The Texas Constitution bans homeowners from taking out a second mortgage except to pay for taxes or home-improvement loans.
It was originally set up to protect Texans from losing their homes during bad economic times.
Now lending institutions want a constitutional amendment to change that.
They say the current law allows Texans to get a loan to install a swimming pool but not to pay for a child's college education.
The Texas Conference for Homeowners' Rights, a coalition of business groups that are pro-lender, has been working to change the law.
Some say it could be an uphill battle in the House where Speaker Pete Laney has opposed the idea in the past.
State Rep. Steve Wolens, D-Dallas, has filed a home-equity lending bill to let homeowners borrow money using their homes as collateral. The loans can be used to start or maintain a business and to pay for education, medical and reverse annuity mortgage expenses.
The Texas Association of Realtors, which had led the fight along with the Farm Bureau against amending the home-equity regulation, backs Wolens' bill.
"My proposal includes stiff penalties for fraudulent lenders, places no personal liability on the consumer, and provides stronger foreclosure protections," Wolens said. "Presently, Texas has some of the weakest foreclosure laws in the nation. A homeowner can literally lose his home without first being afforded the right to a hearing."
State Rep. Richard Raymond, D-Benavides, said he believes a majority of lawmakers are willing to support the bill if it provides adequate safeguards.
"I'm waiting to see where the debate goes and I want to hear from people who are opposed to it, even with safeguards," Raymond said.
State Rep. Irma Rangel, D-Kingsville, said her concern is for elderly Texans who might be tricked into borrowing against their home for other family members.
"My concern is the elderly senior citizens who have grandchildren, or even some children, who get involved in criminal activity and they want to borrow money to help their grandchildren," Rangel said. "And a lot of people out there are trying to conduct scam deals on senior citizens."
Texas is the only state that doesn't allow general home-equity lending for items other than taxes or home improvement.