By: Sibley S.B. No. 551 A BILL TO BE ENTITLED AN ACT 1-1 relating to excluding certain sums related to asset-backed 1-2 securities from the definition of interest. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle 1, Title 79, Revised Statutes (Article 1-5 5069-1.01 et seq., Vernon's Texas Civil Statutes), is amended by 1-6 adding Article 1.13 to read as follows: 1-7 Art. 1.13. CERTAIN SUMS EXCLUDED FROM DEFINITION OF INTEREST 1-8 WITH RESPECT TO ASSET-BACKED SECURITIES. (a) In this article: 1-9 (1) "Asset-backed securities" means debt obligations 1-10 or certificates of beneficial ownership that are: 1-11 (A) part of a single issue or single series of 1-12 securities aggregating $1,000,000 or more issuable in one or more 1-13 classes; 1-14 (B) secured by a pledge of or represent an 1-15 undivided ownership interest in one or more financial assets, 1-16 either fixed or revolving, that by their terms convert into cash 1-17 within a finite time period plus any rights or other assets 1-18 designed to assure the servicing or timely distribution of proceeds 1-19 to security holders; and 1-20 (C) issued by a pass-through entity for a 1-21 business, commercial, agricultural, investment, or similar purpose. 1-22 (2) "Pass-through entity" means a corporation, limited 1-23 liability company, association, general partnership, registered 1-24 limited liability partnership, limited partnership or business, 2-1 grantor or common-law trust under state law, or segregated pool of 2-2 assets under federal tax law that, on the date of original issuance 2-3 of asset-backed securities, does not have significant assets other 2-4 than: 2-5 (A) assets pledged to or held for the benefit of 2-6 holders of the asset-backed securities; or 2-7 (B) assets pledged to or held for the benefit of 2-8 holders of other asset-backed securities issued on an earlier date. 2-9 (b) Notwithstanding Article 1.01 of this subtitle, for 2-10 purposes of this title the term "interest" excludes any sums paid 2-11 or passed through, obligated to be paid or to be passed through, or 2-12 not paid as a result of a discounted sale price to the holders of 2-13 asset-backed securities by a pass-through entity, in connection 2-14 with the original issuance or otherwise, regardless of the 2-15 denomination of the sums under the terms of the asset-backed 2-16 securities. Sums excluded from the definition of interest by this 2-17 article are not subject to Article 1.04 of this subtitle. 2-18 (c) This article does not affect or otherwise apply to 2-19 conventional interest, as defined by Article 1.01 of this subtitle, 2-20 paid, charged, or received on the ultimate assets pledged to or 2-21 held for the benefit of the holders of asset-backed securities. 2-22 SECTION 2. The importance of this legislation and the 2-23 crowded condition of the calendars in both houses create an 2-24 emergency and an imperative public necessity that the 2-25 constitutional rule requiring bills to be read on three several 2-26 days in each house be suspended, and this rule is hereby suspended, 2-27 and that this Act take effect and be in force from and after its 3-1 passage, and it is so enacted.