The Lone Star State No Longer Alone: Texas OKs HELCs

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The financial services lobby was able to navigate the turbulence surrounding the unprecedented walk-out of the Democratic caucus in the House to get a bill passed last week that would allow credit unions and banks to join lenders in the 49 other states to offer open-ended home equity lines of credit.

The legislation looked like it would die up until the final days of the biennial legislative session because of a massive back-up of bills caused by the walk-out of the Democrats to block a vote on a congressional redistricting plan favoring Republicans. But House leaders agreed to move the HELC measure to the top of the pile of bills, allowing a House vote, then Senate concurrence, before last week's close of the legislative session. Otherwise, it would have been until 2005 until the bill could have been resurrected.

John Tippets, president of American Airlines Employees FCU, and head of the Texas Conference for Homeowners Rights, a broad-based lenders' coalition lobbying for the bill, said the bill, coming five years after Texas become the final state to allow home equity loans, was a long time in coming.

"I've always believed that a home equity loan is one of the best products a credit union can offer," said Tippets, noting that his $3.4-billion credit union has been able to offer open-ended HELCs in the 49 other states for years.

The measure, if signed into law by the governor as expected, must still go before the voters in a September referendum because it would amend the state's constitution.

Unlike an earlier version of the bill, which would have limited the uses of HELCs, the bill passed last week will allow HELCs for unlimited purposes in draws of $4,000 or more. "You can't use them to borrow $100 to pay the grocery bill," said Tippets.

The bill would also allow homeowners to borrow up to 50% of the market value of their home and to make payments semi-monthly or biweekly. It would also require that the borrower receive a disclosure one day before closing, explaining all costs, including fees, points, interest, and charges to be included at closing.

An accompanying bill will give authority to the various state financial regulators, including the credit union supervisor, to make interpretative rulings.

Tippets cited the lobbying for the bill by the broad coalition of lenders as evidence of how credit unions can work with banks.

"This shows what bankers and credit unions can do on a positive agenda," he said.

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