HBA-TYH H.B. 1547 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1547
By: Danburg
Financial Institutions
2/26/1999
Introduced



BACKGROUND AND PURPOSE 

In 1997, the 75th Legislature passed a constitutional amendment allowing
home equity lending and reverse annuity mortgages.  It was intended to
preserve as many homeowners' rights as possible. In 1998, the Senate
Interim Committee on State Affairs heard testimony regarding the passage
and implementation of home equity lending in Texas.  The committee's
meetings centered around three principal issues: lack of regulating
authority, one-acre urban homestead limitation, and the inability to insure
reverse annuity mortgages. 

In November 1997, H.J.R. 31 was approved by the voters.  When H.J.R. 31
passed the legislature, an attempt to clarify the language in the
constitution through enabling legislation was unsuccessful. Lenders find
themselves in a situation of uncertainty because there is no enabling
legislation designating regulatory oversight in home equity lending
procedures.  Many lenders, including smaller community banks, feel that the
Texas home lending law is too restrictive and that interpretation of the
law by the courts may result in varying interpretations in different parts
of the state. 

H.B. 1547 authorizes the Finance Commission of Texas and the Credit Union
Commission to adopt rules, consistent with Section 50 (Homestead; Extension
of Credit Secured by Lien; Protection from Forced Sale; Mortgages, Trust
Deeds, and Liens), Article XVI, Texas Constitution, to interpret home
equity lending law. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Finance Commission of Texas  in
SECTION 1 (Section 11.306, Finance Code) and the Credit Union Commission in
SECTION 2 (Section 15.402, Finance Code)of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter D, Chapter 11, Finance Code, by adding
Section 11.306, as follows: 
 
Sec. 11.306.  HOME EQUITY LENDING RULES.  (a)  Authorizes the Finance
Commission of Texas (commission) to adopt rules, consistent with Section
50, Article XVI, Texas Constitution, to interpret Subsections (a)(5)-(7)
and (e)-(p) of that section.  Provides that the rules apply to all persons
subject to those subsections, except to a credit union.  
 
(b)  Authorizes the banking commissioner, savings and loan commissioner,
and consumer credit commissioner to propose rules and submit other
recommendations to the commission under this section.  

SECTION 2.  Amends Section 15.402, Finance Code, by adding Subsection (d),
as follows: 

(d) Authorizes the Credit Union Commission to adopt rules applicable to
credit unions, consistent with Section 50, Article XVI, Texas Constitution,
to interpret  Subsections (a)(5)-(7) and (e)-(p) of that section.  

 SECTION 3. Provides that this Act takes effect on the date on which the
constitutional amendment proposed by __J.R. No. _____, 76th Legislature,
Regular Session, 1999, takes effect. Provides that if that amendment is not
approved by the voters, this Act has no effect.  

SECTION 4.Emergency clause.