I have a Texas refinance where the borrower and coborrower are divorcing and an Owelty Lien was place on the property pursuant to the divorce decree. It is my understanding that this does not fall under the Texas 50 (A)-(6) cash out rules and is considered a rate and term refinance. Is this correct?

You need to read all of Section 50(a) for your answer:

(a) The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for:
(1)* * *
(2)* * *
(3) an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family homestead in a divorce proceeding;


An owelty is a legal fiction. Husband and wife are divorcing so it is decided that he gets the house (homestead) and she will relocate. They have paid on the mortgage all those years and she wants to "cash out" her equity. But suppose the husband has no cash to give her. He must get a loan, but except for the owelty provision (and perhaps a home equity lien), there is no category under which he can grant a lien on the entire property to secure the cash out; it is purchase money as to her one-half, but not his one-half. Through the owelty fiction, he can place a valid lien on both halves of the property.

Thanks for the response. I have read 50(a) and I think the question is would this loan be subject to 50(a)6 restrictions; or because it is for an owelty lien, can it be treated as a regular loan. The owelty lien was pursuant to the divorce decree and in order for the husband to pay the wife husband has to refi his property but no cash out to husband.

Not if it is not a home equity loan, which it would not be unless you decide to make it so. If you do decide to make it so, I would talk to your attorney.

Thanks again.