By: Ellis S.B. No. 1703 A BILL TO BE ENTITLED AN ACT 1-1 relating to loan assistance for low-income individuals and 1-2 families. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Chapter 2306, Government Code, is amended by 1-5 adding Subchapter FF to read as follows: 1-6 SUBCHAPTER FF. INTERIM CONSTRUCTION LOAN PROGRAM 1-7 Sec. 2306.751. DEFINITIONS. In this subchapter: 1-8 (1) "Construction supply company" means a retail or 1-9 wholesale entity that sells construction equipment and supplies for 1-10 home construction and home improvements. 1-11 (2) "Nonprofit housing assistance organization" means 1-12 a nonprofit entity that aids low-income persons in acquiring 1-13 affordable housing and includes an entity that provides 1-14 construction equipment and supplies or technical assistance for 1-15 home construction or home improvements. 1-16 (3) "Owner-builder" means a person who owns a piece of 1-17 real property, either through a contract for deed or a warranty 1-18 deed, and who undertakes to make improvements to that property. 1-19 The term does not include a person who owns or operates a 1-20 construction business. 1-21 Sec. 2306.752. INTERIM CONSTRUCTION LOAN PROGRAM. (a) To 1-22 provide for the development of affordable housing in this state, 1-23 the department shall establish a program in which the department: 1-24 (1) cooperates with construction supply companies or 2-1 nonprofit housing assistance organizations to provide interim 2-2 construction loans for owner-builders; and 2-3 (2) provides other services that facilitate the 2-4 implementation of the program, including assistance in refinancing 2-5 interim construction loans to provide private market-rate mortgages 2-6 for owner-builders who participate in the program. 2-7 (b) An interim construction loan under this program may 2-8 provide resources to: 2-9 (1) build new residential housing; or 2-10 (2) develop, renovate, or otherwise make improvements 2-11 to existing residential housing. 2-12 (c) The department may adopt rules necessary to accomplish 2-13 the purposes of this subchapter. 2-14 Sec. 2306.753. PARTICIPATION AGREEMENT. (a) Under the 2-15 program, the department shall enter into a participation agreement 2-16 with one or more construction supply companies or nonprofit housing 2-17 assistance organizations to provide loan guarantees from the 2-18 department for interim construction loans made by the company or 2-19 organization to eligible owner-builders under this subchapter. 2-20 (b) The department by rule shall establish a limit for the 2-21 percentage of an interim construction loan that the department 2-22 guarantees under the program that is based on the estimated value 2-23 of the property after the improvements to the property are 2-24 completed. The department may not agree to a guarantee for an 2-25 interim builder loan issued to an owner-builder by a participating 2-26 construction supply company or nonprofit housing assistance 3-1 organization that exceeds that limit. 3-2 (c) The department may not make an agreement with a 3-3 construction supply company or nonprofit housing assistance 3-4 organization under the program unless the participation agreement 3-5 allows the department to annually renegotiate the guarantee 3-6 percentage for an interim construction loan issued by the 3-7 construction supply company or nonprofit housing assistance 3-8 organization. The department shall renegotiate the terms of an 3-9 interim construction loan guarantee when possible to obtain a 3-10 better guarantee percentage for the state from the construction 3-11 supply company or nonprofit housing assistance organization. 3-12 (d) A participating construction supply company or nonprofit 3-13 housing assistance organization may require an owner-builder to 3-14 provide a warranty deed for the property that is the proposed 3-15 subject of the interim construction loan as collateral for the 3-16 loan. 3-17 Sec. 2306.754. OWNER-BUILDER ELIGIBILITY. (a) The 3-18 department shall establish eligibility requirements for 3-19 owner-builders to participate in the program. The eligibility 3-20 requirements must include a priority for owner-builders who are 3-21 individuals or families of low, very low, or extremely low income. 3-22 (b) The department may select nonprofit housing assistance 3-23 organizations to certify the eligibility of owner-builders to 3-24 participate in the interim construction loan program. A nonprofit 3-25 housing assistance organization selected by the department shall 3-26 use the eligibility requirements established by the department to 4-1 certify the eligibility of an owner-builder for the program. 4-2 Sec. 2306.755. PARTICIPANT DUTIES. A construction supply 4-3 company or nonprofit housing assistance organization that 4-4 participates in the program shall: 4-5 (1) administer the interim construction loan; 4-6 (2) provide technical assistance to the owner-builder 4-7 for improvements made to the property; and 4-8 (3) perform or assist in performing the necessary 4-9 inspections for improvements made to the property. 4-10 Sec. 2306.756. REFINANCING ASSISTANCE. (a) The department 4-11 shall assist an owner-builder who obtains an interim construction 4-12 loan under the program to refinance the loan to: 4-13 (1) pay the balance of the interim construction loan 4-14 and other debts on the property; and 4-15 (2) obtain a mortgage loan on the improved property. 4-16 (b) The department shall identify: 4-17 (1) private lenders to provide private market-rate 4-18 mortgages for low-income owner-builders who obtain loans under the 4-19 program; and 4-20 (2) nonprofit housing assistance organizations and 4-21 housing assistance programs to aid owner-builders who do not 4-22 qualify for private market-rate mortgages. 4-23 Sec. 2306.757. FUNDING. (a) The department may not spend 4-24 state money to fund a loan guarantee issued under this subchapter. 4-25 (b) The department shall identify funds that are appropriate 4-26 for the program. 5-1 (c) The department may cooperate with nonprofit housing 5-2 assistance organizations to establish loan guarantee pools that may 5-3 be used to obtain loans for the purposes of this subchapter. 5-4 Sec. 2306.758. REPORTING DUTIES. The department shall: 5-5 (1) compose an annual report that evaluates the 5-6 repayment history and coinciding guarantee percentages for 5-7 guarantees issued under a program under this subchapter; and 5-8 (2) deliver a copy of the report to the governor, the 5-9 lieutenant governor, and the speaker of the house of 5-10 representatives. 5-11 SECTION 2. (a) This Act takes effect September 1, 1999. 5-12 (b) The Texas Department of Housing and Community Affairs 5-13 shall deliver the first report required by Section 2306.758, 5-14 Government Code, as added by this Act, not later than January 1, 5-15 2001. 5-16 SECTION 3. The importance of this legislation and the 5-17 crowded condition of the calendars in both houses create an 5-18 emergency and an imperative public necessity that the 5-19 constitutional rule requiring bills to be read on three several 5-20 days in each house be suspended, and this rule is hereby suspended.