Home equity regulations: The forgotten Texas miracle

Julie C. Nichols General

HousingWire – Kerri Ann Panchuk

If you repeat a lie long enough, it becomes truth. Such is the case in Texas, a state heralded as the only economy to weather the housing bubble without experiencing a steep drop in home values. Texas advocates would give the internal business structure all the credit, but that’s not entirely true. As for why Texas performed so well remains the subject of ongoing debate. But it seems the one thing the Lone Star State had going for it during the financial crisis is the one thing it’s known for rebelling against: Regulations. So you thought the state got ahead by recoiling from all financial rules? Think again, economists say.

A new report from the Federal Reserve Bank of Dallas claims the Texas housing market stayed afloat during the recession because of an existing state law that limited home equity borrowing. To be fair, this rumor circulated for a while, but the Dallas Fed set out to prove it. It seems after the 1980s real estate crisis, Texas lawmakers and voters agreed on several housing/mortgage finance-related regulations. And if you remember the Dallas-Fort Worth market in the 1980s, lawmakers and state voters had plenty of evidence to support the creation of boundaries in lending.

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