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JOINT RESOLUTION
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proposing a constitutional amendment relating to home equity loans |
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allowed following refinance of certain homestead purchase money |
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loans and to the minimum advance limit on a home equity line of |
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credit. |
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BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subsections (a), (g), and (t), Section 50, |
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Article XVI, Texas Constitution, are amended to read as follows: |
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(a) The homestead of a family, or of a single adult person, |
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shall be, and is hereby protected from forced sale, for the payment |
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of all debts except for: |
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(1) the purchase money thereof, or a part of such |
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purchase money; |
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(2) the taxes due thereon; |
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(3) an owelty of partition imposed against the |
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entirety of the property by a court order or by a written agreement |
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of the parties to the partition, including a debt of one spouse in |
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favor of the other spouse resulting from a division or an award of a |
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family homestead in a divorce proceeding; |
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(4) the refinance of a lien against a homestead, |
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including a federal tax lien resulting from the tax debt of both |
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spouses, if the homestead is a family homestead, or from the tax |
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debt of the owner; |
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(5) work and material used in constructing new |
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improvements thereon, if contracted for in writing, or work and |
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material used to repair or renovate existing improvements thereon |
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if: |
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(A) the work and material are contracted for in |
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writing, with the consent of both spouses, in the case of a family |
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homestead, given in the same manner as is required in making a sale |
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and conveyance of the homestead; |
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(B) the contract for the work and material is not |
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executed by the owner or the owner's spouse before the fifth day |
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after the owner makes written application for any extension of |
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credit for the work and material, unless the work and material are |
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necessary to complete immediate repairs to conditions on the |
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homestead property that materially affect the health or safety of |
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the owner or person residing in the homestead and the owner of the |
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homestead acknowledges such in writing; |
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(C) the contract for the work and material |
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expressly provides that the owner may rescind the contract without |
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penalty or charge within three days after the execution of the |
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contract by all parties, unless the work and material are necessary |
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to complete immediate repairs to conditions on the homestead |
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property that materially affect the health or safety of the owner or |
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person residing in the homestead and the owner of the homestead |
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acknowledges such in writing; and |
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(D) the contract for the work and material is |
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executed by the owner and the owner's spouse only at the office of a |
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third-party lender making an extension of credit for the work and |
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material, an attorney at law, or a title company; |
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(6) an extension of credit that: |
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(A) is secured by a voluntary lien on the |
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homestead created under a written agreement with the consent of |
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each owner and each owner's spouse; |
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(B) is of a principal amount that when added to |
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the aggregate total of the outstanding principal balances of all |
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other indebtedness secured by valid encumbrances of record against |
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the homestead does not exceed 80 percent of the fair market value of |
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the homestead on the date the extension of credit is made; |
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(C) is without recourse for personal liability |
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against each owner and the spouse of each owner, unless the owner or |
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spouse obtained the extension of credit by actual fraud; |
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(D) is secured by a lien that may be foreclosed |
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upon only by a court order; |
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(E) does not require the owner or the owner's |
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spouse to pay, in addition to any interest, fees to any person that |
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are necessary to originate, evaluate, maintain, record, insure, or |
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service the extension of credit that exceed, in the aggregate, |
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three percent of the original principal amount of the extension of |
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credit; |
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(F) is not a form of open-end account that may be |
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debited from time to time or under which credit may be extended from |
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time to time unless the open-end account is a home equity line of |
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credit; |
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(G) is payable in advance without penalty or |
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other charge; |
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(H) is not secured by any additional real or |
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personal property other than the homestead; |
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(I) is not secured by homestead property |
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designated for agricultural use as provided by statutes governing |
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property tax, unless such homestead property is used primarily for |
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the production of milk; |
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(J) may not be accelerated because of a decrease |
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in the market value of the homestead or because of the owner's |
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default under other indebtedness not secured by a prior valid |
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encumbrance against the homestead; |
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(K) is the only debt secured by the homestead at |
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the time the extension of credit is made unless the other debt was: |
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(i) made for a purpose described by |
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Subsections (a)(1)-(a)(5) or Subsection (a)(8) of this section; or |
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(ii) a refinance in which an extension of |
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credit described by Subsection (a)(6) of this section was combined |
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with a debt made for a purpose described by Subsection (a)(1) of |
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this section into a single debt; |
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(L) is scheduled to be repaid: |
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(i) in substantially equal successive |
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periodic installments, not more often than every 14 days and not |
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less often than monthly, beginning no later than two months from the |
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date the extension of credit is made, each of which equals or |
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exceeds the amount of accrued interest as of the date of the |
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scheduled installment; or |
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(ii) if the extension of credit is a home |
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equity line of credit, in periodic payments described under |
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Subsection (t)(8) of this section; |
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(M) is closed not before: |
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(i) the 12th day after the later of the date |
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that the owner of the homestead submits an application to the lender |
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for the extension of credit or the date that the lender provides the |
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owner a copy of the notice prescribed by Subsection (g) of this |
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section; |
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(ii) one business day after the date that |
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the owner of the homestead receives a final itemized disclosure of |
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the actual fees, points, interest, costs, and charges that will be |
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charged at closing. If a bona fide emergency or another good cause |
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exists and the lender obtains the written consent of the owner, the |
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lender may provide the documentation to the owner or the lender may |
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modify previously provided documentation on the date of closing; |
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and |
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(iii) the first anniversary of the closing |
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date of any other extension of credit described by Subsection |
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(a)(6) of this section secured by the same homestead property, |
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except a refinance described by Paragraph (K)(ii) or (Q)(x)(f) of |
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this subdivision; |
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(N) is closed only at the office of the lender, an |
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attorney at law, or a title company; |
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(O) permits a lender to contract for and receive |
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any fixed or variable rate of interest authorized under statute; |
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(P) is made by one of the following that has not |
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been found by a federal regulatory agency to have engaged in the |
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practice of refusing to make loans because the applicants for the |
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loans reside or the property proposed to secure the loans is located |
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in a certain area: |
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(i) a bank, savings and loan association, |
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savings bank, or credit union doing business under the laws of this |
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state or the United States; |
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(ii) a federally chartered lending |
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instrumentality or a person approved as a mortgagee by the United |
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States government to make federally insured loans; |
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(iii) a person licensed to make regulated |
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loans, as provided by statute of this state; |
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(iv) a person who sold the homestead |
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property to the current owner and who provided all or part of the |
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financing for the purchase; |
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(v) a person who is related to the homestead |
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property owner within the second degree of affinity or |
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consanguinity; or |
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(vi) a person regulated by this state as a |
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mortgage broker; and |
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(Q) is made on the condition that: |
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(i) the owner of the homestead is not |
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required to apply the proceeds of the extension of credit to repay |
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another debt except debt secured by the homestead or debt to another |
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lender; |
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(ii) the owner of the homestead not assign |
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wages as security for the extension of credit; |
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(iii) the owner of the homestead not sign |
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any instrument in which blanks are left to be filled in; |
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(iv) the owner of the homestead not sign a |
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confession of judgment or power of attorney to the lender or to a |
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third person to confess judgment or to appear for the owner in a |
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judicial proceeding; |
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(v) the lender, at the time the extension of |
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credit is made, provide the owner of the homestead a copy of all |
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documents signed by the owner related to the extension of credit; |
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(vi) the security instruments securing the |
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extension of credit contain a disclosure that the extension of |
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credit is the type of credit defined by Section 50(a)(6), Article |
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XVI, Texas Constitution; |
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(vii) within a reasonable time after |
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termination and full payment of the extension of credit, the lender |
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cancel and return the promissory note to the owner of the homestead |
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and give the owner, in recordable form, a release of the lien |
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securing the extension of credit or a copy of an endorsement and |
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assignment of the lien to a lender that is refinancing the extension |
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of credit; |
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(viii) the owner of the homestead and any |
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spouse of the owner may, within three days after the extension of |
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credit is made, rescind the extension of credit without penalty or |
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charge; |
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(ix) the owner of the homestead and the |
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lender sign a written acknowledgment as to the fair market value of |
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the homestead property on the date the extension of credit is made; |
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(x) except as provided by Subparagraph (xi) |
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of this paragraph, the lender or any holder of the note for the |
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extension of credit shall forfeit all principal and interest of the |
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extension of credit if the lender or holder fails to comply with the |
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lender's or holder's obligations under the extension of credit and |
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fails to correct the failure to comply not later than the 60th day |
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after the date the lender or holder is notified by the borrower of |
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the lender's failure to comply by: |
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(a) paying to the owner an amount equal to any overcharge |
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paid by the owner under or related to the extension of credit if the |
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owner has paid an amount that exceeds an amount stated in the |
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applicable Paragraph (E), (G), or (O) of this subdivision; |
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(b) sending the owner a written acknowledgement that the |
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lien is valid only in the amount that the extension of credit does |
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not exceed the percentage described by Paragraph (B) of this |
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subdivision, if applicable, or is not secured by property described |
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under Paragraph (H) or (I) of this subdivision, if applicable; |
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(c) sending the owner a written notice modifying any other |
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amount, percentage, term, or other provision prohibited by this |
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section to a permitted amount, percentage, term, or other provision |
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and adjusting the account of the borrower to ensure that the |
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borrower is not required to pay more than an amount permitted by |
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this section and is not subject to any other term or provision |
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prohibited by this section; |
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(d) delivering the required documents to the borrower if the |
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lender fails to comply with Subparagraph (v) of this paragraph or |
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obtaining the appropriate signatures if the lender fails to comply |
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with Subparagraph (ix) of this paragraph; |
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(e) sending the owner a written acknowledgement, if the |
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failure to comply is prohibited by Paragraph (K) of this |
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subdivision, that the accrual of interest and all of the owner's |
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obligations under the extension of credit are abated while any |
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prior lien prohibited under Paragraph (K) remains secured by the |
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homestead; or |
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(f) if the failure to comply cannot be cured under |
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Subparagraphs (x)(a)-(e) of this paragraph, curing the failure to |
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comply by a refund or credit to the owner of $1,000 and offering the |
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owner the right to refinance the extension of credit with the lender |
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or holder for the remaining term of the loan at no cost to the owner |
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on the same terms, including interest, as the original extension of |
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credit with any modifications necessary to comply with this section |
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or on terms on which the owner and the lender or holder otherwise |
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agree that comply with this section; and |
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(xi) the lender or any holder of the note |
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for the extension of credit shall forfeit all principal and |
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interest of the extension of credit if the extension of credit is |
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made by a person other than a person described under Paragraph (P) |
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of this subdivision or if the lien was not created under a written |
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agreement with the consent of each owner and each owner's spouse, |
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unless each owner and each owner's spouse who did not initially |
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consent subsequently consents; |
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(7) a reverse mortgage; or |
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(8) the conversion and refinance of a personal |
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property lien secured by a manufactured home to a lien on real |
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property, including the refinance of the purchase price of the |
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manufactured home, the cost of installing the manufactured home on |
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the real property, and the refinance of the purchase price of the |
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real property. |
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(g) An extension of credit described by Subsection (a)(6) of |
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this section may be secured by a valid lien against homestead |
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property if the extension of credit is not closed before the 12th |
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day after the lender provides the owner with the following written |
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notice on a separate instrument: |
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"NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION |
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50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION: |
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"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION |
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ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME. |
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SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY |
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THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER MAY |
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FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT: |
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"(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE CONSENT |
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OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE; |
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"(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE |
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MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL BALANCES |
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OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80 PERCENT OF THE |
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FAIR MARKET VALUE OF YOUR HOME; |
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"(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL |
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LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE |
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OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD; |
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"(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON ONLY |
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WITH A COURT ORDER; |
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"(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 3 |
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PERCENT OF THE LOAN AMOUNT; |
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"(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY BE |
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DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED FROM |
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TIME TO TIME UNLESS IT IS A HOME EQUITY LINE OF CREDIT; |
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"(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR CHARGE; |
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"(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE LOAN; |
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"(I) THE LOAN MAY NOT BE SECURED BY AGRICULTURAL HOMESTEAD |
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PROPERTY, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS USED |
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PRIMARILY FOR THE PRODUCTION OF MILK; |
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"(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER THAN |
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AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME DECREASES |
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OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT SECURED BY YOUR |
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HOME; |
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"(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6), ARTICLE |
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XVI, OF THE TEXAS CONSTITUTION, OTHER THAN A LOAN MADE AS PART OF A |
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REFINANCE OF THE PURCHASE MONEY DEBT ON YOUR HOME, MAY BE SECURED |
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WITH YOUR HOME AT ANY GIVEN TIME; |
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"(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN PAYMENTS |
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THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR EACH PAYMENT |
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PERIOD; |
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"(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU SUBMIT A |
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WRITTEN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER YOU |
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RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND IF YOUR HOME WAS |
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SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, OTHER THAN |
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A LOAN MADE AS PART OF A REFINANCE OF THE PURCHASE MONEY DEBT ON YOUR |
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HOME, A NEW LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE |
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ONE YEAR HAS PASSED FROM THE CLOSING DATE OF THE OTHER LOAN; |
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"(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER, |
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TITLE COMPANY, OR AN ATTORNEY AT LAW; |
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"(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE OF |
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INTEREST AUTHORIZED BY STATUTE; |
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"(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS |
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DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS |
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CONSTITUTION; |
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"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF |
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THE TEXAS CONSTITUTION MUST: |
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"(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO ANOTHER |
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DEBT EXCEPT A DEBT THAT IS SECURED BY YOUR HOME OR OWED TO ANOTHER |
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LENDER; |
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"(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS SECURITY; |
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"(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS WHICH |
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HAVE BLANKS LEFT TO BE FILLED IN; |
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"(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF |
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JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT |
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OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF; |
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"(5) PROVIDE THAT YOU RECEIVE A COPY OF ALL DOCUMENTS |
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YOU SIGN AT CLOSING; |
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"(6) PROVIDE THAT THE SECURITY INSTRUMENTS CONTAIN A |
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DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION 50(a)(6), |
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ARTICLE XVI, OF THE TEXAS CONSTITUTION; |
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"(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL, THE |
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LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN ASSIGNMENT OF |
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THE LIEN, WHICHEVER IS APPROPRIATE; |
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"(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER |
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CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE; |
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"(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE THE |
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FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES; AND |
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"(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL |
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PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE |
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LENDER'S OBLIGATIONS UNLESS THE LENDER CURES THE FAILURE TO COMPLY |
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AS PROVIDED BY SECTION 50(a)(6)(Q)(x), ARTICLE XVI, OF THE TEXAS |
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CONSTITUTION; AND |
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"(R) IF THE LOAN IS A HOME EQUITY LINE OF CREDIT: |
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"(1) YOU MAY REQUEST ADVANCES, REPAY MONEY, AND |
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REBORROW MONEY UNDER THE LINE OF CREDIT; |
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"(2) EACH ADVANCE UNDER THE LINE OF CREDIT MUST BE IN |
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AN AMOUNT OF AT LEAST $1,000 [$4,000]; |
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"(3) YOU MAY NOT USE A CREDIT CARD, DEBIT CARD, |
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SOLICITATION CHECK, OR SIMILAR DEVICE TO OBTAIN ADVANCES UNDER THE |
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LINE OF CREDIT; |
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"(4) ANY FEES THE LENDER CHARGES MAY BE CHARGED AND |
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COLLECTED ONLY AT THE TIME THE LINE OF CREDIT IS ESTABLISHED AND THE |
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LENDER MAY NOT CHARGE A FEE IN CONNECTION WITH ANY ADVANCE; |
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"(5) THE MAXIMUM PRINCIPAL AMOUNT THAT MAY BE |
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EXTENDED, WHEN ADDED TO ALL OTHER DEBTS SECURED BY YOUR HOME, MAY |
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NOT EXCEED 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME ON THE |
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DATE THE LINE OF CREDIT IS ESTABLISHED; |
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"(6) IF THE PRINCIPAL BALANCE UNDER THE LINE OF CREDIT |
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AT ANY TIME EXCEEDS 50 PERCENT OF THE FAIR MARKET VALUE OF YOUR |
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HOME, AS DETERMINED ON THE DATE THE LINE OF CREDIT IS ESTABLISHED, |
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YOU MAY NOT CONTINUE TO REQUEST ADVANCES UNDER THE LINE OF CREDIT |
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UNTIL THE BALANCE IS LESS THAN 50 PERCENT OF THE FAIR MARKET VALUE; |
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AND |
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"(7) THE LENDER MAY NOT UNILATERALLY AMEND THE TERMS |
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OF THE LINE OF CREDIT. |
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"THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE |
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TEXAS CONSTITUTION. YOUR RIGHTS ARE GOVERNED BY SECTION 50, |
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ARTICLE XVI, OF THE TEXAS CONSTITUTION, AND NOT BY THIS NOTICE." |
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If the discussions with the borrower are conducted |
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primarily in a language other than English, the lender shall, |
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before closing, provide an additional copy of the notice translated |
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into the written language in which the discussions were conducted. |
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(t) A home equity line of credit is a form of an open-end |
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account that may be debited from time to time, under which credit |
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may be extended from time to time and under which: |
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(1) the owner requests advances, repays money, and |
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reborrows money; |
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(2) any single debit or advance is not less than $1,000 |
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[$4,000]; |
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(3) the owner does not use a credit card, debit card, |
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preprinted solicitation check, or similar device to obtain an |
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advance; |
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(4) any fees described by Subsection (a)(6)(E) of this |
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section are charged and collected only at the time the extension of |
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credit is established and no fee is charged or collected in |
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connection with any debit or advance; |
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(5) the maximum principal amount that may be extended |
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under the account, when added to the aggregate total of the |
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outstanding principal balances of all indebtedness secured by the |
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homestead on the date the extension of credit is established, does |
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not exceed an amount described under Subsection (a)(6)(B) of this |
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section; |
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(6) no additional debits or advances are made if the |
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total principal amount outstanding exceeds an amount equal to 50 |
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percent of the fair market value of the homestead as determined on |
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the date the account is established; |
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(7) the lender or holder may not unilaterally amend |
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the extension of credit; and |
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(8) repayment is to be made in regular periodic |
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installments, not more often than every 14 days and not less often |
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than monthly, beginning not later than two months from the date the |
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extension of credit is established, and: |
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(A) during the period during which the owner may |
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request advances, each installment equals or exceeds the amount of |
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accrued interest; and |
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(B) after the period during which the owner may |
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request advances, installments are substantially equal. |
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SECTION 2. This proposed constitutional amendment shall be |
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submitted to the voters at an election to be held November 6, 2007. |
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The ballot shall be printed to permit voting for or against the |
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proposition: "The constitutional amendment allowing a home equity |
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loan to be made regardless of whether a previous home equity loan |
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has been included in a refinance of the purchase money debt of a |
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home and lowering the minimum advance requirement on a home equity |
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line of credit." |