Texas Reverse Mortgage Loan Amendment, Proposition 5 (2013)
|Referred by:||Texas State Legislature|
The measure authorized the making of a reverse mortgage loan for the purchase of a home and amended certain requirements regarding a reverse mortgage loan. The measure was sponsored in the legislature by Sen. John Carona (R-16) as Senate Joint Resolution 18.
- See also: 2013 ballot measure election results
Below are the official election results:
|Texas Proposition 5|
- These results are from the Texas Secretary of State.
A reverse mortgage is a credit agreement under which a creditor provides money to a borrower in exchange for a lien on the borrower's home. The borrower is usually not required to repay the money or interest on the money until the borrower dies, sells the home or permanently moves out of the home. Reverse mortgages are available to people ages 62 and up. At the time of Prop 5's approval, Texas was the second largest market in the country for reverse mortgages. However, prior to the passage of Prop 5, it was the only state that didn't offer the "reverse mortgage for purchase," as it was not permitted to do so in the state's constitution. This form of reverse mortgage allows a person to purchase a new primary residence and obtain a reverse mortgage in a single transaction. Prop 5 included the terms of a "reverse mortgage for purpose" in the constitution so seniors could use this method to obtain a new home. It also required lenders of reverse mortgages to expand the required counseling to borrowers, ensuring that seniors know what specific actions can lead to foreclosure.
Texas Secretary of State, John Steen selected the order of the nine ballot measures for 2013 at random. The nine approved amendments were added to the Texas Constitution, the longest state constitution in the country. As of 2011, the state legislature has put 653 amendments before voters since 1876, of which 474 were passed. LWV-Texas Education Fund Chair Linda Krefting, had this to say about the nine constitutional amendments: "The issues at stake affect all Texans now and in the future, from property tax exemptions to funding the water state plan. Given the significance of the issues and relative permanence of constitutional amendments, voters need to understand each of the propositions to cast an informed vote."
Text of measure
The ballot was printed to permit voting for or against the proposition:
|“||The constitutional amendment to authorize the making of a reverse mortgage loan for the purchase of homestead property and to amend lender disclosures and other requirements in connection with a reverse mortgage loan.||”|
Fiscal impact statement
According to the fiscal impact statement for SJR 18, which was released on February 13, 2013, "No fiscal implication to the State is anticipated, other than the cost of publication. The cost to the state for publication of the resolution is $108,921. No fiscal implication to units of local government is anticipated."
Texans for Prop 5 led the campaign in favor of Proposition 5.
- Houston Association of REALTORS®
- MetroTex Association of REALTORS®
- Texas Association of REALTORS®
The arguments presented in favor of Prop 5 in the state's official voter guide were constructed by the Texas Legislative Council. The arguments featured were based on comments made about the amendment during the legislative process and generally summarized the main arguments supporting the amendment. They read as follows:
- It is not uncommon for older homeowners to find themselves in the market for a new home, whether for purposes of downsizing to a more suitable residence, relocating to be closer to their grown children or to medical care, or simply lowering the cost of homeownership. To do so, Texas seniors currently must sell one home and purchase another, either by paying in cash or by taking out a new mortgage, in two separate transactions, with separate closing costs on each transaction. The proposed amendment would add a reverse mortgage for purchase option to the reverse mortgage currently available to older homeowners, allowing Texas homeowners age 62 and older, who may be house-rich and income-poor, to sell one property and purchase another in a single transaction using the equity in an existing house to make a cash down payment on a less expensive residence. By combining the selling and buying of the two properties into one transaction and eliminating a set of fees, a homeowner could save several thousand dollars in closing fees.
- The proposed amendment would also provide important safeguards for potential reverse mortgage borrowers by requiring detailed disclosures to be made at least 12 days before the closing, providing prospective borrowers with the time and relevant information needed to make informed decisions. In addition to describing a borrower's obligations, the required disclosures would include information regarding the consequences, including a possible foreclosure, of the borrower's failure to meet certain contractual obligations, such as payment of property taxes on the home. The disclosure regarding property taxes would be an important consideration for seniors who currently are eligible to defer unpaid property taxes in Texas in order to remain in their homes but may lose that opportunity when using a reverse mortgage.
According to the League of Women Voters of Texas, which offered both support and opposition arguments for the measure, arguments in support of the measure included:
- This proposition saves costs for seniors by allowing a reverse mortgage loan to be set up as part of a purchase rather than after a purchase to eliminate duplicative processes.
- Using a "reverse mortgage for purchase," the homeowner can occupy a new residence without making a single mortgage payment. This helps seniors relocate to to other geographical areas or downsize to homes that better meet their needs.
- Reverse mortgage loans are typically easier to qualify for than traditional loans, which have income and credit score requirements to support the borrower;s ability to meet repayment commitments.
Other arguments included:
- Empower Texans supported Proposition 5. They said, "[Prop 5] Provides additional ways for homeowners to leverage the value of their property."
| Preamble • 1 • 2|
Article 3 (1-43) • Article 3 (44-49) • Article 3 (50-67)
4 • 5 • 6 • 7 • 8 • 9 • 10 • 11 • 12 • 13 • 14 • 15 • 16 • 17
According to the Texas Legislative Council's Official Voter Guide, which was compiled by the Texas Legislative Council:
- No comments opposing the proposed amendment were made during the house and senate committee hearings or during debate on the amendment in the house and senate chambers. A review of other sources also did not reveal any apparent opposition to the amendment.
According to the League of Women Voters of Texas, which offered both support and opposition arguments for the measure, arguments opposing the measure included:
- All reverse mortgages are complex financial products. Surveys have found that consumers struggle to understand and make good decisions even after required counseling.
- Homewoners can lose a lifetime of home equity as a result of fraud, scams, misleading advertising, aggressive sales tactics and discriminatory practices sometimes associated with reverse mortgages. This risk increases significantly when state regulation and enforcement are weak.
- As baby boomers consider the reverse mortgage market, their choices may put them at considerable risk at a time in their lives when making a financial recovery is unlikely.
Media editorial positions
- The Austin Chronicle said, "This would add a homestead purchase option (via existing home equity) to existing reverse mortgage law; would make it easier for elderly to sell/buy a homestead in a single transaction."
- The Dallas Morning News said, "Texas, which is the only state to prohibit reverse mortgages for home purchase, should make this commonsense change. Older Texans, especially those who are house-rich and cash-poor, deserve the greater financial flexibility and choice that this change in the constitution would provide... Voters should pass Proposition 5 and extend greater choice to older homebuyers."
- Houston Chronicle said, "The current law only allows traditional mortgages, which lets homeowners borrow against the equity of their homes. The proposal would save costs on mortgage loans and make it easier for older Texans to relocate or downsize to homes that better meet their needs."
- San Antonio Express-News said, "This amendment, if passed, would ultimately provide greater financial flexibility for borrowers. It would allow them to avoid paying double closing costs when they choose to move or downsize. It also offers the potential to keep assets invested elsewhere. Vote yes on Proposition 5, allowing the purchase of a primary residence through a reverse mortgage."
- The Burnt Orange Report endorsed Prop 5, saying, "These reverse mortgage loans are optional, and overseen and regulated by HUD. Anyone who takes the loan is required to complete counseling before it is issued, and a full notice of the terms of the loan is sent 12 days before it starts so a borrower can be super-duper sure it's on the up and up. This process actually has more protections in place than regular reverse mortgages, and is regulated by HUD, aka the Federal Government. The name makes it sound bad, but the instrument is a pretty good option for a lot of seniors and there are a lot of safeguards in place -- including the additional Texas-specific safeguards that the amendment would provide. We still have concerns that this may inadvertently open the door to bad actors in the housing market who try to prey on senior citizens. However, additional safeguards appear to be in place to prevent that. On the balance, this seems acceptable. We narrowly endorse a vote FOR Proposition 5 in the November 2013 constitutional amendment elections."
Path to the ballot
- See also: Amending the Texas Constitution
A 2/3rds vote in both chambers of the Texas State Legislature is required to refer an amendment to the ballot. Texas is one of sixteen states that requires this. Since the bill is a joint resolution, it does not require the governor's signature before being placed on the ballot.
The Texas House of Representatives passed the amendment on May 16, 2013, with a vote of 139 to 1. The Texas State Senate previously passed the amendment on March 12, 2013, with a vote of 31 to 0.
|Texas Reverse Mortgage Loan Amendment, SJR 18 House Vote|
|Texas Reverse Mortgage Loan Amendment, SJR 18 Senate Vote|
- OpenStates.org, "SJR 18: Texas Senate Joint Resolution - "Proposing a constitutional amendment to authorize the making of a reverse mortgage loan for the purchase of homestead property and to amend certain requirements in connection with a reverse mortgage loan," retrieved June 1, 2013
- Texas Legislative Council's Official Voter Guide, "Amendment No. 5, SJR 18," accessed October 7, 2013
- The League of Women Voters of Texas, "Voter Information," accessed October 7, 2013
- Legislative Reference Library of Texas, "Constitutional Amendments," accessed September 26, 2013
- The Gilmer Mirror Online, "Texas Voters Will Decide: Whether to Approve Property Tax Exemptions Related to Military Service," September 5, 2013
- Texas State Legislature, "S.J.R. No. 18," retrieved June 1, 2013
- Texas Legislature Online, "FISCAL NOTE, 83RD LEGISLATIVE REGULAR SESSION," February 13, 2013
- Empower Texans,"Recommendations: Texas Constitutional Amendments," October 17, 2013
- The Austin Chronicle, "'Chronicle' Endorsements", October 18, 2013
- The Dallas Morning News, "Editorial: Voters should approve Prop 5 for reverse mortgages", October 2, 2013
- Houston Chronicle, "Our take on the proposed constitutional amendments", October 15, 2013
- San Antonio Express-News, "Vote for reverse mortgage change", October 8, 2013
- Burnt Orange Report, "Burnt Orange Report Endorses A Vote FOR Statewide Proposition 5," October 17, 2013
- HousingWire, "Reverse mortgage legislation approved by Texas House," May 17, 2013
- OpenStates.org, "SJR 18," accessed October 24, 2013