LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
75th Regular Session
February 23, 1997
TO: Honorable Kenneth Armbrister, Chair IN RE: Senate Bill No. 173
Committee on State Affairs By: Patterson, Jerry
Senate
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on SB173 ( Relating
to a voluntary, consensual encumbrance on homestead property
for the purpose of an equity loan.) this office has detemined
the following:
Biennial Net Impact to General Revenue Funds by SB173-As Introduced
Implementing the provisions of the bill would result in a net
positive impact of $65,000 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
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 with the provisions of the
bill. The Office of the Consumer Credit Commissioner projects
that additional examiners will be required to examine an increased
number of licensed lenders 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 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. Money in the fund
would be used for reimbursing aggrieved persons who suffer actual
damages. 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 deposited into the fund.
Methodolgy
The bill provides for the Finance Commission 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 Equity Loan Recovery Fund.
The Office
of the Consumer Credit Commissioner's projected revenues of
$1.3 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 projects that
the cost of the new division would include 22 additional full
time equivalents (FTEs), including 5 examiners, 2 assistant
examiners, 3 financial analysts, 2 attorneys, 1 consumer education
specialist, and 9 administrative technicians. Salaries are
projected at $740,000 per year. With additional travel and
related operating costs, the total costs of operation and staffing
is estimated at slightly over $1 million dollars per year.
Collection of funds for the equity loan recovery fund depends
on rules established by the Finance Commission. No amounts
for this fund can be projected until such rules are promulgated.
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 Change in Number
Savings/(Cost) Gain/(Loss) from Gain/(Loss) from of State
from General General Revenue Other - Equity Employees from
Revenue Fund Fund Loan Recovery Fund FY 1997
0001 0001 OTHER-OTH
1998 ($1,253,500) $1,256,000 $110,000 22.0
1998 (1,198,500) 1,261,000 110,000 22.0
2000 (1,209,500) 1,261,000 110,000 22.0
2001 (1,229,500) 1,261,000 110,000 22.0
2002 (1,276,500) 1,316,000 110,000 22.0
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 $2,500
1999 62,500
2000 51,500
2001 31,500
2002 39,500
Similar annual fiscal implications These 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: 454 Department of Insurance
450 Savings and Loan Department
449 Finance Commission of Texas
451 Department of Banking
304 Comptroller of Public Accounts
LBB Staff: JK ,JD ,JA