A refinance of debt secured by the homestead, any portion of
which is an extension of credit described by Subsection (a)(6) of
Section 50, may not be secured by a valid lien against the homestead
unless either the refinance of the debt is an extension of credit
described by Subsection (a)(6) or (a)(7) of Section 50, or all of
the conditions in Section 50(f)(2) are met.
(1) One Year Prohibition. To meet the condition in
Section 50(f)(2)(A), the refinance may not be closed before the first
anniversary of the closing date of the equity loan. For purposes of
this section, the closing date of the refinance is the date on which
the owner signs the loan agreement for the refinance.
(2) Advance of Additional Funds. To meet the condition
in Section 50(f)(2)(B), the refinance may not include the advance
of any additional funds other than funds advanced to refinance a debt
described by Subsections (a)(1) through (a)(7) of Section 50, or actual
costs and reserves required by the lender to refinance the debt.
(A) In order to be included in the funds advanced for
the refinance, actual costs must be identifiable, must be actually
required by the lender to refinance the debt, and must comply with
any applicable limitations on costs.
(B) In order to be included in the funds advanced for
the refinance, reserves (e.g., an escrow account for taxes and insurance)
must be actually required by the lender to refinance the debt, and
must comply with applicable law.
(C) Amounts that the owner pays before or at closing
(e.g., through cash, check, or electronic funds transfer) are not
advanced by the lender, and are not subject to the limitation on the
advance of additional funds.
(3) 80 Percent Limitation on Loan Amount. To meet the
condition in Section 50(f)(2)(C), the refinance of the extension of
credit must be of a principal amount that when added to the aggregate
total of the outstanding principal balances of all other indebtedness
secured by valid encumbrances of record against the homestead does
not exceed 80 percent of the fair market value of the homestead on
the date the refinance of the extension of credit is made.
(A) The principal amount of the refinance is the sum
of the amount advanced and any charges at the inception of the refinance,
to the extent these charges are financed in the principal amount of
the refinance.
(B) The principal balance of all outstanding debt secured
by the homestead on the date the refinance is made determines the
maximum principal amount of the refinance.
(C) The principal amount of the refinance does not
include interest accrued after the date the refinance is made (other
than any interest capitalized and added to the principal balance on
the date the refinance is made), or other amounts advanced by the
lender after closing as a result of default, including for example,
ad valorem taxes, hazard insurance premiums, and authorized collection
costs, including reasonable attorney's fees.
(4) Refinance Disclosure. To meet the condition in
Section 50(f)(2)(D), the lender must provide the refinance disclosure
described in Section 50(f)(2)(D) to the owner on a separate document
not later than the third business day after the date the owner submits
the loan application to the lender and at least 12 days before the
date the refinance of the extension of credit is closed.
(A) Submission of a loan application to an agent acting
on behalf of the lender is submission to the lender. A loan application
may be given orally or electronically.
(B) For purposes of Section 50(f)(2)(D), the application
is submitted on the date the owner submits a loan application specifically
for a refinance of a home equity loan to a non-home-equity loan. If
the owner initially applies for another type of loan, then the application
is considered submitted on the earliest of:
(i) the date the owner modifies the application, orally
or in writing, to specify that it is for a refinance of a home equity
loan to a non-home-equity loan; or
(ii) the date the owner submits a new application specifically
for a refinance of a home equity loan to a non-home-equity loan.
(C) For purposes of determining the earliest permitted
closing date, the next succeeding calendar day after the date that
the lender provides the owner a copy of the required refinance disclosure
is the first day of the 12-day waiting period. The refinance may be
closed at any time on or after the 12th calendar day after the lender
provides the owner a copy of the required refinance disclosure.
(D) The lender must deliver the refinance disclosure
or place it in the mail no later than the third business day after
the owner submits the loan application. The refinance disclosure must
be delivered to the owner at least 12 days before the refinance is
closed. If a lender mails the refinance disclosure to the owner, the
lender must allow a reasonable period of time for delivery. A period
of three calendar days, not including Sundays and federal legal public
holidays, constitutes a rebuttable presumption for sufficient mailing
and delivery.
(E) The lender may provide the refinance disclosure
electronically in accordance with state and federal law governing
electronic signatures and delivery of electronic documents. The UETA
and the E-Sign Act include requirements for electronic signatures
and delivery.
(F) One copy of the required refinance disclosure may
be provided to married owners.
(G) The refinance disclosure is only a summary of the
owner's rights, which are governed by the substantive terms of the
constitution. The substantive requirements prevail regarding a lender's
responsibilities in an equity loan or refinance. A lender may supplement
the refinance disclosure to clarify any discrepancies or inconsistencies.
(H) A lender may rely on an established system of verifiable
procedures to evidence compliance with this paragraph.
(I) The Finance Commission will publish a Spanish translation
of the refinance disclosure on its website. A lender whose discussions
with the owner are conducted primarily in Spanish may provide the
Finance Commission's Spanish translation to the owner, although the
Spanish translation is not required by Section 50(f)(2).
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