HBA-JLV H.J.R. 101 77(R) BILL ANALYSIS Office of House Bill AnalysisH.J.R. 101 By: Solomons Financial Institutions 3/28/2001 Introduced BACKGROUND AND PURPOSE Under the Texas Constitution, any future refinance or renewal of a home equity loan is considered a home equity loan and is subject to all constitutional provisions governing new home equity loans. As a result, there are concerns that many mortgage companies and traditional first lien lenders have become reluctant to refinance an existing first lien loan and home equity loan. Under current provisions, a first lien loan could become converted to a non-recourse loan and subject to potential forfeiture of principal and interest if a problem arises. This situation could restrict the ability of the homeowner borrower to take advantage of lower interest rates and to refinance both loans into a single new loan. As proposed, House Joint Resolution 101 requires the submission to the voters of a constitutional amendment simplifying requirements for certain refinances of home equity loans without additional cash advances. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this resolution does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Joint Resolution 101 amends the Texas Constitution to authorize a refinance of debt secured by a valid lien against the homestead if the refinance meets the following conditions: _property securing the refinanced debt is not subject to one or more valid and enforceable prior contractual liens or security interests; _the refinance is not closed before one year after the date that the extension of credit was closed; and _the extension of credit does not include the advance of any additional funds except for actual costs and reserves required by the lender to refinance such debt. The resolution provides that a lien securing a refinance under these provisions will be considered to be a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the homestead is a family homestead or from the tax debt of the owner. FOR ELECTION This proposed constitutional amendment shall be submitted to the voters at an election to be held November 6, 2001.