By Patterson S.J.R. No. 12
75R3346 DWS-F
A 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
1-24 and material are contracted for in writing, with the consent of
2-1 both spouses, in the case of a family homestead, given in the same
2-2 manner as is required in making a sale and conveyance of the
2-3 homestead; or
2-4 (6) an equity loan.
2-5 (b) The [nor may the] owner or claimant of the property
2-6 claimed as homestead, if married, may not sell or abandon the
2-7 homestead without the consent of the other spouse, given in such
2-8 manner as may be prescribed by law.
2-9 (c) No mortgage, trust deed, or other lien on the homestead
2-10 shall ever be valid, except for a debt described by this section,
2-11 whether such mortgage, or trust deed, or other lien, shall have
2-12 been created by the owner alone, or together with his or her
2-13 spouse, in case the owner is married. All pretended sales of the
2-14 homestead involving any condition of defeasance shall be void. A
2-15 purchaser or lender for value without actual knowledge may
2-16 conclusively rely on an affidavit that designates other property as
2-17 the homestead of the affiant and that states that the property to
2-18 be conveyed or encumbered is not the homestead of the affiant.
2-19 (d) An equity loan may be made, originated, negotiated, or
2-20 arranged only by:
2-21 (1) a bank, savings and loan association, savings
2-22 bank, or credit union doing business under the laws of this state
2-23 or the United States;
2-24 (2) a person licensed to make regulated loans, as
2-25 provided by statute; or
2-26 (3) a person approved as a mortgagee by the United
2-27 States government to make federally insured loans, as determined by
3-1 statute.
3-2 (e) An equity loan may not be secured by homestead property
3-3 that is designated for agricultural use, as provided by statutes
3-4 governing property tax.
3-5 (f) An equity loan may not be in the form of a credit card
3-6 transaction, as defined by statute.
3-7 (g) At any time, a homestead may not be encumbered by more
3-8 than one equity loan in addition to any valid encumbrances on the
3-9 homestead property authorized by Subsection (a)(1), (2), (3), (4),
3-10 or (5) of this section.
3-11 (h) A lender may not require or accept real or personal
3-12 property as additional collateral on an equity loan, except for a
3-13 manufactured home, personal property affixed or to be affixed to
3-14 the homestead in a manner that would make the property a fixture,
3-15 or rents derived from the homestead property. Only the homestead
3-16 property securing an equity loan may be collateral for the equity
3-17 loan.
3-18 (i) A lender may not require or accept a borrower's
3-19 homestead property, regardless of whether the property was
3-20 previously encumbered by an existing equity loan, as collateral on
3-21 a debt not described by Subsection (a) of this section.
3-22 (j) The committed principal amount of an equity loan plus
3-23 the aggregate total of the outstanding balances of other
3-24 indebtedness secured by valid encumbrances of record against the
3-25 homestead property may not exceed 90 percent of the fair market
3-26 value of the homestead property on the date the equity loan is
3-27 closed. Violation of this subsection does not affect the validity
4-1 of other indebtedness secured by valid encumbrances of record
4-2 against the homestead property.
4-3 (k) For the purposes of Subsection (j) of this section, the
4-4 aggregate total of the outstanding balances of indebtedness secured
4-5 by valid encumbrances of record against the homestead property does
4-6 not include any advance made by a lender to protect a lien,
4-7 security interest, or other valid encumbrance on the homestead
4-8 property securing the loan, including the payment of hazard
4-9 insurance premiums, repairs to the homestead property, or payments
4-10 on any indebtedness secured by a prior valid encumbrance on the
4-11 homestead property.
4-12 (l) A lender may not accelerate the remaining payments of an
4-13 equity loan or demand payment of the loan in full because of a
4-14 decrease in the market value of the homestead property securing the
4-15 equity loan, unless the decrease in the market value is caused by
4-16 substantial damage or destruction to the property, condemnation or
4-17 other taking of the property, the discovery of an environmental
4-18 hazard on the property, or the use of the property in a manner that
4-19 constitutes waste on the property or a nuisance. This section does
4-20 not prohibit a lender, if permitted by the loan documents, from
4-21 refusing to make additional advances under an equity loan, other
4-22 than a reverse mortgage, if the value of the homestead property
4-23 decreases, regardless of the cause of the decrease.
4-24 (m) A lender may not accelerate the remaining payments of an
4-25 equity loan or demand payment of the loan in full because of the
4-26 borrower's default under any other indebtedness not secured by a
4-27 prior valid encumbrance on the homestead property, regardless of
5-1 whether the indebtedness is owed to the lender. This section does
5-2 not prohibit a lender, if permitted by the loan documents, from
5-3 refusing to make additional advances under an equity loan, other
5-4 than a reverse mortgage, if the borrower has defaulted in the
5-5 performance or payment of another indebtedness owed to the lender
5-6 or another creditor.
5-7 (n) A lienholder or assignee for value may conclusively rely
5-8 on an acknowledgment by the owner of homestead property and the
5-9 owner's spouse, if the owner is married, of compliance with
5-10 applicable requirements for an equity loan secured by a mortgage,
5-11 trust deed, or other lien on a homestead.
5-12 (o) In this section:
5-13 (1) "Blended equity loan" means an equity loan made
5-14 for:
5-15 (A) the payment or refinancing of all or part of
5-16 the purchase money of a homestead, taxes on homestead property, a
5-17 federal tax lien on homestead property, an owelty of partition
5-18 imposed against homestead property, or the work and material used
5-19 in constructing improvements on a homestead or for the refinance of
5-20 any other lien against the homestead; and
5-21 (B) another purpose.
5-22 (2) "Equity loan" means an extension of credit under a
5-23 written agreement, including a contract for an open-end account,
5-24 blended equity loan, or reverse mortgage, that is:
5-25 (A) secured in whole or in part by a voluntary
5-26 lien on or other consensual security interest in a homestead; and
5-27 (B) created with the consent of each owner and
6-1 the spouse of each owner, in accordance with applicable statutory
6-2 requirements.
6-3 (3) "Reverse mortgage" means a nonrecourse equity
6-4 loan:
6-5 (A) under which advances are provided to a
6-6 borrower based on the equity in a borrower's residence homestead
6-7 property; and
6-8 (B) that requires no payment of principal or
6-9 interest until the entire loan becomes due and payable.
6-10 SECTION 2. The following temporary provision is added to the
6-11 Texas Constitution:
6-12 TEMPORARY PROVISION. (a) This temporary provision applies to
6-13 the constitutional amendment proposed by the 75th Legislature,
6-14 Regular Session, 1997, authorizing a voluntary, consensual
6-15 encumbrance on homestead property.
6-16 (b) The constitutional amendment takes effect January 1,
6-17 1998.
6-18 (c) This temporary provision takes effect on the adoption of
6-19 the amendment by the voters and expires January 2, 1998.
6-20 SECTION 3. This proposed constitutional amendment shall be
6-21 submitted to the voters at an election to be held November 4, 1997.
6-22 The ballot shall be printed to permit voting for or against the
6-23 proposition: "The constitutional amendment extending homeowners'
6-24 rights to borrow voluntarily against the equity in, and establish a
6-25 valid lien on, their homesteads according to specific guidelines
6-26 for purposes in addition to those currently provided for under
6-27 state law without affecting homestead tax exemptions or eliminating
7-1 existing homestead protections against involuntary liens and
7-2 judgment creditors."