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.