What are Refinancing Loans in Texas?

Texas Cash Out Refinance Rules, Guidelines 2022

The cash out refinance rule changes are as follows:

1. Eliminating the provision prohibiting home equity loans on properties with an agricultural exemption other than dairy farms – Lenders may close a Section 50(a)(6) loans on properties with an agricultural exemption in place at the time of closing.
2. Reducing the 3% fee cap to a 2% fee cap with certain fees excluded from the 2% fee cap – The total fees for the refinance loan cannot exceed 2% of the total loan amount but third-party fees are excluded. The following fees are exempt from the 2% fee cap:
   1. an appraisal performed by a third party appraiser,
   2. a property survey by a state registered or licensed surveyor,
   3. a state base premium for mortgagee policy of title insurance with endorsements established in accordance with state law, or
   4. 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 – The SJR60 allows the owner to refinance the home equity loan as a non-home equity refinance loan under Article XVI, subjection 50(a)(4) if:
   1. the refinance is not closed before the first anniversary of the date the home equity loan was closed;
   2. no additional funds are advanced other than the funds advanced to the homeowner from the original transaction;
   3. the principal amount of the refinance when added to the aggregate total of the outstanding principal balance on the loan does not exceed 80% of the homestead’s fair market value at the time of refinancing; and
   4. the lender provides the owner a written notice prescribed by proposed subsection (f)(2)(D) of SJR60 on a separate document within three (3) business days of application and at least twelve (12) days before the refinance is closed.
4. Repealing the 50% ceiling on additional advances under Home Equity Lines of Credit or HELOCs – The SJR60 eliminates subsection 50(t)(6) that prevents additional advances on a HELOC if the principal amount outstanding on the HELOC exceeds 50% of the fair market value of the homestead on the date the HELOC was established. However, the 80% fair market value cap under subsection (a)(6)(B) is not affected by the repeal of subsection 50(t)(6).
5. Updating who is authorized to make home equity loans – subsection (a)(6)(P)(i) states that subsidiaries of the banks, savings and loan associations, savings banks, and credit unions doing business under the laws of Texas or of the United States also may make home equity loans. The subsection (a)(6)(P)(vi) replaces the term “broker” with “banker” or “mortgage company”, clarifying that licensed mortgage companies and registered mortgage bankers may make home equity loans.
6. Amending the 12-day Notice Disclosures prescribed for 50(a)(6) loans – the addition of a provision that states, “fees and charges to make the loan may not exceed 2 percent of the loan amount, except for a fee or charge for an appraisal performed by a third party appraiser, a property survey performed by a state registered or licensed surveyor, a state base premium for  a mortgagee policy of title insurance with endorsements, or a title examination report.  Basically, the 3% fee cap changing to a 2% fee cap with exceptions.