Focus Report, Volume 85, Number 6, September 2017 Page: Page9
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Opponents say
Proposition 2 could raise costs for borrowers
and roll back important consumer protections.
These protections should be continued because they
have worked for both consumers and lenders while
contributing to a stable housing market that was not as
seriously affected by the recent housing bubble as those
in other states.
The proposed changes to the fee cap would raise,
not lower, costs for consumers and could create
incentives to lenders to make loans just to generate more
income from fees. While Proposition 2 would lower the
overall cap, it also would exclude major charges from
the cap calculation. Borrowers would continue to pay
these charges for appraisals, surveys, title insurance, or
title examination reports. Lenders then would have room
under the cap to raise or add upfront fees. The costs
to borrowers easily could be higher than current costs
under the 3 percent cap. Lenders instead should focus on
home equity loans as a package, with fees, interest rate,
and consumer protections taken into consideration, not
just on the level of fees they may charge.
Allowing home equity loans to be refinanced as
non-home equity loans would run counter to the ideas
and protections embedded in Texas home equity laws.
These laws deliberately encompass the idea of "once-
a-home-equity-loan, always-a-home-equity-loan' so
that homeowners who borrow against the equity in their
homes have certain protections. These include requiring
judicial foreclosure on home equity loans and making
home equity loans non-recourse so that a borrower's
other assets are not at risk in a default. Requiring
judicial foreclosure is especially important because it
ensures the involvement of a court and that homeowners
are given certain rights in the foreclosure process.
The type of refinancing contemplated under the
proposed amendment also could incentivize lenders to
encourage the refinancing of loans both to earn the fees
and to bring a loan out from under the protections given
to home equity borrowers. Home equity loan borrowers
interested in refinancing their loans already can do so
with a new home equity loan that carries with it all the
protections, and this would be a better option than the
change proposed in Proposition 2.House Research Organization Page 9
House Research Organization
Page 9
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Texas. Legislature. House of Representatives. Research Organization. Focus Report, Volume 85, Number 6, September 2017, periodical, September 7, 2017; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1033148/m1/9/?q=%22~1~1%22~1&rotate=90: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.