Texas Home Equity Lending

Transcription

1 Texas Home Equity Lending Tom Overbeck Gregg & Valby, L.L.P West Loop South, Suite 200 Houston, Texas Tel: (713) Fax: (713)

2 I. Important concepts in Texas homestead law A. The urban homestead 1. One or more contiguous lots amounting to not more than 10 acres in a city, town, or village and used for purposes of a home or both as an urban home and a place to exercise a business or calling of the claimant together with improvements. 2. located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision; and a. served by police protection, paid or volunteer fire protection, and at least three of the following services provided by a municipality or under contract to a municipality: i. electric ii. natural gas iii. sewer iv. storm sewer; or v. water

3 cont B. Valid liens against the homestead - Article 16, 50(a) 1. purchase money 2. taxes 3. Owelty 4. refinance (including federal tax lien) 5. improvements, repairs, renovations

4 II. Article 16, 50(a)(6) A. consent of each owner and each owner s spouse B. 80% CLTV (worksheet) 1. acknowledgment of FMV 2. appraisal or valuation in accordance with state and federal requirements 3. no actual knowledge of inaccuracy C. without recourse D. judicial foreclosure only E. costs and fees may not exceed 3%

5 E. costs and fees may not exceed 3% HUD-1 3% worksheet 1. Not included a. optional charges b. optional insurance (e.g. credit life) c. interest (per diem interest and points) d. charges absorbed by the lender (POCL) e. escrow funds f. property insurance

6 cont 2. Included a. not interest b. charges to originate the loan by lender or 3rd parties c. charges to evaluate a credit decision i. credit report ii. survey iii. flood cert iv. tax cert v. title vi. inspection vii. appraisal d. charges to maintain e. MI g. recording fees h. fees at or before closing

7 cont F. not open-ended unless HELOC G. no PPP H. no additional collateral I. no agricultural designation (except for milk) J. no acceleration for decrease in market value or cross-default under non-homestead indebtedness K. no other home equity loans L. substantially equal installments i. no interest only ii. no balloon

8 cont M. not closed before: 1. 12th day after later of date owner submits loan application or the date or the date lender provides home equity disclosure (beware of superseded notice form); 12-day Disclosure 2. one business day after the date the owner receives copy of the loan application (if not previously provided) and final HUD-1; and a. any time during regular business hours on the following business day b. good cause exception for de minimus variance with written consent 3. first anniversary after the closing of any other (a)(6) loan.

9 cont. N. closing only at the office of a lender, attorney, or title company O. authorized interest rate 1. no negative amortization 2. no interest only P. authorized lender not found guilty of redlining Q. further conditions: 1. owner is required to apply proceeds to repay another debt, except debt secured by the homestead or debt to another lender 2. no assignment of wages as security 3. no signature on instrument with blanks relating to substantive terms left to be filled in 4. no confession of judgment or POA for the lender to confess judgment 5. at closing, provide copy of final loan application and all documents signed by owner at closing 6. home equity disclosure on security instrument 7. return of note and recordable release of lien upon full payment or copy of assignment or endorsement upon refinance 8. forfeiture upon failure to comply and timely cure Curing Home Equity Loans chart

10 III. Refinance including advancement of additional funds under(a)(1) (a)(5) is invalid unless: optional charges A. closed as (a)(6) loan B. advance is for additional funds for reasonable costs necessary to refinance (a)(2), (3), or (5)

11 IV. Refinance of debt, any portion of which is (a)(6), must be (a)(6) or (a)(7).