Vote yes on Proposition 2
We recommend voting yes on Proposition 2, which would ease restrictions on home equity borrowing.
But we offer this recommendation with a caveat. While Proposition 2 eases home equity lending in ways that will benefit many borrowers, it also does away with some consumer protections. This is a trade-off voters should weigh.
This tension is clear in how Proposition 2 deals with fees for home equity loans. Proposition 2 would lower the cap for these fees from 3 percent to 2 percent, but this may not save consumers money. It could even cost consumers more.
Why? Because the present cap of 3 percent includes third-party fees for appraisals, surveys, title examinations and so on. Proposition 2 would move these fees outside the cap. The potential upshot is borrowers would still pay these third-party fees and lenders could have more room under the cap to also charge fees.
But lenders have said the 3 percent cap isn’t working. It can be very difficult to put a loan together that falls under the 3 percent cap, they have said, especially in rural areas. This change, then, would hopefully open up credit to more homeowners.
Proposition 2 would also allow homeowners on agricultural properties to use home equity loans. It would allow borrowers to refinance home equity loans and traditional mortgages into one payment. And it would streamline how advances are made for home equity loans in Texas in a way that would give borrowers more flexibility.
For these reasons, Proposition 2 merits voter support.