By Danburg                                             H.B. No. 749
       74R4173 DWS-F
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to a voluntary, consensual encumbrance on homestead
    1-3  property for the purpose of an equity loan.
    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 as
   1-13  provided by Sections 53.059(a), (b), and (c); or
   1-14              (4)  an equity loan, as defined by Article 5A.01, Title
   1-15  79, Revised Statutes (Article 5069-5A.01, Vernon's Texas Civil
   1-16  Statutes).
   1-17        SECTION 2.  Title 79, Revised Statutes (Article 5069-1.01 et
   1-18  seq., Vernon's Texas Civil Statutes), is amended by adding Chapter
   1-19  5A to read as follows:
   1-20                       CHAPTER 5A.  EQUITY LOANS
   1-21        Art. 5A.01.  DEFINITIONS.  In this chapter:
   1-22              (1)  "Advance"  means a draw or extension of credit as
   1-23  described by Article 1.01(f) of this title under an equity loan
   1-24  structured as a contract for an open-end account or as a reverse
    2-1  mortgage.
    2-2              (2)  "Application" means an oral or written request for
    2-3  an equity loan made according to procedures established by the
    2-4  lender.
    2-5              (3)  "Blended equity loan"  means an equity loan made
    2-6  for:
    2-7                    (A)  the payment or refinancing of all or part of
    2-8  the purchase money of a homestead, taxes on homestead property, or
    2-9  the work and material used in constructing improvements on a
   2-10  homestead or for the refinancing of a valid lien given in renewal
   2-11  and extension of a lien made for such a purpose; and
   2-12                    (B)  another purpose.
   2-13              (4)  "Business day" means a day other than a Sunday or
   2-14  a legal public holiday listed by 5 U.S.C. Section 6103(a).
   2-15              (5)  "Equity loan"  means an extension of credit under
   2-16  a written agreement, including a contract for an open-end account,
   2-17  blended equity loan, or reverse mortgage, that is secured in whole
   2-18  or in part by a voluntary lien on or other consensual security
   2-19  interest in a homestead created with the consent of each owner and
   2-20  the spouse of each owner in accordance with applicable statutory
   2-21  requirements.
   2-22              (6)  "Reverse mortgage" means a nonrecourse equity
   2-23  loan:
   2-24                    (A)  under which advances are provided to a
   2-25  borrower based on the equity in a borrower's residence homestead
   2-26  property; and
   2-27                    (B)  that requires no payment of principal or
    3-1  interest until the entire loan becomes due and payable.
    3-2        Art. 5A.02.  CONSTRUCTION OF CHAPTER.  (a)  For the purposes
    3-3  of this chapter, an equity loan is considered made on the earliest
    3-4  date on which both of the following are executed:
    3-5              (1)  each promissory note, or contract for an open
    3-6  account, evidencing the equity loan; and
    3-7              (2)  a deed of trust or other security instrument
    3-8  securing the equity loan.
    3-9        (b)  In establishing the fair market value of homestead
   3-10  property, a lender shall rely on an appraisal or evaluation,
   3-11  whichever may be appropriate, prepared in accordance with a state
   3-12  or federal requirement applicable to the lender.  If no state or
   3-13  federal appraisal or evaluation requirement applies to an equity
   3-14  loan, the fair market value of the homestead property may be, at
   3-15  the lender's option, the value estimate set forth in:
   3-16              (1)  the most recent ad valorem tax appraisal district
   3-17  valuation letter for the homestead property; or
   3-18              (2)  an appraisal prepared by a licensed or certified
   3-19  appraiser under the Texas Appraiser Licensing and Certification Act
   3-20  (Article 6573a.2, Vernon's Texas Civil Statutes).
   3-21        Art. 5A.03.  APPLICABILITY OF CHAPTER.  (a)  A lender making,
   3-22  negotiating, or arranging an equity loan, including a reverse
   3-23  mortgage, is required to comply with:
   3-24              (1)  this chapter;
   3-25              (2)  any nonconflicting requirement of another law
   3-26  relied on as authority for the rate or amount of interest provided
   3-27  for in the loan; and
    4-1              (3)  applicable federal law.
    4-2        (b)  A loan made for the payment or refinancing of all or
    4-3  part of the purchase money of a homestead, taxes on homestead
    4-4  property, including the refinancing of valid and subsisting ad
    4-5  valorem tax liens, federal tax liens, and maintenance fee liens, or
    4-6  the work and material used in constructing improvements on a
    4-7  homestead, or a loan made in renewal and extension of such a loan,
    4-8  is not an equity loan, but may be made subject to this chapter if
    4-9  the parties in the loan documents agree that the loan is to be
   4-10  governed by this chapter.  A blended equity loan is governed by
   4-11  this chapter.
   4-12        Art. 5A.04.  ELIGIBLE PROPERTY.  An equity loan may not be
   4-13  secured by homestead property that is not in a city, town, or
   4-14  village.
   4-15        Art. 5A.05.  AUTHORIZED LENDERS.  (a)  An equity loan may be
   4-16  made only by:
   4-17              (1)  a bank, savings and loan association, savings
   4-18  bank, or credit union doing business under the laws of this state
   4-19  or of the United States;
   4-20              (2)  a person licensed under Chapter 3 of this title;
   4-21  or
   4-22              (3)  a person approved as a mortgagee by the United
   4-23  States Department of Housing and Urban Development to make insured
   4-24  loans under the National Housing Act (12 U.S.C. Section 1701 et
   4-25  seq.).
   4-26        (b)  A lender under Subsection (a) of this section may make
   4-27  an equity loan in addition to any other loan authorized for that
    5-1  lender.
    5-2        Art. 5A.06.  ONE EQUITY LOAN AUTHORIZED.  At any time a
    5-3  homestead may not be encumbered by more than one equity loan in
    5-4  addition to a valid encumbrance on homestead property authorized by
    5-5  Section 41.001(b)(1), (2), or (3), Property Code.
    5-6        Art. 5A.07.  ADVANCES AND REPAYMENT DETERMINED BY AGREEMENT.
    5-7  An equity loan may provide for funding to or for the benefit of the
    5-8  borrower in one or more advances at a frequency and for a term  to
    5-9  which the parties agree.  An equity loan may provide for repayment
   5-10  in one or more payments on a payment schedule and in amounts to
   5-11  which the parties agree.
   5-12        Art. 5A.08.  LIMITATION ON EQUITY LOAN TO PERSON 65 YEARS OF
   5-13  AGE OR OLDER.  A lender may not make an equity loan other than a
   5-14  reverse mortgage if a borrower under the loan is 65 years of age or
   5-15  older.
   5-16        Art. 5A.09.  PERCENT OF VALUE LIMIT.   The principal amount
   5-17  of an equity loan plus the aggregate total of the outstanding
   5-18  balances of other indebtedness secured by valid encumbrances of
   5-19  record against the homestead property may not exceed 90 percent of
   5-20  the fair market value of the homestead property on the date the
   5-21  equity loan is made.  The principal amount of a blended equity loan
   5-22  may not exceed 90 percent of the fair market value of the homestead
   5-23  property on the date the blended equity loan is made.
   5-24        Art. 5A.10.  ADVANCE NOT INCLUDED AS OUTSTANDING
   5-25  INDEBTEDNESS.  For the purposes of Article 5A.09 of this title, the
   5-26  aggregate total of the outstanding balances of indebtedness secured
   5-27  by valid encumbrances of record against the homestead property does
    6-1  not include any advance made by a lender to protect a lien,
    6-2  security interest, or other valid encumbrance on the homestead
    6-3  property securing the loan, including the payment of hazard
    6-4  insurance premiums, repairs to the homestead property, or payments
    6-5  on any indebtedness secured by a prior valid encumbrance on the
    6-6  homestead property.
    6-7        Art. 5A.11.  LIMIT ON COLLATERAL AND USE OF PROCEEDS.  (a)  A
    6-8  lender may not require or accept real or personal property as
    6-9  additional collateral on an equity loan, except for a manufactured
   6-10  home, as defined in the Texas Manufactured Housing Standards Act
   6-11  (Article 5221f, Vernon's Texas Civil Statutes), personal property
   6-12  affixed or to be affixed to the homestead in a manner that would
   6-13  make the property a fixture, or rents derived from homestead
   6-14  property.  Only the homestead property securing an equity loan may
   6-15  be  collateral for the equity loan.
   6-16        (b)  A lender may not:
   6-17              (1)  require or accept a borrower's homestead property,
   6-18  regardless of whether the property was previously encumbered by an
   6-19  existing equity loan, as collateral on a debt not described by
   6-20  Section 41.001(b), Property Code; or
   6-21              (2)  require a borrower to apply the proceeds of an
   6-22  equity loan to repay a debt not described by Section 41.001(b),
   6-23  Property Code.
   6-24        (c)  This section does not:
   6-25              (1)  prohibit or limit any statutory or common law lien
   6-26  or right of offset; or
   6-27              (2)  prevent a lender from requiring insurance
    7-1  authorized by this chapter as additional security for an equity
    7-2  loan.
    7-3        (d)  Proceeds of a sale of the homestead or its fixtures, or
    7-4  proceeds of insurance covering the property, are not considered
    7-5  additional collateral and may be included as part of the security
    7-6  for the loan.
    7-7        (e)  A provision of a deed of trust or other security
    7-8  agreement that secures a loan other than an equity loan and that
    7-9  makes the deed of trust or security interest applicable to other
   7-10  indebtedness of the borrower does not apply to an equity loan of
   7-11  the borrower to the extent that the provision would cause the
   7-12  equity loan to be secured by property other than the borrower's
   7-13  homestead property.  This subsection does not affect the validity
   7-14  of the provision as applied to a loan other than an equity loan.
   7-15        Art. 5A.12.  ACCELERATION PROHIBITED.  (a)  A lender may not
   7-16  accelerate the remaining payments of an equity loan or demand
   7-17  payment of the loan in full because of a decrease in the market
   7-18  value of the homestead property securing the equity loan, unless
   7-19  the decrease in the market value is caused by substantial damage or
   7-20  destruction to the property, a condemnation or other taking of the
   7-21  property, the discovery of an environmental hazard on the property,
   7-22  or the use of the property in a manner that constitutes waste on
   7-23  the property or a nuisance.  This section does not prohibit a
   7-24  lender, if permitted by the loan documents, from refusing to make
   7-25  additional advances under an equity loan, other than a reverse
   7-26  mortgage,  if the market value of the homestead property decreases,
   7-27  regardless of the cause of the decrease.
    8-1        (b)  A lender may not accelerate the remaining payments of an
    8-2  equity loan or demand payment of the loan in full because of the
    8-3  borrower's default under any other indebtedness not secured by a
    8-4  prior valid encumbrance on the homestead property, regardless of
    8-5  whether the indebtedness is owed to the lender.  This section does
    8-6  not prohibit a lender, if permitted by the loan documents, from
    8-7  refusing to make additional advances under an equity loan, other
    8-8  than a reverse mortgage, if the borrower has defaulted in the
    8-9  performance or payment of another indebtedness owed to the lender
   8-10  or another creditor.
   8-11        Art. 5A.13.  NOTICE.  (a)  The lender in an equity loan shall
   8-12  provide to a borrower a boldfaced type notice, in all capital
   8-13  letters, as follows:
   8-14              "YOU ARE PLEDGING YOUR HOMESTEAD AS COLLATERAL TO
   8-15        SECURE THE PAYMENT OF A LOAN.  IF YOU DO NOT PAY OR IF
   8-16        YOU FAIL TO PERFORM THE TERMS OF THE LOAN CONTRACT, THE
   8-17        LENDER HAS THE RIGHT TO FORECLOSE ON YOUR HOMESTEAD AND
   8-18        SELL IT TO PAY THE LOAN.
   8-19              "YOUR HOMESTEAD MAY NOT BE PLEDGED TO SECURE THE
   8-20        PAYMENT OF MORE THAN ONE EQUITY LOAN AT A TIME.
   8-21              "ALL THE DEBTS AGAINST YOUR HOMESTEAD, INCLUDING
   8-22        THE EQUITY LOAN, MAY NOT EXCEED 90 PERCENT OF THE VALUE
   8-23        OF YOUR HOMESTEAD.
   8-24              "YOUR LENDER MAY NOT ACCEPT ANY OTHER PROPERTY
   8-25        YOU OWN, OTHER THAN A MANUFACTURED HOME, AS ADDITIONAL
   8-26        COLLATERAL FOR YOUR LOAN.
   8-27              "YOU HAVE AT LEAST 15 DAYS FROM THE DATE YOU
    9-1        REQUESTED THE LOAN TO CHANGE YOUR MIND ABOUT THE LOAN
    9-2        BEFORE YOU CAN SIGN THE LOAN DOCUMENTS.  IN ADDITION,
    9-3        YOU HAVE THREE BUSINESS DAYS AFTER YOU SIGN THE LOAN
    9-4        DOCUMENTS TO CHANGE YOUR MIND ABOUT THE LOAN.  IF YOU
    9-5        DECIDE NOT TO TAKE THE LOAN DURING ONE OF THESE
    9-6        PERIODS, YOU WILL HAVE NO FURTHER OBLIGATION TO THE
    9-7        LENDER.
    9-8              "THE LOAN DOCUMENT MAY NOT BE SIGNED AT YOUR
    9-9        HOME, AND MAY BE SIGNED ONLY AT THE LENDER'S OFFICE, AT
   9-10        A TITLE COMPANY, OR AT A TEXAS ATTORNEY'S OFFICE.
   9-11              "UNLESS THE INFORMATION IS CONTAINED IN YOUR NOTE
   9-12        OR ANOTHER LOAN DOCUMENT, YOUR LENDER IS REQUIRED TO
   9-13        GIVE YOU A WRITTEN STATEMENT WITH ITS NAME AND ADDRESS
   9-14        AND YOUR NAME AND ADDRESS EITHER BEFORE OR WHEN YOU
   9-15        SIGN THE LOAN DOCUMENTS.  THE STATEMENT MUST ALSO
   9-16        INCLUDE A DESCRIPTION OF ANY INSURANCE YOU PURCHASED,
   9-17        AND HOW MUCH YOU PAID, IN CONNECTION WITH THE LOAN.
   9-18              "ON YOUR REQUEST, YOUR LENDER IS REQUIRED TO GIVE
   9-19        YOU A RECEIPT IF YOU MAKE A PAYMENT ON THE LOAN IN
   9-20        CASH."
   9-21        (b)  The lender shall provide the notice when the lender
   9-22  receives an application for the loan.
   9-23        Art. 5A.14.  WAITING PERIOD; RESCISSION.  (a)  An equity loan
   9-24  may not be made before the 16th day after the date the lender
   9-25  receives an application for the loan.
   9-26        (b)  Each owner of residential homestead property securing an
   9-27  equity loan may rescind the loan.  Compliance with all applicable
   10-1  state and federal law regarding the  right to rescind, including 12
   10-2  C.F.R. Sections 226.15 et seq. and 226.23 et seq., is considered
   10-3  compliance with this chapter regarding rescission.
   10-4        (c)  The right of rescission provided by this section applies
   10-5  to each equity loan made under this chapter, regardless of the
   10-6  purpose of the loan.  An owner of the residential homestead
   10-7  property securing an equity loan may not waive the right of
   10-8  rescission required by this section, regardless of whether
   10-9  applicable state or federal law provides for a waiver.
  10-10        (d)  If an equity loan is made before the expiration of the
  10-11  waiting period provided by Subsection (a) of this section, the
  10-12  period for rescission is extended by a number of days equal to the
  10-13  number of days before the end of the waiting period that the loan
  10-14  is made.
  10-15        Art. 5A.15.  LOCATION OF CLOSING.  An equity loan  may not be
  10-16  closed at the residence of the borrower and shall be closed only at
  10-17  an office of the lender, a title company, or an attorney licensed
  10-18  to practice law in this state.  For the purposes of this section,
  10-19  "closing" means the execution by the borrower of a promissory note
  10-20  and the security instruments securing the loan.
  10-21        Art. 5A.16.  GENERAL PROVISIONS RELATING TO REVERSE
  10-22  MORTGAGES.  (a)  Payment in whole or in part shall be permitted
  10-23  without penalty at any time during the term of a reverse mortgage.
  10-24        (b)  Advances made under a reverse mortgage and interest on
  10-25  those advances have priority over a lien filed after the date on
  10-26  which the  mortgage is made.
  10-27        (c)  A reverse mortgage may provide for an interest rate that
   11-1  is fixed or adjustable and may also provide for interest that is
   11-2  contingent on appreciation in the fair market value of the
   11-3  homestead property.
   11-4        (d)  If a reverse mortgage provides for periodic advances to
   11-5  a borrower, the advances may not be reduced in amount or number
   11-6  because of an adjustment in the interest rate.
   11-7        (e)  A lender who fails to make loan advances as required in
   11-8  the loan documents, and who fails to cure the default as required
   11-9  in the loan documents, forfeits any right to collect all interest.
  11-10        Art. 5A.17.  REPAYMENT OF REVERSE MORTGAGE.  (a)  A reverse
  11-11  mortgage becomes due and payable if:
  11-12              (1)  the homestead property securing the loan is sold;
  11-13              (2)  all borrowers cease occupying the homestead
  11-14  property as a principal residence;
  11-15              (3)  any fixed maturity date agreed to by the lender
  11-16  and the borrower is reached; or
  11-17              (4)  an event that is specified in the loan documents,
  11-18  including the death of all borrowers, occurs and jeopardizes the
  11-19  lender's security.
  11-20        (b)  Temporary absences from the homestead property by all
  11-21  borrowers for a period not exceeding 60 consecutive calendar days
  11-22  may not cause the reverse mortgage to become due and payable.
  11-23  Temporary absences from the homestead property by all borrowers for
  11-24  a period exceeding 60 consecutive calendar days but not exceeding
  11-25  one year may not cause the reverse mortgage to become due and
  11-26  payable if the borrower has taken prior action to secure the home
  11-27  in a manner satisfactory to the lender.
   12-1        (c)  The lender's right to collect reverse mortgage payments
   12-2  is subject to the applicable statute of limitations for a debt
   12-3  provided by Section 16.004(a), Civil Practice and Remedies Code,
   12-4  and by Section 3.122, Business & Commerce Code, except that the
   12-5  period of limitations begins on the date the reverse mortgage
   12-6  becomes due and payable.
   12-7        (d)  In the loan documents, the lender must prominently
   12-8  disclose any interest or fee to be charged during the period that
   12-9  begins on the date the reverse mortgage becomes due and payable and
  12-10  ends when repayment is made in full.
  12-11        Art. 5A.18.  INAPPLICABILITY OF OTHER STATUTES TO REVERSE
  12-12  MORTGAGE.  A reverse mortgage loan may be made or acquired without
  12-13  regard to the following provisions of any applicable state statute:
  12-14              (1)  a limitation on the purpose and use of future
  12-15  advances or other mortgage proceeds;
  12-16              (2)  a limitation on future advances to a term of years
  12-17  or a limitation on the term of open account advances;
  12-18              (3)  a limitation on the term during which future
  12-19  advances take priority over intervening advances;
  12-20              (4)  a requirement that a maximum loan amount be stated
  12-21  in the reverse mortgage loan documents;
  12-22              (5)  a limitation on loan-to-value ratios, other than a
  12-23  limitation provided by this chapter;
  12-24              (6)  a prohibition on balloon payments;
  12-25              (7)  a prohibition on compound interest and interest on
  12-26  interest;
  12-27              (8)  a prohibition on contracting for, charging, or
   13-1  receiving any rate of interest authorized under Article 1.04 of
   13-2  this title or under any other statute authorizing a lender to
   13-3  contract for a rate of interest; and
   13-4              (9)  a requirement that a percentage of the reverse
   13-5  mortgage proceeds be advanced before the assignment of the reverse
   13-6  mortgage.
   13-7        Art. 5A.19.  STATUS OF REVERSE MORTGAGE LOAN UNDER PUBLIC
   13-8  ASSISTANCE PROGRAM.  For the purposes of determining eligibility
   13-9  under any statute relating to payments, allowance, benefits, or
  13-10  services provided on a means-tested basis by this state, including
  13-11  supplemental security income, low-income energy assistance,
  13-12  property tax relief, medical assistance, and general assistance:
  13-13              (1)  reverse mortgage loan advances made to a borrower
  13-14  are considered proceeds from a loan, and not  income; and
  13-15              (2)  undisbursed funds under a reverse mortgage loan
  13-16  are considered equity in a borrower's home and not proceeds from a
  13-17  loan.
  13-18        Art. 5A.20.  REVERSE MORTGAGE LOAN INFORMATION AND
  13-19  COUNSELING.   A lender may not make a reverse mortgage commitment
  13-20  unless the loan applicant attests in writing that the applicant
  13-21  received from the lender, at the time the notice is required by
  13-22  Article 5A.13 of this chapter, a statement prepared by the consumer
  13-23  credit commissioner regarding the advisability and availability of
  13-24  independent information and counseling services on reverse
  13-25  mortgages.  The consumer credit commissioner shall:
  13-26              (1)  develop the content and format of the statement;
  13-27              (2)  provide independent consumer information on
   14-1  reverse mortgages and their alternatives; and
   14-2              (3)  refer consumers to independent counseling services
   14-3  with expertise in reverse mortgages.
   14-4        Art. 5A.21.  INTEREST.  A lender may contract for and receive
   14-5  on an equity loan any fixed or variable rate of interest that does
   14-6  not exceed the maximum rate of interest authorized under Article
   14-7  1.04 of this title or under any other state or federal statute
   14-8  authorizing the lender to contract for a rate of interest.
   14-9  Interest shall be accrued and earned by applying the simple annual
  14-10  interest rate or rates under the loan contract to the principal
  14-11  balance, including additions to principal authorized by the loan
  14-12  contract and unpaid interest, from time to time unpaid until the
  14-13  date of payment in full.
  14-14        Art. 5A.22.  CHARGES AND FEES.  A contract for an equity loan
  14-15  may permit a lender to collect the following fees and charges in
  14-16  connection with the loan:
  14-17              (1)  a reasonable expense or cost paid, or that will be
  14-18  paid, to a third party that is not an employee or affiliate of the
  14-19  lender if the expense or cost is:
  14-20                    (A)  for an abstract, a title report, attorney's
  14-21  fees for a legal opinion or document preparation, title insurance,
  14-22  property damage insurance, credit life insurance, accident
  14-23  insurance, health insurance, escrow for future payments of taxes
  14-24  and insurance, an annuity, an appraisal or evaluation, a survey, or
  14-25  a credit report; or
  14-26                    (B)  actually incurred in the making or servicing
  14-27  of an equity loan and necessary or proper for the protection of the
   15-1  lender;
   15-2              (2)  a fee prescribed by law paid, or that will be
   15-3  paid, to a public official for determining the existence of or for
   15-4  recording, releasing, or satisfying a lien, security interest, or
   15-5  other valid encumbrance related to an equity loan;
   15-6              (3)  a bona fide commitment fee for the separate
   15-7  consideration of committing to make an equity loan in the future;
   15-8              (4)  any other fee required by federal statute;
   15-9              (5)  a reasonable fee or charge paid to the trustee in
  15-10  connection with a deed of trust or similar instrument executed in
  15-11  connection with the equity loan, including a fee for enforcing the
  15-12  lien, posting for sale, selling, or releasing the property secured
  15-13  by the deed of trust;
  15-14              (6)  a reasonable fee paid to an attorney who is not an
  15-15  employee of the lender in the collection of a delinquent equity
  15-16  loan and any court cost or fee incurred in the collection  or
  15-17  foreclosure of a lien created by the loan;
  15-18              (7)  a fee not to exceed the amount permitted by law
  15-19  for the return by a depository institution of a dishonored check,
  15-20  negotiable order of withdrawal, share draft, or deposit draft
  15-21  offered in full or partial payment of an equity loan; and
  15-22              (8)  a late charge or penalty, if all or part of a
  15-23  scheduled payment continues unpaid for 10 or more days after the
  15-24  date the payment was due, except that:
  15-25                    (A)  only one late charge or penalty authorized
  15-26  by this article may be charged for each scheduled payment that is
  15-27  past due;
   16-1                    (B)  the late charge or penalty may not exceed
   16-2  five percent of the unpaid amount of the scheduled payment that is
   16-3  past due; and
   16-4                    (C)  the late charge or penalty must be in lieu
   16-5  of interest on the past due payment.
   16-6        Art. 5A.23.  INSURANCE.  (a)  Under an equity loan, a lender
   16-7  may request or require a borrower to provide insurance:
   16-8              (1)  in the amounts and under the conditions that apply
   16-9  to secondary mortgage loans as provided by Articles 5.02 and 5.03
  16-10  of this title;
  16-11              (2)  in the amounts and under the terms and conditions
  16-12  of the Home Equity Conversion Mortgage Insurance program (Housing
  16-13  and Community Development Act of 1987), Pub. L. 100-242, National
  16-14  Housing Act (12 U.S.C. Section 1715z-20), and 24 C.F.R. Section 206
  16-15  et seq.; and
  16-16              (3)  in the amounts and under the terms and conditions
  16-17  provided for by any state or federal statute authorizing or
  16-18  requiring any type of insurance relating to a loan or other
  16-19  extension of credit, including insurance authorized under Chapters
  16-20  1-7 and Chapter 15 of this title.
  16-21        (b)  Premiums for insurance under this article may be added
  16-22  to the loan contract.
  16-23        Art. 5A.24.  LENDER'S DUTY TO BORROWER.  (a)  The lender
  16-24  under an equity loan shall deliver to the borrower, or to one of
  16-25  the borrowers if more than one, a copy of the note or the contract
  16-26  for an open account, a copy of all other documents signed by the
  16-27  borrower or borrowers, and a written statement of:
   17-1              (1)  the name and address of each borrower and of the
   17-2  lender; and
   17-3              (2)  each type of insurance, if any, for which a charge
   17-4  to a borrower  is included in the loan agreement and the amount of
   17-5  the charge for the insurance.
   17-6        (b)  If the note or another loan document contains the
   17-7  information required by Subsection (a) of this article, a copy of
   17-8  the note or document may be delivered to the borrower rather than
   17-9  the separate written statement.
  17-10        (c)  If requested by the borrower, the lender shall give a
  17-11  receipt to a person making a cash payment on an equity loan.
  17-12        (d)  A prepayment fee, charge, or penalty may not be
  17-13  collected on any equity loan, except as authorized by Article 1.07
  17-14  of this title.
  17-15        (e)  On termination and full payment of an equity loan, the
  17-16  holder shall within a reasonable time:
  17-17              (1)  cancel and return any note to the borrower and
  17-18  give the borrower a release of any mortgage, deed of trust,
  17-19  security instrument, or other instrument securing the loan; or
  17-20              (2)  endorse the note and assign any mortgage, deed of
  17-21  trust, or other security instrument to a refinancing lender who
  17-22  advances funds to discharge the equity loan indebtedness at the
  17-23  request of the borrower and in renewal and extension of the
  17-24  security instrument.
  17-25        Art. 5A.25.  PROHIBITED PRACTICES.  (a)  A lender may not
  17-26  accept an assignment of wages as security for a loan made under
  17-27  this chapter.
   18-1        (b)  In connection with an equity loan, a lender may not
   18-2  accept a confession of judgment or  power of attorney running to
   18-3  the lender or to a third person to confess judgment or to appear
   18-4  for a borrower in a judicial proceeding.
   18-5        (c)  A lender may not accept an instrument in which blanks
   18-6  are left to be filled in after an equity loan is executed.
   18-7        Art. 5A.26.  REPORT BY LENDERS.  (a)  Before March 1 of each
   18-8  odd-numbered year, a lender that makes an equity loan shall submit
   18-9  to the consumer credit commissioner a report of the lender's equity
  18-10  loan activity during the two-year period ending on December 31 of
  18-11  the year preceding the year the report is submitted.  For each
  18-12  equity loan for which the lender received an application, the
  18-13  report must state the purpose of the loan, whether the loan was
  18-14  granted, and the applicant's race or national origin, sex, income,
  18-15  and zip code.
  18-16        (b)  The consumer credit commissioner may accept a copy of a
  18-17  report submitted by the lender to a federal agency instead of the
  18-18  report required under Subsection (a) of this article if the report
  18-19  submitted to the federal agency contains the information required
  18-20  for a report under Subsection (a) of this article.
  18-21        (c)  A lender that does not make an equity loan during the
  18-22  period covered by a report is not required to submit the report.
  18-23        (d)  In this article, "consumer credit commissioner" means
  18-24  the Office of Consumer Credit Commissioner established under
  18-25  Chapter 2 of this title.
  18-26        SECTION 3.  (a)  After May 1, 1998, the consumer credit
  18-27  commissioner shall conduct a study of homestead equity lending
   19-1  under Chapter 5A, Title 79, Revised Statutes, as added by this Act.
   19-2        (b)  Before January 1, 1999, the consumer credit commissioner
   19-3  shall submit a report on its study to the governor, lieutenant
   19-4  governor, and speaker of the house of representatives.  The report
   19-5  must include:
   19-6              (1)  a summary of the information received by the
   19-7  consumer credit commissioner under Article 5A.26, Title 79, Revised
   19-8  Statutes, as added by this Act;
   19-9              (2)  an analysis of the effectiveness of the provisions
  19-10  of Chapter 5A, Title 79, Revised Statutes, intended to protect
  19-11  borrowers, as added by this Act; and
  19-12              (3)  other information the consumer credit commissioner
  19-13  considers relevant to the regulation of equity loans.
  19-14        (c)  In this section, "consumer credit commissioner" means
  19-15  the Office of Consumer Credit Commissioner established under
  19-16  Chapter 2, Title 79, Revised Statutes.
  19-17        SECTION 4.  This Act takes effect on May 1, 1996, but only if
  19-18  the constitutional amendment proposed by __J.R. No. ___, Acts of
  19-19  the 74th Legislature, Regular Session, 1995, allowing voluntary,
  19-20  consensual encumbrances on homestead property for the purpose of
  19-21  home equity loans, is approved by the voters.  If that amendment is
  19-22  not approved by the voters, this Act has no effect.
  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
  19-26  constitutional rule requiring bills to be read on three several
  19-27  days in each house be suspended, and this rule is hereby suspended.