Texas bankers are predicting that the statewide ban on home equity lending may be lifted next year.
"We're highly optimistic that the (home equity legalization) amendment will pass," said John Heasley, general counsel for the Texas Bankers Association.
Texas is the only state that does not allow banks to make home equity, or second mortgage, loans. The prohibition is written into the state constitution and dates back more than 100 years, Mr. Heasley said.
The state Legislature, which holds full sessions every two years, will meet in January. In 1995, a bill proposing the legalization of home equity loans passed the state Senate but not the House.
Allowing banks to make these loans would bring $500 million annually into the state's economy, according to the Texas Comptroller's Office. In addition, it would allow area bankers and lenders to tap into millions of dollars in revenue.
The Austin-based Texas Conference for Homeowners Rights has been lobbying extensively this year to allow home equity lending, observers say.
The Consumer Bankers Association, Washington, has also consistently supported lifting the ban, a representative of the group said.
The Texas Association of Realtors has long been a foe of pro-home equity legislation. The association says second mortgages tend to slow down sales by locking homeowners into their homes. Recently, the association has made some concessions, proposing the legalization of second mortgages if needed for medical bills or education.
The homeowner rights group says the Realtors' proposal is impractical, because monitoring how homeowners spend their money is difficult.