Texas Constitutional Amendment Election, 2007 - Proposition 8

Proposition 8

Proposition 8 (H.J.R. No. 72) is the constitutional amendment to clarify certain provisions relating to the making of a home equity loan and use of home equity loan proceeds.

The measure passed 77.55 percent in favor to 22.45 percent against.

• Comments by supporters: Recent interpretations of home equity lending law by the Finance Commission of Texas and court cases have created a lot of uncertainty in that area of law that the proposed amendment is intended to address. Additional clarity is especially important because mistakes in following the legal technicalities of the law can result in invalidating a loan. The proposed amendment more closely reflects the actual business practices of lenders while protecting borrowers from unscrupulous practices. Hurricane Rita and Hurricane Katrina have shown that flexibility is needed in the one-year waiting period between home equity loans, so that borrowers can access the equity in their homes to finance repair of damages caused during a declared state of emergency.

• Comments by opponents: Opponents agree that a constitutional amendment is necessary to address uncertainties in the law but disagree as to what uncertainties should be addressed and how the law should be changed. The amendment fails to address crucial issues, such as what charges are subject to the constitutional fee cap and whether an application for a home equity loan may be taken orally. Because the courts tend to favor lenders on these issues, failure of the amendment to address the issues is the same as settling the issues in the lenders’ favor to the detriment of borrowers. Moreover, the amendment does not provide enough protection to home equity line of credit borrowers, who are enticed into taking advances on the loan by the use of preprinted checks.