The Texas market could be a gusher for some home equity loan prospectors-especially those who operate with their own rigs.

Pending legislation to open the market would limit closing costs to 3%, making it easiest for lenders who don't rely on brokers. The Texas Legislature passed a joint resolution in late May, and the measure is going before Texas voters Nov 4.

"For us, it's beautiful," said Randall Sage, chief executive of First Finance.

The Bloomfield, Mich.-based lender advertises on television and charges no fees for its debt consolidation loans. The company is shooting new, Texas-geared commercials, Mr. Sage said, and is awaiting its Texas state mortgage banker license.

"It's going to be a retail state," he said. Brokers, who traditionally make their money from taking a cut of a loan amount, would not be able to make as much money, Mr. Sage said, noting that the 3% limit includes title insurance plus all origination costs.

Mr. Sage is one of many preparing to descend on the state. Volume estimates vary, but lenders agree that there are billions of dollars in home equity loans to be made once the century-old ban on second mortgages, known as the Homestead Act, is lifted.

"This is a once-in-a-lifetime opportunity," Harold Marshall, president and chief operating officer of Associates First Capital Corp. said in a recent interview with Texas Business. "This is an enormous market that is totally untapped."

Associates already has 62 branches in Texas that make personal consumer and home improvement loans. The branch presence provides the Dallas-based company with a "real leg up," said a spokesman.

Associates would definitely be advertising the new product, the spokesman noted, but has not decided what the best channel is. "We are trying to refine the delivery mechanism so that we're not just another voice in the wilderness," he said.

As banks and finance companies roll out new home equity programs in the state, "there's going to be a lot of clutter," he said. "Anyone licensed to lend money in Texas will be advertising."

Barnett Banks, through Equicredit Corp., its subprime lending division, has already made several steps to take advantage of the estimated $200 billion market.

Equicredit would offer home equity loans through its three branches in Texas, which now generate about $4 million per month in first mortgage loans, a spokesman said. Within 90 days of the law passing, Equicredit said it expects to open eight more offices offering home equity loans.

The company even built an underwriting center in Dallas/Fort Worth this year to deal with the potential increase in volume.

Banc One Corp. and Norwest Corp.'s mortgage units have already begun mailings to consumers in Texas, said Christine Clifford, an associate with Wholesale Access, a Columbia, Md.-based consultancy. Wholesale Access is predicting that over $10 billion in home equity loans would be originated in Texas in the first twelve months after the ban is repealed. Most of that is expected to be originated on a retail basis, Ms. Clifford said.

Norwest is planning to offer home equity loans through its 154 bank branches in Texas, said a company spokesman who declined to discuss the banking company's advertising strategy. In addition, Norwest Consumer Finance, the bank's subprime unit, would be offering home equity loans through its 55 stores in Texas starting Jan. 1, he said.

Not everyone is gearing up to do business yet though. "We're going to wait to see if the law passes," said a spokesman from Texas Commerce Bank. But the 125-branch Chase Manhattan Corp. subsidiary would probably offer Chase's home equity product, if the loan is legalized.

Countrywide Credit Industries, the nation's second-largest mortgage lender, is gearing up to do home equity business in Texas through its retail and wholesale channels. But Rik Bright, senior vice president of Countrywide's home equity lending division, said restrictions such as a maximum of an 80% loan-to-value ratio and no revolving lines of credit are "very, very onerous."

"The legislation which was initially proposed was much more favorable. We're ending up with something that as far as we're concerned is not going to be that meaningful," Mr. Bright said, adding that the $10 billion estimate is very aggressive in light of the restrictions.

But "even with the limitations," the proposal is a "decided consumer and business opportunity," said a spokesman from NationsBank Corp., the leading bank presence in Texas, with 330 branches. "NationsBank is crafting its product and working on its marketing strategies," the spokesman said.

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