5.3 Texas HELOC Regulations & Authorized Closing Locations

5.3 Texas HELOC Regulations & Authorized Closing Locations

A Texas HELOC is still an (a)(6) loan: Section 50(a)(6)(F) forbids a form of open-end account that may be debited from time to time unless the open-end account is a home equity line of credit. Section 50(t) then defines that HELOC. Every core (a)(6) condition still applies—80 percent combined principal, non-recourse, court-order foreclosure, one equity credit at a time, owner-and-spouse consent, authorized lender, authorized closing office, § 50(g) notice, twelve-day wait, two percent fee cap, and three-day rescission—plus the extra § 50(t) operating rules. A reverse mortgage is a different exception under § 50(a)(7) and § 50(k). Do not originate one product on the other's documents.

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Section 50(t) HELOC conditions in current constitutional text

Section 50(t) defines a home equity line of credit as an open-end account that may be debited from time to time, under which credit may be extended from time to time, and under which all of the following are true:

1. Owner-requested advances. The owner requests advances, repays money, and reborrows money. Interpretation 7 TAC § 153.84 confirms that an owner may, but is not required to, make in-person contact to request preprinted checks or to obtain an advance. Subsequent advances are not new (a)(6) closings, but they are still HELOC advances subject to § 50(t).
2. Four-thousand-dollar minimum advance. Any single debit or advance is not less than $4,000. The § 50(g) notice says the same in consumer language: each advance under the line must be in an amount of at least $4,000. A $3,500 convenience draw is not a Texas homestead HELOC advance. Former lower thresholds in old marketing pieces are not the current constitution.
3. No card, debit device, or unsolicited check. The owner does not use a credit card, debit card, or similar device, or a preprinted check unsolicited by the borrower, to obtain an advance. Interpretation 7 TAC § 153.84 allows the borrower from time to time to specifically request preprinted checks, including with a reorder form, but the lender may not periodically mail unsolicited checks.
4. Fees only at origination of the line. Any fees described by § 50(a)(6)(E) are charged and collected only at the time the extension of credit is established, and no fee is charged or collected in connection with any debit or advance. Annual "draw fees," per-advance origination charges, and convenience-advance surcharges fail this clause even if the original two percent math was clean.
5. Eighty percent cap as established at origination. The maximum principal that may be extended under the account, when added to the aggregate outstanding principal of all homestead-secured indebtedness on the date the extension of credit is established, does not exceed the amount described in § 50(a)(6)(B). The measuring fair market value and the other homestead debt are locked when the line is opened, not re-traded on every later draw. The § 50(g) HELOC summary also states that if the principal balance under the line later exceeds 80 percent of the fair market value determined on the date the line was established, the owner may not continue to request advances until the balance is less than that 80 percent figure.
6. Subsection (t)(6) is repealed. Do not rebuild a repealed HELOC condition from an old outline.
7. No unilateral amendment. The lender or holder may not unilaterally amend the extension of credit. Changing the credit limit, draw conditions, or repayment structure by lender-only notice is a constitutional breach, not a servicing convenience.
8. Repayment shape. Repayment is in regular periodic installments, not more often than every 14 days and not less often than monthly, beginning not later than two months from the date the extension of credit is established. During the period when the owner may request advances, each installment equals or exceeds accrued interest. After the draw period, installments are substantially equal. Interpretation 7 TAC § 153.88 restates that schedule.

Because a HELOC is an (a)(6) loan, § 50(a)(6)(K) still allows only one equity credit on the homestead. The owner cannot keep a closed-end (a)(6) loan and add a HELOC, or keep two HELOCs. One equity line (or one closed-end equity loan), not both.

Worked HELOC cap and advance example

A homestead's fair market value on the date the HELOC is established is $400,000. Eighty percent is $320,000. A purchase-money first lien then has $240,000 of outstanding principal. The maximum HELOC principal that may be extended is $80,000. The lender may not "refresh" that ceiling later because the house appreciated, and it may not unilaterally raise the limit under § 50(t)(7).

• First advance: $4,000 minimum. A $2,000 draw is not permitted.
• If the owner later requests $3,999, the advance still fails § 50(t)(2).
• If the line is fully drawn at $80,000, additional advances are unavailable until principal is repaid enough that a new advance of at least $4,000 would still keep the line within the origination cap and the 80 percent-of-origination-FMV freeze described in the § 50(g) notice.
• Charging a $50 "advance fee" on the second draw fails § 50(t)(4) even if the original closing fees were under two percent.

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Authorized closing locations apply to the HELOC closing—and to powers of attorney

Section 50(a)(6)(N) does not create a HELOC exception. The line is closed only at the office of the lender, an attorney at law, or a title company. Interpretation 7 TAC § 153.15 requires the closing office to be the permanent physical address of the office or branch office of the lender, attorney, or title company, so the closing occurs at an authorized physical location other than the homestead. The interpretation expressly allows the closing to occur in any area at that permanent physical address, including an indoor office or the parking lot of that office. It does not allow a mobile notary to close in the owner's kitchen, garage, or front porch.

Two related signatures must also occur at those same offices:

• Any power of attorney allowing an attorney-in-fact to execute closing documents must be signed by the owner or spouse at the permanent physical address of an office of the lender, an attorney at law, or a title company. The lender may use a verifiable system (a written statement in the power of attorney, an affidavit of a person present, or a notarial certificate) to evidence that location.
• The consent required by § 50(a)(6)(A) must be signed by the owner and the owner's spouse, or by such an attorney-in-fact, at one of those same permanent physical addresses.

Subsequent $4,000 advances are owner-requested draws under § 50(t)(1), not new closings, so they do not each require a fresh title-company sitting. The original HELOC closing still does. Originators who "start" a Texas HELOC at the kitchen table and plan to "fix it at the title company later" have not met (N) at the moment the extension of credit is closed.

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Refinancing a § 50(a)(6) loan into a non-equity § 50(a)(4) loan: § 50(f) and (f-1)

Once any portion of homestead debt is a § 50(a)(6) loan, § 50(f) restricts how it can be refinanced. A refinance of homestead-secured debt, any portion of which is (a)(6) credit, may not be secured by a valid homestead lien unless either:

• § 50(f)(1): the refinance is itself an extension of credit described by § 50(a)(6) or a reverse mortgage under § 50(a)(7); or
• § 50(f)(2): all of the following conditions are met.

Section 50(f)(2) is the conversion path into a non-equity refinance. It is not automatic rate-and-term language from another state. Every condition is mandatory:

(A) Twelve-month seasoning. The refinance is not closed before the first anniversary of the date the (a)(6) extension of credit was closed. This is a first-anniversary test on the equity loan being refinanced. Do not import the (M)(iii) emergency-oath shortcut into (f)(2)(A); that emergency text sits in (M)(iii), not in (f)(2)(A).

(B) No extra cash beyond permitted items. The refinanced extension of credit does not include the advance of any additional funds other than (i) funds advanced to refinance a debt described by § 50(a)(1) through (a)(7), or (ii) actual costs and reserves required by the lender to refinance the debt. Interpretation 7 TAC § 153.45 reads "actual costs" as identifiable costs actually required by the lender that comply with applicable cost limits, and "reserves" as amounts such as a tax-and-insurance escrow actually required to refinance. Amounts the owner pays at closing from the owner's own funds are not advances by the lender. A $10,000 check to the owner, a credit-card payoff that is not a homestead lien described by (a)(1)–(a)(7), or "cash out for whatever you want" takes the file out of (f)(2) and back into a new (a)(6) or an (a)(7) reverse mortgage.

(C) Eighty percent combined principal on the refinance date. The refinance principal, plus other homestead-secured principal, may not exceed 80 percent of fair market value on the date the refinance is made. Interpretation 7 TAC § 153.45 uses the principal balance of all outstanding homestead-secured debt on that refinance date to size the maximum.

(D) The constitutional refinance notice, twice-timed. The lender provides the owner the written notice printed in § 50(f)(2)(D) on a separate document, not later than the third business day after the owner submits the loan application, and at least 12 days before the refinance closes. Interpretation 7 TAC § 153.1 defines "business day" for § 50(f)(2)(D) as a day on which the lender's offices are open to the public for substantially all of its business functions. One copy may be given to married owners. Electronic delivery is allowed if UETA and E-Sign requirements are met. The notice is not optional boilerplate. It tells the owner, in the constitution's own words, that the existing loan is a home-equity loan; that a non-home-equity refinance will allow foreclosure without a court order; that the new loan will be with recourse for personal liability against the owner and spouse; and that the owner is leaving behind important constitutional equity protections and should consider consulting an attorney.

Section 50(f-1) then re-characterizes a lien that truly meets (f)(2): that lien is deemed to be a lien described by § 50(a)(4)—the refinance of a valid homestead lien. An affidavit executed by the owner or the owner's spouse acknowledging that the requirements of (f)(2) have been met conclusively establishes that the requirements of (a)(4) have been met. The affidavit is not a substitute for actually satisfying seasoning, no extra cash, 80 percent, and the notice. It is the constitution's conclusive-evidence device once those requirements have been met. Originators who close a conversion without the notice, without the wait, or with cash out, cannot repair that file by stuffing an affidavit in the imaged stack.

Worked conversion example

A § 50(a)(6) loan closed June 2, 2025. The owner wants a non-equity rate-and-term refinance of that equity loan plus the first-lien purchase-money debt, with no cash to the borrower.

• Earliest (f)(2) closing: June 2, 2026 (first anniversary).
• Application Monday, June 8, 2026. The separate (f)(2)(D) notice is due not later than the third business day after that application, using the lender's actual business-day calendar, and closing may not occur until at least 12 days after the owner has that notice.
• Payoff of the (a)(6) loan and the (a)(1) purchase-money loan is within (f)(2)(B)(i). Required closing costs and required escrow reserves may be financed under (B)(ii). A $15,000 cash-out line on the Closing Disclosure is not (f)(2).
• Combined principal on the June closing date must still be at or under 80 percent of then-current fair market value.
• Owner or spouse affidavit that (f)(2) was met supports the (f-1) conclusive (a)(4) characterization.

If the owner instead wants cash, or the anniversary has not arrived, the refinance must remain an (a)(6) equity loan (or, if the owner qualifies, an (a)(7) reverse mortgage). Calling a cash-out refinance "(f)(2) conversion" does not make it one.

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Do not confuse a HELOC with a § 50(a)(7) reverse mortgage

Section 50(a)(7) is a different homestead exception. A reverse mortgage under § 50(k) is made to a person who is or whose spouse is 62 or older, uses a different constitutional notice, has different foreclosure grounds and timing, and is not the $4,000-advance HELOC product. A HELOC accrues and is repaid on the § 50(t)(8) schedule while the owner still lives in the home. A reverse mortgage generally does not require repayment of principal or interest until a listed maturity event in § 50(k)(6). Mixing the two on the exam—or in a file—is a category error. Closing-location discipline, owner-and-spouse consent, and non-recourse appear in both families, but the advance rules, age rules, notices, and refinance conversion path in § 50(f) do not make a HELOC into a reverse mortgage.