SRC-TNM S.J.R. 14 75(R)    BILL ANALYSIS


Senate Research CenterS.J.R. 14
By: Nixon
State Affairs
2-24-97
As Filed


DIGEST 

Currently, the homestead exemption created in the Texas Constitution
protects a property owner from foreclosure on the individual's homestead.
The definition of a homestead in Texas statute allows an individual up to
one acre of land that is used for the purposes of an urban home or a place
to exercise a calling of business.  It is this property that is exempt
from creditors' claims.  This protection prohibits the property owner from
borrowing against the equity the owner has in the property with the
exception of several instances.  An individual may borrow against the
equity in the homestead for purchase money, taxes on property, work and
material use in capital improvements, an owelty of partition, and the
refinance of a federal tax lien.  The goal of S.J.R. 14 is to separate the
residential homestead from the business homestead and allow an individual
to borrow up to 90 percent of the equity built up in the individual's
business homestead.  
  
PURPOSE

As proposed, S.J.R. 14 requires the submission to the voters of a
constitutional amendment to authorize a voluntary, consensual encumbrance
on a business homestead for the purpose of an equity loan. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 50, Article XVI, Texas Constitution, as follows:

Sec. 50.  Provides that a homestead of a family or of a single adult is
required to be protected from forced sale, for the payment of all debts,
except for an equity loan on a business homestead. 

(b) Makes conforming changes. 

SECTION 2. Amends Article XVI, Texas Constitution, by adding Section 50a,
as follows: 

Sec. 50a. (a) Prohibits an equity loan from being secured by a homestead
other than a business homestead.  Prohibits a lender from requiring or
accepting a borrower's homestead as collateral on a debt. 

(b)Prohibits a lender from accelerating or demanding full payment of an
equity loan because of a decrease in the market value of the business
homestead securing the equity loan, and provides exceptions.  Provides
that a lender is not prohibited from refusing to make additional advances
under an equity loan. 

(c) Prohibits a lender from accelerating or demanding payment of an equity
loan because of the borrower's default under any other indebtedness not
secured by a prior valid encumbrance on the business homestead.  Provides
that a lender is not prohibited from refusing to make additional advances
under an equity loan, other than a reverse mortgage, if the borrower has
defaulted in the performance or payment of another indebtedness  owed to
the lender or another creditor. 

(d) Prohibits the principal amount of an equity loan plus the aggregate
total of any other debt secured by valid encumbrances of record against
the business homestead from exceeding 90 percent of the fair market value
of the homestead on the date the equity loan is made. 

(e) Defines "business homestead," "equity loan," and "reverse mortgage."

SECTION 3. Adds a temporary provision to the Texas Constitution, as
follows:  

TEMPORARY PROVISION. (a) Provides that this temporary provision applies to
the constitutional amendment proposed by the 75th Legislature, Regular
Session, 1997, authorizing a voluntary, consensual encumbrance on a
business homestead. 


(b) Provides that the constitutional amendment takes effect May 1, 1998.

(c) Provides that this temporary provision takes effect on the adoption of
the amendment by the voters and expires May 2, 1998. 

SECTION 3. Requires this proposed constitutional amendment to be submitted
to the voters at an election to be held November 4, 1997.  Sets forth the
required language for the ballot.