LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
May 17, 1997
TO: Honorable Kenneth Armbrister, Chair IN RE: House Bill No. 1188, As Engrossed
Committee on State Affairs By: Danburg/et al.
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on HB1188 ( relating
to home equity loans, the regulation of certain institutions
and occupations connected with home equity loans, and the consideration
of home equity in certain financial assistance applications;
providing an administrative penalty.) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by HB1188-As Engrossed
Implementing the provisions of the bill would result in a net
positive impact of $227,800 to General Revenue Related Funds
through the biennium ending August 31, 1999.
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal Analysis
Upon passage of a constitutional amendment providing for home
equity lending, this bill would create a division within the
Office of the Consumer Credit Commissioner for the purpose of
licensing, examining and verifying compliance of lenders and
mortgage brokers with the bill's provisions. The Office of
the Consumer Credit Commissioner projects that additional examiners
will be required to examine an increased number of licensed
lenders and registered mortgage brokers at an increased cost
per examination as a result of the added complexity of the type
of examinations conducted. Collected revenues would increase
due to the licensure of more regulated lenders and the registration
of mortgage brokers, and from fees collected as a result of
charges assessed to lenders for examinations.
The bill would
also direct the Consumer Credit Commissioner to establish and
maintain an equity loan recovery fund to reimburse aggrieved
persons who suffer actual damages as a result of misrepresentation,
dishonesty, or fraud. Money received by the consumer credit
commissioner for deposit in the equity loan recovery fund would
be held by the consumer credit commissioner in trust for carrying
out the purposes of the fund. The finance commission would be
required to establish and collect reasonable and necessary fees
from each authorized lender for each home equity loan originated
by the lender to accomplish the purposes of the fund. Fees
collected shall be held in trust by the Consumer Credit Commissioner.
This
bill would require mortgage brokers to register with the Office
of the Consumer Credit Commissioner and requires the agency
to examine registrants and verify compliance with various educational
requirements. The bill would create a special General Revenue
- Dedicated account for the collection of all money related
to registering mortgage brokers to be used solely for the same
purpose.
The bill would also require financial institutions
to report information of its financial activities with the appropriate
regulatory agency and provides for an administrative penalty
for failure to comply with such provisions.
Methodolgy
The Office of the Consumer Credit Commissioner's projected revenues
of $1.4 million during the first year of implementation include
increased licensing fees resulting from a projected increase
in the number of lenders, as well as revenues generated from
examinations. The agency will charge a $150 surcharge per visit,
plus $32 per hour of examination. The agency estimates that
800 mortgage brokers would become registered.
The agency
projects that 28 additional FTEs would be required for the new
division to implement the bill's provisions, including the registration
of mortgage brokers. The FTEs would include the following:
7 examiners, 2 assistant examiners, 3 financial analysts, 2
attorneys, 1 consumer education specialist, 2 registration personnel,
1 briefing clerk, and 10 administrative technicians. Salaries
are projected to total $834,000 per year. The total cost of
operation and staffing, including additional travel and related
operating costs, is estimated at slightly over $1.4 million
dollars per year during the next biennium.
Collection of
funds for the Equity Loan Recovery Fund would depend on rules
established by the Finance Commission.
The Comptroller
notes that, even though bill specifies that the Equity Loan
Recovery Fund would be held in trust by the Office of Consumer
Credit Commissioner, these funds could potentially be considered
a new dedicated account in the General Revenue Fund. This fiscal
note assumes that the Equity Loan Recovery Fund would not be
a new dedicated account in the General Revenue Fund.
The probable fiscal implications of Implementing the provisions
of the bill during each of the first five years following passage
is estimated as follows:
Five Year Impact:
Fiscal Year Probable Probable Revenue Probable Revenue Probable Change in Number
Savings/(Cost) Gain/(Loss) from Gain/(Loss) from Savings/(Cost) of State
from General General Revenue New - GR Dedicated from New - GR Employees from
Revenue Fund Fund Dedicated FY 1997
0001 0001 NEW-DED NEW-DED
1998 ($1,277,200) $1,256,000 $180,000 ($156,300) 28.0
1998 (1,012,000) 1,261,000 150,000 (126,300) 28.0
2000 (1,024,300) 1,261,000 150,000 (101,300) 28.0
2001 (1,043,000) 1,261,000 150,000 (101,300) 28.0
2002 (1,090,000) 1,316,000 150,000 (101,300) 28.0
Net Impact on General Revenue Related Funds:
The probable fiscal implication to General Revenue related funds
during each of the first five years is estimated as follows:
Fiscal Year Probable Net Postive/(Negative)
General Revenue Related Funds
Funds
1998 ($21,200)
1999 249,000
2000 236,700
2001 218,000
2002 226,000
Similar annual fiscal implications Similar impacts would continue
as long as the provisions of the bill are in effect.
No fiscal implication to units of local government is anticipated.
Source: Agencies: 304 Comptroller of Public Accounts
466 Office of the Consumer Credit Commissioner
LBB Staff: JK ,JD ,JA