Texas Home Equity Lending Guidance: Coronavirus Emergency Measures

On April 1, 2020, financial regulatory agencies in Texas issued official guidance on emergency measures for home equity lenders in response to the coronavirus COVID-19. The joint statement was made by the Department of Banking, the Department of Savings and Mortgage Lending, the Office of Consumer Credit Commissioner, and the Credit Union Department as a result of Gov. Greg Abbott's declaration of a state of disaster for all Texas counties.

The agencies anticipate that many lenders will make new loans to assist consumers in recovery efforts and may need to adjust terms or temporarily extend maturities of existing loans where circumstances warrant and safety and soundness is not compromised. The agencies are encouraging lenders to work with borrowers and support measures that will help borrowers recover and provide an opportunity to repay their debt. At the same time, lenders must ensure they comply with Article XVI, Section 50, of the Texas Constitution to have a valid home-equity lien.

Covered in the guidance:

• Existing HELOC
• Refinance of Home Equity Loan
• Modification of Existing Home Equity Loan
• Authorized Closing Location

Download the guidance bulletin.

Authorized Closing Location

In particular, Cornerstone Regulatory Compliance Counsel Suzanne Yashewski points to the guidance for "Authorized Closing Location," which references two Texas regulatory provisions that state a home equity loan or a home improvement loan must be “closed only at the office of the lender, an attorney at law, or a title company.” These two provisions do not include an exception for disasters or emergencies.

To address the current public safety crisis and minimize the spread of COVID-19, the agencies have issued new guidance that encourages lenders to consider ways to close loans in accordance with social-distancing recommendations, such as the following:

• Physical separation between the borrower and any employees (which may include physical barriers, partitions, or separate rooms).
• Use of video or audio conference to communicate with the borrower and verify the borrower’s identity.
• Use of electronic systems for the borrower to view documents, as well as electronic signatures (in accordance with Texas law and the federal E-Sign Act).
• Use of an online notary (in accordance with Texas law).
• Minimizing the use of paper documents and limiting the handling of paper documents after execution.
• Implementing enhanced sanitization protocol for areas occupied by the borrower (in accordance with recommendations of health authorities).

Lenders working with consumers on home equity loans must remain cognizant of the requirements and work with a qualified attorney to develop a plan to ensure loans are closed appropriately. The agencies agree that a reasonable option may include closing in any area located at the permanent physical address of the office or branch office of the lender, attorney, or title company, as described by the interpretation at 7 Texas Administrative Code §153.15 (e.g., a parking lot).

The agencies make clear that this guidance is not an interpretation of the Texas Constitution and is not being issued under Texas Finance Code §11.308 and §15.413, nor does it provide any safe harbor to avoid potential civil litigation against a lender.

ADDITIONAL QUESTIONS?

Please contact Cornerstone Regulatory Compliance Counsel Suzanne Yashewski at 512-853-8516 or Associate Regulatory Compliance Counsel Nathan Behncke at 512-853-8514. Alternatively, don't hesitate to call our Information Central Hotline with any questions regarding the latest regulatory and compliance guidance, business continuity and staff considerations, and more.

Information Central
512-853-8515
800-442-5762, ext. 8515