LINES OF CREDIT UNDER TEXAS HOME

EQUITY AND REVERSE MORTGAGE LAW

 

 

 

 

 

 

 

 

 

 

 

 

 

J. ALTON ALSUP

Brown, Fowler & Alsup P. C.

10333 Richmond Avenue, Suite 860

Houston, Texas 77042

T (713) 468-0400 • F (713) 468-5335

alalsup@bfalegal.com

 

 

 

 

 

 

 

 

State Bar of Texas

28TH ANNUAL ADVANCED

REAL ESTATE LAW COURSE

June 29-July 1, 2006

San Antonio

 

CHAPTER 23

 


 

 


TABLE OF CONTENTS

I..... Introduction: Constitutional Home Equity Reform Measures Now

...... Authorize Line of Credit Terms.................................................................................................. 1

II.... Texas’ Uniquely Protective Homestead Laws...................................................................... 2

A.    Background: Constitutionally Vested Homestead Rights.......................................................................... 2

B.    Background: Applicability of Strict Compliance Standards........................................................................ 2

C.    Background: The Constitutional Homestead Redefined............................................................................ 3

III... Texas Home Equity Line of Credit Loans (HELOCs)............................................................... 3

A.    How Home Equity Lines of Credit Work................................................................................................ 3

B.    Express Constitutional Authority and Limitations of Texas HELOCs........................................................ 4

C.    The Exacting Section 50 (a)(6) Conditions Also Applicable to Texas HELOCs......................................... 5

D.    Official Finance Commission Interpretations of Section 50(t) Authorizing Texas HELOCs......................... 7

E.    Title Insurance: Department Amends Rules and Forms of Endorsements for Texas HELOCs................... 9

F.    Certain Regulatory Considerations......................................................................................................... 9

1.    Truth in Lending Act Disclosures Required for HELOCs................................................................. 9

a.     Disclosure of Important Terms [§226.5b]................................................................................. 9

b.     Brochure: When Your Home is On the Line: What You Should Know About Home

       Equity Lines of Credit [§226.5b(e)].......................................................................................... 9

c.     Initial Disclosure Statement [§226.6]........................................................................................ 9

d.     Periodic Statements [§226.7]................................................................................................. 10

e.     Right of Rescission Notice [§226.15]..................................................................................... 10

f.     Annual Statement of Billing Rights [§226.9(a)]....................................................................... 10

g.     Other Subsequent Disclosure Requirements [§226.9(b)-(c)]:.................................................... 10

2.  Texas Usury and Finance Code Regulation of Subordinate-Lien Texas HELOCs............................... 10

IV.. Texas Reverse Mortgage Loans................................................................................................. 11

A.    How Texas Reverse Mortgages Work................................................................................................. 11

B.    Express Constitutional Authority and Limitations of Texas Reverse Mortgages....................................... 12

a.     Voluntary Homestead Lien.................................................................................................... 13

b.     Non-recourse Debt............................................................................................................... 13

c.     Based on Equity in Homestead.............................................................................................. 13

d.     Repayment; Acceleration; Default; Foreclosure...................................................................... 13

e.     Consumer Notice; Counseling................................................................................................ 13

f.     Advances Per Authorized Payment Plan (including Line of Credit Method).............................. 14

g.     Lien Priority; Future Advances.............................................................................................. 14

h.     Interest; Shared Appreciation................................................................................................ 14

i.      Reducing or Failing to Make Advances; Forfeiture.................................................................. 14

j.      Preemptive Authority............................................................................................................ 15

C.    Title Insurance: Department Amends Rules and Forms Of Endorsements for Texas Reverse Mortgages.. 15

D.    Mortgage Insurance: HUD and Fannie Mae Authorize Line of Credit Option for Texas

       Reverse Mortgages............................................................................................................................. 16

E.    Texas Reverse Mortgage Default and Expedited Foreclosure Process.................................................... 17

a.     Maturing Events and Default................................................................................................. 17

b.     Notice and Acceleration........................................................................................................ 18

c.     Methods of Foreclosure......................................................................................................... 18

d.     The Revised Expedited Foreclosure Procedures — Rule 736................................................... 18

V.... Conclusion: Outlook for Texas Home Equity Lines of Credit..................................... 19