By Danburg H.J.R. No. 57
76R5373 DWS-F
A JOINT RESOLUTION
1-1 proposing a constitutional amendment permitting an equity loan to
1-2 be secured by one or more lots containing all or part of an urban
1-3 homestead plus other real property; relating to when payment may be
1-4 required on a reverse mortgage; and authorizing the legislature to
1-5 provide for the interpretation of the home equity lending law by a
1-6 state agency.
1-7 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-8 SECTION 1. Section 50(a), Article XVI, Texas Constitution,
1-9 is amended to read as follows:
1-10 (a) The homestead of a family, or of a single adult person,
1-11 shall be, and is hereby protected from forced sale, for the payment
1-12 of all debts except for:
1-13 (1) the purchase money thereof, or a part of such
1-14 purchase money;
1-15 (2) the taxes due thereon;
1-16 (3) an owelty of partition imposed against the
1-17 entirety of the property by a court order or by a written agreement
1-18 of the parties to the partition, including a debt of one spouse in
1-19 favor of the other spouse resulting from a division or an award of
1-20 a family homestead in a divorce proceeding;
1-21 (4) the refinance of a lien against a homestead,
1-22 including a federal tax lien resulting from the tax debt of both
1-23 spouses, if the homestead is a family homestead, or from the tax
1-24 debt of the owner;
2-1 (5) work and material used in constructing new
2-2 improvements thereon, if contracted for in writing, or work and
2-3 material used to repair or renovate existing improvements thereon
2-4 if:
2-5 (A) the work and material are contracted for in
2-6 writing, with the consent of both spouses, in the case of a family
2-7 homestead, given in the same manner as is required in making a sale
2-8 and conveyance of the homestead;
2-9 (B) the contract for the work and material is
2-10 not executed by the owner or the owner's spouse before the 12th day
2-11 after the owner makes written application for any extension of
2-12 credit for the work and material, unless the work and material are
2-13 necessary to complete immediate repairs to conditions on the
2-14 homestead property that materially affect the health or safety of
2-15 the owner or person residing in the homestead and the owner of the
2-16 homestead acknowledges such in writing;
2-17 (C) the contract for the work and material
2-18 expressly provides that the owner may rescind the contract without
2-19 penalty or charge within three days after the execution of the
2-20 contract by all parties, unless the work and material are necessary
2-21 to complete immediate repairs to conditions on the homestead
2-22 property that materially affect the health or safety of the owner
2-23 or person residing in the homestead and the owner of the homestead
2-24 acknowledges such in writing; and
2-25 (D) the contract for the work and material is
2-26 executed by the owner and the owner's spouse only at the office of
2-27 a third-party lender making an extension of credit for the work and
3-1 material, an attorney at law, or a title company;
3-2 (6) an extension of credit that:
3-3 (A) is secured by a voluntary lien on the
3-4 homestead created under a written agreement with the consent of
3-5 each owner and each owner's spouse;
3-6 (B) is of a principal amount that when added to
3-7 the aggregate total of the outstanding principal balances of all
3-8 other indebtedness secured by valid encumbrances of record against
3-9 the security [homestead] does not exceed 80 percent of the fair
3-10 market value of the security [homestead] on the date the extension
3-11 of credit is made;
3-12 (C) is without recourse for personal liability
3-13 against each owner and the spouse of each owner, unless the owner
3-14 or spouse obtained the extension of credit by actual fraud;
3-15 (D) is secured by a lien that may be foreclosed
3-16 upon only by a court order;
3-17 (E) does not require the owner or the owner's
3-18 spouse to pay, in addition to any interest, fees to any person that
3-19 are necessary to originate, evaluate, maintain, record, insure, or
3-20 service the extension of credit that exceed, in the aggregate,
3-21 three percent of the original principal amount of the extension of
3-22 credit;
3-23 (F) is not a form of open-end account that may
3-24 be debited from time to time or under which credit may be extended
3-25 from time to time;
3-26 (G) is payable in advance without penalty or
3-27 other charge;
4-1 (H) is not secured by any additional real or
4-2 personal property other than:
4-3 (i) the homestead;
4-4 (ii) any real property that is part of one
4-5 or more lots in a city, town, or village, as described by Section
4-6 51 of this article, and that includes all or part of the homestead;
4-7 and
4-8 (iii) any improvements on the property
4-9 described by Subparagraphs (i) and (ii) of this paragraph;
4-10 (I) is not secured by homestead property
4-11 designated for agricultural use as provided by statutes governing
4-12 property tax, unless such homestead property is used primarily for
4-13 the production of milk;
4-14 (J) may not be accelerated because of a decrease
4-15 in the market value of the homestead or because of the owner's
4-16 default under other indebtedness not secured by a prior valid
4-17 encumbrance against the homestead;
4-18 (K) is the only debt secured by the homestead at
4-19 the time the extension of credit is made unless the other debt was
4-20 made for a purpose described by Subsections (a)(1)-(a)(5) of this
4-21 section;
4-22 (L) is scheduled to be repaid in substantially
4-23 equal successive monthly installments beginning no later than two
4-24 months from the date the extension of credit is made, each of which
4-25 equals or exceeds the amount of accrued interest as of the date of
4-26 the scheduled installment;
4-27 (M) is closed not before:
5-1 (i) the 12th day after the later of the
5-2 date that the owner of the homestead submits an application to the
5-3 lender for the extension of credit or the date that the lender
5-4 provides the owner a copy of the notice prescribed by Subsection
5-5 (g) of this section; and
5-6 (ii) the first anniversary of the closing
5-7 date of any other extension of credit described by Subsection
5-8 (a)(6) of this section secured by the same homestead property;
5-9 (N) is closed only at the office of the lender,
5-10 an attorney at law, or a title company;
5-11 (O) permits a lender to contract for and receive
5-12 any fixed or variable rate of interest authorized under statute;
5-13 (P) is made by one of the following that has not
5-14 been found by a federal regulatory agency to have engaged in the
5-15 practice of refusing to make loans because the applicants for the
5-16 loans reside or the property proposed to secure the loans is
5-17 located in a certain area:
5-18 (i) a bank, savings and loan association,
5-19 savings bank, or credit union doing business under the laws of this
5-20 state or the United States;
5-21 (ii) a federally chartered lending
5-22 instrumentality or a person approved as a mortgagee by the United
5-23 States government to make federally insured loans;
5-24 (iii) a person licensed to make regulated
5-25 loans, as provided by statute of this state;
5-26 (iv) a person who sold the homestead
5-27 property to the current owner and who provided all or part of the
6-1 financing for the purchase; or
6-2 (v) a person who is related to the
6-3 homestead property owner within the second degree of affinity or
6-4 consanguinity; and
6-5 (Q) is made on the condition that:
6-6 (i) the owner of the homestead is not
6-7 required to apply the proceeds of the extension of credit to repay
6-8 another debt except debt secured by the homestead or debt to
6-9 another lender;
6-10 (ii) the owner of the homestead not assign
6-11 wages as security for the extension of credit;
6-12 (iii) the owner of the homestead not sign
6-13 any instrument in which blanks are left to be filled in;
6-14 (iv) the owner of the homestead not sign a
6-15 confession of judgment or power of attorney to the lender or to a
6-16 third person to confess judgment or to appear for the owner in a
6-17 judicial proceeding;
6-18 (v) the lender, at the time the extension
6-19 of credit is made, provide the owner of the homestead a copy of all
6-20 documents signed by the owner related to the extension of credit;
6-21 (vi) the security instruments securing the
6-22 extension of credit contain a disclosure that the extension of
6-23 credit is the type of credit defined by Section 50(a)(6), Article
6-24 XVI, Texas Constitution;
6-25 (vii) within a reasonable time after
6-26 termination and full payment of the extension of credit, the lender
6-27 cancel and return the promissory note to the owner of the homestead
7-1 and give the owner, in recordable form, a release of the lien
7-2 securing the extension of credit or a copy of an endorsement and
7-3 assignment of the lien to a lender that is refinancing the
7-4 extension of credit;
7-5 (viii) the owner of the homestead and any
7-6 spouse of the owner may, within three days after the extension of
7-7 credit is made, rescind the extension of credit without penalty or
7-8 charge;
7-9 (ix) the owner of the homestead and the
7-10 lender sign a written acknowledgment as to the fair market value of
7-11 the security [homestead property] on the date the extension of
7-12 credit is made; and
7-13 (x) the lender or any holder of the note
7-14 for the extension of credit shall forfeit all principal and
7-15 interest of the extension of credit if the lender or holder fails
7-16 to comply with the lender's or holder's obligations under the
7-17 extension of credit within a reasonable time after the lender or
7-18 holder is notified by the borrower of the lender's failure to
7-19 comply; or
7-20 (7) a reverse mortgage.
7-21 SECTION 2. Section 50(g), Article XVI, Texas Constitution,
7-22 is amended to read as follows:
7-23 (g) An extension of credit described by Subsection (a)(6) of
7-24 this section may be secured by a valid lien against homestead
7-25 property if the extension of credit is not closed before the 12th
7-26 day after the lender provides the owner with the following written
7-27 notice on a separate instrument:
8-1 "NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION
8-2 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
8-3 "SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION
8-4 ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.
8-5 SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY
8-6 THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER
8-7 MAY FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:
8-8 "(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE
8-9 CONSENT OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;
8-10 "(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS
8-11 MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL
8-12 BALANCES OF ALL OTHER LIENS AGAINST THE SECURITY FOR THE LOAN [YOUR
8-13 HOME], IS MORE THAN 80 PERCENT OF THE FAIR MARKET VALUE OF THE
8-14 SECURITY [YOUR HOME];
8-15 "(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
8-16 LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
8-17 OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
8-18 "(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON
8-19 ONLY WITH A COURT ORDER;
8-20 "(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED
8-21 3 PERCENT OF THE LOAN AMOUNT;
8-22 "(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY
8-23 BE DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED
8-24 FROM TIME TO TIME;
8-25 "(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR
8-26 CHARGE;
8-27 "(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE
9-1 LOAN;
9-2 "(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL
9-3 HOMESTEAD PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS
9-4 USED PRIMARILY FOR THE PRODUCTION OF MILK;
9-5 "(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER
9-6 THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME
9-7 DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT
9-8 SECURED BY YOUR HOME;
9-9 "(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6),
9-10 ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR
9-11 HOME AT ANY GIVEN TIME;
9-12 "(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN
9-13 PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR
9-14 EACH PAYMENT PERIOD;
9-15 "(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU
9-16 SUBMIT A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER
9-17 YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND IF YOUR HOME
9-18 WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW
9-19 LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
9-20 PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
9-21 "(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE
9-22 LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;
9-23 "(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE
9-24 OF INTEREST AUTHORIZED BY STATUTE;
9-25 "(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
9-26 DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
9-27 CONSTITUTION; AND
10-1 "(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI,
10-2 OF THE TEXAS CONSTITUTION MUST:
10-3 "(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO
10-4 ANOTHER DEBT THAT IS NOT SECURED BY YOUR HOME OR TO ANOTHER DEBT TO
10-5 THE SAME LENDER;
10-6 "(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS
10-7 SECURITY;
10-8 "(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS
10-9 WHICH HAVE BLANKS LEFT TO BE FILLED IN;
10-10 "(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF
10-11 JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
10-12 OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
10-13 "(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL
10-14 DOCUMENTS YOU SIGN AT CLOSING;
10-15 "(6) PROVIDE THAT THE SECURITY INSTRUMENTS
10-16 CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION
10-17 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
10-18 "(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL,
10-19 THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN
10-20 ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
10-21 "(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
10-22 CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
10-23 "(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE
10-24 THE FAIR MARKET VALUE OF THE SECURITY FOR THE LOAN [YOUR HOME] ON
10-25 THE DATE THE LOAN CLOSES; AND
10-26 "(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL
10-27 PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
11-1 LENDER'S OBLIGATIONS."
11-2 If the discussions with the borrower are conducted primarily
11-3 in a language other than English, the lender shall, before closing,
11-4 provide an additional copy of the notice translated into the
11-5 written language in which the discussions were conducted.
11-6 SECTION 3. Section 50(h), Article XVI, Texas Constitution,
11-7 is amended to read as follows:
11-8 (h) A lender or assignee for value may conclusively rely on
11-9 the written acknowledgment as to the fair market value of the
11-10 security [homestead property] made in accordance with Subsection
11-11 (a)(6)(Q)(ix) of this section if:
11-12 (1) the value acknowledged to is the value estimate in
11-13 an appraisal or evaluation prepared in accordance with a state or
11-14 federal requirement applicable to an extension of credit under
11-15 Subsection (a)(6); and
11-16 (2) the lender or assignee does not have actual
11-17 knowledge at the time of the payment of value or advance of funds
11-18 by the lender or assignee that the fair market value stated in the
11-19 written acknowledgment was incorrect.
11-20 SECTION 4. Section 50(k), Article XVI, Texas Constitution,
11-21 is amended to read as follows:
11-22 (k) "Reverse mortgage" means an extension of credit:
11-23 (1) that is secured by a voluntary lien on homestead
11-24 property created by a written agreement with the consent of each
11-25 owner and each owner's spouse;
11-26 (2) that is made to a person who is or whose spouse is
11-27 55 years or older;
12-1 (3) that is made without recourse for personal
12-2 liability against each owner and the spouse of each owner;
12-3 (4) under which advances are provided to a borrower
12-4 based on the equity in a borrower's homestead;
12-5 (5) that does not permit the lender to reduce the
12-6 amount or number of advances because of an adjustment in the
12-7 interest rate if periodic advances are to be made;
12-8 (6) that requires no payment of principal or interest
12-9 until:
12-10 (A) the homestead property securing the loan is
12-11 sold or otherwise transferred; [or]
12-12 (B) all borrowers cease occupying the homestead
12-13 property as a principal residence for more than 180 consecutive
12-14 days;
12-15 (C) [and] the location of the homestead property
12-16 owner is unknown to the lender; or
12-17 (D) the borrower defaults on an obligation
12-18 specified in the loan documents to maintain, pay taxes on, or
12-19 insure the homestead property;
12-20 (7) that provides that if the lender fails to make
12-21 loan advances as required in the loan documents and if the lender
12-22 fails to cure the default as required in the loan documents, the
12-23 lender forfeits all principal and interest of the reverse mortgage;
12-24 and
12-25 (8) that is not made unless the owner of the homestead
12-26 attests in writing that the owner received counseling regarding the
12-27 advisability and availability of reverse mortgages and other
13-1 financial alternatives.
13-2 SECTION 5. Section 50, Article XVI, Texas Constitution, is
13-3 amended by adding Subsection (t) to read as follows:
13-4 (t) The legislature may by statute delegate to one or more
13-5 state agencies the power to interpret Subsections (a)(5)-(7) and
13-6 (e)-(p) of this section. An act or omission does not violate a
13-7 provision included in those subsections if the act or omission
13-8 conforms to an interpretation of the provision that is:
13-9 (1) in effect at the time of the act or omission; and
13-10 (2) made by a state agency to which the power of
13-11 interpretation is delegated as provided by this subsection or by an
13-12 appellate court of this state or the United States.
13-13 SECTION 6. This proposed constitutional amendment shall be
13-14 submitted to the voters at an election to be held November 2, 1999.
13-15 The ballot shall be printed to permit voting for or against the
13-16 proposition: "The constitutional amendment permitting an equity
13-17 loan to be secured by one or more lots containing all or part of an
13-18 urban homestead plus other real property; relating to when payment
13-19 may be required on a reverse mortgage; and authorizing the
13-20 legislature to provide for interpretation of home equity lending
13-21 law by a state agency."