1-1 By: Marchant (Senate Sponsor - Duncan) H.B. No. 3334
1-2 (In the Senate - Received from the House April 27, 1997;
1-3 April 29, 1997, read first time and referred to Committee on
1-4 Finance; May 5, 1997, reported favorably by the following vote:
1-5 Yeas 12, Nays 0; May 5, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to securities eligible to secure a deposit of public
1-9 funds.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 2257.002(5), Government Code, is amended
1-12 to read as follows:
1-13 (5) "Eligible security" means:
1-14 (A) a surety bond;
1-15 (B) an investment security; [or]
1-16 (C) an ownership or beneficial interest in an
1-17 investment security, other than an option contract to purchase or
1-18 sell an investment security;
1-19 (D) a fixed-rate collateralized mortgage
1-20 obligation that has an expected weighted average life of 10 years
1-21 or less and does not constitute a high-risk mortgage security; or
1-22 (E) a floating-rate collateralized mortgage
1-23 obligation that does not constitute a high-risk mortgage security.
1-24 SECTION 2. Subchapter A, Chapter 2257, Government Code, is
1-25 amended by adding Section 2257.0025 to read as follows:
1-26 Sec. 2257.0025. HIGH-RISK MORTGAGE SECURITY. (a) For
1-27 purposes of this chapter, a fixed-rate collateralized mortgage
1-28 obligation is a high-risk mortgage security if the security:
1-29 (1) has an average life sensitivity with a weighted
1-30 average life that:
1-31 (A) extends by more than four years, assuming an
1-32 immediate and sustained parallel shift in the yield curve of plus
1-33 300 basis points; or
1-34 (B) shortens by more than six years, assuming an
1-35 immediate and sustained parallel shift in the yield curve of minus
1-36 300 basis points; and
1-37 (2) is price sensitive; that is, the estimated change
1-38 in the price of the mortgage derivative product is more than 17
1-39 percent, because of an immediate and sustained parallel shift in
1-40 the yield curve of plus or minus 300 basis points.
1-41 (b) For purposes of this chapter, a floating-rate
1-42 collateralized mortgage obligation is a high-risk mortgage security
1-43 if the security:
1-44 (1) bears an interest rate that is equal to the
1-45 contractual cap on the instrument; or
1-46 (2) is price sensitive; that is, the estimated change
1-47 in the price of the mortgage derivative product is more than 17
1-48 percent, because of an immediate and sustained parallel shift in
1-49 the yield curve of plus or minus 300 basis points.
1-50 SECTION 3. This Act takes effect September 1, 1997.
1-51 SECTION 4. The importance of this legislation and the
1-52 crowded condition of the calendars in both houses create an
1-53 emergency and an imperative public necessity that the
1-54 constitutional rule requiring bills to be read on three several
1-55 days in each house be suspended, and this rule is hereby suspended.
1-56 * * * * *