BILL ANALYSIS
By: Solomons
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Due to the recent lawsuit, ACORN, et al. v. Finance Commission of Texas, et al., the Finance and Credit Union Commissions asked the Legislature to clarify the home equity loan provisions in the Texas Constitution. Also, in response to the financial ramifications of Hurricanes Rita and Katrina, homeowners need access to the equity in their property in the event of a natural disaster.
C.S.H.J.R. 72 amends the home equity provisions in Section 50, Article XVI of the Texas Constitution to address these issues.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.
ANALYSIS
C.S.H.J.R. 72 amends Section 50, Article XVI, Texas Constitution, as follows:
The substitute establishes the designation of the agricultural use lien on the date the property closes. In order to trigger the 12 day waiting period, the substitute requires the application to be a loan application. One day prior to closing, the owner of the homestead will receive a copy of the loan application and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. In the event of a state of emergency declared by the Texas Governor or U.S. President, the substitute allows an individual, on oath, to access their equity in their home within the one year requirement. The substitute prohibits the homeowner to sign any instrument in which blanks relating to substantive terms of agreement are left to be filled in by the lender or applicant. The substitute requires the lender, at the time the extension of credit is made, to provide the owner of the homestead a copy of the final loan application and all executed documents signed by the owner at closing related to the extension of credit.
The substantive changes to the home equity provisions are reflected in the notice provision to the borrower. An agricultural lien must be designated at the date of closing. In order to trigger the 12 day waiting period, the notice requires the application for home equity to be a loan application. One day prior to closing, the notice states that the owner of the homestead will receive a copy of the loan application and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. In the event of a state of emergency declared by the Texas Governor or U.S. President, the notice allows an individual, on oath, to access their equity in their home within the one year requirement. The notice prohibits the homeowner to sign any instrument in which blanks relating to substantive terms of agreement are left to be filled in by the lender or applicant. The notice informs the borrower that the lender, at the time the extension of credit is made, will provide the owner of the homestead a copy of the final loan application and all executed documents signed by the owner at closing related to the extension of credit. The notice informs borrowers that they cannot use a credit card, debit card, or similar device, or preprinted check that the borrower did not solicit, to obtain advances under the line of credit.
The final substantive change prohibits a borrower for a home equity loan to use a credit card, debit card, or similar device, or preprinted check unsolicited by the borrower, to obtain an advance.
This proposed constitutional amendment shall be submitted to the voters at an election to be held November 6, 2007. The ballot shall be printed to permit voting for or against the proposition: "The constitutional amendment to clarify certain provisions relating to the making of a home equity loan and use of home equity loan proceeds."
EFFECTIVE DATE
The date on which the constitutional amendment relating to home equity takes effect, if that amendment is approved by the voters.
COMPARISON OF ORIGINAL TO SUBSTITUTE
C.S.H.J.R. 72 modifies the original by replacing language in the provision that triggers the 12 day waiting period by requiring the application to be a loan application. The substitute amends the original to state that the owner of the homestead will receive a copy of the loan application in addition to a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. The substitute removes the language to allow the homeowner to voluntarily, by oath, apply the proceeds of the extension of credit to repay another debt to the lender that is not secured by the homestead. The substitute modifies the language to require the lender to provide the homeowner a copy of the final loan application and all executed that are signed by the owner at closing. The substitute removes the language that the cap on fees did not include interest. The substitute modifies the language that prohibits a homeowner from using a credit card, debit card, solicitation check with any amount preprinted, or similar device to obtain advances under the line of credit.
C.S.H.J.R. 72 amends the notice to the borrower section to require homeowner to apply for a loan application for a home equity loan. The substitute adds language that the home owner receives a copy of the loan application in addition to receiving a final itemized disclosure of all actual fees, points, interest, costs, and charges for closing. The substitute removes the language "materially and adversely affects the health, safety or financial condition of the homeowner" when a homeowner requests on oath an earlier closing date in the event of a declared state of emergency. The substitute removes language that the homeowner can voluntarily, by oath, apply the proceeds of the extension of credit to repay another debt to the lender that is not secured by the homestead. The substitute amends the notice to require the lender to provide the homeowner a copy of the final loan application and all executed documents that are signed by the owner at closing. Finally, the substitute modifies the notice to warn borrowers that they cannot use a credit card, debit card, or similar device, or preprinted check unsolicited by the borrower, to obtain an advance.