Home Equity Loans in Texas: Maintaining the Texas Tradition of Homestead Protection

Abstract

This Article examines home equity financing in Texas, focusing on how continued protection of the homestead shelters Texas homeowners from problems experienced by some homeowners in other states. In Part I of the Article, I briefly explore the history of homestead protection and home equity loans in Texas, a subject on which Joe McKnight literally wrote the book. In Part II, I discuss the growth of home equity loans in other states, the reasons for their popularity, and the problems that have arisen for homeowners who have been victimized by predatory lenders. Part III examines the constitutional amendment that ultimately permitted home equity lending in Texas, focusing on the consumer protection requirements of the provision and how they are aimed at preventing predatory lending practices. In Part IV, I discuss criticism aimed at the amendment and problems that have arisen in interpreting and applying it. Part V discusses the limited legislative response to these issues and the court cases interpreting the amendment. In the Conclusion, I address the criticisms of the constitutional provision and defend its consumer protection measures.

Keywords: Home equity loan, Homestead, Home mortgage, Predatory lending, Real estate finance, Real estate law, Real property law, Mortgages