Guest Blogger: Mark Raskin (NMLS# 176513), President of the Texas Mortgage Bankers Association and Branch Manager/Senior Loan Officer at PrimeLending
It probably comes as no surprise to you that Texas does things a little differently than most states, especially when it comes to private-property rights. For example, we have strict consumer protections related to home equity lending (loans which let you borrow against the equity in your home), which are so important to Texans that voters actually amended the state constitution to include them in 1997.
But over the past 20 years, much has changed in the housing market, and now it’s time for our rules to catch up. Proposition 2 on the November ballot is our chance to make this change.
The primary way Prop 2 will help Texas homeowners like you is by making smaller loans available to more Texans. Right now, there’s a 3% limit on fees that can be charged to create a home equity loan. That means if you’re looking to get a home equity loan of $10,000, you can only be charged up to $300 for all the fees associated with the loan, including appraisals, title policies, etc.
But loan fees can add up fast, so lenders aren’t always able to make these kinds of loans for relatively low amounts.
Prop 2 would actually lower that fee limit from 3% to 2% and take three expenses outside of the lender’s control—the appraisal, title insurance premium, and survey—out of the fee limitations,. This means smaller home equity loans will be more readily accessible for Texans.
Prop 2 also gives homeowners with existing home equity loans more options to refinance, either to another home equity loan or a traditional mortgage loan with a lower interest rate and fees. Fewer restrictions makes it easier for homeowners to access their hard-earned home equity and makes a more level playing field.
But there’s also one important thing Prop 2 doesn’t do – put your equity at greater risk. Remember those strong protections I mentioned? Texas prohibits borrowing more than 80% of your home’s value. Now, 20% of your home’s equity will always be protected. Other states will let homeowners borrow 100% of their home’s equity, putting their homes at risk when the market changes. Nothing in Prop 2 removes the constitutional protections Texans have when borrowing on their home equity.
You may not need to tap into your home’s equity right now. But what about when your child goes to college, if you want to renovate your home or if you have an unexpected expense, like medical bills? These are all common reasons Texans take out home equity loans.
You may never need or want to take out a home equity loan, but don’t you want the peace of mind to know that you could if you needed to?
Vote yes for smart reform in the mortgage industry when you vote yes for Prop 2.
Remember, you can vote early beginning Monday, October 23 through Friday, November 3. Election day is Tuesday, November 7, 2017. Click here to find out where you can vote early or click here to learn more about the proposed legislation.
Whether you vote early or on Election Day, vote for Proposition 2. You work hard to build up the equity in your home. You should be able to access it when you need it.