Texas Cashout Refinance Changes 2018

Texas Home Equity Changes

Texas has made some major changes to the a(6) Texas Cashout Refinance, aka Texas Home Equity.  Cashout of the equity on your primary residence in Texas has always been regarded as one of the most conservative cashout programs in the nation, limiting our options greatly compared to our brother and sister borrowers in other states.  So when we say there has been some major changes to this program, the term major is used relative to the current guidelines of the Texas Home Equity, but the changes did not change so majorly that our cashout is anything like the ones of other states.  Though these changes were passed by legislature in May of this year, 2017, and passed by the majority of Texas voters in November of this year, closings will not become affected by the changes until January 1, 2018.

Changes to Home Equity Lending in Texas

1. Eliminating the ban on home equity loans on homesteads with agricultural exemptions.
   • lenders will be able to close on homes that have agriculture exemptions at the time of closing
2. Reducing the 3% fee cap to a 2% fee cap with certain fees excluded from this 2% fee cap.
   • now, fees for the refinance can not add up to more than 2% of the final loan amount
   • many fees are no longer counted under that 2% cap:  
     • appraisal performed by 3rd party appraiser
     • survey fee by a state registered licensed surveyor
     • title insurance premium – state base premium for a mortgagee policy of title insurance with endorsements established in accordance with state law, or if a mortgagee title policy is not issued, a title examination report if its cost is less than the state base premium for a mortgagee title policy without endorsements.
3. Permitting, under certain conditions, a home equity loan to be refinanced as a non-home equity loan.
   • S.J.R. 60 allows the owner to refinance the owner’s home equity loan as a non-home equity refinance loan under Article XVI, subsection 50(a)(4)
     • the refinance must not happen before the 1st anniversary  of the closing date of the original home equity
     • no additional funds are taken/advanced other than debts refinanced from the original purchase of the home or actual closing costs and reserves required by the lender to refinance
     • the new loan  to value must still remain under 80%
4. Repealing the 50% ceiling on additional advances under Home Equity Lines of Credit (HELOCs).
   • 80% ceiling stays in place though
5. Updating who is authorized to make home equity loans.
6. Amending The 12-day Notice Disclosure Prescribed For 50(a)(6) Loans
   • the major change to this notice is the wording regarding the 3% fee cap changing to 2%.

What if you apply for a Texas Home Equity in 2017, but close on it in 2018?

If the loan is applied for in 2017, but does not close in 2017, the lender will have to wait until January 1, 2018, provide the new form of 12-day disclosure and wait the 12 days to close.