Why No Home Equity Loans In Texas?
Question: I don’t live in Texas, but every once in a while my mortgage company sends me information about home equity loans. The brochures always state home equity loans are illegal in Texas. Why is it against the law there, and legal in the 49 other states? What is it that the lawmakers in Texas are afraid about? And what’s the punishment in Texas if a bank makes a home equity loan? Do the people at the bank get executed? Since Texas leads the country in executions, do they figure the more dumb laws like this they make will create more opportunities for more executions, apparently a favorite past-time there. In any event, please post the reasons for this.
Answer: Home Equity loans were illegal in Texas due to the phraseology of the Homestead laws which were written in the 1800’s. The writers of the Texas constitution were very concerned about folks getting their houses taken by the banks.
Repealing this law (requiring yet another amendment to the Texas constitution) was a favorite political hot button that always resurfaced every couple of years around election time. Finally, after years and years of debating this issue, the amendment passed and you can now get a home equity loan in Texas as of 01/01/1998, although many home equity loan products (such as the 125% HEL) remain illegal.
I can’t imagine that any bank would have issued a home equity loan to anyone in Texas, so there’s no need to speculate on what the punishment would have been if such a loan was issued. Clearly, there’s also no need to talk to your idiotic statements regarding Texas and execution “opportunities”.
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