LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
April 17, 1995
TO: Honorable Ken Armbrister, Chair IN RE: Committee
Committee on State Affairs Substitute
Senate for Senate
Austin, Texas Bill No. 301
FROM: John Keel, Director
In response to your request for a Fiscal Note on Senate Bill No.
301 (Relating to a voluntary, consensual encumbrance on homestead
property for the purpose of an equity loan.; Relating to a
voluntary, consensual encumbrance on homestead property for the
purpose of an equity loan.) this office has determined the
following:
The bill would allow homeowner's to receive an equity loan or
reversible mortgage loan from financial institutions against
their homestead property. The principal amount of the loan plus
all other encumbrances could not exceed 90% of the fair market
value of the property used as collateral; only the homestead
property securing an equity loan could be used as collateral.
Acceleration of an equity loan is prohibited due to a decrease in
market value, unless the decrease is caused by damage or
destruction to the property, environmental hazards, condemnation
or use of the secured property that constitutes a waste or
nuisance. Lenders would be required to provide homeowners with a
notice, as specified in the bill, once they request application
for an equity loan.
The bill would also create the division of Access to Financial
Services in the Office of Consumer Credit Commissioner. The
division will conduct research on equity lending, business
practices, prepare a report for the legislature regarding Home
Equity Lending.
The bill also creates the Equity Loan Recovery Fund to reimburse
consumers who suffer damages as a result of misrepresentation,
dishonesty, or fraud committed by an authorized lender. The
Office of Consumer Credit Commissioner will act as the
administrator of the account.
The probable fiscal implication of implementing the provisions of
the bill during each of the first five years following passage
is estimated as follows:
Fiscal Probable Revenue Probable Cost Out Probable Revenue
Year Gain to GR of GR Gain to Other
Consolidated - Consolidated - Funds 997 - Equity
Consumer Credit Consumer Credit Loan Recovery Fund
Exp Fd 509 Exp Fd 509
1996 $1,256,000 $1,261,072 $85,000
1997 1,261,000 1,200,478 110,000
1998 1,261,000 1,215,951 110,000
1999 1,261,000 1,239,785 110,000
2000 1,316,000 1,341,006 110,000
Fiscal Change in
Year Number of State
Employees from
FY 1995
1996 22.0
1997 22.0
1998 22.0
1999 22.0
2000 22.0
Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.
No fiscal implication to units of local government is
anticipated.
Source: Comptroller of Public Accounts, Office of the Consumer
Credit Commissioner
LBB Staff: JK, VS, DF