Bulletin: TX2007003

Dear Associates:

A number of proposed constitutional amendments to the Texas Constitution were submitted to Texas voters on November 6, 2007. Included in these proposed amendments was HJR 72 (Solomons) which clarified several provisions of Article XVI, Section 50 relating to home equity loans. Voters approved this amendment "to clarify certain provisions relating to the making of a home equity loan and use of home equity loan proceeds. The changes are effective November 6, 2007.

Specifically, Sections 50(a), (g), and (t) were amended as follows:

1) The Texas Constitution does not allow for a home equity loan to be secured by homestead property that has been designated for agricultural use. The amendment clarifies that the agricultural designation is only relevant on the date of closing.

Result: Therefore, so long as there is no such designation on the homestead property on the date of closing, a prior or subsequent designation should not have any effect as to the validity of the lien.

Actions/requirements: Written confirmation, preferably a tax certificate from the appropriate taxing entity, should be obtained evidencing that the land has no agricultural designation on the date of closing.

2) The Texas Constitution provides that a home equity loan may not be closed prior to the first anniversary of the closing date of a prior home equity loan. The amendment provides for an exception in the event that the owner may request an earlier closing due to a state of emergency that has been declared by the president of the United States or the governor, that applies to the area where the homestead is located.

Actions/Requirements: You should require a sworn, written request from the borrower and confirmation the president or the governor has declared a state of emergency that applies where the homestead is located. We will rely on your knowledge of your area regarding declarations of emergency.

3) There is also a constitutional requirement that no blanks are left in instruments executed by the borrower(s). The amendment now references that no blanks relating to substantive terms of loan agreement may be left blank.

Actions/Requirements: Regardless of this amendment, you should be careful toinsurethat no blanks are left in any instrument signed by the borrower(s).

4) In relation to documents which must be given to the borrower at closing, the borrower must now be given a copy of the final loan application as well as all documents executed at closing related to the extension of credit.

Actions/Requirements: Provide the borrower with a copy of the final loan application as well as all documents executed at closing related to the extension of credit.

5) Finally, distributions on HELOCs may be distributed by check at closing. However, distributions by check after closing must be requested by the borrower(s).

6)Actions/Requirements: You do not have the responsibility to determine how the disbursements are to be made. Additionally, you may refuse to make any post-closing disbursements.

Various state agencies may pass regulations that will affect how lenders deal with some of these issues. If such regulations affect how we handle files, we will let you know. If you have any questions, please call a Texas Underwriting Counsel.