How Would I know If My Home Equity Lien Can Be Enforcedable

Home equity lending became a law in Texas and San Antonio starting in 1997 just after the citizenry's approval of the amendment to the Texas Constitution. As this law came into effect in Texas, it was comprised of one of the most stringent consumer protection provisions one can find within the nation. So what exactly is a home equity? Home equity is simply the difference between the fair market value of your house, plus the complete balance of all encumbrances or liens on your property.

The general rule that might apply concerning the enforceability of home equity lien is located in Section 50, Article XVI from the Texas Constitution. This rule mentions that the homestead is is not included in a forced sale for any repayment of debts including credit card payments or satisfactory support to an illegitimate child among numerous others. But bear in mind, under the same section are quite a few exceptions. If the property is used as collateral for a payment of debt, a lien on that real property is created. How then can these liens be enforceable?

Complying with the home equity or reverse mortgage loan provisions from the Texas Constitution and also the Property Code is a requirement to get a lien to become enforceable. But which are the requisites enumerated under the above mentioned pertinent laws?

The initial part of the amended law contains the terms and conditions along with the respective rights belonging to the parties included in home-equity loan. Paragraph 6 (a) of the same section (Sec. 50) provides that the extension of credit is required to be secured by a voluntary lien in written form along with the consent of every owner and each owner's spouse. Paragraph 6 (b) states how the sum total of all mortgage debt (not solely the home equity loan) shouldn't be more than 80% from fair market value of your house. To illustrate, you can no longer borrow alongside your $100,000 home, if you currently have an $80,000 mortgage. If the mortgage on that same $100,000.00 home were $81,000.00, a home equity loan has stopped being a possibility since the existing mortgage already exceeds 80% on the fair market value.

The borrower should also be aware that under the law, a home equity loan can only be secured one at a time against a property. While other financing modifications could be possible, a homeowner cannot insist on an additional home equity loan until the very first has been satisfied in full, and just one home equity loan a year. In addition you will find inclusions on agricultural or open space lands. However these are not part of the operation of the home equity loan. If for example the individual is unlicensed they will be unable to make the home equity loan except if they meet these stipulations:

• Provide seller-financing or

• Related to the borrower within the second degree

Lenders are certainly not allowed to charge fees and costs (besides interest) which adds up to greater than 3% of the principal on the loan. The law has provisions in place that grant penalties to lenders who violates this rule and won't correct the mistake once the lender is informed.

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 for its failure to comply with Sec. 50 of Article XIV of the Texas Constitution (2007).

For more information on home equity loans, make reference to the documents released by the Office of Consumer Credit Commissioner in cooperation with the Department of Banking, Savings and Loan Department, and also the Credit Union Department. These agencies offer further explanations of this law.
Odus Zinkman can be described as technical writer who likes writing on topics in the legal field. Presently, his concentration is on San Antonio Bankruptcy Law, and San Antonio Real Estate Law. His mission is to provide info on important topics to assist individuals in making better decisions.