In 2017, the citizens of the former Republic of Texas approved an amendment to Tex. Const. art. 16, § 50(f) to permit a Texas home equity loan (aka a “Texas 50(a)(6) loan”) to be refinanced with a loan other than a reverse mortgage or another Texas 50(a)(6) loan (see https://compliance.docutech.com/2017/11/08/document-updates-various-texas-home-equity-loan-documents/ for details).
Under Ibid. § 50(f)(2), a loan which (inter alia) does not advance additional funds other than to refinance the previous loan and/or finance the “actual costs and reserves required by the lender to refinance the debt”, is qualified to refinance a Texas 50(a)(6) loan without becoming such a loan itself (these are known as “Texas 50(f)(2) loans”). In 2017 and 2018, we configured several of our documents to print disclosures and other documents for these loans, including the addition of print conditions which only permitted these documents to print when Loan Purpose (FI 5991) only equaled “NoCashOutOther” (for details, see https://compliance.docutech.com/2017/11/28/document-updates-various-texas-home-equity-loan-documents-2/).
Under FNMA’s classifications, there are loans which would be considered a Texas 50(f)(2) loan under Texas’ Constitution, but which would be considered a cash-out refinance by FNMA. For example, if a refinance transaction includes both the payoff of a first lien and that of a non-purchase money second – regardless of whether additional cash is taken out – it is considered a “cash-out refinance” by FNMA (see FNMA 2021 Selling Guide B2-1.2-04). An example of this is a refinance of both a purchase money mortgage and a HELOC (a HELOC being considering a special type of 50[a][6] loan under Tex. Const. art. 16, § 50[t]).
These type of “cash-out refinances” by FNMA may cause the field “Loan Purpose” to equal “CashOutOther”, even though the loan really is not a true cash-out. As a result – and to ensure that our Texas 50(f)(2) disclosures print for these types of loans – we will be adding this condition to Print Condition # 2 of the following documents:
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- TX Notice Concerning Extensions of Credit – Spanish (Cx3640)
- TX Affidavit of Fair Market Value of Homestead Property (Cx3653)
- TX Notice Concerning Extensions of Credit (Cx4549)
- TX Owner’s Affidavit of Compliance (Cx5008)
Please note that our current condition of No Cash-Out Refi is Refinancing a TX Home Equity 50(a)(6) Loan (FI 118143) equals “Yes” will still remain in place, preventing our Texas 50(f)(2) disclosures from printing for true cash-out refinances.
Is this a Texas Home Equity Section 50(a)(6) loan? (FI 29932) will still need to be set to “No” to print the Texas 50(f)(2) disclosures. If Is this a Texas Home Equity Section 50(a)(6) loan? is “Yes”, Texas Home Equity loan documents will print instead.
These changes will take effect on May 4, 2021. Questions or concerns should be directed towards Client Support at 1.800.497.3584.
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Update: The global standard value mapping on No Cash-Out Refi is Refinancing a TX Home Equity 50(a)(6) Loan (FI 118143) that defaults the field to “No” has been modified to allow a “Yes” value to remain in place when Loan Purpose is “CashOutOther”.
This change is on Stage and Stage 2.0 and will take effect on ConformX Production on May 4, 2021.
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