By: Harris S.J.R. No. 37
SENATE JOINT RESOLUTION
1-1 proposing a constitutional amendment relating to the application of
1-2 equity loan law to cooperative membership fees and certificates.
1-3 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsection (a), Section 50, Article XVI, Texas
1-5 Constitution, is amended to read as follows:
1-6 (a) The homestead of a family, or of a single adult person,
1-7 shall be, and is hereby protected from forced sale, for the payment
1-8 of all debts except for:
1-9 (1) the purchase money thereof, or a part of such
1-10 purchase money;
1-11 (2) the taxes due thereon;
1-12 (3) an owelty of partition imposed against the
1-13 entirety of the property by a court order or by a written agreement
1-14 of the parties to the partition, including a debt of one spouse in
1-15 favor of the other spouse resulting from a division or an award of
1-16 a family homestead in a divorce proceeding;
1-17 (4) the refinance of a lien against a homestead,
1-18 including a federal tax lien resulting from the tax debt of both
1-19 spouses, if the homestead is a family homestead, or from the tax
1-20 debt of the owner;
1-21 (5) work and material used in constructing new
1-22 improvements thereon, if contracted for in writing, or work and
1-23 material used to repair or renovate existing improvements thereon
1-24 if:
2-1 (A) the work and material are contracted for in
2-2 writing, with the consent of both spouses, in the case of a family
2-3 homestead, given in the same manner as is required in making a sale
2-4 and conveyance of the homestead;
2-5 (B) the contract for the work and material is
2-6 not executed by the owner or the owner's spouse before the 12th day
2-7 after the owner makes written application for any extension of
2-8 credit for the work and material, unless the work and material are
2-9 necessary to complete immediate repairs to conditions on the
2-10 homestead property that materially affect the health or safety of
2-11 the owner or person residing in the homestead and the owner of the
2-12 homestead acknowledges such in writing;
2-13 (C) the contract for the work and material
2-14 expressly provides that the owner may rescind the contract without
2-15 penalty or charge within three days after the execution of the
2-16 contract by all parties, unless the work and material are necessary
2-17 to complete immediate repairs to conditions on the homestead
2-18 property that materially affect the health or safety of the owner
2-19 or person residing in the homestead and the owner of the homestead
2-20 acknowledges such in writing; and
2-21 (D) the contract for the work and material is
2-22 executed by the owner and the owner's spouse only at the office of
2-23 a third-party lender making an extension of credit for the work and
2-24 material, an attorney at law, or a title company;
2-25 (6) an extension of credit that:
2-26 (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 or cooperative
3-15 membership fees, fees to any person that are necessary to
3-16 originate, evaluate, maintain, record, insure, or service the
3-17 extension of credit that exceed, in the aggregate, three percent of
3-18 the original principal amount of the extension of 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 or cooperative
3-26 membership certificates;
4-1 (I) is not secured by homestead property
4-2 designated for agricultural use as provided by statutes governing
4-3 property tax, unless such homestead property is used primarily for
4-4 the production of milk;
4-5 (J) may not be accelerated because of a decrease
4-6 in the market value of the homestead or because of the owner's
4-7 default under other indebtedness not secured by a prior valid
4-8 encumbrance against the homestead;
4-9 (K) is the only debt secured by the homestead at
4-10 the time the extension of credit is made unless the other debt was
4-11 made for a purpose described by Subsections (a)(1)-(a)(5) of this
4-12 section;
4-13 (L) is scheduled to be repaid in substantially
4-14 equal successive monthly installments beginning no later than two
4-15 months from the date the extension of credit is made, each of which
4-16 equals or exceeds the amount of accrued interest as of the date of
4-17 the scheduled installment;
4-18 (M) is closed not before:
4-19 (i) the 12th day after the later of the
4-20 date that the owner of the homestead submits an application to the
4-21 lender for the extension of credit or the date that the lender
4-22 provides the owner a copy of the notice prescribed by Subsection
4-23 (g) of this section; and
4-24 (ii) the first anniversary of the closing
4-25 date of any other extension of credit described by Subsection
4-26 (a)(6) of this section secured by the same homestead property;
5-1 (N) is closed only at the office of the lender,
5-2 an attorney at law, or a title company;
5-3 (O) permits a lender to contract for and receive
5-4 any fixed or variable rate of interest authorized under statute;
5-5 (P) is made by one of the following that has not
5-6 been found by a federal regulatory agency to have engaged in the
5-7 practice of refusing to make loans because the applicants for the
5-8 loans reside or the property proposed to secure the loans is
5-9 located in a certain area:
5-10 (i) a bank, savings and loan association,
5-11 savings bank, or credit union doing business under the laws of this
5-12 state or the United States;
5-13 (ii) a federally chartered lending
5-14 instrumentality or a person approved as a mortgagee by the United
5-15 States government to make federally insured loans;
5-16 (iii) a person licensed to make regulated
5-17 loans, as provided by statute of this state;
5-18 (iv) a person who sold the homestead
5-19 property to the current owner and who provided all or part of the
5-20 financing for the purchase; or
5-21 (v) a person who is related to the
5-22 homestead property owner within the second degree of affinity or
5-23 consanguinity; and
5-24 (Q) is made on the condition that:
5-25 (i) the owner of the homestead is not
5-26 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
7-1 credit is made, rescind the extension of credit without penalty or
7-2 charge;
7-3 (ix) the owner of the homestead and the
7-4 lender sign a written acknowledgment as to the fair market value of
7-5 the homestead property on the date the extension of credit is made;
7-6 and
7-7 (x) the lender or any holder of the note
7-8 for the extension of credit shall forfeit all principal and
7-9 interest of the extension of credit if the lender or holder fails
7-10 to comply with the lender's or holder's obligations under the
7-11 extension of credit within a reasonable time after the lender or
7-12 holder is notified by the borrower of the lender's failure to
7-13 comply; or
7-14 (7) a reverse mortgage.
7-15 SECTION 2. Subsection (g), Section 50, Article XVI, Texas
7-16 Constitution, is amended to read as follows:
7-17 (g) An extension of credit described by Subsection (a)(6) of
7-18 this section may be secured by a valid lien against homestead
7-19 property if the extension of credit is not closed before the 12th
7-20 day after the lender provides the owner with the following written
7-21 notice on a separate instrument:
7-22 "NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION
7-23 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
7-24 "SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION
7-25 ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.
7-26 SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY
8-1 THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER
8-2 MAY FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:
8-3 "(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE
8-4 CONSENT OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;
8-5 "(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS
8-6 MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL
8-7 BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80
8-8 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;
8-9 "(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
8-10 LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
8-11 OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
8-12 "(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON
8-13 ONLY WITH A COURT ORDER;
8-14 "(E) FEES AND CHARGES TO MAKE THE LOAN, EXCLUDING
8-15 COOPERATIVE MEMBERSHIP FEES, MAY NOT EXCEED 3 PERCENT OF THE LOAN
8-16 AMOUNT;
8-17 "(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY
8-18 BE DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED
8-19 FROM TIME TO TIME;
8-20 "(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR
8-21 CHARGE;
8-22 "(H) NO ADDITIONAL COLLATERAL, OTHER THAN COOPERATIVE
8-23 MEMBERSHIP CERTIFICATES, MAY BE SECURITY FOR THE LOAN;
8-24 "(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL
8-25 HOMESTEAD PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS
8-26 USED PRIMARILY FOR THE PRODUCTION OF MILK;
9-1 "(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER
9-2 THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME
9-3 DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT
9-4 SECURED BY YOUR HOME;
9-5 "(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6),
9-6 ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR
9-7 HOME AT ANY GIVEN TIME;
9-8 "(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN
9-9 PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR
9-10 EACH PAYMENT PERIOD;
9-11 "(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU
9-12 SUBMIT A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER
9-13 YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND IF YOUR HOME
9-14 WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW
9-15 LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
9-16 PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
9-17 "(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE
9-18 LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;
9-19 "(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE
9-20 OF INTEREST AUTHORIZED BY STATUTE;
9-21 "(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
9-22 DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
9-23 CONSTITUTION; AND
9-24 "(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI,
9-25 OF THE TEXAS CONSTITUTION MUST:
9-26 "(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO
10-1 ANOTHER DEBT THAT IS NOT SECURED BY YOUR HOME OR TO ANOTHER DEBT TO
10-2 THE SAME LENDER;
10-3 "(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS
10-4 SECURITY;
10-5 "(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS
10-6 WHICH HAVE BLANKS LEFT TO BE FILLED IN;
10-7 "(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF
10-8 JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
10-9 OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
10-10 "(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL
10-11 DOCUMENTS YOU SIGN AT CLOSING;
10-12 "(6) PROVIDE THAT THE SECURITY INSTRUMENTS
10-13 CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION
10-14 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
10-15 "(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL,
10-16 THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN
10-17 ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
10-18 "(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
10-19 CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
10-20 "(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE
10-21 THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES;
10-22 AND
10-23 "(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL
10-24 PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
10-25 LENDER'S OBLIGATIONS."
10-26 If the discussions with the borrower are conducted primarily
11-1 in a language other than English, the lender shall, before closing,
11-2 provide an additional copy of the notice translated into the
11-3 written language in which the discussions were conducted.
11-4 SECTION 3. This proposed constitutional amendment shall be
11-5 submitted to the voters at an election to be held November 2, 1999.
11-6 The ballot shall be printed to permit voting for or against the
11-7 proposition: "The constitutional amendment relating to application
11-8 of equity loan law to cooperative membership fees and
11-9 certificates."