Texas a Model for the Nation

It seems that Texas does do something right; this program should be a model for the nation, not just for states but perhaps for federal regulation.  Some interesting history here, including that this regulation is written into the state Constitution, which explains why Gov Perry and his predecessor didn't, because they couldn't, undo it.  The following is excerpted from http://mediamatters.org/research/201108220034?lid=1178083&rid=63138410  

Strict Home-Loan Regulation Helped Shield Texas From Housing Boom And Bust

Wash. Post: "Tight Regulation Of Home Equity Loans" And "Tightly Regulated" Mortgage Lenders Helped Shield Texas From Housing Bubble.From The Washington Post:

Texas was shielded from the worst of the housing-market bust by the state government's tight regulation of home equity loans, which were not permitted until the late 1990s and are limited to 80 percent of a homeowner's equity. Elsewhere, property owners often took out riskier home equity loans and mortgages that left them financially crippled when housing prices collapsed, causing damaging ripples across the economy.
At the same time, mortgage lenders in Texas are tightly regulated, which prevented abuses that were prevalent in many parts of the country. Taken together, the regulations helped keep Texas housing prices in check. [The Washington Post, 8/20/11]

Wash. Post: Housing Problems In Texas "Are Orders Of Magnitude Less Than They Would Have Been Without The Home-Equity Limits." From The Washington Post:

But there is a broader secret to Texas's success, and Washington reformers ought to be paying very close attention. If there's one thing that Congress can do to help protect borrowers from the worst lending excesses that fueled the mortgage and financial crises, it's to follow the Lone Star State's lead and put the brakes on "cash-out" refinancing and home-equity lending.
A cash-out refinance is a mortgage taken out for a higher balance than the one on an existing loan, net of fees. Across the nation, cash-outs became ubiquitous during the mortgage boom, as skyrocketing house prices made it possible for homeowners, even those with bad credit, to use their home equity like an ATM. But not in Texas. There, cash-outs and home-equity loans cannot total more than 80 percent of a home's appraised value. There's a 12-day cooling-off period after an application, during which the borrower can pull out. And when a borrower refinances a mortgage, it's illegal to get even a dollar back. Texas really means it: All these protections, and more, are in the state constitution. The Texas restrictions on mortgage borrowing date from the first days of statehood in 1845, when the constitution banned home loans.
[...]
Until 1998, Texans couldn't take out home-equity loans at all. The roots of this fierce resistance to debt's temptations go deep in Texas history. Seven years before the republic joined the Union in 1845, many homesteaders lost their property because of a bank panic and the resulting foreclosures. Drawing from Mexican codes protecting landholders, the new constitution of the state of Texas forbade lenders from peddling mortgages to homesteaders.
The home-equity restrictions have not only helped keep cash-out refinances a rare breed in Texas; other risky mortgages were scarce there, too. The home-equity borrowing restrictions helped keep home prices from overinflating, and home buyers therefore didn't need to turn to exotic mortgages with such features as 2/28 ARMs, interest-only payments, or negative amortization in order to buy a home. Even when they did, Texas law requires these risky features to be clearly disclosed. Fewer than 20 percent of Texas subprime mortgages included any of them.
That's not to say that Texas borrowers didn't get into bubble trouble. Plenty bought overpriced houses, which is why one in eight Texans now owe more than their home is worth. And it was easy enough for lenders to get around the home-equity borrowing limits by using creative appraisals that pretend a home is worth more than it really is. But the casualties are orders of magnitude less than they would have been without the home-equity limits. [The Washington Post, 4/4/10]