BILL ANALYSIS



H.B. 2868
By: Horn
April 20, 1995
Committee Report (Unamended)


BACKGROUND

Section 32.06 (Transfer of Tax Liens), Tax Code, provides
procedures for a person to pay taxes on another's property (with
the agreement of the property owner) and receive a tax lien on the
property.  This person, the transferee, then has all the same
remedies as a taxing authority, such as charging penalties and
interest.  They also have the right to foreclose on the property,
subject to the all rights of redemption of the former property
owner.

PURPOSE

This bill provides additional procedures for and clarifies
treatment of transferees of tax liens.

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. Amends Section 32.06, Tax Code, Subsections (c), (e),
           (f), (g), (i), and (j).

     (c) Provides for the foreclosure of a tax lien by terms
     specified in any contract between the owner of the property
     and the transferee of the tax lien.

     (e) Raises the cap from 10% to 18% for interest charged on
     delinquent taxes, penalties, interest, recording expenses, and
     any charges authorized in Subsection (j) by a transferee.

     (f) Provides that the holder of a preexisting lien can pay the
     taxes and authorized charges in Subsection (j).

     (g) Provides for foreclosure by the transferee of the tax lien
     under terms of the contract with the property owner.

     (i) Provides that if a former owner exercises the right of
     redemption, that accrued interest and other outstanding
     authorized charges would be included in the redemption amount;
     also raises the amount of the outstanding judgement from 110%
     to 118% for the purposes of determining a lesser amount for
     redemption.

     (j) Provides that this section does not affect the right of an
     owner to enter into a contract with a transferee. Also
     provides authorized charges that may be included in such
     contract:

           (1) Default charge of $.05 for each $1 of any scheduled
           installment due when any portion of the installment is
           unpaid for 10 days or more following the date the
           payment is due.

           (2) Prepayment penalty.

           (3) Reasonable fees for title examination or premiums,
           title insurance, or a title search for the benefit of
           a transferee.


           (4) Reasonable attorney fees for preparation of the loan
           documents, provided the attorney is not a salaried
           employee of the transferee.

           (5) Charges prescribed by law for determining the
           existence of and for perfecting, releasing and
           satisfying any lien or security interest.

           (6) Reasonable appraisal fees.

           (7) Reasonable costs of any credit report.

           (8) Reasonable costs of a survey.

           (9) Premiums paid or received in connection with the
           sale of credit life, credit accident and health, and
           mortgage guaranty insurance, the benefits of which go
           to reduce or extinguish the tax lien obligation.  The
           transferee shall be entitled to request or require any
           such insurance from the owner of real property.

           (10) Reasonable fees for collection of the tax lien
           obligation, including attorney's fees, trustee's fees,
           and other normal fees incurred by a lender that makes
           loans secured by real property.

           (11) Fee of $25 or less for the return by depository
           institution of a dishonored check, negotiated order of
           withdrawal, or share draft offered in full or partial
           payment of a tax lien obligation.

SECTION 2. Amends Section 32.06, Tax Code, by adding Subsections
           (k)-(n).

     (k) Provides for the rights of the transferee of a tax lien be
     subrogated to all rights and remedies of the transferring
     taxing authority.

     (l) Provides that the interest rate in subsection (e) shall
     only apply to transferees who advance over $500,000 in any
     consecutive 12 months, otherwise the interest rate is capped
     at 10%.

     (m) Provides that the provisions of Chapter 5 (Secondary
     Mortgage Loans), Chapter 15 (Revolving Loan and Revolving
     Triparty Accounts), and Sections 1.07 (Determination of the
     rate of interest on loans secured by a lien on any interest in
     real property), Subsections (d)(1) and (f), Title 79, Revised
     Statutes, do not apply to transactions covered by this
     Section.  Also, establishes that a transferee does not need a
     license.

     (n) Provides a remedy for interest charges in excess of rate
     allowed as determined under Chapter 8, Title 79 Revised
     Statutes (Article 5609-8.01 et seq., V.T.C.S.)

SECTION 3. Amends Section 34.02 (Distribution of Proceeds), Tax
           Code, by adding Subsection (e) defining "taxes" as
           including all charges, fees, and other provisions of
           Section 32.06, Tax Code.

SECTION 4. Effective Date: September 1, 1995.

SECTION 5. Emergency Clause.

SUMMARY OF COMMITTEE ACTION

Public notice was posted in accordance with the rules, and a public
hearing was held on April 4, 1995.  Without objection, the bill was
left pending before the committee.

On April 18, 1995, a public hearing was held, and H.B. 2868 was
laid out before the committee.  By a record vote of 10 ayes, 0
nays, 0 present not voting and 1 absent, the committee voted to
report H.B. 2868 to the House without amendment with the
recommendation that it be sent to the Local & Consent Calendar, and
that it do pass.