1-1     By:  Harris                                           S.J.R. No. 37
 1-2           (In the Senate - Filed March 12, 1999; March 18, 1999, read
 1-3     first time and referred to Committee on State Affairs;
 1-4     April 9, 1999, reported favorably by the following vote:  Yeas 9,
 1-5     Nays 0; April 9, 1999, sent to printer.)
 1-6                           SENATE JOINT RESOLUTION
 1-7     proposing a constitutional amendment relating to the application of
 1-8     equity loan law to cooperative membership fees and certificates.
 1-9           BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10           SECTION 1.  Subsection (a), Section 50, Article XVI, Texas
1-11     Constitution, is amended to read as follows:
1-12           (a)  The homestead of a family, or of a single adult person,
1-13     shall be, and is hereby protected from forced sale, for the payment
1-14     of all debts except for:
1-15                 (1)  the purchase money thereof, or a part of such
1-16     purchase money;
1-17                 (2)  the taxes due thereon;
1-18                 (3)  an owelty of partition imposed against the
1-19     entirety of the property by a court order or by a written agreement
1-20     of the parties to the partition, including a debt of one spouse in
1-21     favor of the other spouse resulting from a division or an award of
1-22     a family homestead in a divorce proceeding;
1-23                 (4)  the refinance of a lien against a homestead,
1-24     including a federal tax lien resulting from the tax debt of both
1-25     spouses, if the homestead is a family homestead, or from the tax
1-26     debt of the owner;
1-27                 (5)  work and material used in constructing new
1-28     improvements thereon, if contracted for in writing, or work and
1-29     material used to repair or renovate existing improvements thereon
1-30     if:
1-31                       (A)  the work and material are contracted for in
1-32     writing, with the consent of both spouses, in the case of a family
1-33     homestead, given in the same manner as is required in making a sale
1-34     and conveyance of the homestead;
1-35                       (B)  the contract for the work and material is
1-36     not executed by the owner or the owner's spouse before the 12th day
1-37     after the owner makes written application for any extension of
1-38     credit for the work and material, unless the work and material are
1-39     necessary to complete immediate repairs to conditions on the
1-40     homestead property that materially affect the health or safety of
1-41     the owner or person residing in the homestead and the owner of the
1-42     homestead acknowledges such in writing;
1-43                       (C)  the contract for the work and material
1-44     expressly provides that the owner may rescind the contract without
1-45     penalty or charge within three days after the execution of the
1-46     contract by all parties, unless the work and material are necessary
1-47     to complete immediate repairs to conditions on the homestead
1-48     property that materially affect the health or safety of the owner
1-49     or person residing in the homestead and the owner of the homestead
1-50     acknowledges such in writing; and
1-51                       (D)  the contract for the work and material is
1-52     executed by the owner and the owner's spouse only at the office of
1-53     a third-party lender making an extension of credit for the work and
1-54     material, an attorney at law, or a title company;
1-55                 (6)  an extension of credit that:
1-56                       (A)  is secured by a voluntary lien on the
1-57     homestead created under a written agreement with the consent of
1-58     each owner and each owner's spouse;
1-59                       (B)  is of a principal amount that when added to
1-60     the aggregate total of the outstanding principal balances of all
1-61     other indebtedness secured by valid encumbrances of record against
1-62     the homestead does not exceed 80 percent of the fair market value
1-63     of the homestead on the date the extension of credit is made;
1-64                       (C)  is without recourse for personal liability
 2-1     against each owner and the spouse of each owner, unless the owner
 2-2     or spouse obtained the extension of credit by actual fraud;
 2-3                       (D)  is secured by a lien that may be foreclosed
 2-4     upon only by a court order;
 2-5                       (E)  does not require the owner or the owner's
 2-6     spouse to pay, in addition to any interest or cooperative
 2-7     membership fees, fees to any person that are necessary to
 2-8     originate, evaluate, maintain, record, insure, or service the
 2-9     extension of credit that exceed, in the aggregate, three percent of
2-10     the original principal amount of the extension of credit;
2-11                       (F)  is not a form of open-end account that may
2-12     be debited from time to time or under which credit may be extended
2-13     from time to time;
2-14                       (G)  is payable in advance without penalty or
2-15     other charge;
2-16                       (H)  is not secured by any additional real or
2-17     personal property other than the homestead or cooperative
2-18     membership certificates;
2-19                       (I)  is not secured by homestead property
2-20     designated for agricultural use as provided by statutes governing
2-21     property tax, unless such homestead property is used primarily for
2-22     the production of milk;
2-23                       (J)  may not be accelerated because of a decrease
2-24     in the market value of the homestead or because of the owner's
2-25     default under other indebtedness not secured by a prior valid
2-26     encumbrance against the homestead;
2-27                       (K)  is the only debt secured by the homestead at
2-28     the time the extension of credit is made unless the other debt was
2-29     made for a purpose described by Subsections (a)(1)-(a)(5) of this
2-30     section;
2-31                       (L)  is scheduled to be repaid in substantially
2-32     equal successive monthly installments beginning no later than two
2-33     months from the date the extension of credit is made, each of which
2-34     equals or exceeds the amount of accrued interest as of the date of
2-35     the scheduled installment;
2-36                       (M)  is closed not before:
2-37                             (i)  the 12th day after the later of the
2-38     date that the owner of the homestead submits an application to the
2-39     lender for the extension of credit or the date that the lender
2-40     provides the owner a copy of the notice prescribed by Subsection
2-41     (g) of this section; and
2-42                             (ii)  the first anniversary of the closing
2-43     date of any other extension of credit described by Subsection
2-44     (a)(6) of this section secured by the same homestead property;
2-45                       (N)  is closed only at the office of the lender,
2-46     an attorney at law, or a title company;
2-47                       (O)  permits a lender to contract for and receive
2-48     any fixed or variable rate of interest authorized under statute;
2-49                       (P)  is made by one of the following that has not
2-50     been found by a federal regulatory agency to have engaged in the
2-51     practice of refusing to make loans because the applicants for the
2-52     loans reside or the property proposed to secure the loans is
2-53     located in a certain area:
2-54                             (i)  a bank, savings and loan association,
2-55     savings bank, or credit union doing business under the laws of this
2-56     state or the United States;
2-57                             (ii)  a federally chartered lending
2-58     instrumentality or a person approved as a mortgagee by the United
2-59     States government to make federally insured loans;
2-60                             (iii)  a person licensed to make regulated
2-61     loans, as provided by statute of this state;
2-62                             (iv)  a person who sold the homestead
2-63     property to the current owner and who provided all or part of the
2-64     financing for the purchase; or
2-65                             (v)  a person who is related to the
2-66     homestead property owner within the second degree of affinity or
2-67     consanguinity; and
2-68                       (Q)  is made on the condition that:
2-69                             (i)  the owner of the homestead is not
 3-1     required to apply the proceeds of the extension of credit to repay
 3-2     another debt except debt secured by the homestead or debt to
 3-3     another lender;
 3-4                             (ii)  the owner of the homestead not assign
 3-5     wages as security for the extension of credit;
 3-6                             (iii)  the owner of the homestead not sign
 3-7     any instrument in which blanks are left to be filled in;
 3-8                             (iv)  the owner of the homestead not sign a
 3-9     confession of judgment or power of attorney to the lender or to a
3-10     third person to confess judgment or to appear for the owner in a
3-11     judicial proceeding;
3-12                             (v)  the lender, at the time the extension
3-13     of credit is made, provide the owner of the homestead a copy of all
3-14     documents signed by the owner related to the extension of credit;
3-15                             (vi)  the security instruments securing the
3-16     extension of credit contain a disclosure that the extension of
3-17     credit is the type of credit defined by Section 50(a)(6), Article
3-18     XVI, Texas Constitution;
3-19                             (vii)  within a reasonable time after
3-20     termination and full payment of the extension of credit, the lender
3-21     cancel and return the promissory note to the owner of the homestead
3-22     and give the owner, in recordable form, a release of the lien
3-23     securing the extension of credit or a copy of an endorsement and
3-24     assignment of the lien to a lender that is refinancing the
3-25     extension of credit;
3-26                             (viii)  the owner of the homestead and any
3-27     spouse of the owner may, within three days after the extension of
3-28     credit is made, rescind the extension of credit without penalty or
3-29     charge;
3-30                             (ix)  the owner of the homestead and the
3-31     lender sign a written acknowledgment as to the fair market value of
3-32     the homestead property on the date the extension of credit is made;
3-33     and
3-34                             (x)  the lender or any holder of the note
3-35     for the extension of credit shall forfeit all principal and
3-36     interest of the extension of credit if the lender or holder fails
3-37     to comply with the lender's or holder's obligations under the
3-38     extension of credit within a reasonable time after the lender or
3-39     holder is notified by the borrower of the lender's failure to
3-40     comply; or
3-41                 (7)  a reverse mortgage.
3-42           SECTION 2.  Subsection (g), Section 50, Article XVI, Texas
3-43     Constitution, is amended to read as follows:
3-44           (g)  An extension of credit described by Subsection (a)(6) of
3-45     this section may be secured by a valid lien against homestead
3-46     property if the extension of credit is not closed before the 12th
3-47     day after the lender provides the owner with the following written
3-48     notice on a separate instrument:
3-49           "NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION
3-50     50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
3-51           "SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION
3-52     ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.
3-53     SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS.  IF YOU DO NOT REPAY
3-54     THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER
3-55     MAY FORECLOSE AND SELL YOUR HOME.  THE CONSTITUTION PROVIDES THAT:
3-56                 "(A)  THE LOAN MUST BE VOLUNTARILY CREATED WITH THE
3-57     CONSENT OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;
3-58                 "(B)  THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS
3-59     MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL
3-60     BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80
3-61     PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;
3-62                 "(C)  THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
3-63     LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
3-64     OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
3-65                 "(D)  THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON
3-66     ONLY WITH A COURT ORDER;
3-67                 "(E)  FEES AND CHARGES TO MAKE THE LOAN, EXCLUDING
3-68     COOPERATIVE MEMBERSHIP FEES, MAY NOT EXCEED 3 PERCENT OF THE LOAN
3-69     AMOUNT;
 4-1                 "(F)  THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY
 4-2     BE DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED
 4-3     FROM TIME TO TIME;
 4-4                 "(G)  YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR
 4-5     CHARGE;
 4-6                 "(H)  NO ADDITIONAL COLLATERAL, OTHER THAN COOPERATIVE
 4-7     MEMBERSHIP CERTIFICATES, MAY BE SECURITY FOR THE LOAN;
 4-8                 "(I)  THE LOAN MAY NOT BE SECURED BY AGRICULTURAL
 4-9     HOMESTEAD PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS
4-10     USED PRIMARILY FOR THE PRODUCTION OF MILK;
4-11                 "(J)  YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER
4-12     THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME
4-13     DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT
4-14     SECURED BY YOUR HOME;
4-15                 "(K)  ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6),
4-16     ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR
4-17     HOME AT ANY GIVEN TIME;
4-18                 "(L)  THE LOAN MUST BE SCHEDULED TO BE REPAID IN
4-19     PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR
4-20     EACH PAYMENT PERIOD;
4-21                 "(M)  THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU
4-22     SUBMIT A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER
4-23     YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER;  AND IF YOUR HOME
4-24     WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW
4-25     LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
4-26     PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
4-27                 "(N)  THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE
4-28     LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;
4-29                 "(O)  THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE
4-30     OF INTEREST AUTHORIZED BY STATUTE;
4-31                 "(P)  ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
4-32     DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
4-33     CONSTITUTION;  AND
4-34                 "(Q)  LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI,
4-35     OF THE TEXAS CONSTITUTION MUST:
4-36                       "(1)  NOT REQUIRE YOU TO APPLY THE PROCEEDS TO
4-37     ANOTHER DEBT THAT IS NOT SECURED BY YOUR HOME OR TO ANOTHER DEBT TO
4-38     THE SAME LENDER;
4-39                       "(2)  NOT REQUIRE THAT YOU ASSIGN WAGES AS
4-40     SECURITY;
4-41                       "(3)  NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS
4-42     WHICH HAVE BLANKS LEFT TO BE FILLED IN;
4-43                       "(4)  NOT REQUIRE THAT YOU SIGN A CONFESSION OF
4-44     JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
4-45     OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
4-46                       "(5)  PROVIDE THAT YOU RECEIVE A COPY OF ALL
4-47     DOCUMENTS YOU SIGN AT CLOSING;
4-48                       "(6)  PROVIDE THAT THE SECURITY INSTRUMENTS
4-49     CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION
4-50     50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
4-51                       "(7)  PROVIDE THAT WHEN THE LOAN IS PAID IN FULL,
4-52     THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN
4-53     ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
4-54                       "(8)  PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
4-55     CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
4-56                       "(9)  PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE
4-57     THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES;
4-58     AND
4-59                       "(10)  PROVIDE THAT THE LENDER WILL FORFEIT ALL
4-60     PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
4-61     LENDER'S OBLIGATIONS."
4-62           If the discussions with the borrower are conducted primarily
4-63     in a language other than English, the lender shall, before closing,
4-64     provide an additional copy of the notice translated into the
4-65     written language in which the discussions were conducted.
4-66           SECTION 3.  This proposed constitutional amendment shall be
4-67     submitted to the voters at an election to be held November 2, 1999.
4-68     The ballot shall be printed to permit voting for or against the
4-69     proposition:  "The constitutional amendment relating to application
 5-1     of equity loan law to cooperative membership fees and
 5-2     certificates."
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