On November 7, 2017, Texas ballot Proposition 2 was approved by voters. Proposition 2 makes significant changes to the Texas Constitution provisions which govern the home equity lending process in Texas. The most significant changes are:
- A removal of the ban on home equity lending to agricultural homesteads.
- A reduction of the 3% fee cap to a 2% fee cap and an exemption of certain fees from the percentage calculation.
- A rollback on the prohibition of converting seasoned home equity loans to non-home equity loans when:
(a) the refinanced loan is signed at least a year after the original home equity loan was signed;
(b) the refinanced loan cannot provide any additional money to the borrower other than to cover the costs to do the refinancing;
(c) the refinanced loan cannot exceed 80 percent of the fair market value of the house; and
(d) the lender of the loan must provide the borrower with a notice about their rights associated with a home equity or non-home equity loan 12 or more days before the date of refinance.
- A removal of the 50% ceiling for additional advances on HELOCs.
- An update to who is authorized to make home equity loans.
- An amendment to the 12-day notice to borrowers to reflect the aforementioned changes.
Additionally, Proposition 2 introduces new mandatory disclosure language to support the process of converting a seasoned home equity loan to a non-home equity loan. The full text of Proposition 2 and other supporting information surrounding this change can be found at the websites linked below.