BILL ANALYSIS



S.B. 727
By: Sibley (Ogden)
05-06-95
Committee Report (Unamended)


BACKGROUND

Since the creation of the student loan note secondary markets
(markets), federal law with respect to the operation and financing
of markets has changed substantially.  The market program was
originally linked to only the "Guaranteed Student Loan" program as
authorized by federal law.

Texas law has not been amended to keep pace with the federal law
changes.  As a result, an ambiguity exists regarding the true
nature of the Texas markets making it difficult to conclude that a
security interest granted by a Texas market is a prior, perfected
security interest.  Furthermore, the specificity in state law has
precluded Texas markets from assisting Texas students with their
higher education needs when federal law would otherwise allow them
to do so.

PURPOSE

If enacted, S.B. 727 eliminates the uncertainty regarding
perfection and priority of security interests granted by Texas
secondary markets in accordance with federal law and allow Texas
markets to participate in all loan programs.

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 53.47, Education Code, by amending
Subsection (e) and adding Subsections (f) and (g), as follows:

   Sec. 53.47. BONDS FOR THE PURCHASE OF LOAN NOTES.  (e) 
Authorizes a nonprofit corporation which has been requested to
exercise the powers enumerated and requested in this section to
invest or cause a trustee or custodian on behalf of such nonprofit
corporation, to invest its funds, including the proceeds of any
bonds, notes, or other obligations and any monies which are pledged
to the payment thereof in an investment authorized by Chapter
2256A, Government Code, or a security issued by another nonprofit
corporation acting under this section.  Makes nonsubstantive
changes.

(f)  Authorizes a nonprofit corporation, whether acting at the
request of a city or cities under Subsection (e) or on its own
behalf, that issues securities to obtain funds to purchase or make 
student or parent loans to exercise the powers granted by the Texas
Non-Profit Corporation Act (Art. 1396-1.01 et seq., V.T.C.S.); 
service loans purchased or made from its funds or contract with
another person to service the loans; grant a security interest in
a trust estate securing its securities; purchase or make a student
or parent loan that is guaranteed or insured, in whole or part, by
one or more persons engaged in guaranteeing or insuring student or
parent loans, including any agency of the federal government; and
make investments as authorized by Subsection (e).

(g)  Provides that a security interest in a trust estate granted
under Subsection (f)(3) is attached and perfected at the time the
security interest is executed and delivered by the nonprofit 
corporation.  Provides that the security interest grants to the
secured party a first prior perfected security interest in the
trust estate for the benefit of the secured party without regard to
the location of the assets that constitute the trust estate.

SECTION 2. Emergency clause.
           Effective date:  upon passage.


SUMMARY OF COMMITTEE ACTION

S.B. 727 was considered by the committee in a formal meeting on May
6, 1995.

The bill was reported favorably without amendment, with the
recommendation that it do pass and be printed, by a record vote of 
7 ayes, 0 nays, 0 pnv, 2 absent.