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.
