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."
4-10 * * * * *