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jburkhalter
Texas
9 Posts |
 Posted - 12/22/2013 : 9:02:12 PM
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I hope this sheds some light. These types of loans are often confusing in Texas. I understand my reply is lengthy, but I also noticed this is a newbie section and I certainly enjoy helping anyone I can.
A Section 50(a)(6) loan (commonly called Home Equity or Line of Credit loan) in Texas is when a homeowner initially takes cash out, for any reason (medical, personal, misc. debt, improvements, etc.). The property also has to be the homestead of the Borrower, and, can only be done once every 12 months. You will commonly hear the term "once a home equity, always a home equity." In theory, that's mostly true. If a homeowner takes out a home equity and refinances it in the future, yes, they will always have to initiate another home equity. They necessarily do NOT have to get cash back on subsequent loans.
Sometimes they will have a primary loan that is conventional, then have a second loan that is a home equity. In this scenario, they can refinance either loan in the same manner as the one they wish to pay off. But some lenders insist on combining both loans into a new home equity (personally, not a good idea as the rates are higher than conventional).
So what does the above mean to you? Honestly, not much, just an educational FYI. But as a signing agent, you should always notice if a Borrower is getting cash back on the HUD **AND** it is their homestead, and if the Deed of Trust has opening language stating the loan is a 50(a)(6) as defined by the Texas Constitution. You should alert your hiring company and see how they wish to handle if you do not have an approved office. For a last curve ball: If the property is a second home or an investment, cash back is allowed and it can be a conventional loan. Home equity only applies to homestead property (their principal residence).
An approved office is any licensed title company within Texas, attorney office (field of practice is not defined in the law, but generally a real estate or document preparation firm), or any office or branch of the lender issuing the loan. Some signing companies try to get creative on what they define as a location. I.E., closing after the title company's hours at a Starbuck's that happens to be in the viewing distance of that title company. Yes, I've heard of much worse....just get anything in writing or email if you see creativity.
Be prepared to have title companies turn you down to use their office for two reasons. They have been burned by an unprofessional notary, or, they are bugged by the parties of your loan assuming the office you are using is the actual title company. There is a third reason, direct title companies (branches wholly owned by the underwriter).....they are trying to monopolize the cash out loans and force lenders to place the order with them directly instead of national companies that fuel our work.
Happy trails, and I wish you luck. |
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29434
Texas
2 Posts |
Posted - 10/06/2013 : 07:49:10 AM
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Thanks LindaH for the info. I'll check further on the Location requirements.
Thomas |
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LindaH
Florida
1754 Posts |
Posted - 10/05/2013 : 07:54:25 AM
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Cash-out closing means the borrowers are taking cash from the loan (not just breaking even) - they are not bringing funds to the table but, rather, are going to receive excess funds after the end of the 3-day rescission period.
Take note - check into this closely - I believe in Texas you have to do these cash-out closings in the office of an attorney or title company...you can't do them in the borrowers' location (home, deli, restaurant, etc).
Linda
http://www.columbiacountynotary.webs.com
http://www.notary.net/websites/LindaHubbell |
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29434
Texas
2 Posts |
Posted - 10/05/2013 : 06:49:50 AM
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| I have had a couple of calls to do a cash out but have never done one so I declined. What is a cash out and how does it differ from doing a regular refinance? |
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cash out closings
