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.