Fannie Mae and Freddie Mac (the “agencies”) have developed new uniform instruments for use with Texas home equity loans beginning January 1, 2018. Those forms will reportedly be available on the agencies’ web sites as that date approaches. In addition, the agencies are imposing a temporary moratorium on purchasing Texas home equity loans while lenders transition to new disclosures.
As we described here, Texas voters recently ratified amendments to the state constitution’s strict requirements for equity loans secured by homestead property. Among other topics, the amendments addressed fee restrictions for those loans, and loosened the limitation that a home equity loan can only be refinanced into another home equity loan that is subject to all the same strict requirements. Those amendments become effective in connection with loans made on and after January 1, 2018.
In addition, the agencies announced that they will not purchase any Texas home equity loans closed during the period of January 1 through January 12, 2018. The reason for the moratorium relates to a 12-day waiting period until closing that starts when the lender provides the borrower a mandatory disclosure describing the borrower’s rights and protections in connection with Texas home equity loans. That disclosure has been amended to reflect the recent amendments. That 12-day waiting period represents a conundrum in connection with loans for which the application process spans the new year. Accordingly, the agencies will temporarily decline to purchase Texas home equity loans closed during the first 12 days of January.
The agencies also, as expected, remind lenders that they must comply with all state law requirements, including the revised requirements for Texas home equity loans.