2013 Texas Legislative Update – Reverse Mortgage for Purchase of Homestead Constitutional Amendment (SJR 18) Effective November 22, 2013 This fourth, and last, legislative update prepared by this firm for the 2013 legislative session advises you that constitutional amendment Senate Joint Resolution 18 (SJR 18), which amends Section 50(k), Article XVI, Texas Constitution, to authorize advances under a reverse mortgage for the purchase of a residential homestead property, is now effective. SJR 18 was approved by the voters on November 5, 2013, and became effective on November 22, 2013, when the vote was canvassed, the results were certified by the Texas Secretary of State, and a proclamation was issued by the Governor. For your convenience we have reprinted below the summary of SJR 18 from our October 4, 2013, legislative update. SJR18: REVERSE MORTGAGE AMENDMENTS TO SECTION 50(k), ARTICLE XVI, TEXAS CONSTITUTION SJR 18 amends Section 50(k) to: (i) authorize advances under a reverse mortgage for the purchase of homestead property that the borrower will occupy as a principal residence; (ii) expand the conditions under which a lender may require repayment of a reverse mortgage to include the borrower’s failure to timely occupy the homestead property purchased with reverse mortgage advances within the period specified in the reverse mortgage agreement; (iii) prohibit the making of a reverse mortgage unless both the prospective borrower and the prospective borrower’s spouse receive counseling regarding the advisability and availability of reverse mortgages and other financial alternatives that is completed within a prescribed period before the closing date of the reverse mortgage; (iv) replace the written notice requirement with a promulgated written notice; and (v) prohibit closing of a reverse mortgage before the 12th day after the date the lender provides to the prospective borrower the promulgated written notice signed by the lender or originator and the borrower. Subsection 50(k)(4)(B) is added to allow advances to the borrower “for the purchase of homestead property that the borrower will occupy as a principal residence [.]” Subsection 50(k)(6)(C-1) is added to include the following as an event that will trigger repayment of the reverse mortgage: “if the extension of credit is used for the purchase of homestead property, the borrower fails to timely occupy the homestead property as the borrower’s principal residence within a specified period after the date the extension of credit is made that is stipulated in the written agreement creating the lien on the property[.]” Subsection 50(k)(8), which requires the owner to receive counseling before making the reverse mortgage, is amended to read as follows: “that is not made unless the prospective borrower and the spouse of the prospective borrower attest in writing that the prospective borrower and the prospective borrower’s spouse received counseling regarding the advisability and availability of reverse mortgages and other financial alternatives that was completed not earlier than the 180th day nor later than the 5th day before the date the extension of credit is closed[.] Subsection 50(k)(9) is amended to replace the requirement that the lender provide the borrower with a written notice specifying the specific provisions in Subsection 50(k)(6) under which the borrower is required to repay the loan with the requirement that the reverse mortgage “is not closed before the 12th day after the date the lender provides to the prospective borrower the following written notice on a separate instrument, which the lender or originator and the borrower must sign for the notice to take effect[.]” For a copy of the new promulgated notice under amended Subsection 50(k)(9), see Exhibit A to this memorandum. Previously, on August 21 2013, we issued our first legislative update for the 2013 legislative session, which summarized those bills effective immediately that we considered are of interest to our clients. On October 1, 2013, we issued our second legislative update for the 2013 legislative session, which summarized those bills effective on and after September 1, 2013, that we considered are of interest to our clients. On October 4, 2013, we issued our third legislative update for the 2013 legislative session, which summarized SJR 18 and Section 17.001 of Senate Bill 1093 (SB 1093), which amends Section 51.002(i) of the Texas Property Code. If you have not received any of these legislative updates, you may request a copy from us or print the update from our Internet website: http://www.bmandg.com. Attachment: Exhibit A – Important Notice to Borrowers Related to Your Reverse Mortgage This Memorandum is provided as general information in regard to the subject matter covered, but no representations or warranty of the accuracy or reliability of the content of this information are made or implied. Opinions expressed in this memorandum are those of the author alone. In publishing this information, neither the author nor the law firm of Black, Mann & Graham L.L.P. is engaged in rendering legal services. While this information concerns legal and regulatory matters, it is not legal advice and its use creates no attorney-client relationship or any other basis for reliance on the information. Readers should not place reliance on this information alone, but should seek independent legal advice regarding the law applicable to matters of interest or concern to them. The law firm of Black, Mann & Graham L.L.P. expressly disclaims any obligation to keep the content of this information current or free of errors. Exhibit A IMPORTANT NOTICE TO BORROWERS RELATED TO YOUR REVERSE MORTGAGE UNDER THE TEXAS TAX CODE, CERTAIN ELDERLY PERSONS MAY DEFER THE COLLECTION OF PROPERTY TAX
