By Patterson                                     H.B. No. 295

      75R1187 DWS-D                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to permitting an encumbrance to be fixed on a homestead

 1-3     for certain extensions of credit; providing a civil penalty.

 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;

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);

1-14                 (4)  an owelty of partition imposed against the

1-15     entirety of the property by a court order or by a written agreement

1-16     of the parties to the partition, including a debt of one spouse in

1-17     favor of the other spouse resulting from a division or an award of

1-18     a family homestead in a divorce proceeding; [or]

1-19                 (5)  the refinance of a lien against a homestead,

1-20     including a federal tax lien resulting from the tax debt of both

1-21     spouses, if the homestead is a family homestead, or from the tax

1-22     debt of the owner; or

1-23                 (6)  an extension of credit for any other purpose, if

1-24     the extension of credit meets the requirements of Section 41.008.

 2-1           SECTION 2.  Subchapter A, Chapter 41, Property Code, is

 2-2     amended by adding Section 41.008 to read as follows:

 2-3           Sec. 41.008.  CERTAIN EXTENSIONS OF CREDIT SECURED BY

 2-4     HOMESTEAD.  (a)  An extension of credit under Section  41.001(b)(6)

 2-5     must be the only debt secured by the homestead.  Any prior debt

 2-6     secured by the homestead must be paid in full before the extension

 2-7     of credit under Section 41.001(b)(6) or refinanced as part of the

 2-8     extension of credit under Section 41.001(b)(6).

 2-9           (b)  A lender may not require that a person obtain an

2-10     extension of credit under Section 41.001(b)(6) as a condition of

2-11     receiving an extension of credit not secured by the homestead.  A

2-12     lender who violates this subsection is liable:

2-13                 (1)  for a civil penalty not to exceed $10,000 for each

2-14     violation; and

2-15                 (2)  to the borrower for the borrower's damages, court

2-16     costs, and reasonable attorney's fees.

2-17           (c)  The attorney general may sue to collect a civil penalty

2-18     under Subsection (b)(1).

2-19           SECTION 3.  This Act takes effect on the date the

2-20     constitutional amendment proposed by   J.R. No.   , 75th

2-21     Legislature, Regular Session, 1997, takes effect.  If that

2-22     amendment is not approved by the voters, this Act has no effect.

2-23           SECTION 4.  The importance of this legislation and the

2-24     crowded condition of the calendars in both houses create an

2-25     emergency and an imperative public necessity that the

2-26     constitutional rule requiring bills to be read on three several

2-27     days in each house be suspended, and this rule is hereby suspended.