Bill Text: TX HJR104 | 2021-2022 | 87th Legislature | Introduced

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Bill Title: Proposing a constitutional amendment authorizing the legislature to provide for exceptions to the requirement that a home equity loan be closed only at the office of the lender, an attorney at law, or a title company.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2021-05-10 - Committee report sent to Calendars [HJR104 Detail]

Download: Texas-2021-HJR104-Introduced.html

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87R5176 JES-D
By: Toth H.J.R. No. 104

A JOINT RESOLUTION
proposing a constitutional amendment authorizing the legislature
to provide for exceptions to 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) is closed only at the office of the lender, an
attorney at law, or a title company, except as otherwise provided by
statute;
(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) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER,
TITLE COMPANY, OR AN ATTORNEY AT LAW, UNLESS YOU QUALIFY FOR AN
EXCEPTION PROVIDED BY 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 2, 2021.
The ballot shall be printed to permit voting for or against the
proposition: "The constitutional amendment authorizing the
legislature to provide for exceptions to the requirement that a
home equity loan be closed only at the office of the lender, an
attorney at law, or a title company."