HBA-CMT H.B. 3294 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3294 By: Wise Urban Affairs 3/25/2001 Introduced BACKGROUND AND PURPOSE Currently, the state funds the operation of colonia self-help centers to provide home finance assistance, counseling, a tool library, instruction, technical assistance on installation of and financing for septic systems, and related services to colonia residents residing along the Texas and Mexico border. The state also operates the owner-builder loan program to provide loans through the colonia self-help centers for the construction and improvement of residential housing for low-income individuals and families. However, improvements to these programs could help them address the needs of colonia residents more effectively. House Bill 3294 modifies the existing colonia self-help center program, establishes a new colonia model subdivision program, and modifies the existing owner-builder loan program, including the establishment of a permanent revolving loan fund. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Department of Housing and Community Affairs in SECTION 1, 9, and 12 (Sections 2306.359, 2306.755, and 2306.787, Government Code) of this bill. ANALYSIS House Bill 3294 amends the Government Code to authorize the Texas Department of Housing and Community Affairs (department) to issue in addition to other bonds tax-exempt single-family mortgage revenue bonds to make home mortgage loans to economic and geographic submarkets of borrowers of extremely low and very low income and who are not served or who are substantially underserved by the private home mortgage lending industry or by housing finance corporations. The department by rule is required to adopt a process for identifying the unmet or substantially underserved home mortgage credit submarkets. In identifying the submarkets, the department is required to consider grants of reservations of the state ceiling to housing finance corporations and consider the volume of home mortgage loans made by private lenders to individuals and families of extremely low and very low income and the interest rates and terms of those loans. The bill sets forth requirements for the approval of any issuance of single -family mortgage revenue bonds by the governing board of the department (board). The bill requires the board to maximize the use of any subsidy to meet the credit needs of the unmet or substantially underserved economic and geographic submarkets. The department is required to adopt by rule a process to allow colonia self-help centers, certified community housing development organizations, and any other appropriate institutions to originate home mortgage loans on behalf of the department. The bill requires the department in conjunction with its identification of unmet or substantially underserved home mortgage credit needs to determine the adequacy of private home mortgage credit in predominately rural counties, certain census tracts with low income and counties adjacent to the international border. The bill requires the department to adopt a policy for serving those areas (Sec. 2306.359). The bill authorizes the department to change the designation of colonias in consultation with the colonia advisory committee and the appropriate self help center, and requires the department to consult with the colonia advisory committee to designate five colonias in each service area to receive concentrated attention from that center (Sec. 2306.583). The bill requires the colonia advisory committee to report directly to the board and to meet jointly with the board at least annually. The board is required to designate one of its members to attend the meetings of the colonia advisory committee (Sec. 2306.585). The bill requires that in order to operate a self-help center, the department is to enter into a four-year contract directly with a local nonprofit organization or a local housing authority. The department is solely responsible for contract oversight and for the monitoring of self-help centers (Sec. 2306.587). The bill deletes the provision that to be eligible for a loan from a colonia self-help center, an owner-builder must reside with at least two other persons related to the owner-builder in the first degree (Sec. 2306.753). The bill increases from $25,000 to $30,000 the maximum amount of a loan that may be given through a colonia self-help center (Sec. 2306.754). The bill authorizes the department to certify nonprofit owner-builder housing programs operated by a taxexempt organization to originate or service loans as an agent of the department. The bill requires the department by rule to adopt procedures for the certification of nonprofit owner-builder housing programs (Sec. 2306.755). The bill requires the department to establish an owner-builder revolving loan fund in the department for the sole purpose of funding loans under the owner-builder loan program using any available source of revenue, including the required transfer by the department to the fund of at least $6 million each state fiscal year until August 31, 2010. The department is required to deposit money received in repayment of an owner-builder loan to the owner-builder revolving loan fund (Sec. 2306.7581). The department is required to establish the colonia model subdivision program (program) to promote the development of new, high-quality, residential subdivisions that provide alternatives to substandard colonias and housing options affordable to individuals and families of extremely low and very low income who would otherwise move into substandard colonias (Sec. 2306.782). The department is required to operate the program only in counties eligible as economically distressed areas to receive financial assistance for water supply and sewer service projects (Sec. 2306.783). The bill requires the department to establish the colonia model subdivision loan fund. The department is required to deposit money repaid from loans under the program to the fund, and to transfer $2 million to the fund each state fiscal year until August 31, 2010 (Sec. 2306.784). The bill sets forth provisions relating to the terms and uses of loans given by the department from the colonia model subdivision loan fund (Sec. 2306.786). In administering the program, the department by rule is required to adopt any subdivision standards in excess of local standards the department considers necessary, as well as, loan application procedures, program guidelines, and contract award procedures. The bill requires the department to adopt rules for the program to ensure that a borrower sells real property under the program only to an individual borrower, nonprofit housing developer, or to a for-profit housing developer for the purposes of constructing residential dwelling units, and that require a borrower to convey real property under the program at a cost that is affordable to individuals and families of extremely low income or individuals and families of very low income (Sec. 2306.787). H.B. 3294 amends the Tax Code to entitle a charitable organization to an exemption from taxation of unimproved real property purchased through the colonia model subdivision program as well as an exemption from taxation on any building or tangible personal property the organization owns and uses in the administration of its acquisition, building, repair, or sale of the property. If the charitable organization sells the property to a person other than an individual borrower, nonprofit housing developer, or for-profit housing developer for the purposes of constructing residential dwelling units, a penalty is imposed on the property equal to the taxes that would have been imposed on the property in each tax year plus interest at an annual rate of 12 percent computed from the dates on which the taxes would have become due (Sec. 11.184). The bill repeals the provision that the owner-builder loan program expires September 1, 2005 (SECTION 14). EFFECTIVE DATE September 1, 2001.