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A coalition of consumer advocacy organizations including the Texas Public Interest Research Group (TexPIRG), Texas Watch and Home Owners for Better Building, are calling on the Texas Legislature to enact legislation to relieve the plight of Texas homeowners.
According to these groups, Texas homeowners are facing pressures from a poorly-functioning government bureaucracy, exploitative homeowners’ insurance rates and predatory mortgage lending. These problems, the coalition says, are turning the dream of owning a home into a nightmare for many Texans. The groups released a report entitled Homeowners Rights in Texas: What the Legislature Must Do to highlight the issues.
“Texas homeowners are hurting,” said Jeff Brooks, Advocate for TexPIRG. “Owning a home is not only a key part of the American dream, but it is also a critical element of a person’s finances. The problems faced by Texas homeowners are intolerable and the state legislature must step up to the plate to enact the necessary reforms.”
A key problem, says the coalition, is the Texas Residential Construction Commission (TRCC). Ostensibly intended to help homeowners and builders resolve their disputes without going to court, the TRCC is actually little more than a barrier protecting the building industry by preventing homeowners from taking legitimate legal action against incompetent and unscrupulous builders. Presently, homeowners are legally forbidden from taking legal action until they have completed the State-Sponsored Inspection and Dispute Resolution Process (SIRP), in which the deck is stacked decisively against the homeowner and in favor of the builder.
“The TRCC is denying the citizens of Texas their basic constitutional right to make full and fair use of the legal system,” Brooks said. “We didn’t put up with that when Santa Anna tried it, and we shouldn’t put up with it now.”
The coalition is calling for substantial reforms to the TRCC, beginning with making the dispute resolution process voluntary rather than mandatory if a citizen wishes to take legal action against an unscrupulous or incompetent builder. The members of the coalition also believe that fees paid by citizens to the TRCC should be abolished, stringent conflict-of-interest provisions should be enacted and that measures should be taken to ensure a voice for consumer protection is present on the TRCC board.
The coalition is also calling on the legislature to finish the job of insurance reform so that homeowners will finally see the rate relief they were promised nearly four years ago.
“Texas homeowners have been suffocating under the crushing weight of their insurance premiums for far too long,” said Alex Winslow, Executive Director of Texas Watch. “ Texas homeowners deserve real insurance reforms that will give them real rate relief, bring greater transparency to the market, and hold insurance companies accountable.”
Despite efforts by lawmakers to rein in insurance premiums, Texas homeowners continue to pay the highest insurance premiums in the nation. While our premiums remain high, insurance losses have reached record low levels. Unfortunately, the insurance department has been unwilling to fully utilize the tools it has to force insurers to lower their premiums. The legislature should mandate that the Texas Department of Insurance conduct a rate review and order refunds and reductions where necessary.
“Insurance companies are being allowed to run roughshod over Texas homeowners,” said Winslow. “If lawmakers are serious about providing relief to Texas homeowners, they should order TDI to do its job and bring rates down.”
Another issue of concern to the coalition is that of predatory mortgage lending. Mortgage brokers are involved in more than half of all home loans originated in Texas, and none have an incentive to assist borrowers with the loan most suitable to them.
“A lot of brokers are worse than used car salesmen, “says Robert Doggett, of the Texas Low Income Housing Information Service. “Everyone knows to be careful when buying a used car. Few borrowers realize that brokers in Texas have no duty to help them find the best loan. Brokers are often paid more for placing borrowers in higher priced and riskier products.”
Many banks, mortgage bankers and brokers often place borrowers into high risk loans without explaining all the facts. Doggett also explained: “Borrowers rely on brokers and loan officers to explain these transactions, and when this is not done objectively it places borrowers and their neighbors at risk when foreclosures plague a community.”
Brokers should have a fiduciary duty to borrowers, like other professionals have toward their clients. Brokers should have to disclose the best loan terms after conducting a search, as opposed to pushing the loan that pays the broker the most. And before borrowers can close an exotic nontraditional mortgage (no interest loan, adjustable rate loan, balloon note, etc.), borrowers should have to discuss the loan with an independent HUD-approved housing counselor to confirm borrowers know what they are getting into. Ultimately, it is still the borrower’s decision, but counseling ensures all the pros and cons are explained beforehand.
The coalition calls upon the legislature to address the problems of the TRCC, homeowners’ insurance and predatory mortgage lending. If this is done effectively and immediately, the financial situation and psychological security of Texas homeowners can be improved significantly, with untold benefits to the great state of Texas.
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