By Ehrhardt H.B. No. 2657
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the authorization of bonds by the Texas Department of
1-3 Housing and Community Affairs.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Modify Section 2306.004, Government Code as
1-6 follows:
1-7 Sec. 2306.004. DEFINITIONS.
1-8 (31) "Economic submarket" means a group of borrowers
1-9 which have common home mortgage loan market qualification
1-10 characteristics such as income level, credit history or credit
1-11 score, employment characteristics, similar to Standard and Poor's
1-12 Credit Rating Criteria of A, B, C, and D, etc.
1-13 (32) "Geographic submarket" means a geographic region
1-14 within the state which may comprise a county, a census tract or a
1-15 municipality which share similar levels of access to home mortgage
1-16 credit from the private home mortgage lending industry as
1-17 determined by the department based on home mortgage lending data
1-18 published by federal and state banking regulatory agencies.
1-19 (33) "Rural county" means a county that is outside the
1-20 boundaries of a Primary Metropolitan Statistical Area (PMSA) or a
1-21 Metropolitan Statistical Area (PMA).
1-22 (34) "Subprime loan means a loan that:
2-1 (a) is made to one or more individuals for purposes of
2-2 buying or repairing a residence designed to be occupied by four or
2-3 fewer families;
2-4 (b) is secured in whole or part by:
2-5 (1) a manufactured home, as defined by Section
2-6 347.002, used or to be used as the borrower's principal residence;
2-7 or
2-8 (2) real property improved by a dwelling designed for
2-9 occupancy by four or fewer families and used or to be used as the
2-10 borrower's principal residence;
2-11 (c) has a principal amount of less than $100,000;
2-12 (d) is not:
2-13 (1) a reverse mortgage; or
2-14 (2) an open-end account, as defined by Section
2-15 301.002; and
2-16 (e) is a credit transaction described by 12 ]C.F.R . Section
2-17 226.32, as amended, except that the term includes:
2-18 (1) a residential mortgage transaction, as defined by
2-19 12 ]C.F.R . Section 226.2, as amended, if the transaction meets the
2-20 description of 12 ]C.F.R . Section 226.32(a)(1), as amended, and
2-21 (2) a loan for which:
2-22 (i) the total loan amount is $10,000 or
2-23 more; and
2-24 (ii) the total points and fees payable by
2-25 the consumer at or before loan closing will exceed five percent of
2-26 the total loan amount.
2-27 SECTION 2. Modify Section 2306.142, Government Code as
3-1 follows:
3-2 Sec. 2306.142. AUTHORIZATION OF BONDS. (a) In its
3-3 discretion, the board shall authorize all bonds issued by the
3-4 department
3-5 (b) The department shall issue single family mortgage
3-6 revenue bonds primarily for purposes of making home mortgage credit
3-7 available to economic and geographic submarkets of borrowers that
3-8 are not served or who are substantially under served by the private
3-9 Conventional, FNMA, FMAC, FHA home mortgage lending industry or
3-10 other housing finance corporations as defined in Chapter 394 of the
3-11 Local Government Code.
3-12 (c) The board shall adopt by rule a methodology for
3-13 determining under served home mortgage credit demand within
3-14 economic and geographic submarkets in the state through a market
3-15 study. In conducting the market study the department shall, at a
3-16 minimum, analyze for different geographic and economic submarkets
3-17 the following factors:
3-18 (1) homeownership rates
3-19 (2) loan volume;
3-20 (3) loan approval ratios;
3-21 (4) loan interest rates;
3-22 (5) loan terms;
3-23 (6) loan availability; and
3-24 (7) use of subprime mortgage loan products, comparing
3-25 the volume amount of subprime loans and interest rates to "A" paper
3-26 mortgage loans as defined by Standard and Poor's Credit Rating
3-27 Criteria.
4-1 (d) The department shall analyze the potential market
4-2 demand, loan availability, and private sector home mortgage lending
4-3 rates available to extremely low, very low, and low income
4-4 borrowers in the rural counties of the state, in census tracts
4-5 where the median family income is less than 80% of the median
4-6 family income for the county in which the census tract is situated
4-7 and in the region of the state adjacent to the Mexican states and
4-8 make provisions for serving these counties, census tracts and
4-9 regions through the single family mortgage revenue bond program in
4-10 a manner proportionate with the needs of these areas as determined
4-11 by the department's market study.
4-12 (e) Utilizing the market study of home mortgage lending in
4-13 economic and geographic submarkets and the analysis set forth in
4-14 subsection (d), the board shall approve single family mortgage bond
4-15 programs with loan marketing, qualification, underwriting,
4-16 structuring and servicing criteria designed to meet the needs of
4-17 the economically and geographically under served markets, including
4-18 those markets served disproportionately by subprime lenders.
4-19 (f) In approving a single family mortgage bond program the
4-20 board shall consider specific set-asides or reservations of
4-21 mortgage loans, consistent with the safe and sound operation of the
4-22 department, for under served geographical submarkets and for
4-23 extremely low and very low income borrower submarkets, including
4-24 reserving funds to serve families considered to have "B" and "C"
4-25 credit according to the Standard and Poor's Credit Rating Criteria.
4-26 (g) The department may use any existing source of funds
4-27 available to the department to provide credit enhancement, down
5-1 payment assistance, interest rate reduction and payment of
5-2 incentive lender points to accomplish the purposes of this section,
5-3 including the use of Capitalized Alternative Mortgage Empowerment
5-4 loans, and other subordinated and mezzanine bond structures which
5-5 the board determines to be consistent with the safe and sound
5-6 operation of the department.
5-7 (h) The department shall provide direct assistance to
5-8 borrowers through principal buydowns, down payment assistance and
5-9 credit enhanced products only to individual borrowers in under
5-10 served economic and geographic submarkets within the state unless
5-11 the board determines that the home mortgage credit needs of these
5-12 submarkets have already been adequately served.
5-13 (i) The board shall certify that each single family mortgage
5-14 bond issued by the department is structured in a manner that serves
5-15 the credit needs of economically under served and geographically
5-16 under served markets.
5-17 (j) Following board approval and certification of a single
5-18 family mortgage bond issuance, the department shall submit the
5-19 proposed bond issuance to the Texas Bond Review Board for review
5-20 and approval.
5-21 (k) In FY 2002 the department shall allocate no less than
5-22 thirty percent (30%) of total loan volume of single family mortgage
5-23 bond loans issued during the year for purposes of serving the
5-24 economic and geographic submarkets within the state.
5-25 (l) In FY 2003 and in subsequent years the department shall
5-26 allocate no less than 40 percent of the total single family
5-27 mortgage bond loan volume for purposes of serving the economic and
6-1 geographic submarkets within the state.
6-2 (m) If the board determines in any year that these
6-3 reservations will make a bond issuance unfeasible or damage the
6-4 financial condition of the department the board may formally appeal
6-5 the requirements provided in subsections (k) and (l) of this
6-6 section to the Texas Bond Review board. The Texas Bond Review
6-7 board, in its sole discretion, may modify or waive the allocation
6-8 levels.
6-9 (n) In addition to such other loan originators as the
6-10 department may select, the department shall provide that colonia
6-11 self-help centers and such other community based and nonprofit
6-12 institutions as the board may deem appropriate shall be originators
6-13 of these loans on behalf of the department.
6-14 (o) The department shall structure the single family
6-15 mortgage bond issuances in such a manner as to fully recover the
6-16 costs associated with conducting market studies and analysis
6-17 required in this section from the bond issuances.
6-18 SECTION 3. This Act takes effect September 1, 2001.