You know that Texas Realtors are trusted experts for buying, selling or leasing property in Texas. Do you also know that we monitor happenings at the Capitol to make sure Texas remains a friendly place for homeowners, buyers, sellers and tenants?
It’s not really a secret
Recently, real estate author and columnist Alyssa Katz wrote a piece for TheBigMoney.com called The Lone Star Secret (March 30, 2010). In the article, Katz examines possible reasons that Texas has averted the worst of the real estate bubble; she credits, among other things, our state’s rigid home-equity lending laws.
Katz called cash-out refinancing “ubiquitous” during the mortgage boom and shows the correlation between the number of cash-out refinances and the number of foreclosures.
She goes so far as to suggest that our national politicians could learn something from us and “follow the Lone Star State’s lead and put the brakes on cash-out refinancing and home-equity lending.”
A little history
In 1997, Texas was the last state where home-equity lending was forbidden, and it appeared that we were going to join the rest of the country in allowing this type of borrowing. Texas Realtors were concerned that loose home-equity-lending standards could create problems for many homeowners so they helped forge the state’s new home-equity lending laws with strong consumer protection. Some of the consumer protections that the Realtors advocated include:
• A limit of 80% loan-to-value ratio – cash-out refinance and home equity loans can’t total more than 80% of a home’s appraised value
• A 3% cap on fees
• No pre-payment penalties
Houston Chronicle columnist Rick Casey picked up on Katz’s article and wrote a piece entitled Why you should hug a Realtor (Chron.com – April 5, 2010). Casey suggests that because of the actions and foresight of Texas Realtors at the Capitol during the 1997 legislative session, many Texans were prevented from bad situations with home-equity loans. Compare what’s going on in Texas with the situation in California, Florida and some other states and you’ll see we’ve avoided the worst of the real estate bubble and accompanying foreclosure problems.
And while not everyone thinks Texas’ home-equity lending laws are a good thing, I agree with Casey that had Texas not taken the path we did, many Texans would have joined the cash-out refinancing boom and would be in a great deal of trouble today.
All signs point to a large budget deficit in Texas next year when the legislators make their way to Austin. Estimates range anywhere from $12-$20 billion and legislators will have to look for means to offset the shortfall. Some of these options, like real estate transfer taxes, sales taxes on real estate transactions and increased property taxes seem to come up every session – and none of them are good for property owners or the real estate industry.
There are also frequent efforts to loosen home-equity lending restrictions. But, as they were back in 1997 and previous years, you can be sure Texas Realtors will be at the Capitol in 2011 for the 82nd Legislative Session to ensure the constitutional protections remain intact and that Texas continues to be a consumer-friendly state for homeownership.
For consumer-friendly real estate tips and more information about issues that affect property owners, buyers, sellers and renters in the Lone Star State, I encourage you to visit TexasRealEstate.com. For your real estate needs, please contact RE/MAX Genesis at 830-833-2000.