As the debate regarding the role of government lending regulation in the mortgage industry continues to heat up, state laws that has proven successful are becoming popular talking points that more regulation could be a good thing.
When the housing market collapsed, laws in Texas protected the local housing market from experiencing more widespread devastation, The New York Times reports. Specifically, Texas homeowners are unable to take out home equity loans if they have less than 20 percent equity on their property and are not allowed to refinance more than once a year.
In fact, home equity loans were not legal in the state until 1997. Once legislation was passed to allow the financial option, stringent regulations were put in place to make sure local lending didn't get out of hand and borrowers didn't take on more debt than they could handle, according to the newspaper.
As a result, households that purchased property prior to the market's peak were less likely to be saddled with negative equity once the bubble burst. Because of this, many Texans were spared from the foreclosure process, and the state posted distressed property numbers much lower than the national average.