Texas home equity reform efforts gathering steam

FARMERS BRANCH, Texas – It’s simple. Texas has a sub-par home equity lending environment compared to those enjoyed by all 49 other states. Reforms are needed, says Texas Credit Union League President and CEO Dick Ensweiler, and, by partnering with other statewide financial institution trade associations, the League is hoping to convince the Texas Legislature of the same. The Texas Conference for Homeowners Rights (TCHR) was formed to promote legislation that will add more flexibility, accessibility and affordability to the state’s home equity laws. The coalition, which meets every two weeks, has hired a public relations firm to spearhead legislative and consumer education efforts, and individual trade associations will be conducting their own education initiatives. Ensweiler said the coalition’s goals are well-defined. “We did want to tackle anything that could be construed as trying to eliminate consumer safeguards in the law. The four areas we have targeted for reform are provisions already found in every other state in the country,” he said. In the legislative session that begins January 14, credit unions will work with the Texas Conference for Homeowners Rights to ask the Legislature to: 1) Establish a home equity line of credit that enables Texans more flexibility when applying for home equity loans. Without authority for a home equity line of credit and with the restriction that borrowers can get only one home equity loan advance in a 12-month period, Texans must borrow the full amount they project to need for the next year and pay interest on the full amount, even if they don’t need it all up front. For example, medical needs occur throughout the year; college tuition comes due in several semester installments; small business expenses may be spread out over the year. Texans should have the right to decide how much of their equity they need to borrow against and when they need it, Ensweiler explained, paying interest only on the money they are using. If Texas homeowners had a home equity line of credit, they could save thousands of dollars in interest costs over the life of a typical loan. 2) Allow borrowers to make payments more frequently than monthly. Many Texans receive paychecks twice a month and would like to have equal loan payments deducted from each paycheck, also saving interest costs over the life of the loan. 3) Give the Texas Credit Union Commissioner the authority to issue interpretive opinions about home equity questions relating to credit unions. Home equity issues related to banks also would be answered by their primary regulator. Currently, no agency has rulemaking or interpretive authority over home equity issues. As a result, may lenders decide not to offer home equity loans because they have uncertainty about some of the rules. Clear designation of a regulator with interpretive authority would encourage more lenders to offer home equity loans and make better interest rates and loan choices available for more Texas consumers. 4) Provide the option of seasoned loan refinancing. This would allow homeowners to refinance both their mortgage and a year-old or older home equity loan into a new mortgage loan, taking advantage of lower interest rates. Home equity loans have been available in Texas since 1998. “Home equity access is working and access should be expanded,” said Ensweiler. “The current laws are restrictive and expensive for homeowners, and now is the time to broaden the laws to work in favor of the hard-working people of Texas.” “Expanding access to home equity loans will open doors and improve the lives of our customers,” said Ensweiler. “Making home equity loans more flexible and affordable will further assist consumers and increase the much needed purchasing power of the average Texas homeowner.” If home equity changes are approved by the Legislature, voters would be asked to approve a constitutional amendment in a November 2003 election. [email protected]