By Danburg, Eckels                                    H.B. No. 2150
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to voluntary, consensual encumbrances on homestead
    1-3  property.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Section 41.001(b), Property Code, is amended to
    1-6  read as follows:
    1-7        (b)  Encumbrances may be properly fixed on homestead property
    1-8  for:
    1-9              (1)  purchase money;
   1-10              (2)  taxes on the property; <or>
   1-11              (3)  work and material used in constructing
   1-12  improvements on the property if contracted for in writing before
   1-13  the material is furnished or the labor is performed and in a manner
   1-14  required for the conveyance of a homestead, with joinder of both
   1-15  spouses if the homestead claimant is married; or
   1-16              (4)  a loan or other written agreement extending
   1-17  credit, including a contract for an open-end account, that is
   1-18  secured in whole or in part by a voluntary lien on or other
   1-19  consensual security interest in a homestead created, with the
   1-20  consent of all owners and the spouse of each owner, in accordance
   1-21  with applicable statutory requirements.
   1-22        SECTION 2.  Title 79, Revised Statutes (Article 5069-1.01 et
   1-23  seq., Vernon's Texas Civil Statutes) is amended by adding Chapter
    2-1  17 to read as follows:
    2-2                       CHAPTER 17.  EQUITY LOANS
    2-3        Art. 17.01.  DEFINITIONS.  (1)  Equity Loan.  A loan or other
    2-4  written agreement extending credit, including a contract for an
    2-5  open-end account, that is secured in whole or in part by a
    2-6  voluntary lien on or other consensual security interest in a
    2-7  homestead created, with the consent of all owners and the spouse of
    2-8  each owner, in accordance with applicable statutory requirements.
    2-9        (2)  Reverse Mortgage.  A nonrecourse equity loan which
   2-10  provides cash advances to a borrower based on the equity in a
   2-11  borrower's owner-occupied principal residence homestead property
   2-12  and requires no payment of principal or interest until the entire
   2-13  loan becomes due and payable.
   2-14        (3)  Net Equity.  Net equity is the fair market value of the
   2-15  homestead property less the aggregate total of the outstanding
   2-16  balances of all indebtedness secured by valid encumbrances of
   2-17  record against the homestead property, on the date an equity loan
   2-18  is made.  For purposes of this Chapter, the date an equity loan is
   2-19  made is the date described in Article 17.01(6) herein.
   2-20        For the purpose of establishing the fair market value of the
   2-21  homestead property, a lender shall rely upon a current appraisal or
   2-22  evaluation, whichever may be appropriate, prepared in accordance
   2-23  with any state or federal requirements applicable to the lender.
   2-24  If no state or federal appraisal or evaluation requirements apply
   2-25  to a particular equity loan, the fair market value of the homestead
    3-1  property may be the value estimate set forth in the most recent ad
    3-2  valorem tax appraisal district valuation letter for the homestead
    3-3  property.
    3-4        For the purposes of this Chapter, a lender may rely upon, and
    3-5  assume the accuracy of, outstanding indebtedness figures obtained
    3-6  by usual and customary means from other lenders or from written
    3-7  loan statements supplied by the borrower.
    3-8        (4)  Advance.  Under an equity loan structured as a contract
    3-9  for an open account or as a reverse mortgage, an advance shall mean
   3-10  a draw or extension of credit as that term is defined in Article
   3-11  1.01(f), Title 79, Revised Statutes (Article 5069-1.01(f), Vernon's
   3-12  Texas Civil Statutes).
   3-13        (5)  Blended Equity Loan.  An equity loan made for the
   3-14  payment or refinancing of all or part of:  (a)  the purchase money
   3-15  of a homestead; (b)  taxes on homestead property; or (c)  the work
   3-16  and material used in constructing improvements on a homestead; and
   3-17  another authorized purpose.
   3-18        (6)  Date an Equity Loan is Made.  For purposes of this
   3-19  Chapter, the date the equity loan is made is the date that both of
   3-20  the following have occurred:  (a)  the promissory note or notes, or
   3-21  contract for an open account, evidencing the equity loan is
   3-22  executed; and (b)  a deed of trust or other security interest that
   3-23  creates a valid lien against the homestead property securing the
   3-24  equity loan is executed.
   3-25        Art. 17.02.  APPLICABILITY OF ACT.  (1)  Licensed Lenders.
    4-1  No person except a bank, savings and loan association, savings
    4-2  bank, or credit union, doing business under the laws of this state
    4-3  or the United States; a person licensed under Chapter 3, Title 79,
    4-4  Revised Statutes; or a lender approved by the U.S. Department of
    4-5  Housing and Urban Development may engage in the business of making,
    4-6  negotiating, or arranging equity loans.  Equity loans may be made
    4-7  in addition to any loans otherwise authorized for those lenders.
    4-8        (2)  Authority.  Notwithstanding any other law of this state,
    4-9  a lender making, negotiating, or arranging an equity loan under
   4-10  this Chapter is required to comply only with the requirements of
   4-11  this Chapter, any nonconflicting requirements of any law relied on
   4-12  as authority for the rate or amount of interest provided for in the
   4-13  loan, and the requirements of applicable federal law.
   4-14        (3)  Other Loans Included.  A loan made for the payment or
   4-15  refinancing of all or part of the purchase money of a homestead,
   4-16  taxes on homestead property, or the work and material used in
   4-17  constructing improvements on a homestead may be made under this
   4-18  Chapter, but the loan shall not be considered an equity loan and
   4-19  shall not be subject to this Chapter unless the parties elect in
   4-20  the loan documents to be governed by this Chapter; provided,
   4-21  however that blended equity loans shall be subject to this Chapter.
   4-22        (4)  Limitation on Encumbrances.  A homestead may not be
   4-23  encumbered by more than one equity loan.  This limitation shall not
   4-24  apply to any valid encumbrance on homestead property authorized by
   4-25  Section 41.001(b)(1), 41.001(b)(2) or 41.001(b)(3), Property Code,
    5-1  Revised Statutes.
    5-2        Art. 17.03.  LOAN REQUIREMENTS.  (1)  Advances and Repayment.
    5-3  An equity loan may provide for funding to or for the benefit of the
    5-4  borrower in one or more advances at a frequency and for a term as
    5-5  agreed by the parties.  An equity loan may provide for repayment in
    5-6  one or more payments on such payment schedule and in such amounts
    5-7  as agreed by the parties.
    5-8        (2)  Loan-to-Value Limitation.  The principal amount of an
    5-9  equity loan shall not exceed sixty per cent of the net equity of
   5-10  the homestead property securing the loan.  The maximum permissible
   5-11  principal amount of an equity loan structured as a contract for an
   5-12  open account shall not exceed sixty per cent of the net equity of
   5-13  the homestead property securing the loan.  In addition to the net
   5-14  equity limitation herein, in no event shall the principal amount of
   5-15  an equity loan plus the aggregate total of the outstanding balances
   5-16  of all other indebtedness secured by valid encumbrances of record
   5-17  against the homestead property exceed ninety per cent of the fair
   5-18  market value of the homestead property on the date the equity loan
   5-19  is made.  The principal amount of a blended equity loan shall not
   5-20  exceed ninety percent of the fair market value of the homestead
   5-21  property on the date the blended equity loan is made.
   5-22        Notwithstanding the foregoing, any advances made by a lender
   5-23  to protect a lien, security interest, or other valid encumbrance on
   5-24  the homestead property securing the loan including, without
   5-25  limitation, the payment of hazard insurance premiums, repairs to
    6-1  the homestead property, or payments on any indebtedness secured by
    6-2  a prior valid encumbrance on the homestead property, shall be
    6-3  secured by the lien, security interest, or other valid encumbrance
    6-4  on the homestead property, without regard to the loan-to-value
    6-5  limitations in this Chapter.
    6-6        (3)  Decrease in Value of Homestead.  A lender may not
    6-7  accelerate the remaining payments of an equity loan or demand
    6-8  payment in full of such loan solely because of a decrease in the
    6-9  market value of the homestead property securing the equity loan,
   6-10  except where such decrease in the market value is caused by
   6-11  substantial damage or destruction to the property, a condemnation
   6-12  or other taking thereof, the discovery of environmental hazards
   6-13  thereon, or the usage of the property in such a manner as to commit
   6-14  waste thereon or a nuisance thereby.  This section shall not
   6-15  prohibit a lender, if the loan documents so provide, from refusing
   6-16  to make additional advances under an equity loan other than a
   6-17  reverse mortgage, in the event of a decrease in the value of the
   6-18  homestead property, regardless of the cause of the decrease.
   6-19        (4)  Limitation on Additional Collateral.  Neither real nor
   6-20  personal property, other than manufactured homes, as defined in
   6-21  Article 5221f, Title 83, Chapter 1b, Revised Statutes (Article
   6-22  5221f et. seq., Vernon's Texas Civil Statutes), may be required as
   6-23  additional collateral on an equity loan except for personal
   6-24  property affixed, or to be affixed, to the homestead in a manner
   6-25  that would classify the property as a fixture.  This section does
    7-1  not prohibit or limit any statutory or common law lien or right of
    7-2  offset.  This section does not prevent a lender from requiring
    7-3  insurance as additional protection and security for a loan if the
    7-4  insurance is authorized by this Chapter.  Proceeds of a sale of the
    7-5  homestead or its fixtures, or proceeds of insurance covering the
    7-6  property, are not considered additional collateral and may be
    7-7  included as part of the security for the loan.
    7-8        (5)  Other Loans.  A lender may not accelerate the remaining
    7-9  payments of an equity loan or demand payment in full of such loan
   7-10  solely because of the borrower's default under any other
   7-11  indebtedness, whether owed to the lender or otherwise.
   7-12  Notwithstanding the foregoing, a lender may accelerate the
   7-13  remaining payments of an equity loan or demand payment in full of
   7-14  such loan solely because of the borrower's default under any
   7-15  indebtedness secured by a prior valid encumbrance on the homestead
   7-16  property.  This section shall not prohibit a lender, if the loan
   7-17  documents so provide, from refusing to make additional advances
   7-18  under an equity loan, other than a reverse mortgage, if the
   7-19  borrower has defaulted in the performance or payment of any other
   7-20  indebtedness owed to the lender or any other creditor.
   7-21        (6)  Notice.  The lender shall provide to a borrower, at the
   7-22  time the borrower executes an application for an equity loan, a
   7-23  boldface type notice, in all capital letters, as follows:
   7-24        "YOU ARE PLEDGING YOUR HOMESTEAD AS COLLATERAL TO
   7-25        SECURE THE PAYMENT OF A LOAN.  IN THE EVENT OF
    8-1        NONPAYMENT OR FAILURE TO PERFORM THE TERMS OF THE LOAN
    8-2        CONTRACT, THE LENDER HAS THE RIGHT TO FORECLOSE ON YOUR
    8-3        HOMESTEAD AND SELL IT TO SATISFY PAYMENT OF THE LOAN.
    8-4        "YOUR HOMESTEAD MAY NOT BE PLEDGED TO SECURE THE
    8-5        PAYMENT OF MORE THAN ONE EQUITY LOAN AT A TIME.
    8-6        "THE AMOUNT OF YOUR EQUITY LOAN MAY NOT BE GREATER THAN
    8-7        SIXTY PERCENT OF THE NET EQUITY YOU HAVE IN YOUR
    8-8        HOMESTEAD.  NET EQUITY IS THE DIFFERENCE BETWEEN THE
    8-9        VALUE OF YOUR HOMESTEAD AND THE TOTAL OF ALL
   8-10        OUTSTANDING DEBTS AGAINST IT.  IN ADDITION, ALL THE
   8-11        DEBTS AGAINST YOUR HOMESTEAD, INCLUDING THE EQUITY
   8-12        LOAN, MAY NOT EXCEED NINETY PERCENT OF THE VALUE OF
   8-13        YOUR HOMESTEAD.
   8-14        "YOUR LENDER MAY NOT REQUIRE YOU TO PLEDGE ANY PROPERTY
   8-15        YOU OWN OTHER THAN A MANUFACTURED HOME AS ADDITIONAL
   8-16        COLLATERAL FOR YOUR LOAN.
   8-17        "YOU HAVE AT LEAST FIFTEEN DAYS FROM THE DATE YOU
   8-18        REQUESTED THE LOAN TO CHANGE YOUR MIND ABOUT THE LOAN
   8-19        BEFORE YOU CAN SIGN THE LOAN DOCUMENTS.  IN ADDITION,
   8-20        YOU HAVE THREE DAYS AFTER YOU SIGN THE LOAN DOCUMENTS
   8-21        TO CHANGE YOUR MIND ABOUT THE LOAN.  IF YOU DECIDE NOT
   8-22        TO TAKE THE LOAN DURING ONE OF THESE TIME PERIODS, YOU
   8-23        WILL HAVE NO FURTHER OBLIGATION TO THE LENDER.
   8-24        "THE LOAN DOCUMENT CANNOT BE SIGNED AT YOUR HOME.  THEY
   8-25        MAY ONLY BE SIGNED AT THE LENDER'S OFFICE, AT A TITLE
    9-1        COMPANY, OR AT A TEXAS ATTORNEY'S OFFICE.
    9-2        "YOUR LENDER IS REQUIRED TO GIVE YOU A WRITTEN
    9-3        STATEMENT WITH ITS NAME AND ADDRESS AND YOUR NAME AND
    9-4        ADDRESS EITHER BEFORE OR WHEN YOU SIGN THE LOAN
    9-5        DOCUMENTS.  THE STATEMENT MUST ALSO INCLUDE A
    9-6        DESCRIPTION OF ANY INSURANCE YOU PURCHASED, AND HOW
    9-7        MUCH YOU PAID, IN CONNECTION WITH THE LOAN.
    9-8        "YOUR LENDER IS REQUIRED TO GIVE YOU A RECEIPT IF YOU
    9-9        MAKE A PAYMENT ON THE LOAN IN CASH."
   9-10        In the event a written loan application is not required by
   9-11  the business practices of the lender or by applicable law, the
   9-12  lender shall provide the notice required by this section to the
   9-13  borrower within three business days of the receipt of:  (i) an
   9-14  application fee in connection with the proposed equity loan; or
   9-15  (ii) a written or verbal request for credit from the borrower.
   9-16        (7)  Cooling-Off Period.  An equity loan may not be made
   9-17  prior to the expiration of at least fifteen calendar days from the
   9-18  date an application for such loan is executed by the borrower.  In
   9-19  the event a written loan application is not required by the
   9-20  business practices of the lender or by other applicable law, the
   9-21  cooling off period shall begin upon the date the earlier of the
   9-22  following occurs:  (i) the lender's receipt of an application fee
   9-23  in connection with the proposed equity loan; or (ii) the receipt of
   9-24  a written or verbal request for credit from the borrower.  For
   9-25  purposes of this Chapter, the date an equity loan is made is that
   10-1  date described in Article 17.01(6) herein.
   10-2        Noncompliance with this section shall increase the period of
   10-3  time within which any borrower or owner may rescind the equity loan
   10-4  by the number of days that the cooling off period falls short of
   10-5  the required fifteen day period.
   10-6        (8)  Right of Rescission.  Subject to the provisions in this
   10-7  section, each owner of the homestead property securing an equity
   10-8  loan shall have the right to rescind such loan.  Compliance with
   10-9  the provisions regarding the giving of notice of any right to
  10-10  rescind and the manner of exercising such right in accordance with
  10-11  any applicable state or federal law, including but not limited to
  10-12  Regulation Z, 12 C.F.R. Section 226.23, et. seq, shall be deemed to
  10-13  be compliance with this Chapter.
  10-14        The right of rescission required by this section shall apply
  10-15  to all equity loans made under this Chapter regardless of the
  10-16  purpose of the loan.  No owner of the homestead property securing
  10-17  an equity loan shall have the right to waive the right of
  10-18  rescission required by this section, regardless of whether
  10-19  applicable state or federal law provides for a waiver.
  10-20        (9)  Location of Closing.  An equity loan made under this
  10-21  Chapter may not be closed at the residence of the borrower, and all
  10-22  such loans must be closed at an office of the lender, a title
  10-23  company, or an attorney licensed to practice law in this state.
  10-24        Art. 17.04.  REVERSE MORTGAGES.  (1)  General Provisions.
  10-25  Notwithstanding any other section of this Chapter, a lender making,
   11-1  negotiating, or arranging a reverse mortgage under this Chapter is
   11-2  required to comply only with the requirements of this section, any
   11-3  nonconflicting requirements of this Chapter, and any nonconflicting
   11-4  requirements of any other applicable state or federal law.
   11-5        (a)  Prepayment.  Payment in whole or in part, shall be
   11-6  permitted without penalty at any time during the term of a reverse
   11-7  mortgage.
   11-8        (b)  Intervening Liens.  All advances made under a reverse
   11-9  mortgage and all interest on such advances shall have priority over
  11-10  any lien filed after the date on which a reverse mortgage is made.
  11-11        (c)  Rates of Interest.  A reverse mortgage may provide for
  11-12  an interest rate which is fixed or adjustable, and may also provide
  11-13  for interest that is contingent on appreciation in the fair market
  11-14  value of the homestead property.
  11-15        (d)  Periodic Advances.  If a reverse mortgage provides for
  11-16  periodic advances to a borrower, such advances shall not be reduced
  11-17  in amount or number based on any adjustment in the interest rate.
  11-18        (e)  Lender Default.  Lenders failing to make loan advances
  11-19  as required in the loan documents, and failing to cure such default
  11-20  as required in the loan documents, shall forfeit any right to
  11-21  collect all interest.
  11-22        (f)  Repayment.  A reverse mortgage shall become due and
  11-23  payable upon the occurrence of any one of the following events:
  11-24  (i)  the homestead property securing the loan is sold; (ii)  all
  11-25  borrowers cease occupying the homestead property as a principal
   12-1  residence; (iii)  any fixed maturity date agreed to by the lender
   12-2  and the borrower is reached; or (iv)  an event occurs which is
   12-3  specified in the loan documents, including the death of all
   12-4  borrowers, which jeopardizes the lender's security.  The reverse
   12-5  mortgage repayment requirement is also expressly subject to the
   12-6  following provisions:  (i)  temporary absences from the homestead
   12-7  property not exceeding sixty consecutive calendar days shall not
   12-8  cause the reverse mortgage to become due and payable;
   12-9  (ii)  temporary absences from the homestead property exceeding
  12-10  sixty consecutive calendar days but not less than one year shall
  12-11  not cause the reverse mortgage to become due and payable so long as
  12-12  the borrower has taken prior action which secures the home in a
  12-13  manner satisfactory to the lender; (iii)  the lender's right to
  12-14  collect reverse mortgage payments shall be subject to the
  12-15  applicable statute of limitations for a debt in Section 16.004(a),
  12-16  Civil Practices and Remedies Code, Revised Statutes; and Section
  12-17  3.122, Business and Commerce Code, Revised Statutes.
  12-18  Notwithstanding Section 3.122, the statute of limitations shall
  12-19  commence on the date the reverse mortgage becomes due and payable;
  12-20  and (iv) in the loan documents, the lender must prominently
  12-21  disclose any interest or fees to be charged during the period that
  12-22  commences on the date that the reverse mortgage becomes due and
  12-23  payable, and ends when repayment in full is made.
  12-24        (2)  Inapplicability of Related Statutes.  Reverse mortgage
  12-25  loans may be made or acquired without regard to the following
   13-1  provisions of any applicable state or federal statute:
   13-2              (a)  limitations on the purpose and use of future
   13-3  advances or any other mortgage proceeds;
   13-4              (b)  limitations on future advances to a term of years,
   13-5  or limitations on the term of open account advances;
   13-6              (c)  limitations on the term during which future
   13-7  advances take priority over intervening advances;
   13-8              (d)  requirements that a maximum loan amount be stated
   13-9  in the reverse mortgage loan documents;
  13-10              (e)  limitations on loan-to-value ratios;
  13-11              (f)  prohibitions on balloon payments;
  13-12              (g)  prohibitions on compounded interest and interest
  13-13  on interest;
  13-14              (h)  prohibitions on contracting for, charging or
  13-15  receiving any rate of interest authorized under Article 1.04, Title
  13-16  79, Revised Statutes (Article 5069-1.04, Vernon's Texas Civil
  13-17  Statutes) or any other state or federal statute authorizing a
  13-18  lender to contract for a rate of interest; and
  13-19              (i)  requirements that a percentage of the reverse
  13-20  mortgage proceeds must be advanced prior to the assignment of the
  13-21  reverse mortgage.
  13-22        (3)  Treatment of Reverse Mortgage Loan Proceeds by Public
  13-23  Benefit Programs.  (a)  Reverse mortgage loan payments made to a
  13-24  borrower shall be treated as proceeds from a loan and not as income
  13-25  for the purpose of determining eligibility and benefits under
   14-1  means-tested programs of aid to individuals.
   14-2              (b)  Undisbursed funds shall be treated as equity in a
   14-3  borrower's home and not as proceeds from a loan for the purpose of
   14-4  determining eligibility and benefits under means-tested programs of
   14-5  aid to individuals.
   14-6              (c)  This paragraph applies to any law relating to
   14-7  payments, allowance, benefits, or services provided on a
   14-8  means-tested basis by this State, including but not limited to
   14-9  supplemental security income, low-income energy assistance,
  14-10  property tax relief, medical assistance, and general assistance.
  14-11        (4)  Consumer Information and Counseling.  No reverse
  14-12  mortgage commitment shall be made by a lender unless the loan
  14-13  applicant attests, in writing, that the applicant received from the
  14-14  lender at time the notice is required by Article 17.03(6) of this
  14-15  Chapter a statement prepared by the Consumer Credit Commissioner
  14-16  regarding the advisability and availability of independent
  14-17  information and counseling services on reverse mortgages.  The
  14-18  Consumer Credit Commissioner shall be responsible for:
  14-19  (a)  developing the content and format of the statement;
  14-20  (b)  providing independent consumer information on reverse
  14-21  mortgages and their alternatives; and (c)  referring consumers to
  14-22  independent counseling services with expertise in reverse
  14-23  mortgages.
  14-24        Art. 17.05.  INTEREST, CHARGES, AND FEES.  (1)  Rates of
  14-25  Interest.  A lender may contract for and receive on an equity loan
   15-1  any fixed or variable rate of interest that does not exceed any
   15-2  rate of interest authorized under Article 1.04, Title 79, Revised
   15-3  Statutes (Article 5069-1.04, Vernon's Texas Civil Statutes) or any
   15-4  other state or federal statute authorizing the lender to contract
   15-5  for a rate of interest.  Interest shall be accrued and earned by
   15-6  applying the simple annual interest rate(s) under the loan contract
   15-7  to the principal balance, including additions to principal
   15-8  authorized by the loan contract, from time to time unpaid until the
   15-9  date of payment in full.
  15-10        (2)  Other Insurance Premiums.  Premiums for insurance
  15-11  written in accordance with Article 17.06 of this Chapter, may be
  15-12  added to the loan contract.
  15-13        (3)  Contractual Fees and Charges.  If the contract for an
  15-14  equity loan so provides, a lender may collect the following fees
  15-15  and charges in connection with an equity loan:
  15-16              (a)  expenses or costs paid, or that will be paid, to a
  15-17  third party for any abstract, title report, attorneys' fees for
  15-18  legal opinion or document preparation, title insurance, property
  15-19  damage insurance, credit life, accident or health insurance,
  15-20  escrows for future payments of taxes and insurance, annuity,
  15-21  appraisal or evaluation, survey, and credit reports;
  15-22              (b)  fees prescribed by law which actually are, or will
  15-23  be paid, to public officials for determining the existence of, or
  15-24  for perfecting, or releasing or satisfying any lien, security
  15-25  interest, or other valid encumbrance related to an equity loan;
   16-1              (c)  expenses or costs necessary or proper for the
   16-2  protection of the lender that are actually incurred in the making
   16-3  or servicing of an equity loan;
   16-4              (d)  bona fide commitment fees for the separate
   16-5  consideration of committing to make an equity loan in the future;
   16-6              (e)  any and all other fees authorized in this Chapter
   16-7  or by applicable state or federal law that are not interest under
   16-8  any law that defines interest or limits the rate of interest that
   16-9  may be charged;
  16-10              (f)  reasonable fees or charges paid to the trustee in
  16-11  connection with a deed of trust or similar instrument executed in
  16-12  connection with the equity loan, including fees for enforcing the
  16-13  lien, posting for sale, selling, or releasing the property secured
  16-14  by the deed of trust;
  16-15              (g)  reasonable fees paid to an attorney who is not an
  16-16  employee of the lender in the collection of a delinquent equity
  16-17  loan and any court costs and fees incurred in the collection of, or
  16-18  foreclosure of, any lien created by the loan.
  16-19              (h)  a fee of $25 or less for the return by a
  16-20  depository institution of a dishonored check, negotiable order of
  16-21  withdrawal, share draft, or deposit draft offered in full or
  16-22  partial payment of an equity loan; and
  16-23              (i)  a late charge or penalty if any scheduled payment
  16-24  or any portion thereof continues unpaid for 10 days or more
  16-25  following the date the payment is due.  Only one penalty authorized
   17-1  by this section of this Chapter may be charged for each past due
   17-2  scheduled payment.  The penalty or late charge may not exceed five
   17-3  percent of the unpaid amount of the scheduled payment.  The penalty
   17-4  or late charge is not interest under any law that defines interest
   17-5  or limits the rate of interest that may be charged, and it may be
   17-6  charged and collected in addition to the interest authorized by
   17-7  law.
   17-8        Art. 17.06.  INSURANCE.  On any equity loan, a lender may
   17-9  request or require a borrower to provide insurance:
  17-10        (a)  in the same amounts and under the same conditions as may
  17-11  apply to secondary mortgage loans as provided by Article 5.02 and
  17-12  5.03, Title 79, Revised Statutes (Article 5069-5.02 and 5.03,
  17-13  Vernon's Texas Civil Statutes);
  17-14        (b)  in the amount and under the terms and conditions of the
  17-15  Home Equity Conversion Mortgage Insurance program (Housing and
  17-16  Community Development Act of 1987; Pub. L. 100-242; National
  17-17  Housing Act (12 U.S.C. 1715 2-20); 24 C.F.R. Section 206 et. seq.);
  17-18  and
  17-19        (c)  in the same amounts and under the same conditions as
  17-20  provided for by any state or federal statute authorizing or
  17-21  requiring any type of insurance relating to a loan other extension
  17-22  of credit, including such insurance authorized or under Articles
  17-23  1-7 and Article 15, Title 79, Revised Statutes (Article 5069-1.01 -
  17-24  7.11; Article 5069-15.01 - 15.11, Vernon's Texas Civil Statutes).
  17-25        Art. 17.07.  LENDER'S DUTY TO BORROWER.  (1)  Written
   18-1  Statement.  On any equity loan, the lender shall deliver to the
   18-2  borrower, or to one of the borrowers if more than one, a copy of
   18-3  the note or contract for an open account and all other documents
   18-4  signed by the borrower and a written statement showing the
   18-5  following information;
   18-6              (a)  the names and addresses of the borrower and of the
   18-7  lender; and
   18-8              (b)  the types of insurance, if any, for which a charge
   18-9  is included in the loan agreement and the charge to the borrower
  18-10  for the insurance.
  18-11        (2)  Copies.  If the note or other loan documents show the
  18-12  information required in (1), a copy of the note or other loan
  18-13  documents may be delivered rather than a separate statement.
  18-14        (3)  Receipt.  The lender shall give a receipt to a person
  18-15  making a cash payment on any loan if requested by borrower.
  18-16        (4)  Prepayment.  No prepayment fee, charge or penalty may be
  18-17  collected on any equity loan except as authorized by Article 1.07,
  18-18  Title 79, Revised Statutes (Article 5069-1.07, Vernon's Texas Civil
  18-19  Statutes.
  18-20        (5)  Release.  On termination and full payment of an equity
  18-21  loan, the holder shall, within a reasonable time, cancel and return
  18-22  any note to the borrower and shall furnish to the borrower releases
  18-23  of any mortgage, deed of trust, security interest, or other
  18-24  interest securing the loan.
  18-25        Art. 17.08.  PROHIBITED PRACTICES.  (1)  Assignment of Wages.
   19-1  A lender may not accept an assignment of wages as security for any
   19-2  loan made under this Chapter.
   19-3        (2)  Confession of Judgment.  In connection with an equity
   19-4  loan, a lender may not accept any confession of judgment or any
   19-5  power of attorney running to the lender or to any third person to
   19-6  confess judgment or to appear for a borrower in a judicial
   19-7  proceeding.
   19-8        (3)  Blanks in Instruments.  A lender may not accept any
   19-9  instrument in which blanks are left to be filled in after an equity
  19-10  loan is made.
  19-11        SECTION 3.  EFFECTIVE DATE.  This Act takes effect on April 1
  19-12  of the year following the date of the constitutional amendment
  19-13  proposed by _____H.J.R.  No. _____, Acts of the _____th
  19-14  Legislature, _____ Called Session, 199 .
  19-15  If that amendment is not approved by the voters, this Act has no
  19-16  effect.
  19-17        SECTION 4.  SEVERABILITY.  If any provision of this Act or
  19-18  its application to any person or circumstance is held invalid, the
  19-19  invalidity does not affect other provisions or applications of this
  19-20  Act that can be given effect without the invalid provision or
  19-21  application, and to this end the provisions of this Act are
  19-22  declared to be severable.
  19-23        SECTION 5.  The importance of this legislation and the
  19-24  crowded condition of the calendars in both houses create an
  19-25  emergency and an imperative public necessity that the
   20-1  constitutional rule requiring bills to be read on three several
   20-2  days in each house be suspended, and this rule is hereby suspended.