Yes ya’ll, living in Texas definitely has its perks. We’ve got the best bar-b-que, the Alamo, national-average low unemployment rates, great football, spacious skies, and the foresight to prevent the housing bust from crippling our housing market.

There are certain laws still in place in the Lone Star State that might surprise you. According to our constitution, if a man comes on your property and steals your steed, you are legally obliged to shoot him dead on the spot—no repercussion. Some of you may say, “Those Texans are an archaic, out-of-date bunch. They need to get with it.” Well, it just so happens that our disposition toward tradition and the way of doing things the old way somehow worked it so that we dodged the brunt of the housing collapse.

According to a Washington Post article on the Texas real estate climate, Texas has deep roots in maintaining control over one’s debt. When the Republic of Texas decided to join the rest of the States, there was a bank mortgage crisis that left many Texas homeless. So we adopted a law preventing banks from “peddling mortgages” out to homeowners.

Up until ’98 home equity loans weren’t even available.

What drove many homeowners into foreclosure—and drove banks into the ground—was a little financial device called a “Cash-Out Refinance”. This is a questionable refinancing procedure that many bubble state (California, Florida, Arizona, Nevada) banks allowed back when home prices were skyrocketing at the turn of the millennium. Banks would refinance homeowners for a loan that was higher than their previous one and pay cash out on the difference. With the promise of home prices to increase this seemed to home owners like a great option, so many would “cash-out” and cover debt with plans to refinance at an even lower interest rate. This created and economic phenomenon called termed “phantom wealth”. The banks should have known better.

Freddie Mac and Fannie Mae quoted that 88% of their refinances in 2006 were at an average 5% higher than previous homeowners’ loans, so this not-so-smart procedure made its way all the way up to the Fed. But not Texas.

Texas mortgage banking is an anomaly in this country. According to our law, cash-out refinances cannot take on any more debt than 80% of the home’s appraised value. So all of that refinancing at a higher price is out the window. We also allow a 12-day period before loan activation that gives borrowers a second chance to think about their refinancing options. And here’s the kicker: it is against our Constitution for homeowners to receive a single buck.

That’s why out of all of Texas’ 3.1 million borrowers only 6% are at or near foreclosure. The national average is 10% and bubble states are far worse. So call us “old-timey”, call us “out-of-date” if you will. We’ll call you “UNDER WATER”.