For years, efforts to let Texans borrow money through home equity loans have been killed early in legislative sessions by opponents of the banking industry and lawmakers who feared more foreclosures. That has changed with a vote by the House Financial Institutions Committee.
The committee voted 8-0 to send to the full House a measure that would let homeowners take out second mortgages for any purpose. The proposal would still face a number of hurdles, including reconciliation with a Senate version and voter approval.
A home’s equity is equal to its value minus all debts for which it serves as collateral. Texas is the only state that doesn’t allow residents to obtain consumer loans using their equity as collateral.
The bill on the table now is milder than what bankers and other supporters had hoped for: A homeowner’s total borrowings could be no more than 75 percent of the value of the house. And when borrowers default, lenders would be required to either go through a lengthy court process before foreclosure or give up the right to seize other assets.
