A Texas lender funds a home equity loan where the closing costs total 4.5% of the loan amount. The borrower notices this exceeds the constitutional cap. Under Texas law, what is the consequence of this fee violation?
Correct Answer
D) The borrower can notify the lender, triggering a 60-day cure period; if uncured, the lender forfeits all principal and interest
Under Texas Constitution Article XVI, Section 50(a)(6)(Q)(x), any constitutional violation triggers the cure and forfeiture process. The borrower notifies the lender, and the lender has 60 days to cure the defect (in this case, by refunding the excess fees). If the lender fails to cure, the lender forfeits all principal and interest on the loan.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
More Tx Specific Financing Questions
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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(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:
- → 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?
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Previous Question
A married couple in Texas purchases a home using a deed of trust as the security instrument. The husband dies unexpectedly, and the wife wants to understand the loan structure. Under Texas deed of trust law, who holds the power of sale if the borrower defaults?
Next Question
A Texas homeowner has a home equity line of credit (HELOC) on his homestead. After drawing $50,000, he wants to take an additional separate home equity loan. Under Texas Constitution Article XVI, Section 50(a)(6), is this permissible?