Williston: How Proposition 2 helps Texas homeowners
Nov. 3, 2017 at 11:37 p.m.
Texas does things a little differently than most states, especially when it comes to private property rights. For example, we have strict consumer protections related to home equity lending that are so important to Texans that voters actually enshrined them in the state constitution back in 1997.
However, much has changed in the housing market in the past 20 years so now it's time for our rules to catch up. Proposition 2 on the November ballot is our chance to make this change. How will it help homeowners, you may ask yourself?
For starters, Proposition 2 would loosen the restrictions and give borrowers more flexibility. Back in 1997, Texas instituted some of the country's strictest limits on how much a person could borrow, but it turns out those limits may be too extreme and are actually hurting Texans.
Right now, there's a 3 percent limit on fees that can be charged to create a home equity loan. Proposition 2 would lower that to 2 percent and revise the types of fees — think survey, appraisal and title insurance premium — that count toward the cap. Borrowers would be able to pay for those expenses separately. Because loan fees add up fast, lenders aren't always able to make these loans for relatively small amounts. And those are precisely the kinds of loans many Texans want but can't get now. By lowering the fee limit and excluding those three expenses, smaller home equity loans will be more readily accessible for Texans. This is one of the main objectives of Proposition 2.
One other important aspect of the proposition is that it would allow farmers and ranchers to take out loans on their agriculture property, which state law now bans. Depending on where you live in the state, this is vital.
It's also imperative that we talk about what Proposition 2 doesn't do. It doesn't take away any of your consumer protections. Texas prohibits borrowing more than 80 percent of your home's appraised value. This means 20 percent of your home's equity will always be protected. Other states will let homeowners borrow 100 percent — or even more — of their equity, putting their homes at risk when the market changes. Nothing in Proposition 2 changes the constitutional protections Texans have when borrowing on their home equity.
You might not need to tap into your home's equity right now, but don't you want to have the option to do so if the situation arises in the future? Think about when your child goes to college, if you want to renovate your home, or if you have an unexpected medical bill. These are all common reasons Texans take out home equity loans.
There's a good chance you might never need to take out a home equity loan, and Proposition 2 won't have any impact on you. But won't it give you peace of mind to know that it's always an option, be it for a large or a small amount, if things ever change?
Election Day is Tuesday. Visit votetexas.gov to find your polling station.
I highly encourage a vote for Proposition 2. You work hard to build up the equity in your home, and you should be able to access it when you need it.
— Chris Williston is president and chief executive officer of the Independent Bankers Association of Texas.