State Senator John Carona (R-Dallas) has filed legislation designed to make home equity borrowing more affordable, flexible and individualized while maintaining comprehensive consumer protections for homeowners.
As proposed, the new legislation, SJR 42, would authorize home equity lines of credit, provide for an interpretative authority, allow weekly or semi-monthly payments, establish cure provisions, and provide for a reverse mortgage loan to refinance a home equity loan. Consumers would benefit from the increased savings in interest payments and flexibility in utilizing the funds.
"A home equity line of credit that allows borrowers to only pay interest on the money used can save homeowners thousands of dollars in interest over the life of a typical loan, without sacrificing current constitutional home equity protections," Carona stated. It also gives homeowners immediate access to their money and allows them to create a financial management plan tailored to their needs and financial situation.
In addition, the bill would increase the opportunities for more, lower-priced loans by authorizing state agencies to interpret the loans and therefore provide all interested parties a forum for participating in the process. Many lenders do not make home equity loans in Texas for fear of interpreting the law incorrectly and those that do often raise interest rates to offset the risk.
"By granting state agencies interpretative authority, and encouraging public participation, we can boost both consumer and lender confidence that the loan would ultimately be constitutional and fair," Senator Carona said, adding that any interested party that disagrees with the interpretation retains the ability to file a lawsuit.
Another area of legal ambiguity that the bill aims to address is the area concerning "cure provisions" or the lender's ability to correct certain violations of the home equity lien provisions. Under Texas home equity law, the burden is on the lender to cure any mistake or error within a reasonable period of time after being notified by the borrower. The new bill directs the lender to cure the error by crediting the borrower with any excess payment or modifying the loan agreement to comply with the constitutional requirements.
"My goal is to provide homeowners with greater protection and control of their homes and finances through legislation and enhanced communication about the financial tools available to them, especially in this precarious economy," said Senator Carona, adding that homeowners often suffer from a lack of information about their legal rights and their financial options.