This memorandum will provide an overview of home equity lending embodied in Article XVI, Section 50, of the Texas Constitution and will also discuss some of the issues lenders face. The full text of Section 50, current to date, is attached to this memorandum (for ease of reference, the home equity and HELOC provisions are highlighted in bold typeface). All references to “sections,” “subsections,” and “parts” in this memorandum refer to the various provisions of Section 50, unless otherwise stated.

This 2010 update revises the April 15, 2009 memorandum as follows:

1.     It discusses the following new cases: ACORN v. Finance Commission of Texas and Credit Union Commission of Texas, 303 S.W.3d 404 (Tex.App.-Austin, 2010); Cerda v. 2004-EQR1, LLC, Civil Action No. SA-07-CV-632-XR (U.S. District Court, W.D. Tex.–San Antonio Division, 2009); Chambers v. First United Bank & Trust Co., 2009 WL 3245420 (Bkrtcy.E.D.Tex.-Sherman Division 2009); Foster v. Bank One Texas N.A., 54 Fed.Appx. 592, 2002 WL 31730405 (5th Cir. 2002); Galvin v. Centex Home Equity Co., L.L.C., 2008 WL 441773 (Tex.App.-San Antonio, 2008, no. pet.); Johnson v. National City Mortgage Co., 2009 WL 2982783 (Bkrtcy.E.D.Tex, 2009); Maluski v. US Bank NA, 2009 WL 3403195 (5th Cir., 2009); McCallum v. Wells Fargo Bank, 2009 WL 3166070 (U.S. District Court, W.D. Tex.–Austin Division, 2009); Pelt v. U.S. Bank Trust National Association, 2002 WL 31006139 (U.S. District Court, N.D. Tex.-Dallas Division 2002); Wilson v. Aames Capital Corp., 2007 WL 3072054 (Tex.App-Houston [14 Dist.] 2007 no pet.). (See Section II. below.) 

2.     It makes editorial changes and typographical corrections to the existing text.

I. HOME EQUITY CONSTITUTIONAL AND INTERPRETATION AMENDMENTS

Since the home equity provisions were first added to the Constitution effective January 1, 1998, and the home equity interpretations (“Interpretations”) were first adopted into the Administrative Code effective January 8, 2004, both have been revised from time to time. In addition, new case law continues to clarify and interpret the constitutional home equity provisions. This memorandum attempts to incorporate these prior changes and present Texas home equity law as it currently exists. For these reasons, a proper understanding and application of home equity law and its interpretations may, and in some cases will, depend upon when a particular transaction closed or when the violation occurred.
 

See attached for complete memorandum