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Texas Sen. Hancock Files Home Equity Lending Law Bill
Tuesday, March 14, 2017 7:00 AM

Sen. Kelly Hancock (R-N. Richland Hills), chairman of the Senate Business and Commerce Committee, filed SJR 60 on Friday, March 10. Like its companion bill in the House, HJR 99, this constitutional amendment proposes to update the Home Equity Lending Law. The home equity law is in the state’s constitution and any changes require a constitutional amendment.

The bill would reclassify 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. With that change, the 3 percent cap will be reduced to a 2 percent 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 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 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 bill also would allow "seasoned refinances" 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 Texas Credit Union Association has been working since last session with the Texas bankers, independent bankers, mortgage bankers, realtors, and Farm Bureau to find common ground on updates to the home equity lending law that all groups can agree on. In 2015, Rep. Richard Raymond (D-Laredo) took on the fee cap issue by filing HJR 131, similar legislation that would have removed third-party expenses from the fee cap. Though that bill did not pass, it did advance the discussion among the stakeholders, laying the groundwork to find agreement on the revisions included in SJR 60.

Passage of a constitutional amendment requires the vote of two-thirds of the House and Senate, not just the majority of votes. Once approved by the House and Senate, it would be submitted to the voters on the Nov. 7, 2017, ballot. If it wins voters’ approval, the bill would become law on Jan. 1, 2018.

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