Constitutional Amendments: Proposition 5, Reverse Mortgage Loans

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This week Burnt Orange Report will be providing information and analysis on the nine proposed amendments on the ballot. These posts do not constitute an endorsement and are simply for informational purposes.

The fifth amendment on the ballot is SJR 18 by by state Sen. John Carona, Republican from Dallas.

Here is the official ballot language:

Proposition 5: The constitutional amendment to authorize the making of a reverse mortgage loan for the purchase of homestead property and to amend lender disclosures and other requirements in connection with a reverse mortgage loan.

The proposed amendment, SJR 18, would amend Section 50-k, Article XVI of the Texas Constitution to allow homeowners who are at least 62 years old to use reverse mortgages to purchase another residency. If passed, eligible homeowners would be able to use the home equity conversion program for purchase program that is offered by the United States Department of Housing and Urban Development.

Read more about what it does below the jump.As of now, Texans cannot use the home equity conversion mortgages for purchase because state law prohibits financing a new home using a reverse mortgage and equity amassed from the existing home to purchase a new residency. This type of reverse mortgage would be available if this proposed amendment is passed by voters.

According to the Texas Legislative Council, SJR 18 would also expand the required financial counseling on reverse mortgages. The borrower and their spouse would have to complete the counseling before closing on the reverse mortgage. Also, it would make required written notices, which are provided by lenders, to include information about how the borrower's actions or lack thereof could result in foreclosure. This notice would have to be delivered 12 days before closing.

During legislative meetings, supporters of the proposition provided a handful of reasons as to why this proposed amendment should pass. Primarily, they say that it's common for older homeowners to find themselves looking for a new home, and under current law these homeowners would have to make two separate transactions to buy a new one. This law would allow for only one transaction, saving the homeowner from having to pay a few thousand dollars in closing fees.

There was no opposition to this proposed amendment during house and senate committee hearings.

Check back tomorrow for information on propositions seven, eight and nine.  


Background on Constitutional Amendments: The Legislature proposes constitutional amendments in joint resolutions in the Senate and House. Each amendment must be passed by both bodies by a two-thirds vote, and the governor does not have the ability to veto proposed amendments. If approved by the majority of voters, the amendments take effect immediately unless specified in the resolution.

Source: Texas Legislative Council.


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