HBA-TYH S.B. 1703 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1703 By: Ellis Urban Affairs 5/10/1999 Engrossed BACKGROUND AND PURPOSE Owner-builder housing can be an affordable option for those with the skills and desire to attempt it. However, several barriers hinder quality owner construction. One of the most significant barriers is financing. Without financing, owner-builders often proceed with construction in a piecemeal fashion, adding to their structures as they accumulate cash for materials. S.B. 1703 directs the Texas Department of Housing and Community Affairs to establish an owner-builder interim construction loan program in partnership with construction supply companies and nonprofit housing assistance organizations. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Department of Housing and Community Development in SECTION 1 (Sections 2306.752 and 2306.753, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 2306, Government Code, by adding Subchapter FF, as follows: SUBCHAPTER FF. INTERIM CONSTRUCTION LOAN PROGRAM Sec. 2306.751. DEFINITIONS. Defines "construction supply company," "nonprofit housing assistance organization," and "owner-builder." Sec. 2306.752. INTERIM CONSTRUCTION LOAN PROGRAM. (a) Requires the Texas Department of Housing and Community Affairs (department), in order to provide for the development of affordable housing in this state, to establish a program in which the department: (1) cooperates with construction supply companies or nonprofit housing assistance organizations to provide interim construction loans (i-c loans) for owner-builders; and (2) provides other services that facilitate the implementation of the program, including assistance in refinancing i-c loans to provide private market-rate mortgages for ownerbuilders who participate in the program. (b) Authorizes an i-c loan program to provide resources to build new residential housing, or develop, renovate, or make improvements to existing housing. (c) Authorizes the department to adopt rules necessary to accomplish the purposes of this subchapter. Sec. 2306.753. PARTICIPATION AGREEMENT. (a) Requires the department, under the program, to enter into a participation agreement with one or more construction supply companies or nonprofit housing assistance organizations to provide loan guarantees for i-c loans to eligible owner-builders. (b) Requires the department, by rule, to establish a limit for the percentage of an i-c loan that the department guarantees under the program based on the estimated value of the property after the improvements to the property are completed. Prohibits the department from agreeing to a guarantee for an i-c loan to an owner-builder that exceeds the limit. (c) Prohibits the department from making an agreement with a construction supply company or nonprofit housing assistance organization under the program unless the participation agreement allows the department to annually renegotiate the guarantee percentage. Requires the department to renegotiate the terms of the i-c loan to obtain a better guarantee percentage for the state. (d) Authorizes the participating construction supply company or nonprofit housing assistance organization to require the owner-builder to provide a warranty deed of the property as collateral for the i-c loan. Sec. 2306.754. OWNER-BUILDER ELIGIBILITY. Requires the department to establish eligibility requirements for owner-builders to participate in the program, which must include a priority for owner-builders whose incomes are low, very low, or extremely low. Authorizes the department to select a nonprofit housing assistance organization to certify the eligibility of an owner-builder for the program. Requires the organization to use the requirements established by the department for that purpose. Sec. 2306.755. PARTICIPANT DUTIES. Requires a participating construction supply company or nonprofit housing assistance organization to administer the i-c loan, provide technical assistance to the owner-builder, and perform or assist in performing inspections. Sec. 2306.756. REFINANCING ASSISTANCE. Requires the department to assist an owner-builder who obtains an i-c loan to refinance the loan to pay the balance of the i-c loan and other debt on the property, and obtain a mortgage loan on the improved property. Requires the department to identify private lenders to provide market rate-mortgages for lowincome owner-builders, and nonprofit housing assistance organizations and programs to aid owner-builders who do not qualify for market rate mortgages. Sec. 2306.757. FUNDING. Prohibits the department from spending state money to fund a loan guarantee issued under this subchapter. Requires the department to identify funds appropriate for this program. Authorizes the department to cooperate with a nonprofit housing assistance organization to establish loan guarantee pools to be used to obtain loans. Sec. 2306.758. REPORTING DUTIES. Requires the department to compose an annual report evaluating the repayment history and coinciding guarantee percentages used for guarantees issued under a program under this subchapter and deliver a copy of the report to the governor, the lieutenant governor, and the speaker of the house of representatives. SECTION 2. (a) Effective date: September 1, 1999. (b) Requires the department to deliver the first report required by Section 2306.758, Government Code, as amended by this Act, no later than January 1, 2001. SECTION 3. Emergency clause.