Texas Register
(31 TexReg 1393), is withdrawn in
this issue of the
Texas Register
. Existing §153.22
is re-proposed for repeal.
Texas Constitution, Article XVI, Section 50 ("Section 50"), sets out the
only permissible encumbrances on a homestead. Pursuant to Section 50(u), as
implemented by Texas Finance Code, §11.308 and §15.413, the power
to interpret Sections 50(a)(5) - (7), (e) - (p), and (t) of the Constitution
has been separately and independently delegated to the commissions, subject
to the statutory admonition that the commissions strive for consistency in
the exercise of this independent authority. To promote the goal of consistency
and better support the confidence of homeowners and lenders seeking to comply
with Section 50, the commissions have chosen to jointly exercise their interpretive
authority. The commissions have jointly adopted procedures for requesting
interpretations, codified in 7 TAC Chapter 151, and jointly adopted interpretations
are codified in 7 TAC Chapter 153. Texas Government Code, Chapter 2001, governs
the process by which interpretations are adopted.
Because of the significantly adverse consequences that can befall a lender
who violates a provision of Section 50, clear and unambiguous guidance regarding
the meaning of such provisions supports the stability of the credit markets.
This stability benefits consumers by ensuring that home equity loans are as
widely available to Texas homeowners as possible. Availability, certainty,
and competition result in reducing the overall transaction cost to consumers
for equity loans. The commissions therefore accept that their interpretive
power must extend beyond mere definition of words and terms in Section 50
to encompass "filling in the gaps" with respect to material matters that are
inadequately addressed in Section 50, including the possible addition of further
details to the extent the commissions believe necessary to fully implement
the intent and purposes of Section 50. In addition, because lenders and borrowers
engaged in credit transactions involving the homestead must consult and comply
with other state and federal law that governs mortgage lending, the commissions
strive to interpret the Constitution in a manner that harmonizes with such
other law.
Concerns have been raised that existing §153.22 may be a restricted
reading of the constitutional language. The commissions proposed a new interpretation
to seek comment on replacing existing §153.22, which was published in
the March 3, 2006, issue of the
Texas Register
(31
TexReg 1393). The commissions received comments on the new proposal which
prompted staff to recommend certain changes in the language of the proposed
new §153.22. The commissions believe that further public input would
be beneficial and have decided to republish the interpretation for further
comment.
To facilitate consideration of the public's views, the commissions seek
public comment in the form of answers to questions on two discrete issues:
(A) Whether the notice requirement of Section 50(g)(Q)(5) is sufficiently
in harmony with the substantive law of Section 50(a)(6)(Q)(v); and (B) Does
the notice provision conflict with Section 50(a)(6)(Q)(v) such that Section
50(a)(6)(Q)(v) must prevail. See
Stringer v. Cendant
Mortg. Corp
., 23 S.W.3d 353, 356-57 (Tex. 2000).
A reading of Section 50(a)(6)(Q)(v), standing alone, could require a lender
to provide an owner with copies of each and every document containing an owner's
signature that is in any way related to the equity loan, without regard to
how the document relates to the equity loan, whether the document is signed
by the owner in relation to the equity loan, when the document is signed,
or whether the lender even possesses the document. The provision could even
require a lender to give the owner copies of such owner-signed, non-closing
documents as driver licenses, IRS forms, financial statements, signed verifications
of employment, signed verifications of accounts, checks signed by the owner,
letters and emails sent by the owner, owner-signed property records from previous
real estate transactions, and documents a lender opts to have the owner sign
simply to verify the document's receipt. The commissions previously concluded
that the framers did not intend such a result. No person submitting comments
or testimony to the commissions has suggested that such a reading is appropriate.
The commissions are also aware of views that suggest an interpretation
should only require the lender to provide the owner with documents signed
at closing. There are concerns that the phrase "related to the extension of
credit," if construed broadly, might include documents that have previously
been provided to the owner, which would add a significant and burdensome process
to home equity lending without adding significant benefit to the owner. The
commissions, therefore, seek comment with specificity regarding a broader
interpretation of the noted phrase.
As currently proposed, §153.22(1) interprets Section 50(a)(6)(Q)(v)
by defining the phrase "documents signed by the owner related to the extension
of credit." As so defined, the lender is required to furnish a copy of a document
to the owner at closing if the document is within the lender's possession
or control, has been signed by the owner as a condition to obtaining the equity
loan, and was intended either for use in the process of evaluating or underwriting
the equity loan, or alters or creates a legal obligation of a party to the
equity loan.
Harold Feeney, Credit Union Commissioner, on behalf of the Texas Credit
Union Commission and Leslie L. Pettijohn, Consumer Credit Commissioner, on
behalf of the Finance Commission of Texas, have determined that for the first
five-year period the interpretation is in effect there will be no fiscal implications
for state or local government as a result of administering the interpretation.
Commissioner Feeney and Commissioner Pettijohn also have determined that
for each year of the first five years the interpretation as proposed is in
effect, the public benefit anticipated as a result of the proposed interpretation
will be to support the stability of the credit markets and ensure that equity
loans are widely available to Texas homeowners, through the creation of reliable
standards and guidelines.
There is no anticipated cost to persons who are required to comply with
the interpretation as proposed. There will be no adverse economic effect on
small or micro businesses.
Written comments on the proposed interpretation may be submitted to Harold
Feeney, Commissioner, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699, or to Sealy Hutchings, General Counsel, Office of Consumer
Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207
or by email to commissioner@tcud.state.tx.us or sealy.hutchings@occc.state.tx.us.
To be considered, a written comment must be received on or before the 30th
day after the date the proposed section (interpretation) is published in the Texas Register
. At the conclusion of the 30th day
after the proposed interpretation is published in the
Texas Register
, no further comments will be considered or accepted
by the commissions.
The Credit Union Commissioner and the Consumer Credit Commissioner have
been delegated the authority to conduct a public meeting on behalf of the
commissions for the purpose of receiving oral comments, views, and/or testimony
concerning the proposed interpretation. A public meeting will be held in Austin
on July 27, 2006, at 2:00 p.m. in the State Finance Commission Building, William
F. Aldridge Hearing Room, located at 2601 North Lamar Boulevard. To be considered,
an oral comment must be received at this public meeting; at the conclusion
of the meeting, no further oral comments will be considered or accepted by
the commissions.
Persons with disabilities who are planning to attend the meeting and have
special communication or other accommodation needs should contact Joann McAnally
at the Office of Consumer Credit Commissioner at (512) 936-7640. Requests
should be made as far in advance of the meeting as possible.
The interpretation is proposed pursuant to Texas Finance Code, §11.308
and §15.413, which separately and independently authorize each commission
to issue interpretations of the Texas Constitution, Article XVI, Section 50(a)(5)
- (7), (e) - (p), (t), and (u), subject to Texas Government Code, Chapter
2001.
The Texas Constitution, Article XVI, Section 50(a)(6), is affected by the
proposed interpretation.
§153.22.Copies of Documents: Section 50(a)(6)(Q)(v).
The lender, at the time the extension of credit is made, must provide
the owner of the homestead a copy of all documents signed by the owner related
to the extension of credit.
(1)
The phrase "documents signed by the owner related to the
extension of credit," as used in Section 50(a)(6)(Q)(v), means documents that
are:
(A)
in the lender's actual or constructive possession, custody,
or control;
(B)
signed by the owner as a condition to obtaining the equity
loan; and
(C)
intended either:
(i)
as information for use in the process of evaluating or
underwriting the equity loan; or
(ii)
to alter or create a legal obligation of a party to the
equity loan.
(2)
The phrase "possession, custody, or control," as used in
this section, means that the lender either has physical possession of the
document or has a right to possession of the original document that is equal
or superior to the person who has physical possession of the document.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on June 30, 2006.
TRD-200603559
Leslie L. Pettijohn
Commissioner
Joint Financial Regulatory Agencies
Earliest possible date of adoption: August 13, 2006
For further information, please call: (512) 936-7622