I have started to work on updating policy, procedures, tools, etc to include the changes brought about because of Proposition 2 that passed in the election on Nov 7 and is effective on 1/1/2018.

It has been difficult to find anything updated and providing any help with the changes. Has anyone started this process at your bank? Have you found any helpful sites, etc that gives a good overview of the changes?

The OCCC site doesn't have anything that I could find nor the Texas Dept of Banking. We belong to TBA and CA and they haven't complied anything yet.

I am wanting to clarify some points about the refinances and the new notice and make sure that I have a good revised Notice Concerning Extensions of Credit that shows the revisions. I have developed my own based off the Proposition 2 version that shows the changes and the cross outs.

I plan on attending this summit:
https://membership.ibat.org/web/Online/Events/Event_Display.aspx?EventKey=SMHE17

I imagine I will have everything I need from this event. I'm not aware of any sites that provide any information.

I just was on IBAT's site and see they are offering the summit on Home Equity. Unfortunately I have prior commitments on that day and won't be able to attend. Thanks for that tidbit.

With little time to get ready for this, it is frustrating that there is not more information, training, etc. popping up! I will keep plugging away.

Here is a recap memo we put together if you are interested:

https://gallery.mailchimp.com/a1570d53a6...hanges_2017.pdf

Thanks, wonderful information.

Thank you for the info! This sure helps a lot!

I am struggling with the meaning of "Once a HE Loan always a HE Loan". I can't wrap my brain around what this means and how this works today. I know this has been repealed but does anyone have any examples of what issues this creates today?

It has not been repealed until 1/1/18. After that, you can refinance a TX HE into a normal rate/term refinance with proper notices, etc. Prior to that time, if you have a TX HE loan, it can only be refinanced into another TX HE loan.

TBA has an article on it in the December magazine.

They point to http://www.fc.texas.gov/homeinfo/home-equity-stmt-sjr60-111517.pdf as a joint financial regulatory statement. I've got customers wanting to apply for the new product, but it looks like if you want the "new HE" - it can't close until at least 1/13/2018. Due to the 12 day notice requirements.

Then there appears to be a wrinkle in that maybe new disclosures will come out again in March?

You are not going to be able to take applications prior to 1/1/18 for a rate/term refinance of a current TX HE loan, as unlike the standard 12 day notice for a HE loan, which can be given at any time, the new 12 day notice for a rate/term refinance must be provided within 3 business days of application.

Randy, would you think though that HE apps in pipeline as of 12/31 that haven't closed need the new disclosure as close to 1/1/2018 as we can get it out?

I'm not sure that I could -- but would the HE apps still in pipeline as of close of business 12/31 need to be shown as terms no longer available and make the borrowers re-start the app process?

If you are talking about a standard 50(a)(6) home equity loan, if it doesn't close by or on 12/31 and it carries into the 2018, then the new 12 day disclosure will have to be given after 1/1/18 and you will need to wait 12 days prior to closing the loan. Basically, there are not going to be any TX HE loans closed between 01/01/18 and 01/13/18 or more like 01/16/18 due to the Martin Luther King holiday.

It means that, if you refinance a 50(a)(6) home equity loan, it must be refinanced as a 50(a)(6) home equity loan or a 50(a)(7) reverse mortgage. As of 01.01.2018, you can make a refinance of a 50(a)(6) with a loan that is not a 50(a)(6) or 50(a)(7) loan if:

(A) the refinance is not closed before the first anniversary of the date the extension of credit was closed;
(B) the refinanced extension of credit does not include the advance of any additional funds other than:
(i) funds advanced to refinance a debt described by Subsections (a)(1) through (a)(7) of this section; or
(ii) actual costs and reserves required by the lender to refinance the debt;
(C) the refinance of the extension of credit is 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; and
(D) the lender provides the owner the written notice 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.

[I didn't include the disclosure, but you can find it here on page 11]

Randy, yes -- a plain Jane typical HE loan app that is in the pipeline. Not the new refi a HE into a non-HE loan type.

I was planning on sending out a small set of new HE disclosures on 1/2, but I wasn't sure if that would fly, and it didn't seem like there was any type of grandfather clause on the ones in pipeline.

You don't need to "re-start." But you can't give the new disclosure before 01.01.2018.

The NEW 12-day notice for Refinances is where I am having a struggle. Management doesn't want to hold off on any applications, which I understand that and it seems that the "revised 12-Day Notice" can be issued as of 1/2/2018 for applications in the pipeline and the closing would actually be 1/17/2018 as I don't see the "revised 12-day Notice" going out on 1/1/2018. So the earliest that the customer could get the money would be 1/23/2018 after the recession period.

However, after re-reading the qualifiers on the NEW Refi 12-day notice, it states it must be provided within 3-days of an application AND at least 12-days before the refinance request closes. Since the new notice is not valid until 1/1/2018 and the customer applies on December 20, we can't meet that requirement however, if we received an application on 12/29/2018, we could provide the NEW Refi 12-day notice on 1/2/2018 and be in compliance. Is that how others are interpreting the NEW Refi 12-day notice?

It is very specific in the constitution and IBAT put out an opinion here: https://www.ibat.org/legal-ease/2017/1/lending-home-equity-2018-blackout-period. It really is pointing back to 1998 and the current 12-day notice.....it doesn't discuss the NEW Refi 12-day notice which is more restrictive that it be within 3 business days of appl AND 12 days before closing....

That is what we intend to do.....not accept any applications for a refinance of a home equity loan into a regular mortgage. I see lender conniving in the future.

You want to risk invalidating your lien for the sake of two business days (which would only be probably tested in the courts)?

I really don't think that customers are going to beating down the door that badly for this product. While the idea is that banks might offer a lower interest rate on them, they provide less borrower protection as personal liability is now in play. Personally, I would probably stick with a 50(a)(6) loan in case the housing market crashes again, which would allow me to just walk away without worries.

So, you aren't going to have a refi home equity into a regular mortgage at all, or just in the early phases - you think?

The real conundrum is that you get an application for a standard refinance. You order the title commitment and five days later when it arrives you find out that their 1st lien loan is actually a 50(a)(6). Since the rate/term refinance 12 day disclosure has to be delivered within three business days of application - what do you do? Make them start over or tell them that you can only offer another 50(a)(6) loan and give them the 50(a)(6) 12 day disclosure which can be delivered anytime, as long as you wait 12 days after delivery to close?

If we provide the three day disclosure at application as an abundance of caution, wouldn't that suffice?

That might be one approach - just give it on every rate/term refinance application for property in Texas. It is "delivered" in three business days - which does not equate to mailed - just another issue to consider.

If we provide the three day disclosure at application as an abundance of caution, wouldn't that suffice?

Yes. And I wouldn't wait until you think you legally have an application because there is no definition of application in the constitution or the proposed interpretations.