Amend HJR 31 as follows:
Strike all below the resolving clause and substitute the
following:
SECTION 1. Section 50, Article XVI, Texas Constitution, is
amended to read as follows:
Sec. 50. (a) The homestead of a family, or of a single
adult person, shall be, and is hereby protected from forced sale,
for the payment of all debts except for:
(1) the purchase money thereof, or a part of such
purchase money;
(2) <,> the taxes due thereon;
(3) <,> an owelty of partition imposed against the
entirety of the property by a court order or by a written agreement
of the parties to the partition, including a debt of one spouse in
favor of the other spouse resulting from a division or an award of
a family homestead in a divorce proceeding;
(4) <,> the refinance of a lien against a homestead,
including a federal tax lien resulting from the tax debt of both
spouses, if the homestead is a family homestead, or from the tax
debt of the owner;
(5) <, or for> work and material used in constructing
improvements thereon, if <and in this last case only when> the work
and material are contracted for in writing, with the consent of
both spouses, in the case of a family homestead, given in the same
manner as is required in making a sale and conveyance of the
homestead; or
(6) an extension of credit that:
(A) is secured by a voluntary lien on the
homestead created under a written agreement with the consent of
each owner and each owner's spouse;
(B) is of a principal amount that when added to
the aggregate total of the outstanding principal balances of all
other indebtedness secured by valid encumbrances of record against
the homestead does not exceed 80 percent of the fair market value
of the homestead on the date the extension of credit is made;
(C) is without recourse for personal liability
against each owner and the spouse of each owner, unless the owner
or spouse obtained the extension of credit by actual fraud;
(D) is secured by a lien that may be foreclosed
upon only by a court order;
(E) does not require the owner or the owner's
spouse to pay, in addition to any interest, fees to any person that
are necessary to originate, evaluate, maintain, record, insure, or
service the extension of credit that exceed, in the aggregate,
three percent of the original principal amount of the extension of
credit;
(F) is not a form of open-end account that may
be debited from time to time or under which credit may be extended
from time to time;
(G) is payable in advance without penalty or
other charge;
(H) is not secured by any additional real or
personal property other than the homestead;
(I) is not secured by homestead property
designated for agricultural use as provided by statutes governing
property tax, unless such homestead property is used primarily for
the production of milk;
(J) may not be accelerated because of a decrease
in the market value of the homestead or because of the owner's
default under other indebtedness not secured by a prior valid
encumbrance against the homestead;
(K) is the only debt secured by the homestead at
the time the extension of credit is made unless the other debt was
made for a purpose described by Subsections (a)(1) - (a)(5) of this
section;
(L) is scheduled to be repaid in substantially
equal successive monthly installments beginning no later than two
months from the date the extension of credit is made, each of which
equals or exceeds the amount of accrued interest as of the date of
the scheduled installment;
(M) is closed not before:
(i) the 12th day after the later of the
date that the owner of the homestead submits an application to the
lender for the extension of credit or the date that the lender
provides the owner a copy of the notice prescribed by Subsection
(g) of this section; and
(ii) the first anniversary of the closing
date of any other extension of credit described by Subsection
(a)(6) of this section secured by the same homestead property;
(N) is closed only at the office of the lender,
an attorney at law, or a title company;
(O) permits a lender to contract for and receive
any fixed or variable rate of interest authorized under statute;
(P) is made by one of the following that has not
been found by a federal regulatory agency to have engaged in the
practice of refusing to make loans because the applicants for the
loans reside or the property proposed to secure the loans is
located in a certain area:
(i) a bank, savings and loan association,
savings bank, or credit union doing business under the laws of this
state or the United States;
(ii) a federally chartered lending
instrumentality or a person approved as a mortgagee by the United
States government to make federally insured loans; or
(iii) a person licensed to make regulated
loans, as provided by statute of this state; and
(Q) is made on the condition that:
(i) the owner of the homestead is not
required to apply the proceeds of the extension of credit to repay
another debt except debt secured by the homestead or debt to
another lender;
(ii) the owner of the homestead not assign
wages as security for the extension of credit;
(iii) the owner of the homestead not sign
any instrument in which blanks are left to be filled in;
(iv) the owner of the homestead not sign a
confession or judgment or power of attorney to the lender or to a
third person to confess judgment or to appear for the owner in a
judicial proceeding;
(v) the lender, at the time the extension
of credit is made, provide the owner of the homestead a copy of all
documents signed by the owner related to the extension of credit;
(vi) the security instruments securing the
extension of credit contain a disclosure that the extension of
credit is the type of credit defined by Section 50(a)(6), Article
XVI, Texas Constitution;
(vii) within a reasonable time after
termination and full payment of the extension of credit, the lender
cancel and return the promissory note to the owner of the homestead
and give the owner, in recordable form, a release of the lien
securing the extension of credit or a copy of an endorsement and
assignment of the lien to a lender that is refinancing the
extension of credit;
(viii) the owner of the homestead and any
spouse of the owner may, within three days after the extension of
credit is made, rescind the extension of credit without penalty or
charge;
(ix) the owner of the homestead and the
lender sign a written acknowledgment as to the fair market value of
the homestead property on the date the extension of credit is made;
and
(x) the lender or any holder of the note
for the extension of credit shall forfeit all principal and
interest of the extension of credit if the lender or holder fails
to comply with the lender's or holder's obligations under the
extension of credit within a reasonable time after the lender or
holder is notified by the borrower of the lender's failure to
comply; or
(7) a reverse mortgage.
(b) An <nor may the> owner or claimant of the property
claimed as homestead may not<, if married,> sell or abandon the
homestead without the consent of each owner and the <other> spouse
of each owner, given in such manner as may be prescribed by law.
(c) No mortgage, trust deed, or other lien on the homestead
shall ever be valid unless it secures a debt described by this
section, <except for a debt described by this section,> whether
such mortgage, <or> trust deed, or other lien, shall have been
created by the owner alone, or together with his or her spouse, in
case the owner is married. All pretended sales of the homestead
involving any condition of defeasance shall be void.
(d) A purchaser or lender for value without actual knowledge
may conclusively rely on an affidavit that designates other
property as the homestead of the affiant and that states that the
property to be conveyed or encumbered is not the homestead of the
affiant.
(e) A refinance of debt secured by a homestead and described
by any subsection under Subsections (a)(1) - (a)(5) that includes
the advance of additional funds may not be secured by a valid lien
against the homestead unless:
(1) the refinance of the debt is an extension of
credit described by Subsection (a)(6) of this section; or
(2) the advance of all the additional funds is for
reasonable costs necessary to refinance such debt or for a purpose
described by Subsection (a)(2), (a)(3), or (a)(5) of this section.
(f) A refinance of debt secured by the homestead, any
portion of which is an extension of credit described by Subsection
(a)(6) of this section, may not be secured by a valid lien against
the homestead unless the refinance of the debt is an extension of
credit described by Subsection (a)(6) of this section.
(g) An extension of credit described by Subsection (a)(6) of
this section may be secured by a valid lien against homestead
property if the extension of credit is not closed before the 12th
day after the lender provides the owner with the following written
notice on a separate instrument:
"NOTICE CONCERNING EXTENSIONS OF CREDIT
DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION
ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.
SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY
THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER
MAY FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:
"(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE CONSENT
OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;
"(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE
MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL
BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80% OF
THE FAIR MARKET VALUE OF YOUR HOME;
"(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
"(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON ONLY
WITH A COURT ORDER;
"(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 3% OF
THE LOAN AMOUNT;
"(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY BE
DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED
FROM TIME TO TIME;
"(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR CHARGE;
"(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE LOAN;
"(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL HOMESTEAD
PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS USED
PRIMARILY FOR THE PRODUCTION OF MILK;
"(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER THAN
AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME DECREASES
OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT SECURED BY YOUR
HOME;
"(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6), ARTICLE
XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR HOME AT ANY
GIVEN TIME;
"(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN PAYMENTS
THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR EACH
PAYMENT PERIOD;
"(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU SUBMIT
A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER YOU
RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND IF YOUR HOME WAS
SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW LOAN
SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
"(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER,
TITLE COMPANY, OR AN ATTORNEY AT LAW;
"(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE OF
INTEREST AUTHORIZED BY STATUTE;
"(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
CONSTITUTION; AND
"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF
THE TEXAS CONSTITUTION MUST:
"(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO ANOTHER
DEBT THAT IS NOT SECURED BY YOUR HOME OR TO ANOTHER DEBT TO THE
SAME LENDER;
"(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS SECURITY;
"(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS WHICH
HAVE BLANKS LEFT TO BE FILLED IN;
"(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF
JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
"(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL DOCUMENTS
YOU SIGN AT CLOSING;
"(6) PROVIDE THAT THE SECURITY INSTRUMENTS CONTAIN A
DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION 50(a)(6),
ARTICLE XVI, OF THE TEXAS CONSTITUTION;
"(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL, THE
LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN ASSIGNMENT OF
THE LIEN, WHICHEVER IS APPROPRIATE;
"(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
"(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE THE
FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES; AND
"(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL
PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
LENDER'S OBLIGATIONS." If the discussions with the borrower are
conducted primarily in a language other than English, the lender
shall, before closing, provide an additional copy of the notice
translated into the written language in which the discussions were
conducted.
(h) A lender or assignee for value may conclusively rely on
the written acknowledgment as to the fair market value of the
homestead property made in accordance with Subsection (a)(6)(Q)(ix)
of this section if:
(1) the value acknowledged to is the value estimate in
an appraisal or evaluation prepared in accordance with a state or
federal requirement applicable to an extension of credit under
Subsection (a)(6); and
(2) the lender or assignee does not have actual
knowledge at the time of the payment of value or advance of funds
by the lender or assignee that the fair market value stated in the
written acknowledgment was incorrect.
(i) This subsection shall not affect or impair any right of
the borrower to recover damages from the lender or assignee under
applicable law for wrongful foreclosure. A purchaser for value
without actual knowledge may conclusively presume that a lien
securing an extension of credit described by Subsection (a)(6) of
this section was a valid lien securing the extension of credit with
homestead property if:
(1) the security instruments securing the extension of
credit contain a disclosure that the extension of credit secured by
the lien was the type of credit defined by Section 50(a)(6),
Article XVI, Texas Constitution;
(2) the purchaser acquires the title to the property
pursuant to or after the foreclosure of the voluntary lien; and
(3) the purchaser is not the lender or assignee under
the extension of credit.
(j) Subsection (a)(6) and Subsections (e)-(i) of this
section are not severable, and none of those provisions would have
been enacted without the others. If any of those provisions are
held to be preempted by the laws of the United States, all of those
provisions are invalid. This subsection shall not apply to any
lien or extension of credit made after January 1, 1998, and before
the date any provision under Subsection (a)(6) or Subsections
(e)-(i) is held to be preempted.
(k) "Reverse mortgage" means an extension of credit:
(1) that is secured by a voluntary lien on homestead
property created by a written agreement with the consent of each
owner and each owner's spouse;
(2) that is made to a person who is or whose spouse is
55 years or older;
(3) that is made without recourse for personal
liability against each owner and the spouse of each owner;
(4) under which advances are provided to a borrower
based on the equity in a borrower's homestead;
(5) that does not permit the lender to reduce the
amount or number of advances because of an adjustment in the
interest rate if periodic advances are to be made;
(6) that requires no payment of principal or interest
until:
(A) the homestead property securing the loan is
sold or otherwise transferred; or
(B) all borrowers cease occupying the homestead
property as a principal residence for more than 180 consecutive
days and the location of the homestead property owner is unknown to
the lender;
(7) that provides that if the lender fails to make
loan advances as required in the loan documents and if the lender
fails to cure the default as required in the loan documents, the
lender forfeits all principal and interest of the reverse mortgage;
and
(8) that is not made unless the owner of the homestead
attests in writing that the owner received counseling regarding the
advisability and availability of reverse mortgages and other
financial alternatives.
(l) Advances made under a reverse mortgage and interest on
those advances have priority over a lien filed for record in the
real property records in the county where the homestead property is
located after the reverse mortgage is filed for record in the real
property records of that county.
(m) A reversed mortgage may provide for an interest rate
that is fixed or adjustable and may also provide for interest that
is contingent on appreciation in the fair market value of the
homestead property. Although payment of principal or interest
shall not be required under a reversed mortgage until the entire
loan becomes due and payable, interest may accrue and be compounded
during the term of the loan as provided by the reverse mortgage
loan agreement.
(n) A reverse mortgage that is secured by a valid lien
against homestead property may be made or acquired without regard
to the following provisions of any other law of this state:
(1) a limitation on the purpose and use of future
advances or other mortgage proceeds;
(2) a limitation on future advances to a term of years
or a limitation on the term of open-end account advances;
(3) a limitation on the term during which future
advances take priority over intervening advances;
(4) a requirement that a maximum loan amount be stated
in the reverse mortgage loan documents;
(5) a prohibition on balloon payments;
(6) a prohibition on compound interest and interest on
interest;
(7) a prohibition on contracting for, charging, or
receiving any rate of interest authorized by any law of this state
authorizing a lender to contract for a rate of interest; and
(8) a requirement that a percentage of the reverse
mortgage proceeds be advanced before the assignment of the reverse
mortgage.
(o) For the purposes of determining eligibility under any
statute relating to payments, allowances, benefits, or services
provided on a means-tested basis by this state, including
supplemental security income, low-income energy assistance,
property tax relief, medical assistance, and general assistance:
(1) reverse mortgage loan advances made to a borrower
are considered proceeds from a loan and not income; and
(2) undisbursed funds under a reverse mortgage loan
are considered equity in a borrower's home and not proceeds from a
loan.
(p) The advances made on a reverse mortgage loan under which
more than one advance is made must be made at regular intervals
according to a plan established by the original loan agreement.
(q) To the extent that any statutes of this state, including
without limitation, Section 41.001 of the Texas Property Code,
purport to limit encumbrances that may properly be fixed on
homestead property in a manner that does not permit encumbrances
for extensions of credit described in Subsection (a)(6) or (a)(7)
of this section, the same shall be superseded to the extent that
such encumbrances shall be permitted to be fixed upon homestead
property in the manner provided for by this amendment.
SECTION 2. The following temporary provision is added to the
Texas Constitution:
TEMPORARY PROVISION. (a) This temporary provision applies
to the constitutional amendment proposed by the 75th Legislature,
Regular Session, 1997, authorizing a voluntary consentual
encumbrance on homestead property.
(b) The constitutional amendment takes effect January 1,
1998.
(c) This temporary provision takes effect on the adoption of
the amendment by the voters and expires January 2, 1998.
SECTION 3. This proposed constitutional amendment shall be
submitted to the voters at an election to be held November 4, 1997.
The ballot shall be printed to permit voting for or against the
proposition: "The amendment to the Texas Constitution expanding
the types of liens for home equity loans that a lender, with the
homeowner's consent, may place against a homestead."