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Texas Legislature Approves Home Equity Lending Revisions
Monday, May 15, 2017 6:55 AM

The constitutional amendment that will allow the first major change to the home equity lending law in Texas in 14 years was passed by the House on a unanimous vote. SJR 60 by Sen. Kelly Hancock (R-North Richland Hills) was previously passed by the Senate and was substituted for HJR 99 by Rep. Tan Parker (R-Flower Mound) when considered by the full House.

“We thank Sen. Hancock and Rep. Parker for sponsoring this important legislation," said Jeff Huffman, president of the Texas Credit Union Association. "The bill will make home equity loans more accessible to the small borrower and offers greater options for the consumer looking to refinance a home equity loan.”

The Texas Credit Union Association (TXCUA) initiated discussions on the need to update the home equity lending laws by working with Rep. Richard Raymond who filed HJR 131 in 2015 to address problems with the 3 percent fee cap on home equity loans that League-member credit unions had raised issues about. Many members who wanted to borrow under $50,000 often ran into issues with the fee cap when trying to get a loan. The TXCUA worked with interested parties in 2016 to find provisions in the home equity lending law that all agreed needed updating to offer expanded options for borrowers.

The bill reclassifies third-party expenses such as appraisals, surveys, title policies, or title reports that are required to make the loan so they are not included in the 3 percent fee cap calculation. The 3 percent fee cap will be reduced to a 2 percent fee cap to protect consumers from additional expense. This will address the problem many borrowers face with home equity loans under $50,000 where the fees required to make the loan exceed the 3 percent cap. The cap has been particularly problematic when making loans in rural areas or to low-income borrowers.

The bill would increase the loan-to-value (LTV) ratio from 50 percent to 80 percent on new advances for home equity lines of credit, making it consistent with the closed-end loan LTV ratio. SJR 60 also repeals the prohibition against allowing agricultural homesteads to have access to home equity loans.

The legislation also would allow refinancing of home equity loans that are at least one year old. They could be refinanced into a conventional loan, providing borrowers additional options and access to lower-rate products, rather than being limited to only refinancing into a home equity loan.

The constitutional amendment will be placed on the Nov. 7, 2017, ballot for voters to approve.

For more information, please contact Texas Credit Union Association President Jeff Huffman at 469-385-6488 or jhuffman@txcua.coop.