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. PILOT 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. PILOT INTERIM CONSTRUCTION LOAN PROGRAM. 1-22 (a) To provide for the development of affordable housing in this 1-23 state, the department shall establish a pilot program in which the 1-24 department: 2-1 (1) cooperates with construction supply companies or 2-2 nonprofit housing assistance organizations to provide interim 2-3 construction loans for owner-builders; and 2-4 (2) provides other services that facilitate the 2-5 implementation of the program, including assistance in refinancing 2-6 interim construction loans to provide private market-rate mortgages 2-7 for owner-builders who participate in the program. 2-8 (b) An interim construction loan under this program may 2-9 provide resources to: 2-10 (1) build new residential housing; or 2-11 (2) develop, renovate, or otherwise make basic repairs 2-12 or improvements to existing residential housing. 2-13 (c) An interim construction loan under this program may not 2-14 provide resources to finance a luxury item or other improvement 2-15 that is not a basic improvement or repair necessary for a housing 2-16 unit to comply with minimum building code standards. 2-17 (d) The department may adopt rules necessary to accomplish 2-18 the purposes of this subchapter. 2-19 Sec. 2306.753. PARTICIPATION AGREEMENT. (a) Under the 2-20 program, the department may enter into a participation agreement 2-21 with one or more construction supply companies or nonprofit housing 2-22 assistance organizations to provide loan guarantees from the 2-23 department for interim construction loans made by the company or 2-24 organization to eligible owner-builders under this subchapter. 2-25 (b) The department by rule shall establish a limit for the 2-26 percentage of an interim construction loan that the department 3-1 guarantees under the program that is based on the estimated value 3-2 of the property after the improvements to the property are 3-3 completed. The department may not agree to a guarantee for an 3-4 interim builder loan issued to an owner-builder by a participating 3-5 construction supply company or nonprofit housing assistance 3-6 organization that exceeds that limit. 3-7 (c) The department may not make an agreement with a 3-8 construction supply company or nonprofit housing assistance 3-9 organization under the program unless the participation agreement 3-10 allows the department to annually renegotiate the guarantee 3-11 percentage for an interim construction loan issued by the 3-12 construction supply company or nonprofit housing assistance 3-13 organization. The department shall renegotiate the terms of an 3-14 interim construction loan guarantee when possible to obtain a 3-15 better guarantee percentage for the state from the construction 3-16 supply company or nonprofit housing assistance organization. 3-17 (d) A participating construction supply company or nonprofit 3-18 housing assistance organization may require an owner-builder to 3-19 provide a warranty deed for the property that is the proposed 3-20 subject of the interim construction loan as collateral for the 3-21 loan. 3-22 Sec. 2306.754. OWNER-BUILDER ELIGIBILITY. (a) The 3-23 department shall establish eligibility requirements for 3-24 owner-builders to participate in the program. The eligibility 3-25 requirements must include a priority for owner-builders who are 3-26 individuals or families of very low or extremely low income. 4-1 (b) The department may select nonprofit housing assistance 4-2 organizations to certify the eligibility of owner-builders to 4-3 participate in the interim construction loan program. A nonprofit 4-4 housing assistance organization selected by the department shall 4-5 use the eligibility requirements established by the department to 4-6 certify the eligibility of an owner-builder for the program. 4-7 Sec. 2306.755. PARTICIPANT DUTIES. A construction supply 4-8 company or nonprofit housing assistance organization that 4-9 participates in the program shall: 4-10 (1) administer the interim construction loan; 4-11 (2) provide technical assistance to the owner-builder 4-12 for improvements made to the property; 4-13 (3) perform the necessary inspections for improvements 4-14 made to the property; and 4-15 (4) warrant that funds provided under the interim 4-16 construction loan have been used exclusively for eligible purposes 4-17 under this subchapter. 4-18 Sec. 2306.756. REFINANCING ASSISTANCE. (a) The department 4-19 shall assist an owner-builder who obtains an interim construction 4-20 loan under the program to refinance the loan to: 4-21 (1) pay the balance of the interim construction loan; 4-22 and 4-23 (2) obtain a mortgage loan on the improved property. 4-24 (b) The department shall identify: 4-25 (1) private lenders to provide private market-rate 4-26 mortgages for low-income owner-builders who obtain loans under the 5-1 program; and 5-2 (2) nonprofit housing assistance organizations and 5-3 housing assistance programs to aid owner-builders who do not 5-4 qualify for private market-rate mortgages. 5-5 Sec. 2306.757. FUNDING. (a) The department may not spend 5-6 state money to fund a loan guarantee issued under this subchapter. 5-7 (b) The department shall identify funds that are appropriate 5-8 for the program. 5-9 (c) The department may cooperate with nonprofit housing 5-10 assistance organizations to establish loan guarantee pools that may 5-11 be used to obtain loans for the purposes of this subchapter. 5-12 Sec. 2306.758. REPORTING DUTIES. The department shall: 5-13 (1) compose an annual report that evaluates the 5-14 repayment history and any coinciding loan guarantee issued under a 5-15 program under this subchapter; 5-16 (2) report the loan amounts, uses, nature of 5-17 improvements funded, and the incomes of the owner-builders who 5-18 participate in the program; 5-19 (3) make recommendations to improve the effectiveness 5-20 and efficiency of the program; and 5-21 (4) deliver a copy of the report to the governor, the 5-22 lieutenant governor, and the speaker of the house of 5-23 representatives. 5-24 SECTION 2. (a) This Act takes effect September 1, 1999. 5-25 (b) The Texas Department of Housing and Community Affairs 5-26 shall deliver the first report required by Section 2306.758, 6-1 Government Code, as added by this Act, not later than January 1, 6-2 2001. 6-3 (c) The Texas Department of Housing and Community Affairs 6-4 shall select an economically distressed area, as defined by Section 6-5 16.341, Water Code, or a census tract delineated by the United 6-6 States Bureau of the Census in which the median family income as 6-7 reported by the bureau is less than 80 percent of the area median 6-8 family income in which to implement the pilot program required by 6-9 Subchapter FF, Chapter 2306, Government Code, as added by this Act. 6-10 (d) The Texas Department of Housing and Community Affairs 6-11 may not enter into a participation agreement under the pilot 6-12 program authorized by Subchapter FF, Chapter 2306, Government Code, 6-13 as added by this Act, on or after September 1, 2001. 6-14 SECTION 3. The importance of this legislation and the 6-15 crowded condition of the calendars in both houses create an 6-16 emergency and an imperative public necessity that the 6-17 constitutional rule requiring bills to be read on three several 6-18 days in each house be suspended, and this rule is hereby suspended. S.B. No. 1703 ________________________________ ________________________________ President of the Senate Speaker of the House I hereby certify that S.B. No. 1703 passed the Senate on April 29, 1999, by the following vote: Yeas 30, Nays 0; May 27, 1999, Senate refused to concur in House amendment and requested appointment of Conference Committee; May 28, 1999, House granted request of the Senate; May 30, 1999, Senate adopted Conference Committee Report by a viva-voce vote. _______________________________ Secretary of the Senate I hereby certify that S.B. No. 1703 passed the House, with amendment, on May 26, 1999, by a non-record vote; May 28, 1999, House granted request of the Senate for appointment of Conference Committee; May 30, 1999, House adopted Conference Committee Report by a non-record vote. _______________________________ Chief Clerk of the House Approved: ________________________________ Date ________________________________ Governor