each owner's spouse who did not initially

consent subsequently consents;

(7) a reverse mortgage; or

(8) the conversion and refinance of a personal

property lien secured by a manufactured home to a lien on real

property, including the refinance of the purchase price of the

manufactured home, the cost of installing the manufactured home on

the real property, and the refinance of the purchase price of the

real property.

(g) An extension of credit described by Subsection (a)(6) of

this section may be secured by a valid lien against homestead

property if the extension of credit is not closed before the 12th

day after the lender provides the owner with the following written

notice on a separate instrument:

"NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION

50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:

"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION

ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.

SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY

THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER MAY

FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:

"(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE CONSENT OF

EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;

"(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE

MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL BALANCES

OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80 PERCENT OF THE

FAIR MARKET VALUE OF YOUR HOME;

"(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL LIABILITY

AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE OBTAINED THIS

EXTENSION OF CREDIT BY ACTUAL FRAUD;

"(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON ONLY

WITH A COURT ORDER;

"(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 2

PERCENT OF THE LOAN AMOUNT, EXCEPT FOR A FEE OR CHARGE FOR AN

APPRAISAL PERFORMED BY A THIRD PARTY APPRAISER, A PROPERTY SURVEY

PERFORMED BY A STATE REGISTERED OR LICENSED SURVEYOR, A STATE BASE

PREMIUM FOR A MORTGAGEE POLICY OF TITLE INSURANCE WITH

ENDORSEMENTS, OR A TITLE EXAMINATION REPORT;

"(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY BE

DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED FROM

TIME TO TIME UNLESS IT IS A HOME EQUITY LINE OF CREDIT;

"(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR CHARGE;

"(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE LOAN;

"(I) (repealed);

"(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER THAN

AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME DECREASES

OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT SECURED BY YOUR

HOME;

"(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6), ARTICLE

XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR HOME AT ANY

GIVEN TIME;

"(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN PAYMENTS THAT

EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR EACH PAYMENT

PERIOD;

"(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU SUBMIT A

LOAN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER YOU RECEIVE

THIS NOTICE, WHICHEVER DATE IS LATER; AND MAY NOT WITHOUT YOUR

CONSENT CLOSE BEFORE ONE BUSINESS DAY AFTER THE DATE ON WHICH YOU

RECEIVE A COPY OF YOUR LOAN APPLICATION IF NOT PREVIOUSLY PROVIDED

AND A FINAL ITEMIZED DISCLOSURE OF THE ACTUAL FEES, POINTS,

INTEREST, COSTS, AND CHARGES THAT WILL BE CHARGED AT CLOSING; AND IF

YOUR HOME WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST

YEAR, A NEW LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE

ONE YEAR HAS PASSED FROM THE CLOSING DATE OF THE OTHER LOAN, UNLESS

ON OATH YOU REQUEST AN EARLIER CLOSING DUE TO A DECLARED STATE OF

EMERGENCY;

"(N)
(repealed)
[
THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE

LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW
];

"(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE OF

INTEREST AUTHORIZED BY STATUTE;

"(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS

DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS

CONSTITUTION;

"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE

TEXAS CONSTITUTION MUST:

"(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO ANOTHER DEBT

EXCEPT A DEBT THAT IS SECURED BY YOUR HOME OR OWED TO ANOTHER

LENDER;

"(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS SECURITY;

"(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS WHICH HAVE

BLANKS FOR SUBSTANTIVE TERMS OF AGREEMENT LEFT TO BE FILLED IN;

"(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF JUDGMENT OR

POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT OR APPEAR IN

A LEGAL PROCEEDING ON YOUR BEHALF;

"(5) PROVIDE THAT YOU RECEIVE A COPY OF YOUR FINAL LOAN

APPLICATION AND ALL EXECUTED DOCUMENTS YOU SIGN AT CLOSING;

"(6) PROVIDE THAT THE SECURITY INSTRUMENTS CONTAIN A

DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION 50(a)(6),

ARTICLE XVI, OF THE TEXAS CONSTITUTION;

"(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL, THE LENDER

WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN ASSIGNMENT OF THE

LIEN, WHICHEVER IS APPROPRIATE;

"(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER CLOSING,

RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;

"(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE THE FAIR

MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES; AND

"(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL PRINCIPAL AND

INTEREST IF THE LENDER FAILS TO COMPLY WITH THE LENDER'S

OBLIGATIONS UNLESS THE LENDER CURES THE FAILURE TO COMPLY AS

PROVIDED BY SECTION 50(a)(6)(Q)(x), ARTICLE XVI, OF THE TEXAS

CONSTITUTION; AND

"(R) IF THE LOAN IS A HOME EQUITY LINE OF CREDIT:

"(1) YOU MAY REQUEST ADVANCES, REPAY MONEY, AND REBORROW

MONEY UNDER THE LINE OF CREDIT;

"(2) EACH ADVANCE UNDER THE LINE OF CREDIT MUST BE IN AN

AMOUNT OF AT LEAST $4,000;

"(3) YOU MAY NOT USE A CREDIT CARD, DEBIT CARD, OR SIMILAR

DEVICE, OR PREPRINTED CHECK THAT YOU DID NOT SOLICIT, TO OBTAIN

ADVANCES UNDER THE LINE OF CREDIT;

"(4) ANY FEES THE LENDER CHARGES MAY BE CHARGED AND COLLECTED

ONLY AT THE TIME THE LINE OF CREDIT IS ESTABLISHED AND THE LENDER

MAY NOT CHARGE A FEE IN CONNECTION WITH ANY ADVANCE;

"(5) THE MAXIMUM PRINCIPAL AMOUNT THAT MAY BE EXTENDED, WHEN

ADDED TO ALL OTHER DEBTS SECURED BY YOUR HOME, MAY NOT EXCEED 80

PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LINE OF

CREDIT IS ESTABLISHED;

"(6) IF THE PRINCIPAL BALANCE UNDER THE LINE OF CREDIT AT ANY

TIME EXCEEDS 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME, AS

DETERMINED ON THE DATE THE LINE OF CREDIT IS ESTABLISHED, YOU MAY

NOT CONTINUE TO REQUEST ADVANCES UNDER THE LINE OF CREDIT UNTIL THE

BALANCE IS LESS THAN 80 PERCENT OF THE FAIR MARKET VALUE; AND

"(7) THE LENDER MAY NOT UNILATERALLY AMEND THE TERMS OF THE

LINE OF CREDIT.

"THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS

CONSTITUTION. YOUR RIGHTS ARE GOVERNED BY SECTION 50, ARTICLE XVI,

OF THE TEXAS CONSTITUTION, AND NOT BY THIS NOTICE."

If the discussions with the borrower are conducted primarily

in a language other than English, the lender shall, before closing,

provide an additional copy of the notice translated into the

written language in which the discussions were conducted.

SECTION 2. This proposed constitutional amendment shall be

submitted to the voters at an election to be held November 4, 2025.

The ballot shall be printed to permit voting for or against the

proposition: "The constitutional amendment to remove the

requirement that a home equity loan be closed only at the office of

the lender, an attorney at law, or a title company."