Texas voters have overwhelmingly approved Proposition 2, a measure that is expected to make reverse mortgage lending more attractive in the state.
A reverse mortgage is a type of home equity loan geared to the elderly. It allows homeowners to convert their equity into cash. Repayment is generally due when the borrower dies or moves out of the home.
Reverse mortgage lending has been allowed in Texas since January 1998, but the law "did not clearly define when the lender can collect on the loan," said Robert Mahalik, senior analyst at the Federal Reserve Bank of Dallas. The proposition, which was approved by 63.9% of voters Tuesday, states that if a reverse-loan borrower dies or vacates the house for 12 months without the lender's approval, the lender can demand repayment.
Mr. Mahalik said he expects reverse mortgage lending activity to "snowball" as a result.
-- Marc Hochstein