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:
Correct Answer
A) The lender may require the borrower to apply the loan proceeds exclusively to home improvements
Texas Constitution Article XVI, Section 50(a)(6) does not restrict how borrowers use home equity loan proceeds. Borrowers are free to use the funds for any purpose — home improvements, debt consolidation, education, or any other use. A lender cannot mandate the use of home equity loan proceeds.
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Related Topics & Key Terms
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Related Concepts
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.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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A Texas homeowner takes out a home equity loan and later wants to refinance it. Under Texas Constitution Article XVI, Section 50(f), how long must the homeowner wait after the original home equity loan was closed before refinancing?
A Texas homeowner applies for a home equity loan on March 1 and receives the required disclosure notice the same day. The lender wants to close as quickly as possible. Under Texas law, what is the earliest the lender can disburse the loan proceeds after closing?
- → 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, all of the following liens may be enforced against a Texas homestead EXCEPT:
- → 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?
- → A Texas lender makes a home equity loan that violates one of the requirements of Texas Constitution Article XVI, Section 50(a)(6). After the loan is made, the lender discovers the violation. Under Texas law, the lender has how many days to cure the defect after being notified by the borrower?
- → A Texas homeowner obtained a home equity loan that violated the constitutional requirements under Article XVI, Section 50(a)(6). The lender claims it did not know about the violation. The borrower sends a written notice of the defect to the lender. Under Texas law, which of the following correctly describes the cure and forfeiture process?
- → A Texas homeowner wants to add an addition to the home. The contractor's total bid is $85,000. Which of the following must be completed BEFORE work begins for the contractor to have a valid mechanic's lien on the homestead?
- → A Texas lender requires a borrower to provide personal property — specifically, the borrower's car and jewelry — as additional collateral for a home equity loan on the borrower's homestead. Under Texas Constitution Article XVI, Section 50(a)(6), is this requirement permissible?
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Previous Question
A married couple in Texas obtains a home equity loan on their homestead. Two years later, one spouse passes away. The surviving spouse wants to refinance the home equity loan into a conventional rate-and-term loan. Under Texas Constitution Article XVI, Section 50(f)(2), what must be satisfied?
Next Question
A Texas lender funds a home equity loan but fails to provide the borrower with a copy of the signed loan documents on the day of closing, as required. The borrower later discovers this omission. Under Texas Constitution Article XVI, Section 50(a)(6), what recourse does the borrower have?