75R10909 GCH-F                           

         By Marchant                                           H.B. No. 3334

         Substitute the following for H.B. No. 3334:

         By Smith                                          C.S.H.B. No. 3334

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to securities eligible to secure a deposit of public

 1-3     funds.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Section 2257.002(5), Government Code, is amended

 1-6     to read as follows:

 1-7                 (5)  "Eligible security" means:

 1-8                       (A)  a surety bond;

 1-9                       (B)  an investment security; [or]

1-10                       (C)  an ownership or beneficial interest in an

1-11     investment security, other than an option contract to purchase or

1-12     sell an investment security;

1-13                       (D)  a fixed-rate collateralized mortgage

1-14     obligation that has an expected weighted average life of 10 years

1-15     or less and does not constitute a high-risk mortgage security; or

1-16                       (E)  a floating-rate collateralized mortgage

1-17     obligation that does not constitute a high-risk mortgage security.

1-18           SECTION 2.  Subchapter A, Chapter 2257, Government Code, is

1-19     amended by adding Section 2257.0025 to read as follows:

1-20           Sec. 2257.0025.  HIGH-RISK MORTGAGE SECURITY.  (a)  For

1-21     purposes of this chapter, a fixed-rate collateralized mortgage

1-22     obligation is a high-risk mortgage security if the security:

1-23                 (1)  has an average life sensitivity with a weighted

1-24     average life that:

 2-1                       (A)  extends by more than four years, assuming an

 2-2     immediate and sustained parallel shift in the yield curve of plus

 2-3     300 basis points; or

 2-4                       (B)  shortens by more than six years, assuming an

 2-5     immediate and sustained parallel shift in the yield curve of minus

 2-6     300 basis points; and

 2-7                 (2)  is price sensitive; that is, the estimated change

 2-8     in the price of the mortgage derivative product is more than 17

 2-9     percent, because of an immediate and sustained parallel shift in

2-10     the yield curve of plus or minus 300 basis points.

2-11           (b)  For purposes of this chapter, a floating-rate

2-12     collateralized mortgage obligation is a high-risk mortgage security

2-13     if the security:

2-14                 (1)  bears an interest rate that is equal to the

2-15     contractual cap on the instrument; or

2-16                 (2)  is price sensitive; that is, the estimated change

2-17     in the price of the mortgage derivative product is more than 17

2-18     percent, because of an immediate and sustained parallel shift in

2-19     the yield curve of plus or minus 300 basis points.

2-20           SECTION 3.  This Act takes effect September 1, 1997.

2-21           SECTION 4.  The importance of this legislation and the

2-22     crowded condition of the calendars in both houses create an

2-23     emergency and an imperative public necessity that the

2-24     constitutional rule requiring bills to be read on three several

2-25     days in each house be suspended, and this rule is hereby suspended.