AUSTIN, Texas – Texans may have passed two home equity loan-related amendments in September and another may have become effective in 1998, but don't expect to see any noticeable uptick in home equity loan activity until the state's Credit Union Commission and Finance Commission smooth out some of the "convoluted" language in the constitutional amendments. That bit of advice comes from Commissioner Harold Feeney of the state's Credit Union Department who tactfully explained that the "constitutional language in the amendments wasn't written as well as it could have been." The Credit Union Commission oversees the staff of the Texas Credit union Department. The Finance Commission oversees the Banking, Savings & Loans, and Consumer Credit Departments. Each commission has nine members. "There are still things that need to be done, and we're waiting for the commissions to come out with their interpretation of the provisions concerning providing home equity lines of credit and home equity loans. Some issues have to be cleared up," said Feeney. The amendment that was passed in Nov. 1997 and became effective Jan. 1998, for the first time allowed Texans to have home equity loans, but it didn't authorize home equity lines of credit. That provision, under certain conditions, was included in Proposition 16 that was passed by Texas voters in September. Feeney cited, by example, language in the 1997 amendment limiting home equity loans to 50% of the fair market value of the home. There's some language, he said, "that could cause you to think that could be higher." Noting areas where there could possibly be confusions because of the wording, Feeney said, "Sometimes when the legislature passes things and makes compromises, they don't always look at the big picture." During the week of Nov. 4, each commission put out for a 30-day comment period to their respective regulatory departments copies of identical interpretations of the constitutional amendment passed in 1997 concerning home equity lending. The commissions will take up the comments they receive at their December meeting, and Feeney said they will either make further modifications to their interpretation or adopt them as is. Also in December, the two commissions hope to put out for comment their interpretation of Proposition 16 concerning home equity lines of credit. Those comments will be due back in time for the commissions to take up at their February meetings. The interpretations, said Feeney, "will provide a safe harbor for lenders. Most credit unions are waiting to see how the provisions will be written." Since there are penalties allowed in the amendments for violations including loss by the lender of principle and interest of a loan, "there is a big incentive by lenders to make sure home equity loans are done correctly." Even so, Feeney said he aware that there are some credit unions – predominantly some of the larger ones in the state – that are already making home equity loans. "They're making them at their own risk, they've decided how much risk they want to assume," said Feeney. -

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