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WICHITA FALLS, Texas – Texas credit unions are in countdown mode. On Sept. 13, Texas credit unions will hopefully get the home equity reform legislation they’ve been waiting and campaigning hard for. On that day, Texas voters will go to the polls to vote on a constitutional amendment, proposition 16, which would improve homeowners’ access to home equity loans. The vote follows three months after the Texas Senate, on May 28, passed SJR 42 and SB 1067 that would reform the original legislation. Credit unions have been actively campaigning the past three months to inform Texans of these reforms. Wayne Mansur, president of Texoma Community Credit Union here, has been campaigning for home equity legislation in Texas since 1982. He, along with other mortgage lenders in the state, received some relief in 1997, when Texas became the last of the 50 U.S. states to enact legislation that permitted home equity lending. But the legislation stopped short of providing the flexibility that many other states enjoy in accessing homeowner assets. Mansur believes, as do most credit union professionals across the state, the “consumer friendly” amendment will pass with little resistance. “All demographics are strongly in favor of this amendment. There may be a low turnout at the polls, but those who vote will be passionately in favor of its passage,” Mansur said. Under current law, homeowners can access their equity only with closed-end loans of a specified duration. In addition, they are limited to a single loan in a 12-month period. Interest rates are usually fixed for the life of the loan, and payments can only be made in equal monthly installments. The reforms would allow homeowners to establish a home equity line of credit for up to 50% of the fair market value of a homestead and 80% loan-to-value capitalization. A line of credit would enable borrowers to transfer existing higher-interest debt to a home equity loan, reducing the interest they pay and enabling them to deduct that interest from their federal income taxes. Based on the fact that home equity loans are exempt from federal income taxes, Texas Comptroller Carole Keeton Strayhorn projected earlier this year that opening up home equity lines of credit could save Texans up to $741 million annually. The reforms also would enable consumers to choose whether they want to make monthly or bimonthly payments on their home equity loans. Texoma Community Credit Union has a $41 million loan portfolio, of which $3.7 million is home equity loans. According to Mansur, the credit union makes six or seven loans per month, with an average loan amount of $28,000. Mansur doesn’t expect his loan volume to change much if the amendment passes, but he expects the consumer to benefit greatly. “I’ve spoken with many senior citizens who say the reforms are long overdue. They’re tired of paying closing costs every time they take out a loan,” Mansur said. “I spoke with a young lady yesterday who wants a $4,500 loan to carpet the house. I can’t give it to her, because she’s already had one home equity loan in the past year. I told her to come back in three weeks (the time it would take for the new amendment to become effective). Personally, I have a college student with tuition that has gone up about 30 percent. I’d like to be able to access the equity in my home for that.” “I don’t think the credit union will necessarily see more loans,” he continued. “I just think we’ll see people save more money. It will mean fewer costs to members. It will reduce their frequency of filling out redundant paperwork. We’ll just have to see a member one time to initiate a line of credit.” -

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