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.
