A Texas homeowner has a home equity loan that was originated with proper constitutional compliance. The lender later transfers the servicing rights to a new company. The new servicer sends a monthly statement that incorrectly lists a prepayment penalty. The borrower wants to pay off the loan but fears the penalty. Under Texas law, what is the borrower's best course of action?
Correct Answer
A) Refuse to pay the penalty, pay off the loan, and if the servicer attempts to enforce the penalty, assert the constitutional prohibition against prepayment penalties on homestead home equity loans
Under Texas Constitution Article XVI, Section 50(a)(6)(G), prepayment penalties are constitutionally prohibited on home equity loans secured by a homestead. This protection cannot be changed by a loan transfer or servicer error. The borrower should pay off the loan and assert the constitutional prohibition if the servicer attempts enforcement.
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Related Concepts
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.
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.
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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:
- → 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?
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Previous Question
A Texas lender forecloses on a home equity loan after the borrower defaults. The foreclosure sale generates $350,000 but the outstanding loan balance including costs is $280,000. Under Texas law, what happens to the $70,000 surplus?
Next Question
A Texas homeowner obtained a home equity loan that closed at the borrower's real estate agent's office. Later, the borrower learns that this closing location may have violated Texas law. Under Texas Constitution Article XVI, Section 50(a)(6)(N), is this a valid constitutional defect?