Since the passage of the home equity laws in 1997, Texans have sent their children to college, remodeled their homes, paid medical expenses or paid off higher interest debt by taking advantage of the equity in their homes.
A home equity loan or line of credit allows a homeowner to borrow money using the home's equity as collateral.
This November, Texas voters can strengthen the consumer protections afforded borrowers in the home equity laws by passing Proposition 8.
Due to a recent lawsuit, the Finance and Credit Union Commissions asked the Legislature to clarify the home equity loan provisions in the Texas Constitution. Also, because of the heavy financial burdens caused by Hurricanes Rita and Katrina, the Legislature believes homeowners should be allowed to access the equity in their property in the event of a natural disaster.
While the basic principles of home equity lending remain unchanged, Proposition 8 enhances several provisions. The two most important provisions are illustrated below:
The first major enhancement requires that the borrower receive a copy of the loan application one business day prior to the loan closing. This change gives the borrower time to review the documents to verify that all the information is correct. Also, the lender is required to provide the homeowner with a copy of the final loan application and all executed documents that the homeowner signs at closing.
A second major enhancement is that in the event of a natural disaster, Proposition 8 allows a homeowner to apply for a home equity loan, even if the homeowner received a home equity loan within the previous year, if their home is located in the area declared a state of emergency by the state or federal government.
While these changes improve specific provisions, Proposition 8 still retains all consumer protections in the Texas Constitution as originally passed by the Texas Legislature and approved by Texas voters in 1997 and 2003.
Proposition 8 is a good idea for Texans. Your support can ensure that all homeowners enjoy clear and fair treatment when they turn to their home equity as a financial resource.
Rep. Burt R. Solomons, R-Carrollton, is the chair of the House Committee on Financial Institutions, which oversees banking and lending issues in the state. He authored the legislation that became Proposition 8.
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