Sunday, January 6, 2013

Are Home Equity Liens Enforceable

Home equity lending was decided into law in Texas and San Antonio begining in 1997 after the citizenry's passage of the amendment of the Texas Constitution. When this progressive law went into effect within Texas, it was comprised of many of the most thorough consumer protection provisions one can find in the nation. So what is a home equity? Home equity is simply the difference between the fair market value of your property, and the total balance of all encumbrances or liens from your property.

In general the rule that can apply in connection with enforceability of home equity lien is found in Section 50, Article XVI from the Texas Constitution. This law mentions that the homestead is exempt from forced sale to your repayment of debts that include credit card payments or satisfaction of support to an illegitimate child in addition to several others. Regardless, under the same section are a number of exceptions. If your homestead is used as security for a payment of debt, a lien on that real property is made. How then can these liens be enforceable?

Compliance with the home equity or reverse mortgage loan provisions from the Texas Constitution and the Property Code would be the requirement to get a lien to become enforceable. But what are requisites included under these pertinent laws?

The begining part of the amended law contains the terms and conditions and also the individual rights belonging to the people engaged in home-equity loan. Paragraph 6 (a) of the same section (Sec. 50) provides that the extension of credit is required to be secured with a voluntary lien in writting together with the consent of each owner and every owner's spouse. Paragraph 6 (b) states that the sum of all mortgage debt (not solely the home equity loan) must not be more than 80% from fair market value of your home. For instance, you can no longer borrow alongside your 0,000 home, if you already have an ,000 mortgage. If your mortgage on that same 0,000.00 home were ,000.00, a home equity loan is not an option because the present mortgage already is greater then 80% on the fair market value.

The homeowner should also consider that under the law, a home equity loan can only be sought one at a time against a house. While even more financing modifications may be possible, a home owner cannot insist on a second home equity loan until the very first has become satisfied completely, and just one home equity loan a year. On top of that you will discover inclusions on agricultural or open space lands. However these are not part of the operation of the home equity loan. In case the individual is unlicensed they will not be able to make the home equity loan except if they meet these requirements:

Provide seller-financing or

Related to the borrower within the second degree

Lenders are not allowed to charge fees and costs (other than interest) which adds up to over 3% from the principal of the loan. The law has procedures in place that grant penalties to lenders who break this rule and won't correct the mistake once the lender is notified.

This law has been applied in deciding Stringer & Stringer v. Cendant Mortgage Corporation (decided 2000) and in Tammy Elkins v. Bank of America, N.A. from Dallas County; 5th district where the court voided a lien on a home equity loan due to its failure to comply with Sec. 50 of Article XIV of the Texas Constitution (2007).

To find out more on home equity loans, refer to the documents released via the Office of Consumer Credit Commissioner in cooperation with the Department of Banking, Savings and Loan Department, and the Credit Union Department. These agencies offer further explanations of this law.

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