Texas Proposition 2, Home Equity Loan Amendment (2017)

Texas Proposition 2
Election date November 7, 2017
Topic Housing and Banking
Status a Approved
Type Constitutional amendment	Origin State legislature

2017 measures
November 7, 2017
Texas Proposition 7
Texas Proposition 4
Texas Proposition 6
Texas Proposition 3
Texas Proposition 5
Texas Proposition 1
Texas Proposition 2

Texas Proposition 2, the Home Equity Loan Amendment, was on the ballot in Texas as a legislatively referred constitutional amendment on November 7, 2017. It was approved.

A "yes" vote supported this amendment to make changes to the home equity borrowing system in Texas. Changes included (a) lowering the cap on home equity loan-related fees from 3 to 2 percent but excluding certain additional fees from counting towards this cap; (b) allowing home equity loans against agricultural property; (c) allowing the refinancing of a home equity loan with a purchase money loan; and (d) allowing advances on a home equity line of credit as long as the principal amount remained below 80 percent of the fair market value of a borrower's house.

A "no" vote opposed this amendment to make changes to the home equity borrowing system in Texas. Therefore, a no vote was a vote to (a) keep the cap on home equity loan-related fees at 3 percent with no additional fees excluded from this cap; (b) continue to prohibit home equity loans against non-dairy agricultural property; (c) continue to prohibit the refinancing a home equity loan with a purchase money loan; and (d) continue to prohibit additional advances on a home equity line of credit unless the principal was below 50 percent of the fair market value of a borrower's house.

Election results

Proposition 2
Result		Votes	Percentage
a Yes		593,052	68.65%
No		270,780	31.35%

Election results from Texas Elections Office

Amendment design

Proposition 2 made changes to Section 50(a) of Article 16 of the Texas Constitution, which addresses the protection of homes from forced sales for payments of debts. Section 50(a) also provides for exceptions from this constitutional protection. Proposition 2 made changes to the provision allowing homeowners to enter into voluntary liens with financial institutions, such as banks and credit unions, or mortgage bankers to secure home equity loans and home equity lines of credit. The measure made four changes to the law.

The measure is applicable to home equity loans or lines of credit made or refinanced on or after January 1, 2018.

Fee cap

Proposition 2 lowered the cap on fees to receive a home equity loan from 3 percent to 2 percent of the original principal amount of the loan. However, the measure excludes from the cap fees related to appraisal, property survey, title insurance premiums, and title examination. Previously, there was no list of items excluded from the cap in the constitution.

Agricultural homesteads

The measure allowed owners of houses on land classified as agricultural to enter into voluntary liens to secure home equity loans. Previously, only owners of houses on land used for milk production were allowed to take home equity loans.

Refinancing a home equity loan

Proposition 2 allowed a borrower to combine a home equity loan with a loan taken to buy a house, known as a purchase money loan. It allows a borrower to refinance these two types of loans into one home equity or non-home equity loan with one rate and one term provided certain conditions are met. These conditions are as follows:

(a) the refinanced loan is signed at least a year after the original home equity loan was signed;

(b) the refinanced loan cannot provide any additional money to the borrower other than to cover the costs to do the refinancing;

(c) the refinanced loan cannot exceed 80 percent of the fair market value of the house; and

(d) the lender of the loan must provide the borrower with a notice about their rights associated with a home equity or non-home equity loan 12 or more days before the date of refinance.

Previously, the option to refinance a home equity loan into a non-home equity loan was prohibited.

Home equity lines of credit

Proposition 2 lifted a restriction on advances under a home equity line of credit that prevented such advances if the principal amount of the debt was more than 50 percent of the fair market value of the house. The amendment allowed advances under a home equity line of credit at any time as long as the principal amount of the debt remained at or below 80 percent of the fair market value of the house.

Previously, a borrower could take out a home equity line of credit of up to 80 percent of the fair market value of the house, but no further draws could be made on that line of credit unless the principal amount owed is no more than 50 percent of the fair market value of the house. At that point, an additional draw could be made that increases the principal amount owed back up to no more than 80 percent of the fair market value of the house.

Under the amendment, the owner of a $250,000 could take out a home equity line of credit of up to $200,000. The owner could then draw on that line of credit freely as long as the principal amount never exceeded $200,000.

Going into 2017, the owner of such a house could take out a home equity line of credit of $200,000, but the owner could not take any additional advances under the home equity line of credit unless the principal was paid down to below $125,000. If, for example, the owner paid the principal down to $120,000, he or she would then be allowed to request an advance of up to $80,000 (i.e. enough to bring the principal amount back up to $200,000).

Text of measure

Ballot title

The ballot title was as follows:

“

The constitutional amendment to establish a lower amount for expenses that can be charged to a borrower and removing certain financing expense limitations for a home equity loan, establishing certain authorized lenders to make a home equity loan, changing certain options for the refinancing of home equity loans, changing the threshold for an advance of a home equity line of credit, and allowing home equity loans on agricultural homesteads.

”

Constitutional changes

See also: Article 16, Texas Constitution

The measure added a Subsection (f-1) to and amended Subsections (a), (f), (g), and (t) of Section 50 of Article 16 of the Texas Constitution. The following underlined text was added, and the struck-through text was deleted:

Note: Hover over the text and scroll to see the full text.

Subsection (a)

(a) The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for:

(1) the purchase money thereof, or a part of such purchase money;

(2) the taxes due thereon;

(3) an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding;

(4) the refinance of a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the homestead is a family homestead, or from the tax debt of the owner;

(5) work and material used in constructing new improvements thereon, if contracted for in writing, or work and material used to repair or renovate existing improvements thereon if:

(A) the work and material are contracted for in writing, with the consent of both spouses, in the case of a family homestead, given in the same manner as is required in making a sale and conveyance of the homestead;

(B) the contract for the work and material is not executed by the owner or the owner's spouse before the fifth day after the owner makes written application for any extension of credit for the work and material, unless the work and material are necessary to complete immediate repairs to conditions on the homestead property that materially affect the health or safety of the owner or person residing in the homestead and the owner of the homestead acknowledges such in writing;

(C) the contract for the work and material expressly provides that the owner may rescind the contract without penalty or charge within three days after the execution of the contract by all parties, unless the work and material are necessary to complete immediate repairs to conditions on the homestead property that materially affect the health or safety of the owner or person residing in the homestead and the owner of the homestead acknowledges such in writing; and

(D) the contract for the work and material is executed by the owner and the owner's spouse only at the office of a third-party lender making an extension of credit for the work and material, an attorney at law, or a title company;

(6) an extension of credit that:

(A) is secured by a voluntary lien on the homestead created under a written agreement with the consent of each owner and each owner's spouse;

(B) is of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the extension of credit is made;

(C) is without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse obtained the extension of credit by actual fraud;

(D) is secured by a lien that may be foreclosed upon only by a court order;

(E) does not require the owner or the owner's spouse to pay, in addition to any interest or any bona fide discount points used to buy down the interest rate, any fees to any person that are necessary to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, two three percent of the original principal amount of the extension of credit, excluding fees for:

(i) an appraisal performed by a third party appraiser;

(ii) a property survey performed by a state registered or licensed surveyor;

(iii) a state base premium for a mortgagee policy of title insurance with endorsements established in accordance with state law; or

(iv) a title examination report if its cost is less than the state base premium for a mortgagee policy of title insurance without endorsements established in accordance with state law;

(F) is not a form of open-end account that may be debited from time to time or under which credit may be extended from time to time unless the open-end account is a home equity line of credit;

(G) is payable in advance without penalty or other charge;

(H) is not secured by any additional real or personal property other than the homestead;

(I) (repealed) is not secured by homestead property that on the date of closing is designated for agricultural use as provided by statutes governing property tax, unless such homestead property is used primarily for the production of milk;

(J) may not be accelerated because of a decrease in the market value of the homestead or because of the owner's default under other indebtedness not secured by a prior valid encumbrance against the homestead;

(K) is the only debt secured by the homestead at the time the extension of credit is made unless the other debt was made for a purpose described by Subsections (a)(1)-(a)(5) or Subsection (a)(8) of this section;

(L) is scheduled to be repaid:

(i) in substantially equal successive periodic installments, not more often than every 14 days and not less often than monthly, beginning no later than two months from the date the extension of credit is made, each of which equals or exceeds the amount of accrued interest as of the date of the scheduled installment; or

(ii) if the extension of credit is a home equity line of credit, in periodic payments described under Subsection (t)(8) of this section;

(M) is closed not before:

(i) the 12th day after the later of the date that the owner of the homestead submits a loan application to the lender for the extension of credit or the date that the lender provides the owner a copy of the notice prescribed by Subsection (g) of this section;

(ii) one business day after the date that the owner of the homestead receives a copy of the loan application if not previously provided and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing. If a bona fide emergency or another good cause exists and the lender obtains the written consent of the owner, the lender may provide the documentation to the owner or the lender may modify previously provided documentation on the date of closing; and

(iii) the first anniversary of the closing date of any other extension of credit described by Subsection (a)(6) of this section secured by the same homestead property, except a refinance described by Paragraph (Q)(x)(f) of this subdivision, unless the owner on oath requests an earlier closing due to a state of emergency that:

(a) has been declared by the president of the United States or the governor as provided by law; and

(b) applies to the area where the homestead is located;

(N) is closed only at the office of the lender, an attorney at law, or a title company;

(O) permits a lender to contract for and receive any fixed or variable rate of interest authorized under statute;

(P) is made by one of the following that has not been found by a federal regulatory agency to have engaged in the practice of refusing to make loans because the applicants for the loans reside or the property proposed to secure the loans is located in a certain area:

(i) a bank, savings and loan association, savings bank, or credit union doing business under the laws of this state or the United States, including a subsidiary of a bank, savings and loan association, savings bank, or credit union described by this subparagraph;

(ii) a federally chartered lending instrumentality or a person approved as a mortgagee by the United States government to make federally insured loans;

(iii) a person licensed to make regulated loans, as provided by statute of this state;

(iv) a person who sold the homestead property to the current owner and who provided all or part of the financing for the purchase;

(v) a person who is related to the homestead property owner within the second degree of affinity or consanguinity; or

(vi) a person regulated by this state as a mortgage banker or mortgage company broker; and

(Q) is made on the condition that:

(i) the owner of the homestead is not required to apply the proceeds of the extension of credit to repay another debt except debt secured by the homestead or debt to another lender;

(ii) the owner of the homestead not assign wages as security for the extension of credit;

(iii) the owner of the homestead not sign any instrument in which blanks relating to substantive terms of agreement are left to be filled in;

(iv) the owner of the homestead not sign a confession of judgment or power of attorney to the lender or to a third person to confess judgment or to appear for the owner in a judicial proceeding;

(v) at the time the extension of credit is made, the owner of the homestead shall receive a copy of the final loan application and all executed documents signed by the owner at closing related to the extension of credit;

(vi) the security instruments securing the extension of credit contain a disclosure that the extension of credit is the type of credit defined by Subsection (a)(6) of this Section Section 50(a)(6), Article XVI, Texas Constitution;

(vii) within a reasonable time after termination and full payment of the extension of credit, the lender cancel and return the promissory note to the owner of the homestead and give the owner, in recordable form, a release of the lien securing the extension of credit or a copy of an endorsement and assignment of the lien to a lender that is refinancing the extension of credit;

(viii) the owner of the homestead and any spouse of the owner may, within three days after the extension of credit is made, rescind the extension of credit without penalty or charge;

(ix) the owner of the homestead and the lender sign a written acknowledgment as to the fair market value of the homestead property on the date the extension of credit is made;

(x) except as provided by Subparagraph (xi) of this paragraph, the lender or any holder of the note for the extension of credit shall forfeit all principal and interest of the extension of credit if the lender or holder fails to comply with the lender's or holder's obligations under the extension of credit and fails to correct the failure to comply not later than the 60th day after the date the lender or holder is notified by the borrower of the lender's failure to comply by:

(a) paying to the owner an amount equal to any overcharge paid by the owner under or related to the extension of credit if the owner has paid an amount that exceeds an amount stated in the applicable Paragraph (E), (G), or (O) of this subdivision;

(b) sending the owner a written acknowledgement that the lien is valid only in the amount that the extension of credit does not exceed the percentage described by Paragraph (B) of this subdivision, if applicable, or is not secured by property described under Paragraph (H) or (I) of this subdivision, if applicable;

(c) sending the owner a written notice modifying any other amount, percentage, term, or other provision prohibited by this section to a permitted amount, percentage, term, or other provision and adjusting the account of the borrower to ensure that the borrower is not required to pay more than an amount permitted by this section and is not subject to any other term or provision prohibited by this section;

(d) delivering the required documents to the borrower if the lender fails to comply with Subparagraph (v) of this paragraph or obtaining the appropriate signatures if the lender fails to comply with Subparagraph (ix) of this paragraph;

(e) sending the owner a written acknowledgement, if the failure to comply is prohibited by Paragraph (K) of this subdivision, that the accrual of interest and all of the owner's obligations under the extension of credit are abated while any prior lien prohibited under Paragraph (K) remains secured by the homestead; or

(f) if the failure to comply cannot be cured under Subparagraphs (x)(a)-(e) of this paragraph, curing the failure to comply by a refund or credit to the owner of $1,000 and offering the owner the right to refinance the extension of credit with the lender or holder for the remaining term of the loan at no cost to the owner on the same terms, including interest, as the original extension of credit with any modifications necessary to comply with this section or on terms on which the owner and the lender or holder otherwise agree that comply with this section; and

(xi) the lender or any holder of the note for the extension of credit shall forfeit all principal and interest of the extension of credit if the extension of credit is made by a person other than a person described under Paragraph (P) of this subdivision or if the lien was not created under a written agreement with the consent of each owner and each owner's spouse, unless each owner and each owner's spouse who did not initially consent subsequently consents;

(7) a reverse mortgage; or

(8) the conversion and refinance of a personal property lien secured by a manufactured home to a lien on real property, including the refinance of the purchase price of the manufactured home, the cost of installing the manufactured home on the real property, and the refinance of the purchase price of the real property.

Subsection (f)

(f) A refinance of debt secured by the homestead, any portion of which is an extension of credit described by Subsection (a)(6) of this section, may not be secured by a valid lien against the homestead unless either:

(1) the refinance of the debt is an extension of credit described by Subsection (a)(6) or (a)(7) of this section; or

(2) all of the following conditions are met:

(A) the refinance is not closed before the first anniversary of the date the extension of credit was closed;

(B) the refinanced extension of credit does not include the advance of any additional funds other than:

(i) funds advanced to refinance a debt described by Subsections (a)(1) through (a)(7) of this section; or

(ii) actual costs and reserves required by the lender to refinance the debt;

(C) the refinance of the extension of credit is of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the homestead on the date the refinance of the extension of credit is made; and

(D) the lender provides the owner the following written notice on a separate document not later than the third business day after the date the owner submits the loan application to the lender and at least 12 days before the date the refinance of the extension of credit is closed:

"YOUR EXISTING LOAN THAT YOU DESIRE TO REFINANCE IS A HOME EQUITY LOAN. YOU MAY HAVE THE OPTION TO REFINANCE YOUR HOME EQUITY LOAN AS EITHER A HOME EQUITY LOAN OR AS A NON-HOME EQUITY LOAN, IF OFFERED BY YOUR LENDER.

"HOME EQUITY LOANS HAVE IMPORTANT CONSUMER PROTECTIONS. A LENDER MAY ONLY FORECLOSE A HOME EQUITY LOAN BASED ON A COURT ORDER. A HOME EQUITY LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL LIABILITY AGAINST YOU AND YOUR SPOUSE.

"IF YOU HAVE APPLIED TO REFINANCE YOUR EXISTING HOME EQUITY LOAN AS A NON-HOME EQUITY LOAN, YOU WILL LOSE CERTAIN CONSUMER PROTECTIONS. A NON-HOME EQUITY REFINANCED LOAN:

"(1) WILL PERMIT THE LENDER TO FORECLOSE WITHOUT A COURT ORDER;

"(2) WILL BE WITH RECOURSE FOR PERSONAL LIABILITY AGAINST YOU AND YOUR SPOUSE; AND

"(3) MAY ALSO CONTAIN OTHER TERMS OR CONDITIONS THAT MAY NOT BE PERMITTED IN A TRADITIONAL HOME EQUITY LOAN.

"BEFORE YOU REFINANCE YOUR EXISTING HOME EQUITY LOAN TO MAKE IT A NON-HOME EQUITY LOAN, YOU SHOULD MAKE SURE YOU UNDERSTAND THAT YOU ARE WAIVING IMPORTANT PROTECTIONS THAT HOME EQUITY LOANS PROVIDE UNDER THE LAW AND SHOULD CONSIDER CONSULTING WITH AN ATTORNEY OF YOUR CHOOSING REGARDING THESE PROTECTIONS.

"YOU MAY WISH TO ASK YOUR LENDER TO REFINANCE YOUR LOAN AS A HOME EQUITY LOAN. HOWEVER, A HOME EQUITY LOAN MAY HAVE A HIGHER INTEREST RATE AND CLOSING COSTS THAN A NON-HOME EQUITY LOAN."

Subsection (f-1)

(f-1) A lien securing a refinance of debt under Subsection (f)(2) of this section is deemed to be a lien described by Subsection (a)(4) of this section. An affidavit executed by the owner or the owner ’s spouse acknowledging that the requirements of Subsection (f)(2) of this section have been met conclusively establishes that the requirements of Subsection (a)(4) of this section have been met.

Subsection (g)

(g) An extension of credit described by Subsection (a)(6) of this section may be secured by a valid lien against homestead property if the extension of credit is not closed before the 12th day after the lender provides the owner with the following written notice on a separate instrument:

"NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:

"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME. SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF YOU DO NOT REPAY THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER MAY FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:

"(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE CONSENT OF EACH OWNER OF YOUR HOME AND EACH OWNER'S SPOUSE;

"(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;

"(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL LIABILITY AGAINST YOU AND YOUR SPOUSE UNLESS YOU OR YOUR SPOUSE OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;

"(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON ONLY WITH A COURT ORDER;

"(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 2 3 PERCENT OF THE LOAN AMOUNT, EXCEPT FOR A FEE OR CHARGE FOR AN APPRAISAL PERFORMED BY A THIRD PARTY APPRAISER, A PROPERTY SURVEY PERFORMED BY A STATE REGISTERED OR LICENSED SURVEYOR, A STATE BASE PREMIUM FOR A MORTGAGEE POLICY OF TITLE INSURANCE WITH ENDORSEMENTS, OR A TITLE EXAMINATION REPORT;

"(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY BE DEBITED FROM TIME TO TIME OR UNDER WHICH CREDIT MAY BE EXTENDED FROM TIME TO TIME UNLESS IT IS A HOME EQUITY LINE OF CREDIT;

"(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR CHARGE;

"(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE LOAN;

"(I) (repealed) THE LOAN MAY NOT BE SECURED BY HOMESTEAD PROPERTY THAT IS DESIGNATED FOR AGRICULTURAL USE AS OF THE DATE OF CLOSING, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY IS USED PRIMARILY FOR THE PRODUCTION OF MILK;

"(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER THAN AGREED SOLELY BECAUSE THE FAIR MARKET VALUE OF YOUR HOME DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS NOT SECURED BY YOUR HOME;

"(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY BE SECURED WITH YOUR HOME AT ANY GIVEN TIME;

"(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT OF ACCRUED INTEREST FOR EACH PAYMENT PERIOD;

"(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU SUBMIT A LOAN APPLICATION TO THE LENDER OR BEFORE 12 DAYS AFTER YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND MAY NOT WITHOUT YOUR CONSENT CLOSE BEFORE ONE BUSINESS DAY AFTER THE DATE ON WHICH YOU RECEIVE A COPY OF YOUR LOAN APPLICATION IF NOT PREVIOUSLY PROVIDED AND A FINAL ITEMIZED DISCLOSURE OF THE ACTUAL FEES, POINTS, INTEREST, COSTS, AND CHARGES THAT WILL BE CHARGED AT CLOSING; AND IF YOUR HOME WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR, A NEW LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS PASSED FROM THE CLOSING DATE OF THE OTHER LOAN, UNLESS ON OATH YOU REQUEST AN EARLIER CLOSING DUE TO A DECLARED STATE OF EMERGENCY;

"(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;

"(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE OF INTEREST AUTHORIZED BY STATUTE;

"(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;

"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION MUST:

"(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO ANOTHER DEBT EXCEPT A DEBT THAT IS SECURED BY YOUR HOME OR OWED TO ANOTHER LENDER;

"(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS SECURITY;

"(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS WHICH HAVE BLANKS FOR SUBSTANTIVE TERMS OF AGREEMENT LEFT TO BE FILLED IN;

"(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF JUDGMENT OR POWER OF ATTORNEY TO ANOTHER PERSON TO CONFESS JUDGMENT OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;

"(5) PROVIDE THAT YOU RECEIVE A COPY OF YOUR FINAL LOAN APPLICATION AND ALL EXECUTED DOCUMENTS YOU SIGN AT CLOSING;

"(6) PROVIDE THAT THE SECURITY INSTRUMENTS CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN DEFINED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;

"(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL, THE LENDER WILL SIGN AND GIVE YOU A RELEASE OF LIEN OR AN ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;

"(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER CLOSING, RESCIND THE LOAN WITHOUT PENALTY OR CHARGE;

"(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LOAN CLOSES; AND

"(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL PRINCIPAL AND INTEREST IF THE LENDER FAILS TO COMPLY WITH THE LENDER'S OBLIGATIONS UNLESS THE LENDER CURES THE FAILURE TO COMPLY AS PROVIDED BY SECTION 50(a)(6)(Q)(x), ARTICLE XVI, OF THE TEXAS CONSTITUTION; AND

"(R) IF THE LOAN IS A HOME EQUITY LINE OF CREDIT:

"(1) YOU MAY REQUEST ADVANCES, REPAY MONEY, AND REBORROW MONEY UNDER THE LINE OF CREDIT;

"(2) EACH ADVANCE UNDER THE LINE OF CREDIT MUST BE IN AN AMOUNT OF AT LEAST $4,000;

"(3) YOU MAY NOT USE A CREDIT CARD, DEBIT CARD, OR SIMILAR DEVICE, OR PREPRINTED CHECK THAT YOU DID NOT SOLICIT, TO OBTAIN ADVANCES UNDER THE LINE OF CREDIT;

"(4) ANY FEES THE LENDER CHARGES MAY BE CHARGED AND COLLECTED ONLY AT THE TIME THE LINE OF CREDIT IS ESTABLISHED AND THE LENDER MAY NOT CHARGE A FEE IN CONNECTION WITH ANY ADVANCE;

"(5) THE MAXIMUM PRINCIPAL AMOUNT THAT MAY BE EXTENDED, WHEN ADDED TO ALL OTHER DEBTS SECURED BY YOUR HOME, MAY NOT EXCEED 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME ON THE DATE THE LINE OF CREDIT IS ESTABLISHED;

"(6) IF THE PRINCIPAL BALANCE UNDER THE LINE OF CREDIT AT ANY TIME EXCEEDS 80 50 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME, AS DETERMINED ON THE DATE THE LINE OF CREDIT IS ESTABLISHED, YOU MAY NOT CONTINUE TO REQUEST ADVANCES UNDER THE LINE OF CREDIT UNTIL THE BALANCE IS LESS THAN 80 50 PERCENT OF THE FAIR MARKET VALUE; AND

"(7) THE LENDER MAY NOT UNILATERALLY AMEND THE TERMS OF THE LINE OF CREDIT.

"THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS CONSTITUTION. YOUR RIGHTS ARE GOVERNED BY SECTION 50, ARTICLE XVI, OF THE TEXAS CONSTITUTION, AND NOT BY THIS NOTICE."

If the discussions with the borrower are conducted primarily in a language other than English, the lender shall, before closing, provide an additional copy of the notice translated into the written language in which the discussions were conducted.

Subsection (t)

(t) A home equity line of credit is a form of an open-end account that may be debited from time to time, under which credit may be extended from time to time and under which:

(1) the owner requests advances, repays money, and reborrows money;

(2) any single debit or advance is not less than $4,000;

(3) the owner does not use a credit card, debit card, or similar device, or preprinted check unsolicited by the borrower, to obtain an advance;

(4) any fees described by Subsection (a)(6)(E) of this section are charged and collected only at the time the extension of credit is established and no fee is charged or collected in connection with any debit or advance;

(5) the maximum principal amount that may be extended under the account, when added to the aggregate total of the outstanding principal balances of all indebtedness secured by the homestead on the date the extension of credit is established, does not exceed an amount described under Subsection (a)(6)(B) of this section;

(6) (repealed) no additional debits or advances are made if the total principal amount outstanding exceeds an amount equal to 50 percent of the fair market value of the homestead as determined on the date the account is established;

(7) the lender or holder may not unilaterally amend the extension of credit; and

(8) repayment is to be made in regular periodic installments, not more often than every 14 days and not less often than monthly, beginning not later than two months from the date the extension of credit is established, and:

(A) during the period during which the owner may request advances, each installment equals or exceeds the amount of accrued interest; and

(B) after the period during which the owner may request advances, installments are substantially equal.

Temporary Provision

(a) This temporary provision applies to the constitutional amendment proposed by the 85th Legislature, Regular Session, 2017, to establish a lower amount for expenses that can be charged to a borrower and removing certain financing expense limitations for a home equity loan, establishing certain authorized lenders to make a home equity loan, changing certain options for the refinancing of home equity loans, changing the threshold for an advance of a home equity line of credit, and allowing home equity loans on agricultural homesteads.

(b) The constitutional amendment takes effect January 1, 2018.

(c) The changes in law made by the constitutional amendment apply only to a home equity loan made on or after the effective date of the constitutional amendment and to an existing home equity loan that is refinanced on or after the effective date of the constitutional amendment.

(d) This temporary provision takes effect on the adoption of the constitutional amendment by the voters and expires January 1, 2019.

Readability score

See also: Ballot measure readability scores, 2017

Using the Flesch-Kincaid Grade Level (FKGL and Flesch Reading Ease (FRE) formulas, Ballotpedia scored the readability of the ballot title and summary for this measure. Readability scores are designed to indicate the reading difficulty of text. The Flesch-Kincaid formulas account for the number of words, syllables, and sentences in a text; they do not account for the difficulty of the ideas in the text. The Texas State Legislature wrote the ballot language for this measure. The FKGL for the ballot title is grade level 34, and the FRE is -27.5. The word count for the ballot title is 69, and the estimated reading time is 18 seconds.

Support

Texans for Prop 2 led the campaign in support of Proposition 2.

Supporters

The following officials sponsored the amendment in the state legislature:

• Sen. Kelly Hancock (R-9)
• Rep. Oscar Longoria (D-35)
• Rep. Robert Guerra (D-41)

• Rep. Richard Raymond (D-42)
• Rep. Tan Parker (R-63)
• Rep. Stan Lambert (R-71)

Arguments

The Texas House Research Organization (HRO) provided arguments supporting and arguments opposing the amendment. The following was the HRO's supporting arguments:

SJR 60 would adjust the state's home equity lending framework to help make loans more accessible, lower costs for borrowers, and give consumers more choice. The proposed amendment would be consistent with the goal of protecting consumers within a stable housing market that Texas set when it developed home-equity loans. Fee cap. SJR 60 would balance consumer protection with an appropriate standard for lenders by lowering the ceiling on fees that can be charged and removing certain fees from the calculation of the cap. These changes would address problems that have surfaced, especially for loans around $100,000 and those in rural areas. It can be difficult for lenders to put together a loan under the fee cap, resulting in some being reluctant to make such loans. The fee cap was designed as a check against lenders imposing excessive fees, and SJR 60 would continue that consumer protection. The fees that would be excluded from the cap come from third parties and do not go to lenders, including ones for appraisals, surveys, title insurance, and title examination reports. If these were excluded and the cap was lowered, consumers would continue to be protected against extreme fees from lenders, and lenders would be held to a reasonable standard that would help ensure they could offer such loans. Refinancing. SJR 60 would increase consumer choice by allowing the refinancing of home equity loans into non-home equity loans, something currently prohibited. If consumers want to combine a home equity loan with a purchase money loan, perhaps to get a lower interest rate on the total amount borrowed and have one payment, that option should be available. The proposed amendment would establish reasonable parameters on such refinances, including requiring at least a year to pass before a home equity loan could be refinanced as a non-home equity loan, not allowing cash advances, and keeping the standard limit used for home equity loans so that the total amount the homeowner had borrowed could not exceed 80 percent of the home's value. SJR 60 would require that consumers receive a notice that clearly explained the difference in the two types of loans so that they could make an informed choice. The notice would ensure that borrowers were especially aware of two important differences between these loan types by including a statement that the new loan would permit lenders to foreclose without a court order and that lenders would have recourse against other assets. This full knowledge of the conditions of each type of loan would help protect borrowers from any aggressive lending practices. Refinanced loans would be under the same regulations as any non-home equity loans with which the borrower would be familiar. Home equity lines of credit. The proposed amendment would repeal an unnecessary restriction on home equity lines of credit, which has resulted in consumers being unable to access funds for which they had been approved. In such instances, owners must repay funds in order to access the remaining line of credit. This can result in consumers taking out larger loans sooner than they would like and paying more interest. SJR 60 would eliminate the 50 percent limit on the amount that can be outstanding before making additional withdrawals, but lines of credit would continue to be covered by provisions that limit loans to 80 percent of fair market value. This would make conditions on lines of credit consistent with regular home equity loans, while continuing the same protections with these loans. Agricultural homesteads. SJR 60 would allow home equity loans to be made on agricultural homesteads to give these consumers the same choice as other Texans. The original home equity laws broadly prohibited such loans, but there have been no problems in the more than 20 years of home equity lending in Texas that would support continuing a prohibition on loans to one class of homesteads. In addition to shutting owners of larger farms and ranches out from home equity loans, the current prohibition keeps smaller, hobby agricultural homesteads from having the option of taking out home equity loans. All of the current consumer protections would continue to cover these loans. Approved lenders. SJR 60 would update the types of approved lenders that can make home equity loans by including subsidiaries of entities that already can make the loans, including banks, savings and loan associations, savings banks, and credit unions. The bill also would update language relating to those in the mortgage industry by eliminating an obsolete term and including mortgage bankers and mortgage companies. All of the lenders that would be added by SJR 60 are highly regulated and would be held to the same standards as those who make the loans now.

Opposition

Arguments

The Texas House Research Organization (HRO) provided arguments supporting and arguments opposing the amendment. The following was the HRO's opposing arguments:

SJR 60 would raise costs for borrowers and would roll back important consumer protections. These protections have worked for consumers and lenders and contributed to a stable housing market that was not as seriously affected by the recent housing bubble as other states. Fee cap. SJR 60's changes to the fee cap would raise, not lower, costs for consumers and could create incentives to lenders to make loans. While the bill would lower the overall cap, it also would exclude major charges from the cap calculation. Borrowers would continue to pay these charges for appraisals, surveys, title insurance, or title examination reports. Lenders would then have room under the cap to raise or add upfront fees. Taken together, the costs to borrowers could easily be higher than current costs under the 3 percent cap. Higher fees going to lenders could incentivize the approval of loans by originators interested in the fees. To protect against predatory lending practices, the focus for lenders should be not only on the fees but on home equity loans as a package, with fees, interest rate, and consumer protections taken into consideration. Refinancing. Allowing home equity loans to be refinanced as non-home equity loans would be counter to the ideas and protections embedded in the Texas home equity laws. These laws deliberately encompassed the idea of "once-a-home-equity-loan, always-a-home-equity-loan" so that homeowners who borrowed against the equity in their homes would have certain protections. Consumers would lose important protections if home equity loans were refinanced as non-home equity loans. These protections include requiring judicial foreclosure on home equity loans and making home equity loans non-recourse so that a borrower's other assets are not at risk in a default. Requiring judicial foreclosure is especially important as it ensures the involvement of a court and that homeowners are afforded certain rights in the foreclosure process. Allowing this type of refinancing also could give lenders incentives to push the refinancing of loans both to earn the fees and to bring a loan out from under the protections given to home equity borrowers. Home equity loan borrowers interested in refinancing their loans already can do so with a new home equity loan that carries with it all the protections, and this would be a better option than the change proposed by SJR 60.

Campaign finance

See also: Campaign finance requirements for Texas ballot measures

As of January 16, 2018, the Texas Credit Union Association Legislative Action Fund was registered to support Proposition 2 and Proposition 7; therefore, the committee was spending funds on campaigns for both amendments. The Texas Association of Realtors Issues Mobilization Political Action Committee was also registered to support Proposition 2. Together, the committees had raised $1.57 million—mostly from credit unions and banking associations—and spent $2.02 million. (expenditures are higher than contributions because the committees started with cash on hand).

	Cash Contributions	In-Kind Contributions	Total Contributions	Cash Expenditures	Total Expenditures
Support	$755,815.96	$820,862.39	$1,576,678.35	$1,199,314.48	$2,020,176.87
Oppose	$0.00	$0.00	$0.00	$0.00	$0.00
Total	$755,815.96	$820,862.39	$1,576,678.35	$1,199,314.48	$2,020,176.87

Support

The following table includes contribution and expenditure totals for the committees in support of the measure.

Committees in support of Proposition 2
Committee	Cash Contributions	In-Kind Contributions	Total Contributions	Cash Expenditures	Total Expenditures
Texas Association of Realtors Issues Mobilization Political Action Committee	$298,226.10	$797,107.03	$1,095,333.13	$741,734.80	$1,538,841.83
Texas Credit Union Association Legislative Action Fund	$457,589.86	$23,755.36	$481,345.22	$457,579.68	$481,335.04
Total	$755,815.96	$820,862.39	$1,576,678.35	$1,199,314.48	$2,020,176.87

Donors

The following were the top donors to the committee.

Donor	Cash Contributions	In-Kind Contributions	Total Contributions
Credit Union National Association	$325,000.00	$9,381.32	$334,381.32
National Association of Realtors	$219,726.10	$0.00	$219,726.10
Cornerstone Credit Union League	$0.00	$175,000.00	$175,000.00
Texas Mortgage Bankers Association	$0.00	$99,990.98	$99,990.98
IBAT PAC	$0.00	$50,000.00	$50,000.00
Independent Bankers Assoc of Texas	$0.00	$50,000.00	$50,000.00

Media editorials

See also: 2017 ballot measure media endorsements

Support

• The Dallas Morning News said: "When the state legalized home-equity loans in 1997, many worried that Texans would irresponsibly tap the value in their homes. Texas instituted some of the nation's toughest limits on how much a person could borrow. But those fears were misplaced. ... homeowners should have the flexibility to pick whatever works best for them."

• The San Antonio Express-News said: "Proposition 2 would also allow homeowners on agricultural properties to use home equity loans. It would allow borrowers to refinance home equity loans and traditional mortgages into one payment. And it would streamline how advances are made for home equity loans in Texas in a way that would give borrowers more flexibility. For these reasons, Proposition 2 merits voter support."

Opposition

• The Houston Chronicle said: "We've yet to hear a convincing reason to change the state's status quo on home-equity borrowing. Why should certain fees be exempted from a cap on costs? Why should lenders be allowed to grant advances on a home equity line of credit on an over-leveraged loan? Why should Texas permit the refinancing of home equity loans into another sort of loan that still has a lien on property but offers fewer consumer protections? All these alterations seem designed to shift the balance away from homeowners and towards the banks - away from caution and towards recklessness."

• The Austin Chronicle said: "The amendment would revise several complicated provisions of home equity law – lowering maximum interest rates while enabling other fees, allowing a shift to less restrictive home loans, loosening refinancing standards, and opening home equity loans to agricultural homesteads. This seems a textbook example of legislation that does not belong in a constitution, nor on a ballot."

Background

Terms and definitions

• Home equity: The concept of home equity refers to the market value of a house, minus the mortgage on the house. A house's equity increases as the mortgage is paid off and its market value increases. For example, if a home is valued at $200,000, but its remaining mortgage is $100,000, then the house's equity is $100,000. A house's equity is considered an asset, and owners of homes can borrow against this asset through home equity loans or home equity lines of credit.
• Voluntary lien: A voluntary lien is a contract in which a borrower gives a lender permission to claim the borrower's property as security for the payment of a debt until all debt to the lender is paid off or discharged. Examples of a voluntary lien include mortgage loans, auto loans, home equity loans, and home equity lines of credit. A voluntary lien is different from an involuntary lien, such as that imposed by a court for not paying taxes, in which property can be possessed without the agreement of the owner.
• Home equity loan: A home equity loan (HEL) is a type of loan in which a homeowner borrows against his or her home's equity. As the borrower is receiving a fixed-rate loan against his or her home equity, the lender is permitted to foreclose on or force the sale of the house if the loan is not repaid to cover remaining debt.
• Home equity line of credit: A home equity line of credit (HELC) is a revolving credit, similar to a credit card, that a homeowner borrows against his or her home's equity. Unlike a home equity loan, a borrower of a home equity line of credit does not receive the total borrowed sum up front. Rather, the borrower is allowed to withdraw a pre-approved amount of money from the line of credit per a pre-approved period of time (e.g. day, month), and then pays back this amount plus interest. If unpaid debts accumulate from the home equity line of credit, the lender is permitted to foreclose on or force the sale of the house to cover remaining debt.

Measures

Voting on Housing
Ballot Measures
By state
By year
Not on ballot
Local Local housing Rent control

This measure amended Section 50 of Article 16, which was part of the original Texas Constitution of 1876. Section 50 was designed to prevent the forced sale of a head of household's home for payment of debts. In 1973, voters approved Proposition 2, making Section 50 applicable to single adult persons and families, not just heads of households. The original Section 50 had three exceptions to the ban on the forced sale of houses for payments of debts: (1) to pay property taxes; (2) to pay debts incurred to obtain money used to purchase the house; or (3) to pay debts incurred to obtain money used to make improvements to the house. It wasn't until 1997 that an exception to the ban was made for home equity loans.

Proposition 8 (1997)

See also: Texas Types of Homestead Liens Amendment, Proposition 8 (1997)

On November 4, 1997, Texans approved Proposition 8, which allowed for home equity loans. The vote was 60 percent to 40 percent. Prior to Proposition 8, Texans were not permitted to acquire home equity loans because Section 50 of Article 16 of the Texas Constitution protected homesteads from forced sales. At the time of the election, Texas was the only state to prohibit home equity loans. Proposition 8 provided an exception from this constitutional protection for home equity loans. The measure did not allow home equity loans against agricultural land, except for land used for the production of milk. The measure went into effect on January 1, 1998.

Proposition 6 (2003)

See also: Texas Refinance Home Equity and Reverse Mortgage Loans Amendment, Proposition 6 (2003)

Voters passed Proposition 6, an amendment to allow borrowers to refinance home equity loans with reverse mortgages, on September 13, 2003. The vote was 71 percent to 29 percent.

Proposition 16 (2003)

See also: Texas Home Equity Lines of Credit (2003)

On September 13, 2003, voters also approved Proposition 16, which authorized borrowers to obtain home equity lines of credit. The measure pass 65 percent to 35 percent.

Referred amendments on the ballot

From 1995 through 2015, the state legislature referred 152 constitutional amendments to the ballot. Voters approved 138 and rejected 14 of the referred amendments. Most of the amendments (136 of 152) were referred to the ballot for elections during odd-numbered election years. The average number of amendments appearing on an odd-year ballot was between 13 and 14. The approval rate at the ballot box was 90.8 percent during the 20-year period from 1995 through 2015. The rejection rate was 9.2 percent. In 2015, there were seven referred amendments on the ballot, the lowest number for an odd-year ballot between 1995 and 2015.

Legislatively-referred constitutional amendments, 1995-2015
Total number	Approved	Percent approved	Defeated	Percent defeated	Odd-year average	Odd-year median	Odd-year minimum	Odd-year maximum
152	138	90.79%	14	9.21%	13.6	14.0	7	22

Path to the ballot

See also: Amending the Texas Constitution

In Texas, a two-thirds vote in both chambers of the Texas State Legislature during one legislative session is required to refer a constitutional amendment to the ballot. Texas is one of 16 states that require a two-thirds supermajority vote in both chambers.

Sen. Kelly Hancock (R-9) filed the amendment in the state legislature as Senate Joint Resolution 60 (SJR 60) on March 19, 2017. The Texas State Senate approved the amendment 30 to 0 with one senator absent on April 20, 2017. The Texas House of Representatives passed the measure 143 to 0 with seven members not voting on May 6, 2017. The measure was filed with the secretary of state on May 10, 2017.

Vote in the Texas Senate April 20, 2017
Requirement: Two-thirds (66.67 percent) vote of all members in each chamber
Number of yes votes required: 21  a
	Yes	No	Not voting
Total	30	0	1
Total percent	96.77%	0.00%	3.23%
Democrat	10	0	1
Republican	20	0	0

Vote in the Texas House of Representatives May 6, 2017
Requirement: Two-thirds (66.67 percent) vote of all members in each chamber
Number of yes votes required: 100  a
	Yes	No	Not voting
Total	143	0	7
Total percent	95.33%	0.00%	4.67%
Democrat	53	0	2
Republican	90	0	5

State profile

Demographic data for Texas
	Texas	U.S.
Total population:	27,429,639	316,515,021
Land area (sq mi):	261,232	3,531,905
Race and ethnicity**
White:	74.9%	73.6%
Black/African American:	11.9%	12.6%
Asian:	4.2%	5.1%
Native American:	0.5%	0.8%
Pacific Islander:	0.1%	0.2%
Two or more:	2.5%	3%
Hispanic/Latino:	38.4%	17.1%
Education
High school graduation rate:	81.9%	86.7%
College graduation rate:	27.6%	29.8%
Income
Median household income:	$53,207	$53,889
Persons below poverty level:	19.9%	11.3%
Source: U.S. Census Bureau, "American Community Survey" (5-year estimates 2010-2015) Click here for more information on the 2020 census and here for more on its impact on the redistricting process in Texas. **Note: Percentages for race and ethnicity may add up to more than 100 percent because respondents may report more than one race and the Hispanic/Latino ethnicity may be selected in conjunction with any race. Read more about race and ethnicity in the census here.

Presidential voting pattern

See also: Presidential voting trends in Texas

Texas voted Republican in all seven presidential elections between 2000 and 2024.

Pivot Counties (2016)

Ballotpedia identified 206 counties that voted for Donald Trump (R) in 2016 after voting for Barack Obama (D) in 2008 and 2012. Collectively, Trump won these Pivot Counties by more than 580,000 votes. Of these 206 counties, one is located in Texas, accounting for 0.5 percent of the total pivot counties.

Pivot Counties (2020)

In 2020, Ballotpedia re-examined the 206 Pivot Counties to view their voting patterns following that year's presidential election. Ballotpedia defined those won by Trump won as Retained Pivot Counties and those won by Joe Biden (D) as Boomerang Pivot Counties. Nationwide, there were 181 Retained Pivot Counties and 25 Boomerang Pivot Counties. Texas had one Retained Pivot County, 0.55 percent of all Retained Pivot Counties.

More Texas coverage on Ballotpedia

• Elections in Texas
• United States congressional delegations from Texas
• Public policy in Texas
• Endorsers in Texas
• Texas fact checks
• More...

Related measures

Measures addressing housing and banking on the ballot in Texas
Year	Measure	Status
2013	Proposition 5: Reverse Mortgage Loan Amendment	a
2003	Proposition 6: Refinance Home Equity and Reverse Mortgage Amendment	a
2003	Proposition 16: Home Equity Lines of Credit Amendment	a
1997	Proposition 8: Homestead Liens Amendment	a
1973	Proposition 2: Homestead Protection Amendment	a
1919	Proposition 4: Loans for Home Acquisition Amendment	d

See also

Suggest a link

• Texas 2017 ballot measures
• 2017 ballot measures
• Texas Legislature
• Housing on the ballot
• Banking policy ballot measures

External links

• Senate Joint Resolution 60

Recent news

The link below is to the most recent stories in a Google news search for the terms Texas 2017 Home Equity Amendment. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.

Texas Proposition 2, Home Equity Loan Amendment (2017) - Google News