Texas Finance Commission Logo
Texas Finance Commission Logo

  

OVERVIEW

Functions & Responsibilities
Studies
Press Releases
Banking System Reports
Members & Committees
Administrative
Hearings
Driving Directions
What's New

LAWS

Laws, Rules & Statutes

MEETINGS

Meeting Packets
Future
Prior

SITE SEARCH

HOME

 

 

Home Equity, Reverse Mortgage, & Home Improvement Lending in Texas
Resources & Information
(Texas Constitution, Article XVI, Section 50)
Blue Divider Line with Star


Constitutional References:

Home Equity, Reverse Mortgage, and Home Improvement Lending:
    • Texas Constitution: Article 16, Section 50
    • Home Improvement Lending: Section 50(a)(5), (c)-(e),and (u)
    • Home Equity Lending: Section 50(a)(6), (c)-(j), (q), (r), (t)*, and (u)
    • Reverse Mortgage: Section 50(a)(7), (c), (d), (f), (k)-(q), (u), and (v)

*Lines of Credit: On September 13, 2003, the voters of Texas approved an amendment of the Constitution that added Section (50)(t) allowing lines of credit.

Regulatory References:

Home Equity and Reverse Mortgage

Joint Resolution:

  • Commissions Sign Joint Resolution Seeking Clarification from Texas Legislature on Home Equity Provisions

Interpretations:

Modification:

Actions Proposed by the Joint Financial Regulatory Agencies:
 — None

Actions on Interpretations Adopted by the Joint Financial Regulatory Agencies:

Adoption of Interpretations and Rules:

  • October 24, 2008 adoption of 7 TAC §§151.1, 151.3, 151.7, and 151.8; 33 TexReg 9073 (November 7, 2008); (Originally proposed at 33 TexReg 5199 (July 4, 2008))
  • October 24, 2008 adoption of 7 TAC §§153.11-153.14, 153.51, and 153.95; 33 TexReg 9074 (November 7, 2008); (Originally proposed at 33 TexReg 5200 (July 4, 2008))  
  • June 20, 2008 adoption of amendments to 7 TAC §153.22 and §153.84; 33 TexReg 5295 (July 4, 2008); (Proposed amendments published at 33 TexReg 2101 (March 14, 2008))
  • October 20, 2006 adoption of amendment to 7 TAC §153.13; 31 TexReg 9022 (November 3, 2006); (Proposed amendments published at 31 TexReg 7076 (September. 1, 2006))
  • June 9, 2006 adoption of new 7 TAC §§153.13, 153.18, and 153.20; 31 TexReg 5080 (June 23, 2006); (Proposed amendments published at 31 TexReg 1393 (March 3, 2006))
  • June 9, 2006 adoption of repeal of 7 TAC §§153.13, 153.18, and 153.20; 31 TexReg 5080 (June 23, 2006); (Proposed amendments published at 31 TexReg 1393 (March 3, 2006))


Home Improvement

Interpretations:

Actions Proposed by the Joint Financial Regulatory Agencies — Currently Out for Comment
 — None

Actions on Interpretations Adopted by the Joint Financial Regulatory Agencies:

Adoption of Interpretations and Rules:

Examination Procedures

Loan Worksheet #10 — Home Equity Lending -- Prepared by Texas Department of Banking - Last Revised 11/2006

Texas Rules of Civil Procedure—Foreclosure:

Procedures Related to Home Equity Loan Foreclosure

Legislative Development of Home Equity Lending:

The Texas Constitution, Article XVI, Section 50, has protected homesteads from forced sale for over 150 years. Historically, constitutional provisions did not permit liens on the homestead for equity homestead loans. (Note: The Texas Legislature meets only in odd-numbered years.).

80th Legislature (2007)
Effective December 4, 2007, the citizens of Texas approved a constitutional amendment to Article XVI, Section 50 (see HJR 72). The amendment makes various changes relating to the eligibility for a home equity loan and the procedural requirements related to obtaining a home equity loan. Specifically, the amendment provides that:

  • whether property is designated for agricultural use, which would make the property ineligible to secure a home equity loan, is determined as of the date of the loan closing;
  • the application that begins the 12-day waiting period before the loan may close must be the loan application;
  • the borrower must receive a copy of the loan application at least one business day before the loan may close;
  • the one-year waiting period between home equity loans may be waived at the borrower’s request in the case of a declared emergency applicable to the area where the property securing the loans is located;
  • a borrower may sign a loan document that has blanks left to be filled in if the blanks do not relate to substantive terms of the loan agreement;
  • at the time the loan is made the borrower must receive a copy of the final loan application and all executed documents the owner signs at closing and those documents may be provided by a person other than the lender; and
  • a borrower may not use an unsolicited preprinted check to obtain an advance on a home equity line of credit.

78th Legislature (2003)
On September 13, 2003, the voters of Texas approved two constitutional amendments proposed by the 78th Legislature in Senate Joint Resolution 42 (SJR 42) and HJR 23. The amendments authorized home equity lines of credit, allowed lenders under certain conditions to cure violations of the home equity lending law, and enabled borrowers to refinance home equity loans with reverse mortgages.

A constitutional amendment was approved by the voters on September 13, 2003 that permitted the legislature to delegate to a state agency the authority to interpret home equity lending constitutional provisions at the request of an interested party or on the agency’s own motion (SJR 42). SB 1067 delegated this authority to the Finance Commission and Credit Union Commission (§11.308 and §15.413 of the Texas Finance Code). Soon thereafter, an interagency workgroup was formed to begin work on interpretative rules that were based primarily upon substantive provisions of a Regulatory Commentary that the agencies drafted in 1998.

76th Legislature (1999)
In 1999, and effective that date, Texas voters approved two corrective constitutional amendments proposed by the 76th Legislature to address these uncertainties. SJR 12 redefined a Reverse Mortgage consistent with federal law. SJR 22, increased the maximum size of an urban homestead to 10 acres.

75th Legislature (1997)
On November 4, 1997, the voters of Texas approved a constitutional amendment proposed by the 75th Legislature in House Joint Resolution 31 (HJR 31). HJR 31 significantly modified the constitutional provisions regarding liens on a homestead for home improvement purposes and created two additional categories of authorized liens, effective January 1, 1998:

  • A lien for a home equity loan
  • A lien for a reverse mortgage (a type of home equity loan)

However, uncertainties in the constitution resulted in many lenders electing to not make home equity loans or to make them only in certain circumstances.

Legislative Development of Reverse Mortgages:

The Texas Constitution, Article XVI, Section 50, has protected homesteads from forced sale for over 150 years. Constitutional provisions did not permit liens on the homestead for reverse mortgages until January 1, 1998.

78th Legislature (2003)
A constitutional amendment was approved by the voters on September 13, 2003 that permitted the legislature to delegate to a state agency the authority to interpret home improvement lending constitutional provisions at the request of an interested party or on the agency’s own motion (SJR 42). SB 1067 delegated this authority to the Finance Commission and Credit Union Commission (§11.308 and §15.413 of the Texas Finance Code).

76th Legislature (1999)
On November 2, 1999, Texas voters approved the constitutional amendments proposed in SJR 12 and SJR 22. The minimum age to obtain a reverse mortgage was set at 62, which is consistent with federal law. Additionally, the maximum size of an urban homestead was increased to 10 acres.

75th Legislature (1997)
On November 4, 1997, the voters of Texas approved a constitutional amendment proposed by the Legislature in HJR 31. This amendment significantly modified the constitutional provisions regarding liens on a homestead creating, effective January 1, 1998, a lien for a reverse mortgage. However, repayment contingencies resulted in lenders electing to not make reverse mortgages. Additionally, the minimum age to obtain a reverse mortgage (set at 55 years) was inconsistent with federal law.

Legislative Development of Home Improvement Lending:

78th Legislature (2003)
A constitutional amendment was approved by the voters on September 13, 2003 that permitted the legislature to delegate to a state agency the authority to interpret home improvement lending constitutional provisions at the request of an interested party or on the agency’s own motion (SJR 42). SB 1067 delegated this authority to the Finance Commission and Credit Union Commission (§11.308 and §15.413 of the Texas Finance Code).

77th Legislature (2001)
On November 6, 2001, the voters of Texas approved a constitutional amendment proposed by the Legislature in HJR 5. This amendment reduced the waiting period between submission of a loan application and execution of a contract for work and materials from 12 days to 5 days.

75th Legislature (1997)
On November 4, 1997, the voters of Texas approved a constitutional amendment proposed by the Legislature in House Joint Resolution 31 (HJR 31). This amendment significantly modified the constitutional provisions regarding liens on a homestead for home improvement purposes. This amendment added a requirement that the contract for work and materials be in writing, established a 12 day waiting period between the submission of a loan application and the execution of the contract for work and materials, gave the owner 3 days to rescind the contract for work and materials, and designated the offices of a third-party lender, an attorney, or a title company as the only approved locations for executing the contract for work and materials.

Studies Related to Section 50:

Disclosures:


Home Equity Lending Contract Disclosure
: English version of the consumer notice as provided by Texas Constitution, Article XVI, Section 50(a)(6).

Aviso Sobre El Crédito Que Se Concede: Spanish version of the Home Equity Lending Contract Disclosure. A lender whose discussions with the borrower are conducted primarily in Spanish for a closed-end home equity loan may rely on this translation of the consumer notice developed under the requirements of Texas Finance Code §341.502, as authorized by 7 Texas Administrative Code §153.51.

Consumer Resources:

Home Equity Loans in Texas FAQ
Préstamos Sobre el Valor Liquido de Residencias

Safe and Sound at Home: Tips for Protecting Your Equity
Para Informarle Tocante el Crédito

Reverse Mortgages in Texas FAQ

Litigation:

ACORN v. Finance Commission

Case Information from the Third Court of Appeals
Appellant Texas Bankers' Association's Motion for Clarification regarding Continuation of the Court's Stay – January 26, 2010
Opinion issued Affirming in part; Reversing and Rendering in part – January 8, 2010
Concurring and Dissenting Opinion issued – January 8, 2010
– Letter Issued by the Court – November 20, 2009
– Appellants' Letter Citing Additional Authorities – August 11, 2009
Appellees' Letter Citing Additional Authorities – July 29, 2009
Appellees’ Response to Commissions’ Motion for Abatement – January 15, 2008
Commissions’ Motion for Abatement – January 4, 2008
Amicus Brief, Independent Bankers Association – April 20, 2007
Oral arguments set for January 31, 2007
Appellee’s Reply Brief – January 29, 2007
Reply Brief of Appellant, Texas Bankers Association – January 19, 2007
Joint Motion for Additional Time for Oral Argument – January 19, 2007
Response Brief of Appellant Texas Bankers Association – January 19, 2007
Reply Brief of Appellants, the Finance Commission of Texas and the Credit Union Commission of Texas – January 9, 2007
      • Appendix

Appellees’ Brief – December 8, 2006
Stay Extended Pending Disposition of Appeal – August 31, 2006
Brief of Appellant, the Finance Commission of Texas and the Credit Union of Texas – August 30, 2006

Brief of Appellant, Texas Bankers Association – August 30, 2006
Plaintiff’s Notice of Appeal – May 23, 2006
Appellants’ Amended Notice of Appeal – May 2, 2006
Final Summary Judgment and Temporary Stay Order – April 29, 2006

Last Updated: 1/27/10