When it comes to home-equity lending, Texas has some of the most conservative homeowner protections in the country. Key among these provisions is the requirement stipulating a home-equity loan may not exceed 80% of the market value of the homestead (80% LTV). Such laws allow ample access to capital while at the same time ensuring homeowners do not incur excessive debt. These legal measures helped insulate Texas from the recession that followed the 2008 housing bubble.
What does this mean for the real estate industry?
Some states allow for home-equity loans upward of 120% loan-to-value (LTV), creating a situation where homeowners become instantly upside down because they owe more to the bank than their homes are worth. When real estate values dipped in these states, many homeowners walked away from their obligation. Foreclosures hurt the overall real estate market and lower home values. The current law allows property owners ample access to the built-up equity in their home.