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Cornerstone Submits Amicus Curiae Support on Behalf of Lenders in Home Equity Case
Friday, April 6, 2018 7:00 AM

On April 2, Cornerstone Credit Union League submitted a joint letter with the Independent Bankers Association, the Texas Bankers Association, and the Texas Mortgage Bankers Association urging the Supreme Court of Texas to review a decision by the Court of Appeals for the Fourteenth District of Texas concerning interpretations of the home equity provisions in the Texas Constitution. 

In Texas, home equity loans must be made in complete conformity with the lengthy list of requirements found in Article XVI, Section 50(a)(6) of the Texas Constitution in order to assure lien validity. The constitution limits the amount of a home equity loan to 80 percent of the home’s fair market value at the time of closing (taking into account all other valid liens secured by the homestead).

The specific constitutional language at issue in the case requires that: "the owner of the homestead and the lender sign a written acknowledgement as to the fair market value of the homestead property on the date the extension of credit is made."

The Court of Appeals decision upheld the trial court’s determination that a lender that signs a fair market value statement post-closing is left with an invalid lien. In other words, if left unchallenged, lenders would need to physically attend all home equity closings and sign the fair market valuation statement then and there. As a result, we need the Supreme Court of Texas to reconsider the interpretation of the sentence at issue.

Cornerstone and the other financial institution trade associations support the interpretation that the clause "on the date the extension of credit is made" is modifying the immediately preceding phrase: "fair market value," and is not requiring that the statement of the value to actually be "signed" on the same date and at the same location as the loan closing. This interpretation would permit home equity loan closings to take place at a title company without the lender being required to physically attend the closing. 

Read the letter supporting the Petition for Review to the Supreme Court of Texas.