Texas bankers have once again failed to win the power to make home-equity loans.

The Texas Legislature recently concluded its biannual session without reviewing a bill that would have eased a century-old law barring most types of loans collateralized by residences.

A $4 Billion Loss

The development dampens lending prospects for local Lone Star State banks and big out-of-state holding companies that moved in with force in the past few years. George Gau, a finance professor at the University of Texas, had calculated that home-equity legislation could translate into some $4 billion of consumer loans.

"Home equity lending represents an entire line of business that can't be offered in Texas, and it is a disadvantage for the banks," said James Sexton, a former state banking commissioner who is a consultant with the law firm of Bracewell & Patterson.

The Texas banking industry spent about $850,000 on lobbying efforts in its latest legislative effort.

Commercial bankers had been hopeful because for the first time they had won support for home equity powers from the politically powerful American Association of Retired Persons as well as a consortium of community banks, thrifts, and credit unions.

Lobbying Failure

Karen Neely, the legislative general counsel for the Independent Bankers Association of Texas, said lawmakers didn't give serious consideration to the latest bill, despite what she characterized as a "highly concentrated effort" by the banks.

Mr. Sexton said home equity lending "simply isn't a serious issue for the public."

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