BILL ANALYSIS C.S.H.B. 2487 By: Gutierrez 03-23-95 Committee Report (Substituted) BACKGROUND Federal law, particularly as expanded by the Riegle Community Development and Regulatory Improvement Act of 1994, requires lenders to obtain or have the borrower obtain flood insurance where such is available. The federal act significantly strengthened this requirement out of a concern that the taxpayers rather than the homeowners were picking up the cost of too many federal disasters. Without this bill, secondary mortgage loans made under Chapter 5 of the Texas Credit Code have no authorization for the lender to charge directly or indirectly the required determination fee for the flood insurance. PURPOSE Rather than refer to the federal flood insurance program alone, this bill provides a pass-through for fees relating to federally mandated programs where such collection or participation is required by an agency created by federal law to capture any additional fees or charges which Congress may add in the future. This is important in the interest of legislative efficiency so that Chapter 5 will not need to be amended repeatedly as federal law makes changes. Perhaps more significantly, there is typically a lag time between a federal mandate and a session of the Texas Legislature. This creates a significant cost problem for lenders during the interim. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Article 5.02, Title 79, Revised Statutes, (1) through (8) deal with repayment of loans, interest rates, and all authorized charges such as fees, compensation, bonuses, commission, brokerage, discounts, and expenses, contracted for or not, received by the lender, or any other person, in connection with the investigating, arranging, negotiation, procuring, guaranteeing, making, servicing, collecting, or enforcing of a loan. Subsection (7) lists in (a) through (g) fees that may be collected by a secondary mortgage loan lender. This bill adds (h) to establish that a secondary mortgage loan lender may collect on or before the closing of a loan, or include in the principal of the secondary mortgage loan reasonable fees which are incurred in connection with the real property offered as security for the loan in order to comply with federally mandated programs where such collection or participation is required by an agency created by federal law. SECTION 2. Effective date clause. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute is a council draft of the original bill. There are no substantive differences between the two versions. SUMMARY OF COMMITTEE ACTION The committee convened in a public hearing on March 27, 1995 to consider HB 2487. The committee considered a complete committee substitute for the bill which was adopted without objection. The following person testified neutrally on the bill: Lesli Pettijohn. The following people testified in favor of the bill: Eric Sandberg; and Karen Neeley. The motion to report HB 2487 favorably as substituted, with the recommendation that it do pass and be printed and be sent to the Committee on Local and Consent Calendars, prevailed by a record vote of: 6 Ayes, 0 Nays, 0 PNV, 3 Absent.