1-1 By: Ellis S.B. No. 1703 1-2 (In the Senate - Filed March 12, 1999; March 15, 1999, read 1-3 first time and referred to Special Committee on Border Affairs; 1-4 April 19, 1999, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 5, Nays 0; April 19, 1999, 1-6 sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1703 By: Truan 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to loan assistance for low-income individuals and 1-11 families. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Chapter 2306, Government Code, is amended by 1-14 adding Subchapter FF to read as follows: 1-15 SUBCHAPTER FF. INTERIM CONSTRUCTION LOAN PROGRAM 1-16 Sec. 2306.751. DEFINITIONS. In this subchapter: 1-17 (1) "Construction supply company" means a retail or 1-18 wholesale entity that sells construction equipment and supplies for 1-19 home construction and home improvements. 1-20 (2) "Nonprofit housing assistance organization" means 1-21 a nonprofit entity that aids low-income persons in acquiring 1-22 affordable housing and includes an entity that provides 1-23 construction equipment and supplies or technical assistance for 1-24 home construction or home improvements. 1-25 (3) "Owner-builder" means a person who owns a piece of 1-26 real property, either through a contract for deed or a warranty 1-27 deed, and who undertakes to make improvements to that property. 1-28 The term does not include a person who owns or operates a 1-29 construction business. 1-30 Sec. 2306.752. INTERIM CONSTRUCTION LOAN PROGRAM. (a) To 1-31 provide for the development of affordable housing in this state, 1-32 the department shall establish a program in which the department: 1-33 (1) cooperates with construction supply companies or 1-34 nonprofit housing assistance organizations to provide interim 1-35 construction loans for owner-builders; and 1-36 (2) provides other services that facilitate the 1-37 implementation of the program, including assistance in refinancing 1-38 interim construction loans to provide private market-rate mortgages 1-39 for owner-builders who participate in the program. 1-40 (b) An interim construction loan under this program may 1-41 provide resources to: 1-42 (1) build new residential housing; or 1-43 (2) develop, renovate, or otherwise make improvements 1-44 to existing residential housing. 1-45 (c) The department may adopt rules necessary to accomplish 1-46 the purposes of this subchapter. 1-47 Sec. 2306.753. PARTICIPATION AGREEMENT. (a) Under the 1-48 program, the department shall enter into a participation agreement 1-49 with one or more construction supply companies or nonprofit housing 1-50 assistance organizations to provide loan guarantees from the 1-51 department for interim construction loans made by the company or 1-52 organization to eligible owner-builders under this subchapter. 1-53 (b) The department by rule shall establish a limit for the 1-54 percentage of an interim construction loan that the department 1-55 guarantees under the program that is based on the estimated value 1-56 of the property after the improvements to the property are 1-57 completed. The department may not agree to a guarantee for an 1-58 interim builder loan issued to an owner-builder by a participating 1-59 construction supply company or nonprofit housing assistance 1-60 organization that exceeds that limit. 1-61 (c) The department may not make an agreement with a 1-62 construction supply company or nonprofit housing assistance 1-63 organization under the program unless the participation agreement 1-64 allows the department to annually renegotiate the guarantee 2-1 percentage for an interim construction loan issued by the 2-2 construction supply company or nonprofit housing assistance 2-3 organization. The department shall renegotiate the terms of an 2-4 interim construction loan guarantee when possible to obtain a 2-5 better guarantee percentage for the state from the construction 2-6 supply company or nonprofit housing assistance organization. 2-7 (d) A participating construction supply company or nonprofit 2-8 housing assistance organization may require an owner-builder to 2-9 provide a warranty deed for the property that is the proposed 2-10 subject of the interim construction loan as collateral for the 2-11 loan. 2-12 Sec. 2306.754. OWNER-BUILDER ELIGIBILITY. (a) The 2-13 department shall establish eligibility requirements for 2-14 owner-builders to participate in the program. The eligibility 2-15 requirements must include a priority for owner-builders who are 2-16 individuals or families of low, very low, or extremely low income. 2-17 (b) The department may select nonprofit housing assistance 2-18 organizations to certify the eligibility of owner-builders to 2-19 participate in the interim construction loan program. A nonprofit 2-20 housing assistance organization selected by the department shall 2-21 use the eligibility requirements established by the department to 2-22 certify the eligibility of an owner-builder for the program. 2-23 Sec. 2306.755. PARTICIPANT DUTIES. A construction supply 2-24 company or nonprofit housing assistance organization that 2-25 participates in the program shall: 2-26 (1) administer the interim construction loan; 2-27 (2) provide technical assistance to the owner-builder 2-28 for improvements made to the property; and 2-29 (3) perform or assist in performing the necessary 2-30 inspections for improvements made to the property. 2-31 Sec. 2306.756. REFINANCING ASSISTANCE. (a) The department 2-32 shall assist an owner-builder who obtains an interim construction 2-33 loan under the program to refinance the loan to: 2-34 (1) pay the balance of the interim construction loan 2-35 and other debts on the property; and 2-36 (2) obtain a mortgage loan on the improved property. 2-37 (b) The department shall identify: 2-38 (1) private lenders to provide private market-rate 2-39 mortgages for low-income owner-builders who obtain loans under the 2-40 program; and 2-41 (2) nonprofit housing assistance organizations and 2-42 housing assistance programs to aid owner-builders who do not 2-43 qualify for private market-rate mortgages. 2-44 Sec. 2306.757. FUNDING. (a) The department may not spend 2-45 state money to fund a loan guarantee issued under this subchapter. 2-46 (b) The department shall identify funds that are appropriate 2-47 for the program. 2-48 (c) The department may cooperate with nonprofit housing 2-49 assistance organizations to establish loan guarantee pools that may 2-50 be used to obtain loans for the purposes of this subchapter. 2-51 Sec. 2306.758. REPORTING DUTIES. The department shall: 2-52 (1) compose an annual report that evaluates the 2-53 repayment history and coinciding guarantee percentages for 2-54 guarantees issued under a program under this subchapter; and 2-55 (2) deliver a copy of the report to the governor, the 2-56 lieutenant governor, and the speaker of the house of 2-57 representatives. 2-58 SECTION 2. (a) This Act takes effect September 1, 1999. 2-59 (b) The Texas Department of Housing and Community Affairs 2-60 shall deliver the first report required by Section 2306.758, 2-61 Government Code, as added by this Act, not later than January 1, 2-62 2001. 2-63 SECTION 3. The importance of this legislation and the 2-64 crowded condition of the calendars in both houses create an 2-65 emergency and an imperative public necessity that the 2-66 constitutional rule requiring bills to be read on three several 2-67 days in each house be suspended, and this rule is hereby suspended. 2-68 * * * * *