Texas Home Equity Changes Effective January 1, 2018

December 29, 2017

Texas Constitution was amended on November 7, 2017 affecting Texas Home Equity loans.

The fee cap was lowered from 3% to 2% of the original loan amount. It excludes:   a)bona fide discount points used to buy down the interest rate, b) appraisal performed by a third party appraiser, c) survey by a state registered or licensed surveyor, d) title insurance premiums with endorsements or title examination report.

Properties zoned agricultural homesteads are now eligible.

Homeowners may choose to refinance a Texas 50(a)(6) home equity loan into a non-home equity refinance loan as (a)(4) when all of these requirements are met:

  • The refinanced loan is signed at least a year after the original home equity loan was signed.
  • No additional funds are advanced to the borrower other than funds advanced to cover the costs to refinance the home equity debt.
  • The refinanced loan total of the outstanding principal balances of all valid encumbrances of record against the homestead cannot exceed 80% of the homestead’s fair market value on the date of the refinance; and
  • The lender must provide the homeowner written notice about their rights associated with a home equity or non-home equity loan within 3 business days of application and at least 12 days before the refinance is signed.

The following Fannie Mae/Freddie Mac forms have a 1/18 revision date:

  • Texas Home Equity Security Instrument (Form 3044.1)
  • Texas Home Equity Affidavit and Agreement (Form 3185)
  • Texas Home Equity Note (Form 3244.1)

Gateway will follow Texas Constitution for loans closing on or after January 1, 2018.  Loans closed in 2018 will need to comply with the updated disclosure fee requirements to be eligible for purchase.  Hence the new 12-day notice will create a new 12 day window, Gateway will not purchase any Texas (a)(6) loans closed from January 1, 2018 through January 12, 2018.

See link to FNMA Guide:  https://www.fanniemae.com/content/announcement/sel1710.pdf

Please contact your Regional Sales Manager with any questions.

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