1-1     By:  Solomons (Senate Sponsor - Shapleigh)             H.J.R. No. 5
 1-2           (In the Senate - Received from the House April 24, 2001;
 1-3     April 25, 2001, read first time and referred to Committee on
 1-4     Business and Commerce; May 10, 2001, reported adversely, with
 1-5     favorable Committee Substitute by the following vote:  Yeas 6, Nays
 1-6     0; May 10, 2001, sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR H.J.R. No. 5                By:  Shapleigh
 1-8                           HOUSE JOINT RESOLUTION
 1-9     proposing a constitutional amendment prescribing requirements for
1-10     imposing a lien for work and material used in the construction,
1-11     repair, or renovation of improvements on residential homestead
1-12     property and including the conversion and refinance of a personal
1-13     property lien secured by a manufactured home to a lien on real
1-14     property as a debt on homestead property protected from a forced
1-15     sale.
1-16           BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-17           SECTION 1.  Section 50(a), Article XVI, Texas Constitution,
1-18     is amended to read as follows:
1-19           (a)  The homestead of a family, or of a single adult person,
1-20     shall be, and is hereby protected from forced sale, for the payment
1-21     of all debts except for:
1-22                 (1)  the purchase money thereof, or a part of such
1-23     purchase money;
1-24                 (2)  the taxes due thereon;
1-25                 (3)  an owelty of partition imposed against the
1-26     entirety of the property by a court order or by a written agreement
1-27     of the parties to the partition, including a debt of one spouse in
1-28     favor of the other spouse resulting from a division or an award of
1-29     a family homestead in a divorce proceeding;
1-30                 (4)  the refinance of a lien against a homestead,
1-31     including a federal tax lien resulting from the tax debt of both
1-32     spouses, if the homestead is a family homestead, or from the tax
1-33     debt of the owner;
1-34                 (5)  work and material used in constructing new
1-35     improvements thereon, if contracted for in writing, or work and
1-36     material used to repair or renovate existing improvements thereon
1-37     if:
1-38                       (A)  the work and material are contracted for in
1-39     writing, with the consent of both spouses, in the case of a family
1-40     homestead, given in the same manner as is required in making a sale
1-41     and conveyance of the homestead;
1-42                       (B)  the contract for the work and material is
1-43     not executed by the owner or the owner's spouse before the fifth
1-44     [12th] day after the owner makes written application for any
1-45     extension of credit for the work and material, unless the work and
1-46     material are necessary to complete immediate repairs to conditions
1-47     on the homestead property that materially affect the health or
1-48     safety of the owner or person residing in the homestead and the
1-49     owner of the homestead acknowledges such in writing;
1-50                       (C)  the contract for the work and material
1-51     expressly provides that the owner may rescind the contract without
1-52     penalty or charge within three days after the execution of the
1-53     contract by all parties, unless the work and material are necessary
1-54     to complete immediate repairs to conditions on the homestead
1-55     property that materially affect the health or safety of the owner
1-56     or person residing in the homestead and the owner of the homestead
1-57     acknowledges such in writing; and
1-58                       (D)  the contract for the work and material is
1-59     executed by the owner and the owner's spouse only at the office of
1-60     a third-party lender making an extension of credit for the work and
1-61     material, an attorney at law, or a title company;
1-62                 (6)  an extension of credit that:
1-63                       (A)  is secured by a voluntary lien on the
1-64     homestead created under a written agreement with the consent of
 2-1     each owner and each owner's spouse;
 2-2                       (B)  is of a principal amount that when added to
 2-3     the aggregate total of the outstanding principal balances of all
 2-4     other indebtedness secured by valid encumbrances of record against
 2-5     the homestead does not exceed 80 percent of the fair market value
 2-6     of the homestead on the date the extension of credit is made;
 2-7                       (C)  is without recourse for personal liability
 2-8     against each owner and the spouse of each owner, unless the owner
 2-9     or spouse obtained the extension of credit by actual fraud;
2-10                       (D)  is secured by a lien that may be foreclosed
2-11     upon only by a court order;
2-12                       (E)  does not require the owner or the owner's
2-13     spouse to pay, in addition to any interest, fees to any person that
2-14     are necessary to originate, evaluate, maintain, record, insure, or
2-15     service the extension of credit that exceed, in the aggregate,
2-16     three percent of the original principal amount of the extension of
2-17     credit;
2-18                       (F)  is not a form of open-end account that may
2-19     be debited from time to time or under which credit may be extended
2-20     from time to time;
2-21                       (G)  is payable in advance without penalty or
2-22     other charge;
2-23                       (H)  is not secured by any additional real or
2-24     personal property other than the homestead;
2-25                       (I)  is not secured by homestead property
2-26     designated for agricultural use as provided by statutes governing
2-27     property tax, unless such homestead property is used primarily for
2-28     the production of milk;
2-29                       (J)  may not be accelerated because of a decrease
2-30     in the market value of the homestead or because of the owner's
2-31     default under other indebtedness not secured by a prior valid
2-32     encumbrance against the homestead;
2-33                       (K)  is the only debt secured by the homestead at
2-34     the time the extension of credit is made unless the other debt was
2-35     made for a purpose described by Subsections (a)(1)-(a)(5) of this
2-36     section;
2-37                       (L)  is scheduled to be repaid in substantially
2-38     equal successive monthly installments beginning no later than two
2-39     months from the date the extension of credit is made, each of which
2-40     equals or exceeds the amount of accrued interest as of the date of
2-41     the scheduled installment;
2-42                       (M)  is closed not before:
2-43                             (i)  the 12th day after the later of the
2-44     date that the owner of the homestead submits an application to the
2-45     lender for the extension of credit or the date that the lender
2-46     provides the owner a copy of the notice prescribed by Subsection
2-47     (g) of this section; and
2-48                             (ii)  the first anniversary of the closing
2-49     date of any other extension of credit described by Subsection
2-50     (a)(6) of this section secured by the same homestead property;
2-51                       (N)  is closed only at the office of the lender,
2-52     an attorney at law, or a title company;
2-53                       (O)  permits a lender to contract for and receive
2-54     any fixed or variable rate of interest authorized under statute;
2-55                       (P)  is made by one of the following that has not
2-56     been found by a federal regulatory agency to have engaged in the
2-57     practice of refusing to make loans because the applicants for the
2-58     loans reside or the property proposed to secure the loans is
2-59     located in a certain area:
2-60                             (i)  a bank, savings and loan association,
2-61     savings bank, or credit union doing business under the laws of this
2-62     state or the United States;
2-63                             (ii)  a federally chartered lending
2-64     instrumentality or a person approved as a mortgagee by the United
2-65     States government to make federally insured loans;
2-66                             (iii)  a person licensed to make regulated
2-67     loans, as provided by statute of this state;
2-68                             (iv)  a person who sold the homestead
2-69     property to the current owner and who provided all or part of the
 3-1     financing for the purchase; or
 3-2                             (v)  a person who is related to the
 3-3     homestead property owner within the second degree of affinity or
 3-4     consanguinity; and
 3-5                       (Q)  is made on the condition that:
 3-6                             (i)  the owner of the homestead is not
 3-7     required to apply the proceeds of the extension of credit to repay
 3-8     another debt except debt secured by the homestead or debt to
 3-9     another lender;
3-10                             (ii)  the owner of the homestead not assign
3-11     wages as security for the extension of credit;
3-12                             (iii)  the owner of the homestead not sign
3-13     any instrument in which blanks are left to be filled in;
3-14                             (iv)  the owner of the homestead not sign a
3-15     confession of judgment or power of attorney to the lender or to a
3-16     third person to confess judgment or to appear for the owner in a
3-17     judicial proceeding;
3-18                             (v)  the lender, at the time the extension
3-19     of credit is made, provide the owner of the homestead a copy of all
3-20     documents signed by the owner related to the extension of credit;
3-21                             (vi)  the security instruments securing the
3-22     extension of credit contain a disclosure that the extension of
3-23     credit is the type of credit defined by Section 50(a)(6), Article
3-24     XVI, Texas Constitution;
3-25                             (vii)  within a reasonable time after
3-26     termination and full payment of the extension of credit, the lender
3-27     cancel and return the promissory note to the owner of the homestead
3-28     and give the owner, in recordable form, a release of the lien
3-29     securing the extension of credit or a copy of an endorsement and
3-30     assignment of the lien to a lender that is refinancing the
3-31     extension of credit;
3-32                             (viii)  the owner of the homestead and any
3-33     spouse of the owner may, within three days after the extension of
3-34     credit is made, rescind the extension of credit without penalty or
3-35     charge;
3-36                             (ix)  the owner of the homestead and the
3-37     lender sign a written acknowledgment as to the fair market value of
3-38     the homestead property on the date the extension of credit is made;
3-39     and
3-40                             (x)  the lender or any holder of the note
3-41     for the extension of credit shall forfeit all principal and
3-42     interest of the extension of credit if the lender or holder fails
3-43     to comply with the lender's or holder's obligations under the
3-44     extension of credit within a reasonable time after the lender or
3-45     holder is notified by the borrower of the lender's failure to
3-46     comply; [or]
3-47                 (7)  a reverse mortgage; or
3-48                 (8)  the conversion and refinance of a personal
3-49     property lien secured by a manufactured home to a lien on real
3-50     property, including the refinance of the purchase price of the
3-51     manufactured home, the cost of installing the manufactured home on
3-52     the real property, and the refinance of the purchase price of the
3-53     real property.
3-54           SECTION 2.  The following temporary provision is added to the
3-55     Texas Constitution:
3-56           TEMPORARY PROVISION.  (a)  This temporary provision applies
3-57     to the constitutional amendment proposed by the 77th  Legislature,
3-58     Regular Session, 2001:
3-59                 (1)  prescribing requirements for imposing a lien for
3-60     work and material used in the construction, repair, or renovation
3-61     of improvements on residential homestead property; and
3-62                 (2)  including the conversion and refinance of a
3-63     personal property lien secured by a manufactured home to a lien on
3-64     real property as a debt on homestead property subject to a forced
3-65     sale.
3-66           (b)  The constitutional amendment takes effect January 1,
3-67     2002.
3-68           (c)  This temporary provision expires January 2, 2002.
3-69           SECTION 3.  This proposed constitutional amendment shall be
 4-1     submitted to the voters at an election to be held November 6, 2001.
 4-2     The ballot shall be printed to permit voting for or against the
 4-3     proposition:  "The constitutional amendment prescribing
 4-4     requirements for imposing a lien for work and material used in the
 4-5     construction, repair, or renovation of improvements on residential
 4-6     homestead property and including the conversion and refinance of a
 4-7     personal property lien secured by a manufactured home to a lien on
 4-8     real property as a debt on homestead property protected from a
 4-9     forced sale."
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