RS C.S.H.B. 1755 75(R)    BILL ANALYSIS


INSURANCE
C.S.H.B. 1755
By: Burnam
4-15-97
Committee Report (Substituted)

BACKGROUND

Private Mortgage Insurance (PMI) is usually required by mortgage lenders
on any home loan where the borrower is unable to make a 20% down payment.
Its purpose is to protect the lender against any deficiency should there
be a foreclosure. Once the borrower's equity in the home reaches twenty
percent or more, most borrowers should be able to cancel PMI.  Because
lenders are not required to notify homeowner when PMI becomes unnecessary,
many homeowners continue to pay for the coverage for the life of the
mortgage.  PMI can cost homeowners between $20 and $100 a month. 

PURPOSE

As proposed, C.S.H.B. 1755 requires lenders to annually notify borrowers
about the possibility of cancelling PMI on their loans and refund any
unearned premiums resulting from the cancellation of PMI to the borrower
within ten (10) days of receipt of those funds. 

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 21.50, Insurance Code, by adding Section 1B as
follows: 

Sec. 1B. -  NOTICE TO BORROWER -  (a) A lender that requires a borrower to
purchase guaranty insurance shall provide a specified notice to the
borrower. 

(b) If a lender receives a refund of an unearned mortgage guaranty
insurance premium, the lender shall remit the refund not later than the
10th business day after the lender receives the refund. 

(c) Lender has a meaning assigned under Section 1(1), Article 21.48A,
Insurance Code 

SECTION 2 - Effective Date, January 1, 1998

SECTION 3 - Emergency Clause

COMPARISON OF ORIGINAL TO SUBSTITUTE

The Committee Substitute changes SECTION 1 to require the lender, rather
than the insurer, to provide notice to the borrower since the lender is in
direct contact with the borrower and must agree to any cancellation.  The
obligation to return any refund of premium is also imposed on the lender
since the insurers return the premium to their insured, the lender.