A lender in Texas includes a prepayment penalty clause in a home equity loan agreement on a borrower's homestead. The borrower signs the agreement without noticing the clause. Under Texas Constitution Article XVI, Section 50(a)(6), what is the status of this prepayment penalty?
Correct Answer
C) The prepayment penalty is void because Texas law prohibits prepayment penalties on home equity loans secured by a homestead
Under Texas Constitution Article XVI, Section 50(a)(6)(G), a home equity loan on a Texas homestead must not include a penalty for early repayment. Any prepayment penalty clause in such a loan is void and unenforceable, regardless of whether the borrower signed the agreement.
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Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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- → A Texas property owner defaults on both a first mortgage and a second-lien home equity loan. The first mortgage lender forecloses and sells the property at the trustee's sale. Under Texas law, what happens to the second-lien home equity loan?
- → Under Texas foreclosure law, a property is sold at a trustee's sale on the first Tuesday of the month. The winning bidder pays the full purchase price. Under Texas Property Code, when does the bidder receive a trustee's deed?
- → In Texas, the standard security instrument for real estate loans is a deed of trust rather than a mortgage. Which parties are involved in a Texas deed of trust?
- → Under Texas Constitution Article XVI, Section 50(a)(6), a home equity loan on a Texas homestead must comply with numerous constitutional requirements. All of the following are required provisions of a Texas home equity loan EXCEPT:
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- → A Texas homeowner closes on a home equity loan on January 15. The loan proceeds are not actually disbursed until January 18, three days after closing. The borrower exercises the right of rescission on January 26. Under Texas Constitution Article XVI, Section 50(a)(6), is this rescission timely?
- → A Texas lender fails to cure a constitutional defect in a home equity loan within the required timeframe. The borrower files a lawsuit. Under Texas Constitution Article XVI, Section 50(a)(6)(Q)(x), what is the potential penalty for the lender's failure to cure?
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Previous Question
Marcus and Keisha close on a home equity loan for their Texas homestead on March 1. On March 10, they decide they want to rescind the loan. Under Texas Constitution Article XVI, Section 50(a)(6), can they still cancel?
Next Question
Sylvia owns a homestead in Houston, Texas, valued at $500,000. She has a first mortgage with a $300,000 balance. She wants to take a home equity loan and also a home improvement loan simultaneously. Under Texas Constitution Article XVI, Section 50, what is the maximum combined debt she can have against the homestead?