By: Patterson, Ellis S.J.R. No. 12
Armbrister, West
SENATE JOINT RESOLUTION
1-1 proposing a constitutional amendment authorizing a voluntary,
1-2 consensual encumbrance on homestead property for the purpose of an
1-3 equity loan.
1-4 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 50, Article XVI, Texas Constitution, is
1-6 amended to read as follows:
1-7 Sec. 50. (a) The homestead of a family, or of a single
1-8 adult person, shall be, and is hereby protected from forced sale,
1-9 for the payment of all debts except for:
1-10 (1) the purchase money thereof, or a part of such
1-11 purchase money;
1-12 (2) [,] the taxes due thereon;
1-13 (3) [,] an owelty of partition imposed against the
1-14 entirety of the property by a court order or by a written agreement
1-15 of the parties to the partition, including a debt of one spouse in
1-16 favor of the other spouse resulting from a division or an award of
1-17 a family homestead in a divorce proceeding;
1-18 (4) [,] the refinance of a lien against a homestead,
1-19 including a federal tax lien resulting from the tax debt of both
1-20 spouses, if the homestead is a family homestead, or from the tax
1-21 debt of the owner;
1-22 (5) [, or for] work and material used in constructing
1-23 improvements thereon, if [and in this last case only when] the work
2-1 and material are contracted for in writing, with the consent of
2-2 both spouses, in the case of a family homestead, given in the same
2-3 manner as is required in making a sale and conveyance of the
2-4 homestead; or
2-5 (6) an equity loan.
2-6 (b) The [nor may the] owner or claimant of the property
2-7 claimed as homestead, if married, may not sell or abandon the
2-8 homestead without the consent of the other spouse, given in such
2-9 manner as may be prescribed by law.
2-10 (c) No mortgage, trust deed, or other lien on the homestead
2-11 shall ever be valid, except for a debt described by this section,
2-12 whether such mortgage, or trust deed, or other lien, shall have
2-13 been created by the owner alone, or together with his or her
2-14 spouse, in case the owner is married. All pretended sales of the
2-15 homestead involving any condition of defeasance shall be void. A
2-16 purchaser or lender for value without actual knowledge may
2-17 conclusively rely on an affidavit that designates other property as
2-18 the homestead of the affiant and that states that the property to
2-19 be conveyed or encumbered is not the homestead of the affiant.
2-20 (d) An equity loan may be made, originated, negotiated, or
2-21 arranged only by:
2-22 (1) a bank, savings and loan association, savings
2-23 bank, or credit union doing business under the laws of this state
2-24 or the United States;
2-25 (2) a person licensed to make regulated loans, as
3-1 provided by statute;
3-2 (3) a person approved as a mortgagee by the United
3-3 States government to make federally insured loans, as determined by
3-4 statute; or
3-5 (4) a person contracted to make, originate, or arrange
3-6 loans qualified for purchase by the Federal National Mortgage
3-7 Association or Federal Home Loan Mortgage Corporation.
3-8 (e) An equity loan may not be secured by homestead property
3-9 that is designated for agricultural use, as provided by statutes
3-10 governing property tax.
3-11 (f) An equity loan may not be in the form of a credit card
3-12 transaction, as defined by statute.
3-13 (g) At any time, a homestead may not be encumbered by more
3-14 than one equity loan in addition to any valid encumbrances on the
3-15 homestead property authorized by Subsection (a)(1), (2), (3), (4),
3-16 or (5) of this section.
3-17 (h) A lender may not require or accept real or personal
3-18 property as additional collateral on an equity loan, except for a
3-19 manufactured home, personal property affixed or to be affixed to
3-20 the homestead in a manner that would make the property a fixture,
3-21 or rents derived from the homestead property. Only the homestead
3-22 property securing an equity loan may be collateral for the equity
3-23 loan.
3-24 (i) A lender may not require or accept a borrower's
3-25 homestead property, regardless of whether the property was
4-1 previously encumbered by an existing equity loan, as collateral on
4-2 a debt not described by Subsection (a) of this section.
4-3 (j) The committed principal amount of an equity loan plus
4-4 the aggregate total of the outstanding balances of other
4-5 indebtedness secured by valid encumbrances of record against the
4-6 homestead property may not exceed 90 percent of the fair market
4-7 value of the homestead property on the date the equity loan is
4-8 closed. Violation of this subsection does not affect the validity
4-9 of other indebtedness secured by valid encumbrances of record
4-10 against the homestead property.
4-11 (k) For the purposes of Subsection (j) of this section, the
4-12 aggregate total of the outstanding balances of indebtedness secured
4-13 by valid encumbrances of record against the homestead property does
4-14 not include any advance made by a lender to protect a lien,
4-15 security interest, or other valid encumbrance on the homestead
4-16 property securing the loan, including the payment of hazard
4-17 insurance premiums, repairs to the homestead property, or payments
4-18 on any indebtedness secured by a prior valid encumbrance on the
4-19 homestead property.
4-20 (l) A lender may not accelerate the remaining payments of an
4-21 equity loan or demand payment of the loan in full because of a
4-22 decrease in the market value of the homestead property securing the
4-23 equity loan, unless the decrease in the market value is caused by
4-24 substantial damage or destruction to the property, condemnation or
4-25 other taking of the property, the discovery of an environmental
5-1 hazard on the property, or the use of the property in a manner that
5-2 constitutes waste on the property or a nuisance. This section does
5-3 not prohibit a lender, if permitted by the loan documents, from
5-4 refusing to make additional advances under an equity loan, other
5-5 than a reverse mortgage, if the value of the homestead property
5-6 decreases, regardless of the cause of the decrease.
5-7 (m) A lender may not accelerate the remaining payments of an
5-8 equity loan or demand payment of the loan in full because of the
5-9 borrower's default under any other indebtedness not secured by a
5-10 prior valid encumbrance on the homestead property, regardless of
5-11 whether the indebtedness is owed to the lender. This section does
5-12 not prohibit a lender, if permitted by the loan documents, from
5-13 refusing to make additional advances under an equity loan, other
5-14 than a reverse mortgage, if the borrower has defaulted in the
5-15 performance or payment of another indebtedness owed to the lender
5-16 or another creditor.
5-17 (n) A lienholder or assignee for value may conclusively rely
5-18 on an acknowledgment by the owner of homestead property and the
5-19 owner's spouse, if the owner is married, of compliance with
5-20 applicable requirements for an equity loan secured by a mortgage,
5-21 trust deed, or other lien on a homestead.
5-22 (o) In this section:
5-23 (1) "Blended equity loan" means an equity loan made
5-24 for:
5-25 (A) the payment or refinancing of all or part of
6-1 the purchase money of a homestead, taxes on homestead property, a
6-2 federal tax lien on homestead property, an owelty of partition
6-3 imposed against homestead property, or the work and material used
6-4 in constructing improvements on a homestead or for the refinance of
6-5 any other lien against the homestead; and
6-6 (B) another purpose.
6-7 (2) "Equity loan" means an extension of credit under a
6-8 written agreement, including a contract for an open-end account,
6-9 blended equity loan, or reverse mortgage, that is:
6-10 (A) secured in whole or in part by a voluntary
6-11 lien on or other consensual security interest in a homestead; and
6-12 (B) created with the consent of each owner and
6-13 the spouse of each owner, in accordance with applicable statutory
6-14 requirements.
6-15 (3) "Reverse mortgage" means a nonrecourse equity
6-16 loan:
6-17 (A) under which advances are provided to a
6-18 borrower based on the equity in a borrower's residence homestead
6-19 property; and
6-20 (B) that requires no payment of principal or
6-21 interest until the entire loan becomes due and payable.
6-22 SECTION 2. The following temporary provision is added to the
6-23 Texas Constitution:
6-24 TEMPORARY PROVISION. (a) This temporary provision applies
6-25 to the constitutional amendment proposed by the 75th Legislature,
7-1 Regular Session, 1997, authorizing a voluntary, consensual
7-2 encumbrance on homestead property.
7-3 (b) The constitutional amendment takes effect January 1,
7-4 1998.
7-5 (c) This temporary provision takes effect on the adoption of
7-6 the amendment by the voters and expires January 2, 1998.
7-7 SECTION 3. This proposed constitutional amendment shall be
7-8 submitted to the voters at an election to be held November 4, 1997.
7-9 The ballot shall be printed to permit voting for or against the
7-10 proposition: "The constitutional amendment extending homeowners'
7-11 rights to borrow voluntarily against the equity in, and establish a
7-12 valid lien on, their homesteads according to specific guidelines
7-13 for purposes in addition to those currently provided for under
7-14 state law without affecting homestead tax exemptions or eliminating
7-15 existing homestead protections against involuntary liens and
7-16 judgment creditors."