By Solomons H.J.R. No. 5
A JOINT RESOLUTION
1-1 proposing a constitutional amendment prescribing requirements for
1-2 imposing a lien for work and material used in the construction,
1-3 repair, or renovation of improvements on residential homestead
1-4 property and including the conversion and refinance of a personal
1-5 property lien secured by a manufactured home to a lien on real
1-6 property as a debt on homestead property subject to a forced sale.
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 fifth
2-11 [12th] day after the owner makes written application for any
2-12 extension of credit for the work and material, unless the work and
2-13 material are necessary to complete immediate repairs to conditions
2-14 on the homestead property that materially affect the health or
2-15 safety of the owner or person residing in the homestead and the
2-16 owner of the 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 homestead does not exceed 80 percent of the fair market value
3-10 of the homestead on the date the extension of credit is made;
3-11 (C) is without recourse for personal liability
3-12 against each owner and the spouse of each owner, unless the owner
3-13 or spouse obtained the extension of credit by actual fraud;
3-14 (D) is secured by a lien that may be foreclosed
3-15 upon only by a court order;
3-16 (E) does not require the owner or the owner's
3-17 spouse to pay, in addition to any interest, fees to any person that
3-18 are necessary to originate, evaluate, maintain, record, insure, or
3-19 service the extension of credit that exceed, in the aggregate,
3-20 three percent of the original principal amount of the extension of
3-21 credit;
3-22 (F) is not a form of open-end account that may
3-23 be debited from time to time or under which credit may be extended
3-24 from time to time;
3-25 (G) is payable in advance without penalty or
3-26 other charge;
3-27 (H) is not secured by any additional real or
4-1 personal property other than the homestead;
4-2 (I) is not secured by homestead property
4-3 designated for agricultural use as provided by statutes governing
4-4 property tax, unless such homestead property is used primarily for
4-5 the production of milk;
4-6 (J) may not be accelerated because of a decrease
4-7 in the market value of the homestead or because of the owner's
4-8 default under other indebtedness not secured by a prior valid
4-9 encumbrance against the homestead;
4-10 (K) is the only debt secured by the homestead at
4-11 the time the extension of credit is made unless the other debt was
4-12 made for a purpose described by Subsections (a)(1)-(a)(5) of this
4-13 section;
4-14 (L) is scheduled to be repaid in substantially
4-15 equal successive monthly installments beginning no later than two
4-16 months from the date the extension of credit is made, each of which
4-17 equals or exceeds the amount of accrued interest as of the date of
4-18 the scheduled installment;
4-19 (M) is closed not before:
4-20 (i) the 12th day after the later of the
4-21 date that the owner of the homestead submits an application to the
4-22 lender for the extension of credit or the date that the lender
4-23 provides the owner a copy of the notice prescribed by Subsection
4-24 (g) of this section; and
4-25 (ii) the first anniversary of the closing
4-26 date of any other extension of credit described by Subsection
4-27 (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
5-27 another debt except debt secured by the homestead or debt to
6-1 another lender;
6-2 (ii) the owner of the homestead not assign
6-3 wages as security for the extension of credit;
6-4 (iii) the owner of the homestead not sign
6-5 any instrument in which blanks are left to be filled in;
6-6 (iv) the owner of the homestead not sign a
6-7 confession of judgment or power of attorney to the lender or to a
6-8 third person to confess judgment or to appear for the owner in a
6-9 judicial proceeding;
6-10 (v) the lender, at the time the extension
6-11 of credit is made, provide the owner of the homestead a copy of all
6-12 documents signed by the owner related to the extension of credit;
6-13 (vi) the security instruments securing the
6-14 extension of credit contain a disclosure that the extension of
6-15 credit is the type of credit defined by Section 50(a)(6), Article
6-16 XVI, Texas Constitution;
6-17 (vii) within a reasonable time after
6-18 termination and full payment of the extension of credit, the lender
6-19 cancel and return the promissory note to the owner of the homestead
6-20 and give the owner, in recordable form, a release of the lien
6-21 securing the extension of credit or a copy of an endorsement and
6-22 assignment of the lien to a lender that is refinancing the
6-23 extension of credit;
6-24 (viii) the owner of the homestead and any
6-25 spouse of the owner may, within three days after the extension of
6-26 credit is made, rescind the extension of credit without penalty or
6-27 charge;
7-1 (ix) the owner of the homestead and the
7-2 lender sign a written acknowledgment as to the fair market value of
7-3 the homestead property on the date the extension of credit is made;
7-4 and
7-5 (x) the lender or any holder of the note
7-6 for the extension of credit shall forfeit all principal and
7-7 interest of the extension of credit if the lender or holder fails
7-8 to comply with the lender's or holder's obligations under the
7-9 extension of credit within a reasonable time after the lender or
7-10 holder is notified by the borrower of the lender's failure to
7-11 comply; [or]
7-12 (7) a reverse mortgage; or
7-13 (8) the conversion and refinance of a personal
7-14 property lien secured by a manufactured home to a lien on real
7-15 property, including the refinance of the purchase price of the
7-16 manufactured home, the cost of installing the manufactured home on
7-17 the real property, and the refinance of the purchase price of the
7-18 real property.
7-19 SECTION 2. The following temporary provision is added to the
7-20 Texas Constitution:
7-21 TEMPORARY PROVISION. (a) This temporary provision applies
7-22 to the constitutional amendment proposed by the 77th Legislature,
7-23 Regular Session, 2001:
7-24 (1) prescribing requirements for imposing a lien for
7-25 work and material used in the construction, repair, or renovation
7-26 of improvements on residential homestead property; and
7-27 (2) including the conversion and refinance of a
8-1 personal property lien secured by a manufactured home to a lien on
8-2 real property as a debt on homestead property subject to a forced
8-3 sale.
8-4 (b) The constitutional amendment takes effect January 1,
8-5 2002.
8-6 (c) This temporary provision expires January 2, 2002.
8-7 SECTION 3. This proposed constitutional amendment shall be
8-8 submitted to the voters at an election to be held November 6, 2001.
8-9 The ballot shall be printed to permit voting for or against the
8-10 proposition: "The constitutional amendment prescribing
8-11 requirements for imposing a lien for work and material used in the
8-12 construction, repair, or renovation of improvements on residential
8-13 homestead property and including the conversion and refinance of a
8-14 personal property lien secured by a manufactured home to a lien on
8-15 real property as a debt on homestead property subject to a forced
8-16 sale."