Home Equity Loans
There are strict provisions in the Texas Constitution that protect homeowners from home equity loan lenders. A home equity loan is a special kind of mortgage transaction in which you use the ownership equity you have in your home to get a cash loan from the bank. The Texas Constitution states that:
- The extension of credit be voluntary, written, and consented to by all owners and their spouses.
- The value of total indebtedness—any current mortgage plus the home equity mortgage — cannot exceed 80% of the home’s total value.
- Recourse beyond the homestead is strictly forbidden.
- The loan cannot close until at least 12 days after the borrower applies for it, and the borrower has a 3-day right of rescission.
- The loan cannot be closed at the borrower’s home.
- Only authorized lenders may extend home equity loans and must follow certain procedures.
- Lenders must make disclosures and include, in a separate written instrument, the text of the constitutional amendment.
- Lenders cannot require fees of more than 3% when closing the loan.
- Lenders cannot extend more than one home equity loan to a consumer at any one time.
After legal notice of a constitutional violation, the bank has 60 days to cure. For instance, if you were charged fees in excess of the 3% limit, the bank must refund you the difference. If the bank fails to cure a violation within 60 days, the borrower may bring a lawsuit to cancel the home equity loan altogether without having to repay it. Don’t delay. Call our office to schedule a free consultation and examination of your closing documents.