Alert

One More Requirement Related to Low-Rate Home Loans

Summer 2006

The Texas high-cost home loan law also contains a requirement that applies only to low-rate home loans.

A “low-rate home loan” is described in the statute as a residential mortgage loan with an interest rate that is 2 percent or more below the T-bill rate for the same term to maturity as the loan (excluding introductory discounted rates and initial rates that automatically step up over time, in which case the fully indexed rate or fully stepped up rate is used to determine whether the loan is a low-rate loan).

Any loan that qualifies as a low-rate home loan and which is made by a government or non-profit lender may not be replaced or consolidated before the seventh anniversary of the date of such loan unless the new loan has a lower rate and requires payment of a lesser amount of points and fees than the original loan, or unless it is a restructure to avoid foreclosure.