Voters To Determine Whether Texas Changes Home Equity Lending Laws

Now that the Texas House and Senate have approved SJR 60 and its companion bill HJR 99, Texans must decide in November whether we should amend our state constitution’s home equity law provisions. Any changes to the state constitution require a voter-approved amendment. The proposed changes may benefit many borrowers and they would remove a prohibition that currently prevents agricultural homestead owners from seeking home equity loans.

Additional Changes Addressed by SJR 60/HJR 99

This joint bill is designed to accomplish several goals. One key objective is to lower the current three percent cap on fees that can be charged to borrowers initiating a home equity loan down to only a two percent cap. To achieve this change, the bill separates out from the cap such fees as property surveys, appraisals, title exam reports and state base premiums. This change is designed to help low-income borrowers and those needing loans in more rural areas.

This means that borrowers seeking home equity loans under $50,000 might currently see those added fees go over the three percent cap. However, if the cap is lowered and the other changes noted above are made, those same borrowers could probably avoid that problem. This proposed amendment would also increase the present loan-to-value ratio up to 80 percent (from its current level of 50%) on home equity lines of credit.

Consumers may also benefit from a new provision allowing them to refinance home equity loans that have already existed for at least one year. They could turn such loans into traditional mortgages if all required conditions are met. Those who wish to make these types of changes would be owed new disclosures clearly outlining the potential benefits that might be lost by making this change. Special time deadlines would also have to be met, making sure that each consumer clearly understands the full impact of converting the loan into a traditional mortgage well before the refinance closing date.

Recent Legislative History Regarding This Joint Bill

Back in 2015, Representative Richard Raymond of Laredo proposed a bill that addressed the three percent fee cap issue by removing specific third-party expenses from the cap. Although that bill failed to pass, it did raise awareness of these important issues.

Meeting Constitutional Change Requirements and Putting Matters to a Vote

The passage of these joint bills required a two-thirds majority vote in both the Texas House and Senate. Now that requirement has been met, it’s time to put this matter on the ballot so voters can make the final decision on November 7, 2017. Should Texas voters approve this amendment, the changes to our state constitution will take effect on January 1, 2018.

Should you have any questions about how you should initiate financing for your home or other purchases, please contact our office and allow us the privilege of helping you. We can also answer any other questions you might have about various contracts and lending practices.

Texas Flood Insurance –The Basics

Texas Flood Claim Appeals:  Obtaining a Fair Settlement

The overall losses imposed by Hurricane Harvey and the other storms still forming will almost certainly set new records. At present, at least one data analytics firm that forecasts natural disaster losses has issued a preliminary estimate indicating that Houston area homeowners may suffer losses equaling $30 billion. However, only about 40 percent of that amount will be covered by insurance — with the federal government picking up the tab for most of it.

How Most Flood Insurance is Handled in Texas

While a small number of private insurance companies are underwriting flood insurance today (often providing an optional rider to your homeowner’s coverage), most stopped doing so long ago since they could not charge high enough premiums to make it a profitable endeavor. Instead, most Texas homeowners are only able to obtain a flood insurance policy through the National Flood Insurance Program (NFIP) that’s run by the Federal Emergency Management Agency (FEMA).

Since homeowner policies don’t cover windstorm and hail damage for those living in this state’s major flood zones like the Houston area, some people also purchase Texas Windstorm Insurance Association (TWIA) coverage to help with those types of losses. However, a Washington Post study indicates that as few as 17% of Houston homeowners may have any flood insurance.

Should you be among the small percentage of homeowners with an NFIP policy or hold one that covers your business property, it’s critical to move forward now and get your NFIP claim filed. However, you need to know that it’s fairly common for these types of claim to be denied – or to be offered a very small amount for your actual losses. Once your claim has been turned down, you’ll then need to work closely with the local insurance representative who sold you the policy on behalf of FEMA to be sure it was processed properly.

Deciding Whether to Appeal FEMA’s Decision About Your NFIP Coverage

Once you’re certain that all pertinent paperwork was fully examined by FEMA when it denied all or part of your NFIP claim, you’ll need to decide whether to file a formal appeal or pursue other possible remedies. Since making the right decision requires a clear understanding of each option – and because you only have 12 months to appeal the decision, it’s often best to speak with your Houston business law attorney who can help you weigh all of your options before moving forward.

In some cases, perhaps to minimize the time involved in obtaining the maximum recovery available, flood insurance policy holders may want to simply obtain a formal appraisal of their covered loss. This option is often chosen when your insurer is agreeing that a covered loss occurred – but is disagreeing with you about the correct amount that should be paid for your loss.

Keep in mind that if you choose this path, FEMA’s website states that you cannot then appeal the FEMA decision if you still don’t like the results. As you can see, you need to fully understand what you’re risking, regardless of the path you choose.

What is Covered (and Not Covered) Under A Flood Policy

The NFIP covers “direct physical damage by flood to your building and/or personal property, also known as contents.” The Standard Flood Insurance Policy (SFIP) is a single-peril (flood) policy that pays only for flood damage to your insured property, up to the policy limit which is $250,000 for a residential policy.

Covered Building Property:

-The electrical and plumbing systems

-Furnaces, water heaters, heat pumps, and sump pumps

-Refrigerators, cooking stoves, and built-in appliances such as dishwashers

-Permanently installed carpeting over an unfinished floor

-Permanently installed paneling, wallboard, bookcases, and cabinets. The damage must be directly caused by flood water. Cabinets that were not damaged by flood water are not covered, even if they match cabinets that were damaged by flood water.

-Window blinds

-Foundation walls, anchorage systems, and staircases attached to the building. There is an exclusion for “loss caused directly by earth movement even if the earth movement is caused by flood.”

-A detached garage, used for limited storage or parking. Up to 10 percent of the building coverage limit can be used, but will reduce the total amount of building coverage available.

-Solar energy equipment, and well water tanks and pumps

Covered Personal Property – Contents:

-Personal belongings such as clothing, furniture, and electronic equipment

– Curtains

-Portable and window air conditioners (easily moved or relocated)

-Portable microwave ovens and portable dishwashers

-Carpets not included in building coverage (carpet installed over wood floors, etc.)

-Clothes washers and dryers

-Certain valuable items such as original artwork and furs (up to $2,500)

-Food freezers and the food in them (but not refrigerators)

Not Covered for Building or Personal Property:

-Damage caused by moisture, mildew, or mold that could have been avoided by the property owner or which are not attributable to the flood

-Damage caused by earth movement, even if the earth movement is caused by flood

-Additional living expenses, such as temporary housing, while the building is being repaired or is unable to be occupied

-Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools

 

Obtaining Timely Advice After a Flood is Critical

Please remember that our firm is here to help you as you try to obtain a fair settlement for your flood losses so you can quickly repair or rebuild your damaged property. (Should you be among those without any insurance coverage, you may want to visit this government website provided for this needing emergency assistance.)

Hurricane Harvey: Avoiding Fraudulent Repair Contractors

Fortunately, many first responders and volunteers nobly rushed out to help residents of Houston and surrounding areas after this catastrophic hurricane unleashed torrential rainfall and flooding. However, too many people lost their lives during the lengthy onslaught and far more suffered extensive property damage. As survivors try to reclaim their lives, they must exercise great caution when hiring repair contractors so they can properly repair and rebuild their homes.

Based on Texas Attorney General website information, and on our country’s recent storm history, we now know that many dishonest “scam artists” tend to show up (often from out of town) right after natural disasters like Hurricane Harvey. They eagerly try to convince desperate homeowners that they alone know how to repair their homes quickly and for far less money than their competitors.

Our general advice to you is to do your homework and carefully check out each contractor’s business reputation before signing on any dotted line. As we stated in our Labor Day email, we will review any contracts from contractors who want to perform work on your property.  We will do this free of charge limited to contracts that are presented to you by the contractor. Please call us for assistance.

Basic Considerations When Planning to Repair Your Home

To help you obtain the quality repairs you need, we’ve summarized some key steps below that can help you hire a competent repair contractor. Specific warnings have also been added so you can spot some of the many “red flags” indicating that someone either isn’t properly skilled or licensed as required under Texas law. Hopefully, you can avoid being swept up in what “60 Minutes” has called “The Storm after the Storm” when disreputable contractors sweep in to make a fast buck while you’re still grieving various losses.

Key Steps to Take While Getting Your Home Repaired

1. Only hire a contractor who has a fixed, local business address (or one nearby) and who offers fair terms of service. You need to hire someone who has lengthy experience doing the type of work you require and who can provide you with local references. This person must be willing to accept partial payments as the job progresses, while regularly paying all subcontractors for their labor and materials as the project moves forward;

2. Search for a contractor who has worked for someone you know and quotes reasonable fees. Whenever possible, only hire someone who has worked for a family member, close friend or business associate. If you cannot find someone that way, then at least call the Houston Better Business Bureau to check on the company’s reputation. Don’t let anyone pressure you into quickly signing a contract so you won’t lose a special price break.

3. Take the time to solicit several bids before choosing the best one (which may not be the lowest). Those who bid too low are often hoping to trap you into later adding other fees that aren’t properly covered in your repair contract.

4. Check online websites to see if you can learn more about each contractor. When you contact the Houston Better Business Bureau, ask if there are any recent negative or unresolved complaints on file. Remember, no listing at all is not necessarily a positive sign. You might also consider visiting such websites as HomeAdvisor.com and the Angie’s List website. The latter one now allows everyone access to most general information for free. Also check the name of the owner(s) of the company. Many times, unscrupulous contractors form new companies to hide their real reputation. Check with the Secretary of State in the state in which the company is incorporated and get the names of individuals shown as officers and directors;

5. Get every contract term in writing – never agree to a mere oral contract for this type of work. Also, avoid signing a contract that’s missing key terms, due dates, or estimated amounts for materials. You can be sure that if you let any lines remain blank, they’ll often be filled in later with terms that greatly benefit the contractor at your expense. Also, keep in mind that if the main contractor fails to pay all subcontractors, they can place liens on your home until you pay them. If the contractor disappears, most courts will hold you liable for the unpaid wages and materials;

6. Find out if the contractor is fully licensed to do the type of work you want, based on Texas law. If you’re unfamiliar with the laws in this area, call your Houston business law attorney here at Murray Lobb for timely advice. Also, make sure the contractor will be securing all required permits before the two of you sign a contract and let the work begin. Keep in mind that it can be a a negative “red flag” if the company says it’s your responsibility to obtain the permits;

7. Inquire about the type of insurance the contractor carries. The company should normally be carrying worker’s compensation, personal liability, and property damage coverage. Don’t just take the company’s word – ask to see proof (insurance certificates) clearly indicating that all such policies are currently in force;

8. Request the inclusion in your contract of a “sign-off checklist” tied to all payments. This will help you hold on to your property and hopefully avoid the placement of any liens upon it because your general contractor left the area, without paying all subcontractors.

9. Obtain your own financing if you can’t pay with a check or credit card. Never sign up for financing through a lender suggested by the contractor. It’s never wise to go through a lender who is a close associate of your contractor since critical terms may be hidden from you. If you can’t pay “cash” – and many people cannot – carefully review the interest rates and fees various banks or credit unions are offering before hiring a contractor

10. Move forward cautiously if you still have a mortgage on your home. Be sure to contact the bank holding the mortgage and obtain its written approval of the contractor you are hiring. (It’s always possible that the bank may already have a short list of reputable contractors that you can choose from when making repairs).

The attorneys here at Murray | Lobb, PLLC would like to help you sort through this daunting task by offering to review any contracts from contractors who want to perform work on your house. 

Please remember that our firm is here to help you as you try to rebuild your home and your life. (If you’re in need of immediate financial or other emergency assistance due to the hurricane, please visit this federal government website.) We look forward to helping you when you call.