By Nixon S.J.R. No. 14
75R1313 DWS-F
A JOINT RESOLUTION
1-1 proposing a constitutional amendment authorizing a voluntary,
1-2 consensual encumbrance on a business homestead for the purpose of
1-3 an 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 on a business homestead as provided
2-5 by Section 50a of this article.
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 SECTION 2. Article XVI, Texas Constitution, is amended by
2-21 adding Section 50a to read as follows:
2-22 Sec. 50a. (a) An equity loan may not be secured by a
2-23 homestead other than a business homestead. A lender may not
2-24 require or accept a borrower's homestead, regardless of whether the
2-25 homestead was previously encumbered by an existing equity loan, as
2-26 collateral on a debt not described by Section 50(a) of this
2-27 article.
3-1 (b) A lender may not accelerate the remaining payments of an
3-2 equity loan or demand payment of the loan in full because of a
3-3 decrease in the market value of the business homestead securing the
3-4 equity loan, unless the decrease in the market value is caused by
3-5 substantial damage or destruction to the homestead, a condemnation
3-6 or other taking of the homestead, the discovery of an environmental
3-7 hazard on the homestead, or the use of the homestead in a manner
3-8 that constitutes waste on the homestead or a nuisance. This
3-9 section does not prohibit a lender, if permitted by the loan
3-10 documents, from refusing to make additional advances under an
3-11 equity loan, other than a reverse mortgage, if the value of the
3-12 homestead decreases, regardless of the cause of the decrease.
3-13 (c) A lender may not accelerate the remaining payments of an
3-14 equity loan or demand payment of the loan in full because of the
3-15 borrower's default under any other indebtedness not secured by a
3-16 prior valid encumbrance on the business homestead, regardless of
3-17 whether the indebtedness is owed to the lender. This section does
3-18 not prohibit a lender, if permitted by the loan documents, from
3-19 refusing to make additional advances under an equity loan, other
3-20 than a reverse mortgage, if the borrower has defaulted in the
3-21 performance or payment of another indebtedness owed to the lender
3-22 or another creditor.
3-23 (d) The principal amount of an equity loan plus the
3-24 aggregate total of the outstanding balances of other indebtedness
3-25 secured by valid encumbrances of record against the business
3-26 homestead may not exceed 90 percent of the fair market value of the
3-27 homestead on the date the equity loan is made.
4-1 (e) In this section:
4-2 (1) "Business homestead" means a homestead used
4-3 exclusively for business purposes.
4-4 (2) "Equity loan" means a loan made for a purpose
4-5 other than a purpose listed in Sections 50(a)(1)-(5) of this
4-6 article.
4-7 (3) "Reverse mortgage" means a nonrecourse equity
4-8 loan:
4-9 (A) under which advances are provided to a
4-10 borrower based on the equity in a borrower's business homestead;
4-11 and
4-12 (B) that requires no payment of principal or
4-13 interest until the entire loan becomes due and payable.
4-14 SECTION 3. The following temporary provision is added to the
4-15 Texas Constitution:
4-16 TEMPORARY PROVISION. (a) This temporary provision applies
4-17 to the constitutional amendment proposed by the 75th Legislature,
4-18 Regular Session, 1997, authorizing a voluntary, consensual
4-19 encumbrance on a business homestead.
4-20 (b) The constitutional amendment takes effect May 1, 1998.
4-21 (c) This temporary provision takes effect on the adoption of
4-22 the amendment by the voters and expires May 2, 1998.
4-23 SECTION 4. This proposed constitutional amendment shall be
4-24 submitted to the voters at an election to be held November 4, 1997.
4-25 The ballot shall be printed to permit voting for or against the
4-26 proposition: "The constitutional amendment extending homeowners'
4-27 rights to borrow voluntarily against the equity in and establish a
5-1 valid lien on their business homesteads."