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.

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