This website will be unavailable from Thursday, May 30, 2024 at 6:00 p.m. through Monday, June 3, 2024 at 7:00 a.m. due to data center maintenance.
79R5776 DWS-F
By: Flynn H.J.R. No. 52
A JOINT RESOLUTION
proposing a constitutional amendment lowering the minimum amount of
a debit or advance allowed under a home equity line of credit.
BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 50(g), Article XVI, Texas Constitution,
is amended to read as follows:
(g) An extension of credit described by Subsection (a)(6) of
this section may be secured by a valid lien against homestead
property if the extension of credit is not closed before the 12th
day after the lender provides the owner with the following written
notice on a separate instrument:
"NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION
50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION
ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.
SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY
THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER MAY
FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:
"(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE
CONSENT OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;
"(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS
MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL
BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80
PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;
"(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL
LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE
OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
"(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON
ONLY WITH A COURT ORDER;
"(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 3
PERCENT OF THE LOAN AMOUNT;
"(F) THE LOAN MAY NOT BE AN OPENEND ACCOUNT THAT MAY BE
DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED FROM
TIME TO TIME UNLESS IT IS A HOME EQUITY LINE OF CREDIT;
"(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR
CHARGE;
"(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE
LOAN;
"(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL
HOMESTEAD PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS
USED PRIMARILY FOR THE PRODUCTION OF MILK;
"(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER
THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME
DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT SECURED
BY YOUR HOME;
"(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6),
ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR HOME
AT ANY GIVEN TIME;
"(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN
PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR
EACH PAYMENT PERIOD;
"(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU
SUBMIT A WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER
YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND IF YOUR HOME
WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW
LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS
PASSED FROM THE CLOSING DATE OF THE OTHER LOAN;
"(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE
LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;
"(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE
OF INTEREST AUTHORIZED BY STATUTE;
"(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS
DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS
CONSTITUTION;
"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI,
OF THE TEXAS CONSTITUTION MUST:
"(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO
ANOTHER DEBT EXCEPT A DEBT THAT IS SECURED BY YOUR HOME OR OWED TO
ANOTHER LENDER;
"(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS
SECURITY;
"(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS
WHICH HAVE BLANKS LEFT TO BE FILLED IN;
"(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF
JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT
OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
"(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL
DOCUMENTS YOU SIGN AT CLOSING;
"(6) PROVIDE THAT THE SECURITY INSTRUMENTS
CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION
50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
"(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL,
THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN ASSIGNMENT
OF THE LIEN, WHICHEVER IS APPROPRIATE;
"(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER
CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;
"(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE
THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES; AND
"(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL
PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE
LENDER'S OBLIGATIONS UNLESS THE LENDER CURES THE FAILURE TO COMPLY
AS PROVIDED BY SECTION 50(a)(6)(Q)(x), ARTICLE XVI, OF THE TEXAS
CONSTITUTION; AND
"(R) IF THE LOAN IS A HOME EQUITY LINE OF CREDIT:
"(1) YOU MAY REQUEST ADVANCES, REPAY MONEY, AND
REBORROW MONEY UNDER THE LINE OF CREDIT;
"(2) EACH ADVANCE UNDER THE LINE OF CREDIT MUST
BE IN AN AMOUNT OF AT LEAST $1,000 [$4,000];
"(3) YOU MAY NOT USE A CREDIT CARD, DEBIT CARD,
SOLICITATION CHECK, OR SIMILAR DEVICE TO OBTAIN ADVANCES UNDER THE
LINE OF CREDIT;
"(4) ANY FEES THE LENDER CHARGES MAY BE CHARGED
AND COLLECTED ONLY AT THE TIME THE LINE OF CREDIT IS ESTABLISHED AND
THE LENDER MAY NOT CHARGE A FEE IN CONNECTION WITH ANY ADVANCE;
"(5) THE MAXIMUM PRINCIPAL AMOUNT THAT MAY BE
EXTENDED, WHEN ADDED TO ALL OTHER DEBTS SECURED BY YOUR HOME, MAY
NOT EXCEED 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME ON THE
DATE THE LINE OF CREDIT IS ESTABLISHED;
"(6) IF THE PRINCIPAL BALANCE UNDER THE LINE OF
CREDIT AT ANY TIME EXCEEDS 50 PERCENT OF THE FAIR MARKET VALUE OF
YOUR HOME, AS DETERMINED ON THE DATE THE LINE OF CREDIT IS
ESTABLISHED, YOU MAY NOT CONTINUE TO REQUEST ADVANCES UNDER THE
LINE OF CREDIT UNTIL THE BALANCE IS LESS THAN 50 PERCENT OF THE FAIR
MARKET VALUE; AND
"(7) THE LENDER MAY NOT UNILATERALLY AMEND THE
TERMS OF THE LINE OF CREDIT.
"THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS
CONSTITUTION. YOUR RIGHTS ARE GOVERNED BY SECTION 50, ARTICLE XVI,
OF THE TEXAS CONSTITUTION, AND NOT BY THIS NOTICE."
If the discussions with the borrower are conducted primarily
in a language other than English, the lender shall, before closing,
provide an additional copy of the notice translated into the
written language in which the discussions were conducted.
SECTION 2. Section 50(t), Article XVI, Texas Constitution,
is amended to read as follows:
(t) A home equity line of credit is a form of an open-end
account that may be debited from time to time, under which credit
may be extended from time to time and under which:
(1) the owner requests advances, repays money, and
reborrows money;
(2) any single debit or advance is not less than $1,000
[$4,000];
(3) the owner does not use a credit card, debit card,
preprinted solicitation check, or similar device to obtain an
advance;
(4) any fees described by Subsection (a)(6)(E) of this
section are charged and collected only at the time the extension of
credit is established and no fee is charged or collected in
connection with any debit or advance;
(5) the maximum principal amount that may be extended
under the account, when added to the aggregate total of the
outstanding principal balances of all indebtedness secured by the
homestead on the date the extension of credit is established, does
not exceed an amount described under Subsection (a)(6)(B) of this
section;
(6) no additional debits or advances are made if the
total principal amount outstanding exceeds an amount equal to 50
percent of the fair market value of the homestead as determined on
the date the account is established;
(7) the lender or holder may not unilaterally amend
the extension of credit; and
(8) repayment is to be made in regular periodic
installments, not more often than every 14 days and not less often
than monthly, beginning not later than two months from the date the
extension of credit is established, and:
(A) during the period during which the owner may
request advances, each installment equals or exceeds the amount of
accrued interest; and
(B) after the period during which the owner may
request advances, installments are substantially equal.
SECTION 3. This proposed constitutional amendment shall be
submitted to the voters at an election to be held November 8, 2005.
The ballot shall be printed to permit voting for or against the
proposition: "The constitutional amendment lowering the minimum
amount of a debit or advance allowed under a home equity line of
credit."