Texas Amends Home Equity Lending Provisions

The Finance Commission of Texas and the Texas Credit Union Commission (collectively, the Commissions) recently adopted amendments to the home equity lending regulations found in Title 7, Chapter 153 of the Texas Administration Code (Chapter 153).  Note Chapter 153 contains the Commissions’ interpretations of the home equity lending provisions of the Texas Constitution, Article XVI, Section 50 (Section 50).  In general, the amendments primarily specify the requirements for electronic disclosures and clarify the applicability of Section 50 to out-of-state financial institutions.  The changes made by these amendments went into effect on January 6, 2022. 

In particular, the amendments add definitions and statutory citations for the terms “E-Sign Act” and “UETA” (referring to the Texas Uniform Electronic Transactions Act).  The terms “E-Sign Act” and “UETA” are now used throughout Chapter 153 in connection with electronic disclosures as a concise way to refer to these two laws. 

For example, Section 50 provides that a home equity loan closing must occur at least 12 days after the owner “submits a loan application to the lender.”  As a result of the amendments, a new provision in Chapter 153 now clarifies that a loan application may be submitted electronically in accordance with state and federal law governing electronic disclosures, with references to the UETA and the E-Sign Act.  By way of another example, Section 50 requires a lender to provide an owner with a copy of the loan application and a final itemized disclosure of amounts that will be charged at closing.  The corresponding amended Chapter 153 provision now states that a lender may provide such disclosure electronically in accordance with state and federal law governing electronic signatures and delivery of electronic documents, and includes references to the UETA and the E-Sign Act. 

The amendments also clarify that a bank organized under the laws of another state may make home equity loans under the Texas Constitution.  Specifically, Chapter 153, as amended, specifies that for purposes of Section 50, a “bank, savings and loan association, savings bank, or credit union doing business under the laws of this state or the United States” includes a state-chartered financial institution that is described by Texas Finance Code Section 201.101(1)(A) – (D), is chartered under the laws of another state, and does business in Texas in accordance with applicable state law.