Investment property Texas cash out seasoning

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Investment property Texas cash out seasoning

Steven Kelly
Lender · Irvine, CA · Member since 2019 · 2 posts · 0 votes

Today I was at the closing table for my sisters cash out investment property texas loan. And the title company pulled out because of a homestead exemption and they stated because she did a loan and December 2018 cash out on the investment property she would have to wait 12 months to do it again on the investment property even though she signed a non-homestead Avadavat on the December 2018 loan.  They told her they have to underwrite this as an A6 Even though it’s an investment property cash out. Not sure understand why I am the loan officer on her deal. Anyone understand?

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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y

Texas has a bunch of wonky rules pertaining to cash out refis. People in general should stick to their own state, my $0.02.

@Andrew Postell might be able to shed some Texas light on the issue. 

Edit: holy crap Andrew, that new profile pic! Are you trying to be a crusader-prince or something? :P

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y

    Texas has a bunch of wonky rules pertaining to cash out refis. People in general should stick to their own state, my $0.02.

    @Andrew Postell might be able to shed some Texas light on the issue. 

    Edit: holy crap Andrew, that new profile pic! Are you trying to be a crusader-prince or something? :P

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  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    7y

    @Steven Kelly based on your description this doesn't make a lot of sense to me.  Were you working with a title company here in Texas?  When you write a "cash out" loan on an investment property here in Texas....that, by definition is a "non-50(a)6" transaction.  So if she did a cash out loan in 2018, on a property that was a investment property then, that would make it not subject to any waiting periods.  Would certainly like to hear any more details that you may have.  Did you end up closing or did they stop the closing process?

    @Chris Mason thanks for the mention and always willing to fight for truth, justice, and the American way ;)

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  • Steven Kelly
    OP
    Lender · Irvine, CA · Member since 2019 · 2 posts · 0 votes
    7y

    @Andrew Postell Thanks for your response. So this was their primary and they claimed it as their Homestead in 2018 until December 2018 when they decided to rent it rather than sell it. So they refinanced the Texas property in December 2018 and signed a non-Homestead Affidavit Declaring that it’s now a rental property. Now we’re trying to do another cash out refinance on that investment property and the title company is stating because it was their Homestead in 2018 they have to treat it as an a6 transaction. They are saying because it’s the only property they own that it has to remain there Homestead even though they’re renting out the property and have proof of that. The lender is OK under writing it as a non-Homestead Investment property cash out transaction no problem but the title company is the one who said Texas law says because it was a homestead property in 2018 you have to wait 12 months to do another cash out transaction on this property.  I guess what we’re trying to figure out is because she signed that non-Homestead affidavit Doesn’t that automatically remove the Homestead exemption?  This is my first Texas transaction so I apologize if I’m not making a lot of sense it just does not make a lot of sense to me.

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    7y

    @Steven Kelly

    Texas courts have upheld Homestead rights even when the principal has signed a non homestead affidavit if the property previously was owner occupied and or a homestead. The theory being that a home owner may feel compelled to sign a non homestead affidavit to obtain a loan (duress). The title company feels that if the non homestead affidavit was signed more than 12 months prior, and the borrower has not occupied the home during this period of time, that the chances of a court ruling the property is a homestead is nil.

    Of course, any of this only comes into play if a suit is filed. In Texas, if there is even the slightest thread of a homestead possibility that’s what the debtors attorney will claim in their pleadings.

    Private Mortgage Financing Partners, LLC
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