Texas Prepares to Tweak Home Equity Law AgainRead Time: 2 mins
Under current Texas law, a home equity loan must be “closed only at the office of the lender, an attorney at law, or a title company.” This has proved to be a considerable obstacle for borrowers who are “homebound” or in quarantine, out of state, working overseas, or deployed in the armed forces.
A pair of bills has been filed with the Texas Legislature that would amend the Texas Constitution (which is where the home equity lending statute is located) to allow such borrowers to close a home equity loan at a remote location using online notarization. The closing could also be conducted through an agent acting under a power of attorney (POA) that expressly gives the agent that power. To become effective, the proposed amendment must be approved by a supermajority of the Legislature and a majority of voters next Fall.
The amendment is a good start, but there’s a catch. The Texas Supreme Court has held that a POA for a home equity loan must also be executed “at the office of the lender, an attorney at law, or a title company.” The Constitutional amendment and implementing statute would allow an attorney-in-fact to close a home equity loan regardless of where the borrower signed the POA, but very few existing POAs expressly give the agent the power to close a home equity loan. Also, although existing POAs may have been executed at one of the authorized locations, many don’t expressly state that, and the lender will likely require confirmation of the location before allowing the POA to be used.
Finally, consider the many borrowers who are seniors. A borrower who granted a POA several years ago may no longer be physically or mentally capable of executing a new POA that is compliant with existing Texas law, much less the proposed requirements.
The bottom line is that an existing POA must be carefully reviewed to make sure it meets legal requirements (and made compliant if possible). Going forward, all POAs should contain the language that is required to make them valid.