Tuesday, December 12, 2017

About Texas Home Equity Lines of Credit (HELOCs) for Texas Notary Signing Agents


PUBLISHED INITIALLY ON 2/15/16.
REPUBLISHED WITH UPDATES ON  12/12/17

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 /There are two rules that Texas notary signing agents must know about Home Equity Lines of Credit (HELOCs) secured by a homesteaded Texas property. /
  1. The documents must be signed in the office of the lender, an attorney at law, or a title company.  
  2. After the documents are signed, the borrowers may expect to receive a copy of all signed documents and the loan application. Some lenders push that instant delivery, and some say it is not necessary.  Keep an eye out for those instructions within the documents OR  in another document.

12/12/17 - HELOC UPDATE - Lenders & Mortgage Bankers also sought changes this year in the 87th legislative session!  The results can be read in a sweet little summary by Independent Bankers of Texas -- link is right here!



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These rules come from the Texas Constitution and have been simplified in the Texas Administrative Code, Chapter 153.  You'll find both of those below, if you are interested in seeing why signing agents are plagued by these requirements.

Home equity lending in Texas started in the mid-1990s.  
Bankers weren't even sure how to handle the loans and most refused to do them.  It took several years to get the processes, rules, and lender penalties worked out.  Finally, it was established that if a lender didn't do something right, it could pay a $1,000 penalty to the borrower and all would be forgiven.

Until this type of loan was approved in Texas, Texans could not take loans out on the equity in their homes.  This is probably one reason why Texas has always had a strong economy.  Until then, all Texans strived to pay off their mortgages and be debt free.

If you are interested in the history of  HELOCs in Texas, you can poke around on the Wayback Machine to view the old website of the Texas Finance Commission.  I read many hours on the old website in the years 2004 - 2006.
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Texas Notary Resource Page

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As I recall, the reason for the borrower having to sign the documents in a title company, law office, or at the lender's office is because members of the Finance Commission (so they said) were concerned about predatory lending and that homesteaded property not be easily foreclosed upon.  Requiring borrowers to forego the ease of a signing agent visiting their homes was supposed to create a situation in which predatory lending wasn't welcome. However, I remember signing many equity loans in the offices of one of the most aggressive and predatory lenders Texas has ever seen, Beneficial Finance that has since been bought out by HSBC and closed all the offices that issued those types of loans.


Laws on Home Equity Lending that are Applicable to Notary Signing Agents



ARTICLE 16. GENERAL PROVISIONS
Sec. 50.  HOMESTEAD; PROTECTION FROM FORCED SALE;MORTGAGES, TRUST DEEDS, AND LIENS.

(a) The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for:

(6)  an extension of credit that:

(N)  is closed only at the office of the lender, an attorney at law, or a title company;
and
(Q)  is made on the condition that:

(v)  at the time the extension of credit is made, the owner of the homestead shall receive a copy of the final loan application and all executed documents signed by the owner at closing related to the extension of credit;

(g)  An extension of credit described by Subsection (a)(6) of this section may be secured by a valid lien against homestead property if the extension of credit is not closed before the 12th day after the lender provides the owner with the following written notice on a separate instrument:
"NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS CONSTITUTION:
"SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME.  SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS.  IF YOU DO NOT REPAY THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER MAY FORECLOSE AND SELL YOUR HOME.  THE CONSTITUTION PROVIDES THAT:

"(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER, TITLE COMPANY, OR AN ATTORNEY AT LAW;

"(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION MUST:

"(5) PROVIDE THAT YOU RECEIVE A COPY OF YOUR FINAL LOAN APPLICATION AND ALL EXECUTED DOCUMENTS YOU SIGN AT CLOSING;

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