Dallas Real Estate - Refi verse HELOC

I learned something new yesterday which was confirmed today. In Texas, once you do a Home Equity Line of Credit (HELOC) on your house, you cannot refinance the house until the Heloc is paid in full.

I had a listing appt yesterday where I feel so bad for their situation. They originally bought the house with putting down 20% and waiving escrows. After a couple of years, they got behind on taxes and decided they needed to refinance the house and roll the taxes into the mortgage and get everything caught up. It's now a couple of years later, his ARM has gone up to over 11.5% and when he inquired about a refi, he found out he didn't refi a couple of years earlier, it was in fact a Heloc.

At that point in the appt, I just got to look down at my hands on the table and say ohhh and awww. I was speechless. I had never heard of such a thing, and it was confirmed today that the Heloc rule is true. It's so sad when mortgage people don't explain things fully to people. What where they doing giving 8% on a refi two years ago anyway? I asked ifhe had questioned the rate, and his reply was that he trusted them and didn't know to ask.

So sad... hopefully I can help him out of this situation.