By Ellis S.B. No. 1703 Substitute the following for S.B. No. 1703: By Hodge C.S.S.B. No. 1703 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to loan assistance for low-income individuals and 1-3 families. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 2306, Government Code, is amended by 1-6 adding Subchapter FF to read as follows: 1-7 SUBCHAPTER FF. PILOT INTERIM CONSTRUCTION LOAN PROGRAM 1-8 Sec. 2306.751. DEFINITIONS. In this subchapter: 1-9 (1) "Construction supply company" means a retail or 1-10 wholesale entity that sells construction equipment and supplies for 1-11 home construction and home improvements. 1-12 (2) "Nonprofit housing assistance organization" means 1-13 a nonprofit entity that aids low-income persons in acquiring 1-14 affordable housing and includes an entity that provides 1-15 construction equipment and supplies or technical assistance for 1-16 home construction or home improvements. 1-17 (3) "Owner-builder" means a person who owns a piece of 1-18 real property, either through a contract for deed or a warranty 1-19 deed, and who undertakes to make improvements to that property. 1-20 The term does not include a person who owns or operates a 1-21 construction business. 1-22 Sec. 2306.752. PILOT INTERIM CONSTRUCTION LOAN PROGRAM. 1-23 (a) To provide for the development of affordable housing in this 2-1 state, the department shall establish a pilot program in which the 2-2 department: 2-3 (1) cooperates with construction supply companies or 2-4 nonprofit housing assistance organizations to provide interim 2-5 construction loans for owner-builders; and 2-6 (2) provides other services that facilitate the 2-7 implementation of the program, including assistance in refinancing 2-8 interim construction loans to provide private market-rate mortgages 2-9 for owner-builders who participate in the program. 2-10 (b) An interim construction loan under this program may 2-11 provide resources to: 2-12 (1) build new residential housing; or 2-13 (2) develop, renovate, or otherwise make basic repairs 2-14 or improvements to existing residential housing. 2-15 (c) An interim construction loan under this program may not 2-16 provide resources to finance a luxury item or other improvement 2-17 that is not a basic improvement or repair necessary for a housing 2-18 unit to comply with minimum building code standards. 2-19 (d) The department may adopt rules necessary to accomplish 2-20 the purposes of this subchapter. 2-21 Sec. 2306.753. PARTICIPATION AGREEMENT. (a) Under the 2-22 program, the department may enter into a participation agreement 2-23 with one or more construction supply companies or nonprofit housing 2-24 assistance organizations to provide loan guarantees from the 2-25 department for interim construction loans made by the company or 2-26 organization to eligible owner-builders under this subchapter. 2-27 (b) The department by rule shall establish a limit for the 3-1 percentage of an interim construction loan that the department 3-2 guarantees under the program that is based on the estimated value 3-3 of the property after the improvements to the property are 3-4 completed. The department may not agree to a guarantee for an 3-5 interim builder loan issued to an owner-builder by a participating 3-6 construction supply company or nonprofit housing assistance 3-7 organization that exceeds that limit. 3-8 (c) The department may not make an agreement with a 3-9 construction supply company or nonprofit housing assistance 3-10 organization under the program unless the participation agreement 3-11 allows the department to annually renegotiate the guarantee 3-12 percentage for an interim construction loan issued by the 3-13 construction supply company or nonprofit housing assistance 3-14 organization. The department shall renegotiate the terms of an 3-15 interim construction loan guarantee when possible to obtain a 3-16 better guarantee percentage for the state from the construction 3-17 supply company or nonprofit housing assistance organization. 3-18 (d) A participating construction supply company or nonprofit 3-19 housing assistance organization may require an owner-builder to 3-20 provide a warranty deed for the property that is the proposed 3-21 subject of the interim construction loan as collateral for the 3-22 loan. 3-23 Sec. 2306.754. OWNER-BUILDER ELIGIBILITY. (a) The 3-24 department shall establish eligibility requirements for 3-25 owner-builders to participate in the program. The eligibility 3-26 requirements must include a priority for owner-builders who are 3-27 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 4-27 program; and 5-1 (2) nonprofit housing assistance organizations and 5-2 housing assistance programs to aid owner-builders who do not 5-3 qualify for private market-rate mortgages. 5-4 Sec. 2306.757. FUNDING. (a) The department may not spend 5-5 state money to fund a loan guarantee issued under this subchapter. 5-6 (b) The department shall identify funds that are appropriate 5-7 for the program. 5-8 (c) The department may cooperate with nonprofit housing 5-9 assistance organizations to establish loan guarantee pools that may 5-10 be used to obtain loans for the purposes of this subchapter. 5-11 Sec. 2306.758. REPORTING DUTIES. The department shall: 5-12 (1) compose an annual report that evaluates the 5-13 repayment history and any coinciding loan guarantee issued under a 5-14 program under this subchapter; 5-15 (2) report the loan amounts, uses, nature of 5-16 improvements funded, and the incomes of the owner-builders who 5-17 participate in the program; 5-18 (3) make recommendations to improve the effectiveness 5-19 and efficiency of the program; and 5-20 (4) deliver a copy of the report to the governor, the 5-21 lieutenant governor, and the speaker of the house of 5-22 representatives. 5-23 SECTION 2. (a) This Act takes effect September 1, 1999. 5-24 (b) The Texas Department of Housing and Community Affairs 5-25 shall deliver the first report required by Section 2306.758, 5-26 Government Code, as added by this Act, not later than January 1, 5-27 2001. 6-1 (c) The Texas Department of Housing and Community Affairs 6-2 shall select an economically distressed area, as defined by Section 6-3 16.341, Water Code, in which to implement the pilot program 6-4 required by Subchapter FF, Chapter 2306, Government Code, as added 6-5 by this Act. 6-6 (d) The Texas Department of Housing and Community Affairs 6-7 may not enter into a participation agreement under the pilot 6-8 program authorized by Subchapter FF, Chapter 2306, Government Code, 6-9 as added by this Act, on or after September 1, 2001. 6-10 SECTION 3. The importance of this legislation and the 6-11 crowded condition of the calendars in both houses create an 6-12 emergency and an imperative public necessity that the 6-13 constitutional rule requiring bills to be read on three several 6-14 days in each house be suspended, and this rule is hereby suspended.