On May 20, 2016, the Texas Supreme Court issued opinions in two noteworthy cases concerning home equity lending in Texas. The Wood case concerns whether a statute of limitations applies to actions to quiet title for constitutionally noncompliant 50(a)(6) home equity liens, and the Garofolo case concerns in what manner and under what circumstances a forfeiture action can be brought for a lender’s failure to perform its requirements under 50(a)(6).
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Read articles below for analysis and discussion of recent trends by BM&G’s industry experts.
2015 Legislative Update from 84th Regular Session of the Texas Legislature
This legislative update summarizes the bills and one proposed constitutional amendment that we consider of interest to our clients, listed in order of importance and not when effective. The effective dates are noted in the applicable summary.
Texas Home Equity Lending – 2015 Update
This memorandum will provide an overview of home equity lending embodied in Article XVI, Section 50, of the Texas Constitution and will also discuss some of the issues lenders face. The full text of Section 50, current to date, is attached to this memorandum (for ease of reference, the home equity and HELOC provisions are highlighted in bold typeface). All references to “sections,” “subsections,” and “parts” in this memorandum refer to the various provisions of Section 50, unless otherwise stated.
Texas Home Equity Lending – Amendments to Home Equity Lending Interpretations, §§153.1, 153.5, 153.15 and 153.51, Effective January 1, 2015
In the December 26, 2014, issue of the Texas Register (Volume 39 Number 52), the Finance Commission of Texas and the Texas Credit Union Commission (“commissions”) jointly adopted amendments to the following home equity lending interpretations in the Texas Administrative Code (7 TAC Chapter 153) without changes to the proposed amendments published for comment in the July 4, 2014, issue of the Texas Register (Volume 39 Number 27). The text of the adopted amended interpretations is set out below. To compare the pre-and-post-amended interpretations, please see the July 8, 2014 memorandum on the firm’s website.
Home Equity Lending – Proposed Amendments to Home Equity Lending Interpretations, §§153.1, 153.5, 153.15 and 153.51
In the July 4, 2014 issue of the Texas Register (Volume 39 Number 27), the Finance Commission of Texas and the Texas Credit Union Commission (“commissions”) jointly proposed amendments to the following home equity lending interpretations in the Texas Administrative Code (7 TAC Chapter 153), as set out below:
Federal Agencies Issue Guidance for Home Equity Lines of Credit Nearing End-of-Draw Periods
On July 1, 2014, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA) and the Conference of State Bank Supervisors (CSBS) issued guidance to financial institutions regarding home equity lines of credit (HELOCs) nearing their end-of-draw periods.
Texas Finance Commission Amends Loan Status Forms in the Texas Administrative Code
In the April 25, 2014, issue of the Texas Register (39 TexReg 3392), the Finance Commission of Texas adopted amendments to the Loan Status Forms, Figure: 7 TAC §80.201(a) and Figure: 7 TAC §80.201(b). The amendments to the figures in §80.201(a) and (b) are adopted without changes to the text as published in the March 7, 2014, issue of the Texas Register (39 TexReg 1562). In general, the purpose of the amendments is to correct the placement of language in the figures. These amendments make no substantive changes to the existing Loan Status Forms.
Proposed Amendments to 7 TAC Chap. 83, Subchap. A Memo
In the April 25, 2014 issue of the Texas Register (39 TexReg 3333), the Finance Commission of Texas (Commission) published proposed amendments to 7 TAC Chapter 83, Subchapter A, §§83.101, 83.102, 83.203, 83.301 – 83.304, 83.307, 83.309 – 83.311, 83.403 – 83.405, 83.501 – 83.505, 83.601 – 83.604, 83.606, 83.701 – 83.704, 83.708, 83.751, 83.752, 83.754, 83.756, 83.757, 83.801, 83.805, 83.809, 83.828, 83.829, 83.831, 83.836, 83.837, 83.851, and 83.858, concerning Rules for Regulated Lenders. The proposed changes affect rules contained in Division 1, concerning General Provisions; Division 2, concerning Authorized Activities; Division 3, concerning Application Procedures; Division 4, concerning License; Division 5, concerning Interest Charges on Loans; Division 6, concerning Alternate Charges for Consumer Loans; Division 7, concerning Interest and Other Charges on Secondary Mortgage Loans; Division 8, concerning Refunds for Precomputed Loans; Division 9, concerning Insurance; Division 10, concerning Duties and Authority of Authorized Lenders; and Division 11, Prohibitions on Authorized Lenders.
Texas Home Equity Lending Update
This memorandum will provide an overview of home equity lending embodied in Article XVI, Section 50, of the Texas Constitution and will also discuss some of the issues lenders face. The full text of Section 50, current to date, is attached to this memorandum (for ease of reference, the home equity and HELOC provisions are highlighted in bold typeface). All references to “sections,” “subsections,” and “parts” in this memorandum refer to the various provisions of Section 50, unless otherwise stated.
Texas Home Equity Loans – Per Diem Interest, Discount Points and Powers of Attorney under the Texas Supreme Court
On January 31, 2014, The Texas Supreme Court published a Supplemental Opinion in the Norwood home equity case cited above. The original opinion adversely affected the use of powers of attorney, declared bona fide discount point to be subject to the three percent fee cap, and placed per diem interest in a doubtful position relative to the three percent fee cap. The Court’s Supplemental Opinion clarifies its original opinion regarding the above.