By Hartnett                                           H.J.R. No. 20
         76R1299 DWS-D                           
                                 A JOINT RESOLUTION
 1-1     proposing a constitutional amendment relating to securing an equity
 1-2     loan with a parcel of property containing an urban homestead and
 1-3     real property adjoining the homestead.
 1-4           BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Section 50(a), Article XVI, Texas Constitution,
 1-6     is amended to read as follows:
 1-7           (a)  The homestead of a family, or of a single adult person,
 1-8     shall be, and is hereby protected from forced sale, for the payment
 1-9     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)  work and material used in constructing new
1-23     improvements thereon, if contracted for in writing, or work and
1-24     material used to repair or renovate existing improvements thereon
 2-1     if:
 2-2                       (A)  the work and material are contracted for in
 2-3     writing, with the consent of both spouses, in the case of a family
 2-4     homestead, given in the same manner as is required in making a sale
 2-5     and conveyance of the homestead;
 2-6                       (B)  the contract for the work and material is
 2-7     not executed by the owner or the owner's spouse before the 12th day
 2-8     after the owner makes written application for any extension of
 2-9     credit for the work and material, unless the work and material are
2-10     necessary to complete immediate repairs to conditions on the
2-11     homestead property that materially affect the health or safety of
2-12     the owner or person residing in the homestead and the owner of the
2-13     homestead acknowledges such in writing;
2-14                       (C)  the contract for the work and material
2-15     expressly provides that the owner may rescind the contract without
2-16     penalty or charge within three days after the execution of the
2-17     contract by all parties, unless the work and material are necessary
2-18     to complete immediate repairs to conditions on the homestead
2-19     property that materially affect the health or safety of the owner
2-20     or person residing in the homestead and the owner of the homestead
2-21     acknowledges such in writing; and
2-22                       (D)  the contract for the work and material is
2-23     executed by the owner and the owner's spouse only at the office of
2-24     a third-party lender making an extension of credit for the work and
2-25     material, an attorney at law, or a title company;
2-26                 (6)  an extension of credit that:
2-27                       (A)  is secured by a voluntary lien on the
 3-1     homestead created under a written agreement with the consent of
 3-2     each owner and each owner's spouse;
 3-3                       (B)  is of a principal amount that when added to
 3-4     the aggregate total of the outstanding principal balances of all
 3-5     other indebtedness secured by valid encumbrances of record against
 3-6     the homestead does not exceed 80 percent of the fair market value
 3-7     of the homestead on the date the extension of credit is made;
 3-8                       (C)  is without recourse for personal liability
 3-9     against each owner and the spouse of each owner, unless the owner
3-10     or spouse obtained the extension of credit by actual fraud;
3-11                       (D)  is secured by a lien that may be foreclosed
3-12     upon only by a court order;
3-13                       (E)  does not require the owner or the owner's
3-14     spouse to pay, in addition to any interest, fees to any person that
3-15     are necessary to originate, evaluate, maintain, record, insure, or
3-16     service the extension of credit that exceed, in the aggregate,
3-17     three percent of the original principal amount of the extension of
3-18     credit;
3-19                       (F)  is not a form of open-end account that may
3-20     be debited from time to time or under which credit may be extended
3-21     from time to time;
3-22                       (G)  is payable in advance without penalty or
3-23     other charge;
3-24                       (H)  is not secured by any additional real or
3-25     personal property other than the homestead, except that if a
3-26     homestead that is in a city, town, or village is included in a
3-27     parcel of land that is larger than the homestead, the extension of
 4-1     credit may be secured by the entire parcel and improvements on the
 4-2     entire parcel;
 4-3                       (I)  is not secured by homestead property
 4-4     designated for agricultural use as provided by statutes governing
 4-5     property tax, unless such homestead property is used primarily for
 4-6     the production of milk;
 4-7                       (J)  may not be accelerated because of a decrease
 4-8     in the market value of the homestead or because of the owner's
 4-9     default under other indebtedness not secured by a prior valid
4-10     encumbrance against the homestead;
4-11                       (K)  is the only debt secured by the homestead at
4-12     the time the extension of credit is made unless the other debt was
4-13     made for a purpose described by Subsections (a)(1)-(a)(5) of this
4-14     section;
4-15                       (L)  is scheduled to be repaid in substantially
4-16     equal successive monthly installments beginning no later than two
4-17     months from the date the extension of credit is made, each of which
4-18     equals or exceeds the amount of accrued interest as of the date of
4-19     the scheduled installment;
4-20                       (M)  is closed not before:
4-21                             (i)  the 12th day after the later of the
4-22     date that the owner of the homestead submits an application to the
4-23     lender for the extension of credit or the date that the lender
4-24     provides the owner a copy of the notice prescribed by Subsection
4-25     (g) of this section; and
4-26                             (ii)  the first anniversary of the closing
4-27     date of any other extension of credit described by Subsection
 5-1     (a)(6) of this section secured by the same homestead property;
 5-2                       (N)  is closed only at the office of the lender,
 5-3     an attorney at law, or a title company;
 5-4                       (O)  permits a lender to contract for and receive
 5-5     any fixed or variable rate of interest authorized under statute;
 5-6                       (P)  is made by one of the following that has not
 5-7     been found by a federal regulatory agency to have engaged in the
 5-8     practice of refusing to make loans because the applicants for the
 5-9     loans reside or the property proposed to secure the loans is
5-10     located in a certain area:
5-11                             (i)  a bank, savings and loan association,
5-12     savings bank, or credit union doing business under the laws of this
5-13     state or the United States;
5-14                             (ii)  a federally chartered lending
5-15     instrumentality or a person approved as a mortgagee by the United
5-16     States government to make federally insured loans;
5-17                             (iii)  a person licensed to make regulated
5-18     loans, as provided by statute of this state;
5-19                             (iv)  a person who sold the homestead
5-20     property to the current owner and who provided all or part of the
5-21     financing for the purchase; or
5-22                             (v)  a person who is related to the
5-23     homestead property owner within the second degree of affinity or
5-24     consanguinity; and
5-25                       (Q)  is made on the condition that:
5-26                             (i)  the owner of the homestead is not
5-27     required to apply the proceeds of the extension of credit to repay
 6-1     another debt except debt secured by the homestead or debt to
 6-2     another lender;
 6-3                             (ii)  the owner of the homestead not assign
 6-4     wages as security for the extension of credit;
 6-5                             (iii)  the owner of the homestead not sign
 6-6     any instrument in which blanks are left to be filled in;
 6-7                             (iv)  the owner of the homestead not sign a
 6-8     confession of judgment or power of attorney to the lender or to a
 6-9     third person to confess judgment or to appear for the owner in a
6-10     judicial proceeding;
6-11                             (v)  the lender, at the time the extension
6-12     of credit is made, provide the owner of the homestead a copy of all
6-13     documents signed by the owner related to the extension of credit;
6-14                             (vi)  the security instruments securing the
6-15     extension of credit contain a disclosure that the extension of
6-16     credit is the type of credit defined by Section 50(a)(6), Article
6-17     XVI, Texas Constitution;
6-18                             (vii)  within a reasonable time after
6-19     termination and full payment of the extension of credit, the lender
6-20     cancel and return the promissory note to the owner of the homestead
6-21     and give the owner, in recordable form, a release of the lien
6-22     securing the extension of credit or a copy of an endorsement and
6-23     assignment of the lien to a lender that is refinancing the
6-24     extension of credit;
6-25                             (viii)  the owner of the homestead and any
6-26     spouse of the owner may, within three days after the extension of
6-27     credit is made, rescind the extension of credit without penalty or
 7-1     charge;
 7-2                             (ix)  the owner of the homestead and the
 7-3     lender sign a written acknowledgment as to the fair market value of
 7-4     the homestead property on the date the extension of credit is made;
 7-5     and
 7-6                             (x)  the lender or any holder of the note
 7-7     for the extension of credit shall forfeit all principal and
 7-8     interest of the extension of credit if the lender or holder fails
 7-9     to comply with the lender's or holder's obligations under the
7-10     extension of credit within a reasonable time after the lender or
7-11     holder is notified by the borrower of the lender's failure to
7-12     comply; or
7-13                 (7)  a reverse mortgage.
7-14           SECTION 2.  Section 50(g), Article XVI, Texas Constitution,
7-15     is amended to read as follows:
7-16           (g)  An extension of credit described by Subsection (a)(6) of
7-17     this section may be secured by a valid lien against homestead
7-18     property if the extension of credit is not closed before the 12th
7-19     day after the lender provides the owner with the following written
7-20     notice on a separate instrument:
7-21           "NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION
7-22     50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
7-23           "SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION
7-24     ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.
7-25     SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY
7-26     THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER
7-27     MAY FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:
 8-1                 "(A)  THE LOAN MUST BE VOLUNTARILY CREATED WITH THE
 8-2     CONSENT OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;
 8-3                 "(B)  THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS
 8-4     MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL
 8-5     BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80
 8-6     PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;
 8-7                 "(C)  THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
 8-8     LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
 8-9     OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
8-10                 "(D)  THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON
8-11     ONLY WITH A COURT ORDER;
8-12                 "(E)  FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED
8-13     3 PERCENT OF THE LOAN AMOUNT;
8-14                 "(F)  THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY
8-15     BE DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED
8-16     FROM TIME TO TIME;
8-17                 "(G)  YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR
8-18     CHARGE;
8-19                 "(H)  NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE
8-20     LOAN OTHER THAN LAND AND IMPROVEMENTS LOCATED IN THE SAME PARCEL OF
8-21     LAND AS AN URBAN HOMESTEAD;
8-22                 "(I)  THE LOAN MAY NOT BE SECURED BY AGRICULTURAL
8-23     HOMESTEAD PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS
8-24     USED PRIMARILY FOR THE PRODUCTION OF MILK;
8-25                 "(J)  YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER
8-26     THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME
8-27     DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT
 9-1     SECURED BY YOUR HOME;
 9-2                 "(K)  ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6),
 9-3     ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR
 9-4     HOME AT ANY GIVEN TIME;
 9-5                 "(L)  THE LOAN MUST BE SCHEDULED TO BE REPAID IN
 9-6     PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR
 9-7     EACH PAYMENT PERIOD;
 9-8                 "(M)  THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU
 9-9     SUBMIT A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER
9-10     YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER;  AND IF YOUR HOME
9-11     WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW
9-12     LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
9-13     PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
9-14                 "(N)  THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE
9-15     LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;
9-16                 "(O)  THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE
9-17     OF INTEREST AUTHORIZED BY STATUTE;
9-18                 "(P)  ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
9-19     DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
9-20     CONSTITUTION;  AND
9-21                 "(Q)  LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI,
9-22     OF THE TEXAS CONSTITUTION MUST:
9-23                       "(1)  NOT REQUIRE YOU TO APPLY THE PROCEEDS TO
9-24     ANOTHER DEBT THAT IS NOT SECURED BY YOUR HOME OR TO ANOTHER DEBT TO
9-25     THE SAME LENDER;
9-26                       "(2)  NOT REQUIRE THAT YOU ASSIGN WAGES AS
9-27     SECURITY;
 10-1                      "(3)  NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS
 10-2    WHICH HAVE BLANKS LEFT TO BE FILLED IN;
 10-3                      "(4)  NOT REQUIRE THAT YOU SIGN A CONFESSION OF
 10-4    JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
 10-5    OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
 10-6                      "(5)  PROVIDE THAT YOU RECEIVE A COPY OF ALL
 10-7    DOCUMENTS YOU SIGN AT CLOSING;
 10-8                      "(6)  PROVIDE THAT THE SECURITY INSTRUMENTS
 10-9    CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION
10-10    50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
10-11                      "(7)  PROVIDE THAT WHEN THE LOAN IS PAID IN FULL,
10-12    THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN
10-13    ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
10-14                      "(8)  PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
10-15    CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
10-16                      "(9)  PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE
10-17    THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES;
10-18    AND
10-19                      "(10)  PROVIDE THAT THE LENDER WILL FORFEIT ALL
10-20    PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
10-21    LENDER'S OBLIGATIONS."
10-22          If the discussions with the borrower are conducted primarily
10-23    in a language other than English, the lender shall, before closing,
10-24    provide an additional copy of the notice translated into the
10-25    written language in which the discussions were conducted.
10-26          SECTION 3.  This proposed constitutional amendment shall be
10-27    submitted to the voters at an election to be held November 2, 1999.
 11-1    The ballot shall be printed to permit voting for or against the
 11-2    proposition:  "The constitutional amendment to allow an equity loan
 11-3    to be secured by a parcel of property containing an urban homestead
 11-4    and real property adjoining the homestead."