BWM C.S.H.B. 1266 75(R)BILL ANALYSIS


FINANCIAL INSTITUTIONS
C.S.H.B. 1266
By: Oliveira/Williams
3-11-97
Committee Report (Substituted)



BACKGROUND 

Foreign Investment Laws implemented by the Mexican government in 1972
allow properties located within "forbidden" zones, 30 miles off any
coastline or 60 miles from a border, to be acquired by a foreigner through
a Mexican bank trust naming the buyer of the property as the beneficiary
of the trust.  Currently, if a U.S. citizen wishes to purchase property in
this area of Mexico, the only sources of financing are through seller
financing or through a Mexican bank. There is no third-party U.S.
dollar-denominated mortgage financing in Mexico. 
 
Seller-financing by developers is typically offered at rates of prime plus
5% or fixed at 13% for terms of only 10 years or less.  If the seller
provides financing, at least 25% is required for a down-payment and the
seller retains the 10 to 15% purchase price discount normally offered to
cash buyers.  The only other source of financing is through a Mexican bank
offered at interest rates in excess of 30%.   

 U.S. citizens interested in purchasing properties within the prohibited
zones in Mexico must pay these exorbitant terms and do not have the
benefit of valuable consumer safeguards that are customary in the U.S.   

PURPOSE

H.B 1266 would allow the creation of dollar-denominated lending programs
for U.S. citizens purchasing residential property in Mexico and would
include many U.S. consumer safeguards such as title insurance, reg Z
disclosures, RESPA-type disclosures, and escrow settlement through a
Mexican financial institution.  

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 Article 1.07, Title 79, Revised Statutes (Article
5069-1.07, Vernon's Texas Civil Statutes) by adding subsection (g) which
allows loans used primarily to purchase an interest in a trust or other
entity in which the principal asset is real property located outside the
U.S., subject to restrictions on interest rates and principal of the loan.

SECTION 2.  Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

There is no substantial difference between the original bill and the
committee substitute.  The substitute is merely a Texas Legislative
Council Bill Format Draft of the bill as originally filed.