A Texas homeowner obtained a home equity loan two years ago. The lender recently assigned the loan to a new servicer. The homeowner discovers that the original loan violated the 80% LTV cap. He sends a cure notice to the new servicer. Under Texas Constitution Article XVI, Section 50(a)(6), is the new servicer responsible for curing the defect?
Correct Answer
D) Yes, because the obligation to cure constitutional defects transfers to the current holder or servicer of the loan
Under Texas Constitution Article XVI, Section 50(a)(6)(Q)(x), the obligation to cure defects in a home equity loan runs with the loan, not with the original lender. The current holder or servicer of the loan is responsible for curing any constitutional violation, regardless of when it occurred or who originated the loan.
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Related Concepts
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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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?
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- → 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
In Texas, real estate transactions typically use a deed of trust rather than a mortgage. What is a key difference between a deed of trust and a traditional mortgage in terms of foreclosure?
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A Texas homeowner wants to use the proceeds from a home equity loan to start a small business. The lender tells her that home equity loan proceeds can only be used for home-related expenses. Under Texas Constitution Article XVI, Section 50(a)(6), is the lender correct?