By Ellis S.B. No. 1703 76R3565 DB-D 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. 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) "Owner-builder" means a person who owns a piece of 1-13 real property, either through a contract for deed or a warranty 1-14 deed, and who undertakes to make improvements to that property. 1-15 The term does not include a person who owns or operates a 1-16 construction business. 1-17 Sec. 2306.752. INTERIM CONSTRUCTION LOAN PROGRAM. (a) To 1-18 provide for the development of affordable housing in this state, 1-19 the department shall: 1-20 (1) cooperate with construction supply companies to 1-21 provide interim construction loans for owner-builders; and 1-22 (2) provide other services that facilitate the 1-23 implementation of the program, including: 1-24 (A) contract for deed conversion assistance 2-1 under Section 2306.255; and 2-2 (B) assistance in refinancing interim 2-3 construction loans to provide private market-rate mortgages for 2-4 owner-builders who participate in the program. 2-5 (b) An interim construction loan under this program may 2-6 provide resources to: 2-7 (1) build new residential housing; or 2-8 (2) develop, renovate, or otherwise make improvements 2-9 to existing residential housing. 2-10 (c) The department may adopt rules necessary to accomplish 2-11 the purposes of this subchapter. 2-12 Sec. 2306.753. PARTICIPATION AGREEMENT. (a) Under the 2-13 program, the department shall enter into a participation agreement 2-14 with one or more construction supply companies to provide loan 2-15 guarantees from the department for interim construction loans made 2-16 by the construction supply companies to eligible owner-builders 2-17 under this subchapter. 2-18 (b) The department by rule shall establish a threshold limit 2-19 for the percentage of an interim construction loan that the 2-20 department guarantees under the program that is based on the 2-21 estimated value of the property after the improvements to the 2-22 property are completed. The department may not agree to a 2-23 guarantee for an interim builder loan issued to an owner-builder by 2-24 a participating construction supply company that exceeds that 2-25 threshold. 2-26 (c) The department may not make an agreement with a 2-27 construction supply company under the program unless the 3-1 participation agreement allows the department to annually 3-2 renegotiate the guarantee percentage for an interim construction 3-3 loan issued by the construction supply company. The department 3-4 shall renegotiate the terms of an interim construction loan 3-5 guarantee when possible to obtain a better guarantee percentage for 3-6 the state from the construction supply company. 3-7 (d) A participating construction supply company may require 3-8 an owner-builder to provide a warranty deed for the property that 3-9 is the proposed subject of the interim construction loan as 3-10 collateral for the loan. 3-11 Sec. 2306.754. OWNER-BUILDER ELIGIBILITY. (a) The 3-12 department shall establish eligibility requirements for 3-13 owner-builders to participate in the program. The eligibility 3-14 requirements must include a priority for owner-builders who are 3-15 individuals or families of low, very low, or extremely low income. 3-16 (b) The department may select nonprofit housing assistance 3-17 organizations to certify the eligibility of owner-builders to 3-18 participate in the interim construction loan program. A nonprofit 3-19 housing assistance organization selected by the department shall 3-20 use the eligibility requirements established by the department to 3-21 certify the eligibility of an owner-builder for the program. 3-22 Sec. 2306.755. CONSTRUCTION SUPPLY COMPANY DUTIES. A 3-23 construction supply company that participates in the program shall: 3-24 (1) administer the interim construction loan; 3-25 (2) provide technical assistance to the owner-builder 3-26 for improvements made to the property; and 3-27 (3) perform or assist in performing the necessary 4-1 inspections for improvements made to the property. 4-2 Sec. 2306.756. REFINANCING ASSISTANCE. (a) The department 4-3 shall assist an owner-builder who obtains an interim construction 4-4 loan under the program to refinance the loan to: 4-5 (1) pay the balance of the interim construction loan 4-6 and other debts on the property; and 4-7 (2) obtain a mortgage loan on the improved property. 4-8 (b) The department shall identify: 4-9 (1) private lenders to provide private market rate 4-10 mortgages for low-income owner-builders who obtain loans under the 4-11 program; and 4-12 (2) nonprofit housing assistance organizations and 4-13 housing assistance programs to aid owner-builders who do not 4-14 qualify for private market-rate mortgages. 4-15 Sec. 2306.757. FUNDING. (a) The department may not spend 4-16 state money to fund a loan guarantee issued under this subchapter. 4-17 (b) The department shall identify funds that are appropriate 4-18 for the program. 4-19 (c) The department may cooperate with nonprofit housing 4-20 assistance organizations to establish loan guarantee pools that may 4-21 be used to obtain loans for the purposes of this subchapter. 4-22 Sec. 2306.758. REPORTING DUTIES. The department shall: 4-23 (1) compose an annual report that evaluates the 4-24 repayment history and coinciding guarantee percentages for 4-25 guarantees issued under a program under this subchapter; and 4-26 (2) deliver a copy of the report to the governor, the 4-27 lieutenant governor, and the speaker of the house of 5-1 representatives. 5-2 SECTION 2. Subchapter K, Chapter 2306, Government Code, is 5-3 amended by adding Section 2306.255 to read as follows: 5-4 Sec. 2306.255. CONTRACT FOR DEED CONVERSION PROGRAM. (a) 5-5 In this section, "office" means the office established by the 5-6 department to promote initiatives for colonias. 5-7 (b) The office shall establish a program to guarantee loans 5-8 made by private lenders to convert a contract for deed into a 5-9 warranty deed. 5-10 (c) The office shall make agreements with private lenders 5-11 that will issue loans for contract conversions under the guarantee 5-12 of the department. The office and the lender must agree on the 5-13 criteria for issuing a deed conversion loan, including the 5-14 percentage of the guarantee to be issued by the department. 5-15 (d) The office may not make an agreement with a lender 5-16 unless the agreement allows the office to annually renegotiate the 5-17 guarantee percentage for a loan issued by the lender. The office 5-18 shall renegotiate the terms of a guarantee when possible to obtain 5-19 a better guarantee percentage for the state from the lender. 5-20 (e) The office shall establish eligibility criteria for a 5-21 holder of a contract for deed who participates in this program. 5-22 The criteria must include a priority for homeowners and owners of 5-23 residential real property who are individuals or families of low, 5-24 very low, or extremely low income. 5-25 (f) The office shall use funds allocated to the department 5-26 under the federal HOME Investment Partnerships program established 5-27 under Title II of the Cranston-Gonzalez National Affordable Housing 6-1 Act (42 U.S.C. Section 12701 et seq.) for a guarantee issued under 6-2 this section. The office may not spend state money to fund a 6-3 guarantee for a loan under the program. 6-4 (g) The office may use the services of the Texas State 6-5 Affordable Housing Corporation when necessary to accomplish the 6-6 purposes of this section. 6-7 (h) The office shall: 6-8 (1) compose an annual report that evaluates the 6-9 repayment history and coinciding guarantee percentages for 6-10 guarantees issued under this section; and 6-11 (2) deliver a copy of the report to the governor, the 6-12 lieutenant governor, and the speaker of the house of 6-13 representatives. 6-14 (i) The department may adopt rules necessary to accomplish 6-15 the purposes of this section. 6-16 SECTION 3. (a) This Act takes effect September 1, 1999. 6-17 (b) The Texas Department of Housing and Community Affairs 6-18 shall deliver the first report required by Section 2306.758, 6-19 Government Code, as added by this Act, not later than January 1, 6-20 2001. 6-21 (c) The office established by the Texas Department of 6-22 Housing and Community Affairs to promote initiatives for colonias 6-23 shall deliver the first report required by Section 2306.255(h), 6-24 Government Code, as added by this Act, not later than January 1, 6-25 2001. 6-26 SECTION 4. The importance of this legislation and the 6-27 crowded condition of the calendars in both houses create an 7-1 emergency and an imperative public necessity that the 7-2 constitutional rule requiring bills to be read on three several 7-3 days in each house be suspended, and this rule is hereby suspended.