Post-Crisis: Texas Housing Laws Could Help All Banks
Posted by
Loyola
Apr 21 '09, 13:39
|
(Texan) Home values didn�t jump high then crash; they rose a nice 25% over the decade (it looks small on the chart, but only because it is overshadowed by the boom/bust).
From USA Today, we see Texas is right around the median of housing foreclosures, with a normal 1%; Arizona, Florida, California and Nevada all have 4% and above.
So what gives? I�ve thought about this a lot, and have come to a simple three word conclusion: �No prepayment penalties.� Right there in their state law:
� 343.205. PREPAYMENT PENALTIES PROHIBITED. A lender may not make a high-cost home loan containing a provision for a prepayment penalty.
And, in general, a consumer�s bill of rights:
No Balloons � a high-cost home loan may not provide for a payment that is more than twice as large as the average of earlier scheduled monthly payments within the first sixty months of the loan.
No Negative Amortization � a high-cost home loan may not provide for a payment schedule that may cause the principal balance to increase.
Borrower�s Payment Ability � the lender may not make high-cost home loans based on the collateral value of the property without regard for the borrower�s repayment ability, including current and expected income, current obligations, employment status, and other financial resources.
No Prepayment Penalty � a high-cost home loan may not contain a provision for a prepayment penalty.
No Charge for Service Not Received � a lender on a high-cost home loan may not charge a borrower for a service or product if the borrower does not receive it.
|