1-1 By: Patterson, Ellis, Armbrister S.J.R. No. 12
1-2 (In the Senate - Filed January 8, 1997; January 16, 1997,
1-3 read first time and referred to Committee on State Affairs;
1-4 March 25, 1997, reported favorably, as amended, by the following
1-5 vote: Yeas 7, Nays 0; March 25, 1997, sent to printer.)
1-6 COMMITTEE AMENDMENT NO. 1 By: Carona
1-7 Amend SECTION 1 of S.J.R. No. 12 as follows:
1-8 (1) At the end of Subdivision (2) of added Subsection (d),
1-9 Section 50, Article XVI, Texas Constitution (page 2, line 6,
1-10 Introduced Version), strike "or".
1-11 (2) At the end of Subdivision (3) of added Subsection (d),
1-12 Section 50, Article XVI, Texas Constitution (page 2, line 9,
1-13 Introduced Version), strike the period and substitute "; or".
1-14 (3) After Subdivision (3) of added Subsection (d), Section
1-15 50, Article XVI, Texas Constitution (page 2, after line 9,
1-16 Introduced Version), add the following:
1-17 "(4) a person contracted to make, originate, or
1-18 arrange loans qualified for purchase by the Federal National
1-19 Mortgage Association or Federal Home Loan Mortgage Corporation."
1-20 SENATE JOINT RESOLUTION
1-21 proposing a constitutional amendment authorizing a voluntary,
1-22 consensual encumbrance on homestead property for the purpose of an
1-23 equity loan.
1-24 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-25 SECTION 1. Section 50, Article XVI, Texas Constitution, is
1-26 amended to read as follows:
1-27 Sec. 50. (a) The homestead of a family, or of a single
1-28 adult person, shall be, and is hereby protected from forced sale,
1-29 for the payment of all debts except for:
1-30 (1) the purchase money thereof, or a part of such
1-31 purchase money;
1-32 (2) [,] the taxes due thereon;
1-33 (3) [,] an owelty of partition imposed against the
1-34 entirety of the property by a court order or by a written agreement
1-35 of the parties to the partition, including a debt of one spouse in
1-36 favor of the other spouse resulting from a division or an award of
1-37 a family homestead in a divorce proceeding;
1-38 (4) [,] the refinance of a lien against a homestead,
1-39 including a federal tax lien resulting from the tax debt of both
1-40 spouses, if the homestead is a family homestead, or from the tax
1-41 debt of the owner;
1-42 (5) [, or for] work and material used in constructing
1-43 improvements thereon, if [and in this last case only when] the work
1-44 and material are contracted for in writing, with the consent of
1-45 both spouses, in the case of a family homestead, given in the same
1-46 manner as is required in making a sale and conveyance of the
1-47 homestead; or
1-48 (6) an equity loan.
1-49 (b) The [nor may the] owner or claimant of the property
1-50 claimed as homestead, if married, may not sell or abandon the
1-51 homestead without the consent of the other spouse, given in such
1-52 manner as may be prescribed by law.
1-53 (c) No mortgage, trust deed, or other lien on the homestead
1-54 shall ever be valid, except for a debt described by this section,
1-55 whether such mortgage, or trust deed, or other lien, shall have
1-56 been created by the owner alone, or together with his or her
1-57 spouse, in case the owner is married. All pretended sales of the
1-58 homestead involving any condition of defeasance shall be void. A
1-59 purchaser or lender for value without actual knowledge may
1-60 conclusively rely on an affidavit that designates other property as
1-61 the homestead of the affiant and that states that the property to
1-62 be conveyed or encumbered is not the homestead of the affiant.
1-63 (d) An equity loan may be made, originated, negotiated, or
1-64 arranged only by:
2-1 (1) a bank, savings and loan association, savings
2-2 bank, or credit union doing business under the laws of this state
2-3 or the United States;
2-4 (2) a person licensed to make regulated loans, as
2-5 provided by statute; or
2-6 (3) a person approved as a mortgagee by the United
2-7 States government to make federally insured loans, as determined by
2-8 statute.
2-9 (e) An equity loan may not be secured by homestead property
2-10 that is designated for agricultural use, as provided by statutes
2-11 governing property tax.
2-12 (f) An equity loan may not be in the form of a credit card
2-13 transaction, as defined by statute.
2-14 (g) At any time, a homestead may not be encumbered by more
2-15 than one equity loan in addition to any valid encumbrances on the
2-16 homestead property authorized by Subsection (a)(1), (2), (3), (4),
2-17 or (5) of this section.
2-18 (h) A lender may not require or accept real or personal
2-19 property as additional collateral on an equity loan, except for a
2-20 manufactured home, personal property affixed or to be affixed to
2-21 the homestead in a manner that would make the property a fixture,
2-22 or rents derived from the homestead property. Only the homestead
2-23 property securing an equity loan may be collateral for the equity
2-24 loan.
2-25 (i) A lender may not require or accept a borrower's
2-26 homestead property, regardless of whether the property was
2-27 previously encumbered by an existing equity loan, as collateral on
2-28 a debt not described by Subsection (a) of this section.
2-29 (j) The committed principal amount of an equity loan plus
2-30 the aggregate total of the outstanding balances of other
2-31 indebtedness secured by valid encumbrances of record against the
2-32 homestead property may not exceed 90 percent of the fair market
2-33 value of the homestead property on the date the equity loan is
2-34 closed. Violation of this subsection does not affect the validity
2-35 of other indebtedness secured by valid encumbrances of record
2-36 against the homestead property.
2-37 (k) For the purposes of Subsection (j) of this section, the
2-38 aggregate total of the outstanding balances of indebtedness secured
2-39 by valid encumbrances of record against the homestead property does
2-40 not include any advance made by a lender to protect a lien,
2-41 security interest, or other valid encumbrance on the homestead
2-42 property securing the loan, including the payment of hazard
2-43 insurance premiums, repairs to the homestead property, or payments
2-44 on any indebtedness secured by a prior valid encumbrance on the
2-45 homestead property.
2-46 (l) A lender may not accelerate the remaining payments of an
2-47 equity loan or demand payment of the loan in full because of a
2-48 decrease in the market value of the homestead property securing the
2-49 equity loan, unless the decrease in the market value is caused by
2-50 substantial damage or destruction to the property, condemnation or
2-51 other taking of the property, the discovery of an environmental
2-52 hazard on the property, or the use of the property in a manner that
2-53 constitutes waste on the property or a nuisance. This section does
2-54 not prohibit a lender, if permitted by the loan documents, from
2-55 refusing to make additional advances under an equity loan, other
2-56 than a reverse mortgage, if the value of the homestead property
2-57 decreases, regardless of the cause of the decrease.
2-58 (m) A lender may not accelerate the remaining payments of an
2-59 equity loan or demand payment of the loan in full because of the
2-60 borrower's default under any other indebtedness not secured by a
2-61 prior valid encumbrance on the homestead property, regardless of
2-62 whether the indebtedness is owed to the lender. This section does
2-63 not prohibit a lender, if permitted by the loan documents, from
2-64 refusing to make additional advances under an equity loan, other
2-65 than a reverse mortgage, if the borrower has defaulted in the
2-66 performance or payment of another indebtedness owed to the lender
2-67 or another creditor.
2-68 (n) A lienholder or assignee for value may conclusively rely
2-69 on an acknowledgment by the owner of homestead property and the
3-1 owner's spouse, if the owner is married, of compliance with
3-2 applicable requirements for an equity loan secured by a mortgage,
3-3 trust deed, or other lien on a homestead.
3-4 (o) In this section:
3-5 (1) "Blended equity loan" means an equity loan made
3-6 for:
3-7 (A) the payment or refinancing of all or part of
3-8 the purchase money of a homestead, taxes on homestead property, a
3-9 federal tax lien on homestead property, an owelty of partition
3-10 imposed against homestead property, or the work and material used
3-11 in constructing improvements on a homestead or for the refinance of
3-12 any other lien against the homestead; and
3-13 (B) another purpose.
3-14 (2) "Equity loan" means an extension of credit under a
3-15 written agreement, including a contract for an open-end account,
3-16 blended equity loan, or reverse mortgage, that is:
3-17 (A) secured in whole or in part by a voluntary
3-18 lien on or other consensual security interest in a homestead; and
3-19 (B) created with the consent of each owner and
3-20 the spouse of each owner, in accordance with applicable statutory
3-21 requirements.
3-22 (3) "Reverse mortgage" means a nonrecourse equity
3-23 loan:
3-24 (A) under which advances are provided to a
3-25 borrower based on the equity in a borrower's residence homestead
3-26 property; and
3-27 (B) that requires no payment of principal or
3-28 interest until the entire loan becomes due and payable.
3-29 SECTION 2. The following temporary provision is added to the
3-30 Texas Constitution:
3-31 TEMPORARY PROVISION. (a) This temporary provision applies
3-32 to the constitutional amendment proposed by the 75th Legislature,
3-33 Regular Session, 1997, authorizing a voluntary, consensual
3-34 encumbrance on homestead property.
3-35 (b) The constitutional amendment takes effect January 1,
3-36 1998.
3-37 (c) This temporary provision takes effect on the adoption of
3-38 the amendment by the voters and expires January 2, 1998.
3-39 SECTION 3. This proposed constitutional amendment shall be
3-40 submitted to the voters at an election to be held November 4, 1997.
3-41 The ballot shall be printed to permit voting for or against the
3-42 proposition: "The constitutional amendment extending homeowners'
3-43 rights to borrow voluntarily against the equity in, and establish a
3-44 valid lien on, their homesteads according to specific guidelines
3-45 for purposes in addition to those currently provided for under
3-46 state law without affecting homestead tax exemptions or eliminating
3-47 existing homestead protections against involuntary liens and
3-48 judgment creditors."
3-49 * * * * *