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