On November 6, 2007, Texas voters overwhelmingly passed HJR 72, which amended the portion of the Texas constitution governing home equity loans (closed - and open - end, cash-out refinance transactions involving owner-occupied (homestead) property).  The amendments became effective on December 4, 2007, the date when the official canvass of the votes was held.

The constitutional amendments clarify the following with respect to home equity loans:

(1) the determination of whether property is agricultural, for the purpose of protection from forced sale, must be made at the time of closing;

(2) a copy of the loan application must be given to the borrower at least one day before closing;

(3) borrowers are allowed to avoid the one-year waiting period between home equity loans in the event of a declared state of emergency;

(4) a blank line without a substantive term to be filled in does not invalidate or require a cure of a home equity loan;

(5) the owner must receive at closing a copy of the final loan application and copies of the executed documents signed by the owner at closing; and

(6) the owner may not use a preprinted solicitation check, or similar device, or preprinted check that is unsolicited by the borrower (this seems to imply that the borrower must request convenience checks before they can be used).

Furthermore, the "Notice Concerning Extensions of Credit" was modified to implement the above amendments.

As a result of these amendments, the following DocMagic Texas home equity disclosures, followed by their corresponding file name in parentheses, were updated:

(1) Texas Notice Concerning Extensions of Credit (TXNCEC.MSC);

(2) Texas Home Equity Affidavit and Agreement First Lien (Fannie Mae's Form 3185) (TX3185.AGR);

(3) Texas Home Equity Affidavit and Agreement (TXHEAA.MSC) (applies to second-lien loans);

(4) Texas Home Equity Certificate From Originating Lender Regarding Compliance (TXHECFL.MSC);

(5) Texas Home Equity Receipt of Copies (TXHEROC.MSC);

(6) Texas Owner's Affidavit Acknowledging Lender's Compliance (TXOA.MSC);

(7) Texas Acknowledgment of Advance Disclosure of Home Equity Fees and Charges (TXAOA.DSC); and

(8) Texas Homestead Owner's Pre-Closing Disclosure Affidavit (TXHOPCDA.DSC).

Please note that for loans closing on or after December 4, 2007, it is important that you provide a copy of the revised Notice Concerning Extensions of Credit at least 12 days prior to date the loan closes.  As a practical matter, that means that the first date on which a home equity loan can close is December 17, 2007.

If you have any questions concerning the contents of this article, please contact DocMagic's Compliance Department.