By Barrientos S.J.R. No. 28
76R7290 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 collateral [homestead] does not exceed 80 percent of the fair
3-7 market value of the collateral [homestead] on the date the
3-8 extension of credit is made;
3-9 (C) is without recourse for personal liability
3-10 against each owner and the spouse of each owner, unless the owner
3-11 or spouse obtained the extension of credit by actual fraud;
3-12 (D) is secured by a lien that may be foreclosed
3-13 upon only by a court order;
3-14 (E) does not require the owner or the owner's
3-15 spouse to pay, in addition to any interest, fees to any person that
3-16 are necessary to originate, evaluate, maintain, record, insure, or
3-17 service the extension of credit that exceed, in the aggregate,
3-18 three percent of the original principal amount of the extension of
3-19 credit;
3-20 (F) is not a form of open-end account that may
3-21 be debited from time to time or under which credit may be extended
3-22 from time to time;
3-23 (G) is payable in advance without penalty or
3-24 other charge;
3-25 (H) is not secured by any additional real or
3-26 personal property other than the homestead, except that if a
3-27 homestead that is in an urban area is included in a parcel of land
4-1 that is larger than the homestead, the extension of credit may be
4-2 secured by the entire parcel and improvements on the 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 collateral [homestead property] on the date the extension of
7-5 credit is made; 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 THE COLLATERAL FOR THE LOAN
8-6 [YOUR HOME], IS MORE THAN 80 PERCENT OF THE FAIR MARKET VALUE OF
8-7 THE COLLATERAL [YOUR HOME];
8-8 "(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
8-9 LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
8-10 OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
8-11 "(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON
8-12 ONLY WITH A COURT ORDER;
8-13 "(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED
8-14 3 PERCENT OF THE LOAN AMOUNT;
8-15 "(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY
8-16 BE DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED
8-17 FROM TIME TO TIME;
8-18 "(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR
8-19 CHARGE;
8-20 "(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE
8-21 LOAN OTHER THAN LAND AND IMPROVEMENTS LOCATED IN THE SAME PARCEL OF
8-22 LAND AS AN URBAN HOMESTEAD;
8-23 "(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL
8-24 HOMESTEAD PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS
8-25 USED PRIMARILY FOR THE PRODUCTION OF MILK;
8-26 "(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER
8-27 THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME
9-1 DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT
9-2 SECURED BY YOUR HOME;
9-3 "(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6),
9-4 ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR
9-5 HOME AT ANY GIVEN TIME;
9-6 "(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN
9-7 PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR
9-8 EACH PAYMENT PERIOD;
9-9 "(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU
9-10 SUBMIT A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER
9-11 YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND IF YOUR HOME
9-12 WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW
9-13 LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
9-14 PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
9-15 "(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE
9-16 LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;
9-17 "(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE
9-18 OF INTEREST AUTHORIZED BY STATUTE;
9-19 "(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
9-20 DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
9-21 CONSTITUTION; AND
9-22 "(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI,
9-23 OF THE TEXAS CONSTITUTION MUST:
9-24 "(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO
9-25 ANOTHER DEBT THAT IS NOT SECURED BY YOUR HOME OR TO ANOTHER DEBT TO
9-26 THE SAME LENDER;
9-27 "(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS
10-1 SECURITY;
10-2 "(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS
10-3 WHICH HAVE BLANKS LEFT TO BE FILLED IN;
10-4 "(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF
10-5 JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
10-6 OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
10-7 "(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL
10-8 DOCUMENTS YOU SIGN AT CLOSING;
10-9 "(6) PROVIDE THAT THE SECURITY INSTRUMENTS
10-10 CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION
10-11 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
10-12 "(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL,
10-13 THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN
10-14 ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
10-15 "(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
10-16 CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
10-17 "(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE
10-18 THE FAIR MARKET VALUE OF THE COLLATERAL FOR THE LOAN [YOUR HOME] ON
10-19 THE DATE THE LOAN CLOSES; AND
10-20 "(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL
10-21 PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
10-22 LENDER'S OBLIGATIONS."
10-23 If the discussions with the borrower are conducted primarily
10-24 in a language other than English, the lender shall, before closing,
10-25 provide an additional copy of the notice translated into the
10-26 written language in which the discussions were conducted.
10-27 SECTION 3. Section 50(h), Article XVI, Texas Constitution,
11-1 is amended to read as follows:
11-2 (h) A lender or assignee for value may conclusively rely on
11-3 the written acknowledgment as to the fair market value of the
11-4 collateral [homestead property] made in accordance with Subsection
11-5 (a)(6)(Q)(ix) of this section if:
11-6 (1) the value acknowledged to is the value estimate in
11-7 an appraisal or evaluation prepared in accordance with a state or
11-8 federal requirement applicable to an extension of credit under
11-9 Subsection (a)(6); and
11-10 (2) the lender or assignee does not have actual
11-11 knowledge at the time of the payment of value or advance of funds
11-12 by the lender or assignee that the fair market value stated in the
11-13 written acknowledgment was incorrect.
11-14 SECTION 4. This proposed constitutional amendment shall be
11-15 submitted to the voters at an election to be held November 2, 1999.
11-16 The ballot shall be printed to permit voting for or against the
11-17 proposition: "The constitutional amendment to allow an equity loan
11-18 to be secured by a parcel of property containing an urban homestead
11-19 and real property adjoining the homestead."