By: Patterson, Brown S.J.R. No. 46
SENATE JOINT RESOLUTION
1-1 proposing a constitutional amendment allowing voluntary, consensual
1-2 encumbrances on homestead property.
1-3 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article XVI, Section 50, of the Texas
1-5 Constitution is amended to read as follows:
1-6 Sec. 50 (a) The homestead of a family, or of a single adult
1-7 person shall be, and is hereby protected from forced sale, for the
1-8 payment of all debts except for;
1-9 (1) The purchase money thereof, or a part of such
1-10 purchase money;
1-11 (2) <,> the taxes due thereon;
1-12 (3) <, or for> work and material used in constructing
1-13 improvements thereon, if <and in this last case only when> the work
1-14 and material are contracted for in writing, with the consent of
1-15 both spouses, in the case of a family homestead, given in the same
1-16 manner as is required in making a sale and conveyance of the
1-17 homestead; or
1-18 (4) an equity loan which is a loan or other written
1-19 agreement extending credit, including a contract for an open-end
1-20 account, that is secured in whole or in part by a voluntary lien on
1-21 or other consensual security interest in a homestead created with
1-22 the consent of all owners and the spouse of each owner, in
1-23 accordance with applicable statutory requirements.
2-1 (b) The <nor may the> owner or claimant of the property
2-2 claimed as homestead, if married, may not sell or abandon the
2-3 homestead without the consent of all owners or the other spouse,
2-4 given in such manner as may be prescribed by law.
2-5 (c) No mortgage, trust deed or other lien on the homestead
2-6 shall ever be valid except for those securing the debts described
2-7 by this section <purchase money therefor, or improvements made
2-8 thereon, as hereinbefore provided>, whether such mortgage, or trust
2-9 deed, or other lien, shall have been created by the owner alone, or
2-10 together with his or her spouse, in case the owner is married. All
2-11 pretended sales of the homestead involving any condition of
2-12 defeasance shall be void.
2-13 (d) No person except a bank, savings and loan association,
2-14 savings bank, or credit union, doing business under the laws of
2-15 this state or the United States; a person licensed under Chapter 3,
2-16 Title 79, Revised Statutes; or a lender approved by the U.S.
2-17 Department of Housing and Urban Development may engage in the
2-18 business of making, negotiating, or arranging equity loans.
2-19 (e) A homestead may not be encumbered by more than one
2-20 equity loan. This limitation shall not apply to any valid
2-21 encumbrance on homestead property authorized by paragraphs (a)(1),
2-22 (a)(2) or (a)(3) of this section.
2-23 (f) The principal amount of an equity loan shall not exceed
2-24 sixty percent of the net equity of the homestead property securing
2-25 the loan. The maximum permissible principal amount of an equity
3-1 loan structured as a contract for an open account shall not exceed
3-2 sixty percent of the net equity of the homestead property securing
3-3 the loan. Net equity is the fair market value of the homestead
3-4 property less the aggregate total of the outstanding balances of
3-5 all indebtedness secured by valid encumbrances of record against
3-6 the homestead property, on the date an equity loan is made.
3-7 In addition to the net equity limitation herein, in no event
3-8 shall the principal amount of an equity loan plus the aggregate
3-9 total of the outstanding balances of all other indebtedness secured
3-10 by valid encumbrances of record against the homestead property
3-11 exceed ninety percent of the fair market value of the homestead
3-12 property on the date the equity loan is made. The principal amount
3-13 of a blended equity loan shall not exceed ninety percent of the
3-14 fair market value of the homestead property on the date the blended
3-15 equity loan is made. A blended equity loan is a equity loan made
3-16 for the payment or refinancing of all or part of: (1) the
3-17 purchase money of a homestead; (2) taxes on homestead property; or
3-18 (3) the work and material used in constructing improvements on a
3-19 homestead; and another authorized purpose.
3-20 Notwithstanding the foregoing, any advances made by a lender
3-21 to protect a lien, security interest, or other valid encumbrance on
3-22 the homestead property securing the loan including, without
3-23 limitation, the payment of hazard insurance premiums, repairs to
3-24 the homestead property, or payments on any indebtedness secured by
3-25 a prior valid encumbrance on the homestead property, shall be
4-1 secured by the lien, security interest, or other valid encumbrance
4-2 on the homestead property, without regard to the loan-to-value
4-3 limitations in this section.
4-4 (g) A lender may not accelerate the remaining payments of an
4-5 equity loan or demand payment in full of such loan solely because
4-6 of a decrease in the market value of the homestead property
4-7 securing the equity loan, except where such decrease in the market
4-8 value is caused by substantial damage or destruction to the
4-9 property, a condemnation or other taking thereof, the discovery of
4-10 environmental hazards thereon, or the usage of the property in such
4-11 a manner as to commit waste thereon or a nuisance thereby. This
4-12 section shall not prohibit a lender, if the loan documents so
4-13 provide, from refusing to make additional advances under an equity
4-14 loan other than a reverse mortgage, in the event of a decrease in
4-15 the value of the homestead property, regardless of the cause of the
4-16 decrease.
4-17 SECTION 2. This proposed constitutional amendment shall be
4-18 submitted to the voters at an election to be held November _____,
4-19 1993. The ballot shall be printed to provide for voting for or
4-20 against the proposition: "The constitutional amendment granting
4-21 the right to borrow on equity in homesteads under certain limited
4-22 circumstances and maintaining homestead protections including those
4-23 against judgment creditors."