HBA-NLM H.J.R. 57 76(R) BILL ANALYSIS Office of House Bill AnalysisH.J.R. 57 By: Danburg Financial Institutions 2/25/1999 Introduced BACKGROUND AND PURPOSE The 75th Legislature passed H.J.R. 31, a constitutional amendment allowing home equity lending and reverse annuity mortgages. Some issues that have arisen since the passage of H.J.R. 31 include the lack of regulating authority, one acre urban homestead limitations, and the inability to insure Reverse Annuity Mortgages. Currently, Section 41.002 (Interests in Land), Property Code, provides that the homestead of a family cannot consist of more than one acre of land if used for the purposes of an urban home. Many residents of Texas live in urban areas on tracts of land that exceed one acre, and are therefore constitutionally prevented from using the equity in their homes. Current law prohibits the use of collateral other than the homestead as security for a home equity loan. H.B. 1221 establishes that the maximum size of the homestead is 10 acres rather than one acre and specifies the criteria that define an urban homestead. In conjunction with H.J.R. 57, this bill effectively allows a person to claim up to 10 acres as an urban homestead exemption. As proposed, H.J.R. 57 requires the submission to the voters of a constitutional amendment allowing home equity loans to be secured by urban homesteads with one or more lots. This bill also allows for the security of reverse annuity mortgages and authorizes the legislature to delegate, by statute, the power to state agencies to interpret home equity lending laws. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 50(a), Article XVI, Texas Constitution, as follows: (a)(6) Updates references to the "homestead" to instead refer to the "security." Includes in the list of exceptions under the existing provisions of this subsection, an extension of credit that is not secured by any additional real or personal property other than: _any real property that is part of one or more lots in a city, town, or village, as described by Section 51 (Amount of Homestead; Uses), Article XVI, Texas Constitution, and that includes all or part of the homestead; and _any improvements on the homestead and real property as described above. Makes conforming changes. SECTION 2. Amends Section 50(g), Article XVI, Texas Constitution, as follows: (g) Updates references to "your home," to refer to "the security for the loan," in notices concerning extensions of credit defined by Subsection (a)(6), of this section. Makes conforming changes. SECTION 3. Amends Section 50(h), Article XVI, Texas Constitution, to make a conforming change. SECTION 4. Amends Section 50(k), Article XVI, Texas Constitution, as follows: (k) Expands the definition of "reverse mortgage," to include an extension of credit that requires no payment of principal or interest until the borrower defaults on an obligation specified in the loan documents to maintain, pay taxes on, or insure the homestead property. Makes nonsubstantive changes. SECTION 5. Amends Section 50, Article XVI, Texas Constitution, by adding Subsection (t), as follows: (t) Authorizes the legislature, by statute, to delegate to one or more state agencies the power to interpret Subsections (a)(5)-(7) and (e)-(p) of this section. Provides that an act or omission does not violate a provision included in those subsections if the act or omission conforms to an interpretation of the provision that is in effect at the time of the act or omission, and made by a state agency to which the power of interpretation is delegated as provided by this subsection or by an appellate court of this state or the United States. SECTION 6. Requires this proposed constitutional amendment to be submitted to the voters at an election to be held November 2, 1999. Sets forth the required language for the ballot.