REFINANCE TRANSACTIONS – FANNIE MAE v. TEXAS LAW
August 18, 2021
In Texas, the term “cash out” is commonly used to describe a home equity loan originated under Section 50(a)(6), Article XVI of the Texas Constitution. However, the term “cash out” is also used to define a refinance transaction under the Fannie Mae Selling Guide, and in this context often carries a different—and sometimes contradictory—meaning. Therefore, it is important for lenders to understand the distinctions between Fannie Mae’s refinance definitions and those under Texas law, and lenders should not rely on Fannie Mae’s categorization of refinance loans for purposes of determining compliance with the provisions of the Texas Constitution.
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