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RULE §65.14 Home Improvement Loans

Published: 2015

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(a) An association may make or purchase participations in home improvement loans secured by a lien on a home, on the terms set out in this section. In no event shall the amount of the loan, when added to the unpaid balance of all prior liens, exceed 95% of the appraised value of the security property. (b) Any such loan must mature and become payable within 240 months from the date the loan is made, and shall be repayable in monthly installments of principal and interest, or may mature and be repayable as allowed in §65.5(e)(1) or (2) of this title (relating to Residential Real Estate Loans). (c) Prior to funding a loan under this section, an association shall have in its permanent loan file for such loan the following documents and records:   (1) an application for the loan, signed by the borrower, which discloses the purpose for which the loan is sought, the identity of the security property, and the source of
funds which will be used to repay the loan;   (2) a proposal signed by the borrower and, if applicable, the contractor reflecting the home improvements to be accomplished;   (3) financial information about the borrower consisting of the information in the applicant's current file at the local credit reporting agency, together with written certification by the borrower that no material adverse changes in the financial information have occurred since the date of such information. A current report shall contain information updated to within six months prior to the date of application for loan;   (4) a loan approval sheet, indicating the amount and terms of the loan, the date of loan approval, by whom approved, the signatures of the persons approving the loan, and any conditions of approval and certifying that the persons approving the loan have confirmed that applicable loan-to-one-borrower limitations are met;
  (5) a loan settlement statement, indicating in detail the expenses, fees, and charges the borrower or borrowers have paid in connection with such loan;   (6) the promissory note signed by the borrower;   (7) the original of the signed instrument or instruments creating or constituting the lien securing the loan;   (8) evidence that the association will have a valid lien on the security property according to the terms of the loan documents;   (9) evidence that the home and all insurable improvements are insured against loss by a fire and extended coverage policy or its equivalent issued by an insurance company authorized to do business in the state in which the home is located and naming the association as coinsured, as its interest may appear;   (10) for all loans of $50,000 or more, a written appraisal report by an appraiser or committee of appraisers, who may be employees of the
association, who are on a list of appraisers approved by the board of directors and in a form approved by the American Institute of Real Estate Appraisers, the Society of Real Estate Appraisers, the Federal Home Loan Mortgage Corporation, or the Federal National Mortgage Corporation. The appraisal report shall be signed by the appraiser or committee of appraisers;   (11) a written opinion of value, with picture of property, by an appraiser appointed by the board of directors on all home improvement loans under $50,000. (d) Other property may be provided as additional security for the loan, without meeting the requirements of this chapter for loans secured by such property, so long as all requirements of this section are met. (e) Upon completion of the improvements financed by the loan, a certificate of completion executed by the owner or contractor shall be made part of the permanent loan file. (f) A loan made
under this section may include add-on interest as authorized by the Texas Credit Code, Title 4 of the Finance Code. (g) Except for add-on interest, a loan made under this section may include amounts to pay interest on the loan, and other fees, only if the loan amount conforms to this section, and provided a detailed, narrative underwriting report is prepared and filed in the loan file explaining the reasons and justifications the association relied upon to include such amounts in the loan. However, the loan shall not include amounts to pay interest on the loan, unless the association has full recourse against the borrower for repayment of the loan and the amount of the loan does not exceed 80% of the appraised value of the security property. Any amount of the loan which represents interest shall not be disbursed until earned.

Source Note: The provisions of this §65.14 adopted to be effective December 27, 1985, 10 TexReg 4795; amended to be effective January 17, 1989, 14 TexReg 53.