|
|
 |
|
Home Equity Loan Extensions & Modifications
|
Question: I am looking for information regarding Home Equity loans and whether there can be extensions or modifications done. Any information that you can provide would be appreciated greatly. Thank you for your help!!
Answer:
7 TAC 153.14 allows modifications of home equity loans. It does not address the issue of substantially equal payments, which are required by the constitution and the interpretations (See Article XI, Section 50(a)(6)(L)(i) and 7 TAC 153.11). When a home equity loan is modified, it typically would affect the amount of the payment, thus causing the payment after modification to possibly not be substantially equal to the payments prior to modification. Unfortunately, 153.14 did not deal with this issue.
Here is a letter from the commissioners of the state agencies that regulate consumer lending in Texas. You will notice that the letter is outdated. For instance, it mentions that home equity lines of credit are not allowed. At the time the letter was written, this was true, but home equity lines of credit are now permitted. When this letter was issued, the agencies did not have authority to interpret the constitution. I am including this letter only because it is instructive on the issue of substantially equal payments. We believe that the concept in the letter would still apply to modifications, and so long as the payments after the modification are substantially equal to each other, they do not have to be substantially equal to the payments prior to the modification.
The rules do not specifically address extensions, but an extension is nothing more than a modification of one of the terms of the loan, and, as stated above, modifications are allowed under the terms of 153.14. You would not want to extend the same loan too often or it would be what is considered an "evergreen loan" (continually extending without being paid off), and these are frowned upon by the regulators.
The Finance Commission has a webpage dedicated to home equity, home improvement, and reverse mortgage lending: http://www.fc.state.tx.us/homeinfo/homeindex.htm
| |
|
|
