Homeowners in almost every state are feeling the effects of the home equity crisis. Those who took out large HELOC loans are now struggling with upside down mortgages and the possibility of foreclosure.

But, borrowers in one state are less exposed. Thanks to more strident state laws, fewer Texans are facing these problems.

The Houston Chronicle explains that an amendment to the state constitution protected them for years, while strict new laws kept issues at bay after the amendment was repealed:

“…The constitutional amendment, approved by the Legislature and adopted by voters in 1997…allow[ed] Texans for the first time to borrow against the equity in their homes to send their children to college, pay for medical expenses, help start a business or other needs.

Previously, Texans could take out second mortgages on their homes only for home improvements. Texas was the only state with such a constitutional restriction, and banks and other lenders had been trying for years to repeal it…

Bankers had enough clout with the Legislature in 1997 to finally get the ban repealed. But consumer advocates, supported by Realtors, were able to win some tight restrictions on equity lending, most of which are still in place.”

Even during the housing boom, Texans were not permitted to take out a home equity line of credit for more than 80% of their home’s value.

Clearly, these laws have had a positive effect for many of the state’s homeowners. However, it has also kept responsible borrowers from taking out the amount otherwise permitted by lenders. Is this a states issue? Should the government become more involved in regulating the mortgage market?

See Also:

HELOC Truth in Lending Act

How to Negotiate the Best HELOC Rates and Terms

HELOC 3-Day Right of Rescission

Tags | Heloc, HELOC foreclosure, home equity line of credit, mortgage crisis