A recent Texas Supreme Court ruling reaffirmed and clarified certain types of qualifying loans must be signed in the office of a lender, attorney or title company, and not a borrower's home. According to Article 16, Section 50 of the Texas Constitution, closings associated with specific loans, including Home Equity Line of Credit (HELOC) loans and cash-out refinance loans, must always be performed in the offices of a lender, title company, or attorney at law.
As a result of the ruling, several loan underwriters issued special alerts to Texas Agents who play a role in certain qualifying transactions, alerting them of the new ruling, some of which caused confusion and raised questions about the ruling itself, its impact on NSAs, and what, if anything, the ruling meant for Signing Agents in other states.
Background On The Texas Homestead Ruling
In Texas, the homestead, or family home, has long been considered sacred, dating back to the settler days of the early to mid 19th century, when laws designed to protect homeowners first appeared in Texas legislation. The so-called 'Homestead laws' are chiseled into the state's Constitution. Constitutional amendments approved by the voters effective in 1998 allowed homeowners to take out HELOC loans, but required them to be closed in the office of a lender, attorney or title company. A 2003 amendment further authorized the legislature to delegate to a state agency the power to interpret the Constitution’s HELOC provisions. The Supreme Court’s ruling struck down one agency interpretation allowing a power of attorney for a HELOC closing to be signed outside of the office of the lender, an attorney or a title company, clarifying that the power of attorney document itself must be signed in one of these offices as well.
Ramifications Of The Ruling For Texas Notary Signing Agents
Despite its length and legal language, the ruling as it applies to Texas Signing Agents basically re-emphasizes that specific types of loan closings MUST be performed at one of three designated locations: the lender, an attorney, or a title company. They must NOT be completed at the borrower’s home. Some types of loan closings — including purchase and non cash-out refinance loans — may still be performed at the borrower’s home. Furthermore, a Power of Attorney document authorizing an agent to sign for a Home Equity Line of Credit or other qualifying loans, must also be performed at one of the three locations — and not at the borrower's home.
Loan Signings That MUST Be Performed At A Lender’s, Attorney's, or Title Office:
- Home Equity Line Of Credit (HELOC)
- Extension of Credit
- Cash-Out Refinance Loan
- Power of Attorney (to be used in conjunction with a HELOC Loan)
Loan Signings That CAN Be Performed At A Borrower's Home:
- Purchase Loan
- Refinance Loan (that doesn't meet above requirements or involve cash-out)
How The Texas Ruling Impacts Other States
Texas has a long history of maintaining the strictest homestead laws of all the states. No other states have a similar law in place. However, if you are a Notary living in a state other than Texas and you are asked to perform a closing for a signer on a Texas property which meets the qualifying circumstances spelled out above, make sure you obtain instructions from your contracting company regarding the location where papers are to be signed.
Underwriting organizations are asking that Notary Signing Agents who have any questions contact them directly for assistance.
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