St. Mary's Law Journal


This Essay provides some historical and legal context for the Texas home equity debate during the 1990s. It begins with an examination of early Texas homestead law, which did not clearly prohibit home equity lending. Part II describes the genesis of the homestead exemption in Texas. Public policy surrounding the homestead law had at least three components: protection of debtors, protection of women, and the fostering of an independent spirit in Texas settlers. Part III evaluates the Texas Constitution’s 1876 ban on home equity loans and the subsequent public debate up until the 1970s. Although criticism of the prohibition on equity borrowing has recurred through the years, readers should consider the fact that critics tend to speak out, while those who are satisfied with the status quo often remain silent. So far as this author is aware, no serious proposal to remove the 1876 additions to Texas homestead law has ever come close to passage. Part IV outlines the beginning of the modern debate over the ban on home equity loans through the passage of the Mortgage Transaction Parity Act of 1982 and subsequent Texas case First Gibraltar Bank, FSB v. Morales. While every state now provides some form of homestead protection, no other state has imposed the strict limitations incorporated in the 1876 Texas Constitution. The author uses a variety of secondary sources and congressional records to illustrate his assertions. The author does not conclude on a side of the issue but prepares to put out more essays on the topic in hopes the issue receives a full public debate.


St. Mary's University School of Law