C.S.H.B. 1009 78(R) BILL ANALYSIS
C.S.H.B. 1009
By: Hardcastle
Financial Institutions
Committee Report (Substituted)
BACKGROUND AND PURPOSE
Since legislation affecting the manufactured housing industry passed
during the 77th legislative session, sales of manufactured homes have
decreased dramatically and numerous manufacturing facilities throughout
the state have closed. Manufactured housing represents an affordable
alternative to site-built homes and is the only unsubsidized alternative
housing available in Texas. One of the provisions of the recently enacted
legislation virtually eliminated the ability of consumers to finance the
acquisition of a manufactured home using a chattel loan, which had the
effect of limiting the options for consumers to finance their new homes.
A chattel loan is a transaction which creates a security interest in
personal property, rather than real property.
C.S.H.B. 1009 restores the availability of chattel loans to finance the
purchase of a manufactured home and enhances the consumer protections
added by the legislature last session. The bill protects local
governments by requiring the mandatory escrow of ad valorem taxes on
manufactured homes financed by chattel loans. The bill also raises the
level of expertise of industry professionals by requiring certification
and continuing education for anyone involved in the sale of manufactured
homes. The bill establishes graduated penalties for "hot haulers," or
individuals who transport a manufactured home without a proper permit.
RULEMAKING AUTHORITY
It is the opinion of the committee that this bill does not expressly
delegate any additional rulemaking authority to a state officer,
department, agency, or institution.
ANALYSIS
C.S.H.B. 1009 amends various sections of the Occupations Code (or Art.
5221f, V.T.C.S.), Property Code, Finance Code, Tax Code, and
Transportation Code to classify manufactured homes as personal property
and restore the capability of financing the purchase of a manufactured
home using a chattel loan, unless the home must be classified as real
property. In doing so, the bill deletes various provisions of law that
classify a manufactured home as real property, the financing of which
would require a real property loan, unless the home were specifically
classified as personal property.
Property Classification
The bill amends Section 1201.222, Occupations Code (or Section 19A, Art.
5221f, V.T.C.S.) and Section 2.001, Property Code to classify as real
property a manufactured home if
_it is permanently attached to real property;
_it is titled in the name of the consumer under a deed or contract for
sale;
_the manufacturer's certificate of origin or the original document of
title has been surrendered for cancellation; and
_a notice or certificate of attachment has been filed in the real property
records of the county in which the home is located.
A manufactured home is also classified as real property if the homeowner
has entered into a lease for the real property on which the home is
located and the lease specifically permits the recording of a notice or
certificate of attachment. Otherwise, a manufactured home is classified
as personal property.
The bill amends Section 1201.217, Occupations Code to permit, rather than
require, that the manufacturer's certificate or the original document of
title to be surrendered to the Texas Department of Housing and Community
Affairs ("the department") for cancellation if the manufactured home is
permanently attached to real property. The bill amends Section 2.001,
Property Code to require the department to issue a document of title for a
new and untitled manufactured home at the first retail sale if the home is
not classified as real property. Regardless of whether the manufactured
home is classified as real or personal property, the department shall
issue a document of title for a previously titled manufactured home at any
subsequent sale of the home.
C.S.H.B. 1009 amends Section 32.014 Tax Code, to provide that a
manufactured home is appraised as an improvement to real property if the
homeowner has been issued a certificate of attachment by the department
and the homeowner owns the real property on which the home is affixed. In
this case, a tax lien attaches to the property on which the home is
affixed. The bill provides that a manufactured home is appraised
separately from real property if the homeowner has not been issued a
certificate of attachment by the department, regardless of who owns the
real property. In this case, a tax lien does not attach to the property
on which the home is affixed.
Consumer Safeguards
The bill permits a consumer to rescind a contract for sale, exchange, or
lease-purchase of a manufactured home without penalty or charge up to
three days after the contract was signed. The bill permits a retailer to
require an earnest money deposit on a specially ordered manufactured home
if an earnest money contract has been signed by all parties, an original
binding loan letter has been presented to the consumer, and the consumer
has not rescinded the contract. The bill amends Section 1201.508,
Occupations Code to prohibit a retailer from requiring a consumer to make
a down payment on the acquisition of a manufactured home from the
retailer's inventory until the loan contract is executed.
The bill amends Section 1201.162, Occupations Code (or Sec, 21(a), Art.
5221f, V.T.C.S.) to modify language to the disclosure which is provided
before a consumer completes a credit application for a manufactured home.
The bill adds language to the disclosure outlining appraisals, escrow of
ad valorem taxes, insurance, types of mortgages available, and the
consumer's right of rescission. With respect to types of mortgages, the
amended notice specifically states that a real estate mortgage may have a
lower interest rate than a chattel mortgage. The bill requires this
notice to be in 12-point type, rather than 10-point type.
For a chattel loan, a retailer shall provide a customer the required
disclosure statement and a fully filled out contract, signed by the
retailer, at least 24 hours before the contract is executed by the
consumer. If a retailer provides a nonbinding estimate regarding the
contract price, monthly payment, or interest rate for a chattel loan, the
estimate must be made in writing and made in good faith. For a chattel
loan, the creditor must require the escrow of ad valorem taxes on the
manufactured home by the consumer. For a real property loan, the creditor
is not required to provide for the escrow of ad valorem taxes. The bill
reduces the requirement that a consumer provide the retailer with a
legible copy of the deed containing a legal description of the property to
real property loans only. The bill deletes the requirement that the
retailer (or others as specified) must file a notice of installation with
the county.
Professional Standards
C.S.H.B. 1009 amends Section 1201.113, Occupations Code to require the
Manufactured Housing Board ("the board") to administer certification and
continuing education programs for persons regulated under the Texas
Manufactured Housing Standards Act. Such persons, and other people
directly involved in the sale of manufactured housing, must complete eight
hours of certification and continuing education annually. The bill
eliminates the existing authority for a voluntary certification program.
The board is required to suspend the license of any person who does not
complete the required program and to reinstate the license upon
completion. The bill requires an organization seeking a contract to
administer this program to submit an application, and the board is
permitted to charge an fee to cover necessary expenses.
C.S.H.B. 1009 permits the director of the Manufactured Housing Board ("the
director") to assess tiered administrative penalties against retailers who
fail to provide information to consumers as required by statute. The
director may not suspend or revoke a retailer's license for a single
violation of the laws requiring the provision of information to a
consumer. However, the director may suspend a license for a second
violation and suspend or revoke a license for subsequent violations.
Other Provisions
The bill amends Section 623.104, Transportation Code to increase the
penalties for moving a manufactured home over a highway or street without
a permit. The bill increases the fine for the first offense to not more
than $1,000 from $500. The fine is increased to not more than $2,000 for
a second offense and not more than $4,000 for a subsequent offense.
The bill sets out the relationship of the bill's provisions to the
adoption of various nonsubstantive revisions of the statute, repeals
sections of statute both in current law and in a nonsubstantive revision
of the statute, and determines the effective date of changes made by the
bill with respect to certain penalties, appraisals, and tax liens. The
bill provides that its provisions amending the Occupations Code control if
a particular nonsubstantive revision takes effect and provisions amending
the Vernon's Texas Civil Statutes control if that revision does not take
effect.
EFFECTIVE DATE
On passage or, if the Act does not get the necessary vote, the Act takes
effect September 1, 2003. Provisions of the bill related to the
certification and continuing education program and the appraisal of
manufactured homes take effect January 1, 2004.
COMPARISON OF ORIGINAL TO SUBSTITUTE
The substitute adds provisions granting a right of rescission, requiring a
retailer to provide a consumer with the chattel loan contract 24 hours
before the consumer executes it, prohibiting a retailer from requiring a
down payment for certain in-stock homes, and ensuring certain nonbinding
estimates are in good faith. The substitute adds language permitting a
retailer to obtain a deposit on specially ordered manufactured homes under
certain conditions. The substitute adds a provision to the required
notice alerting consumers to the availability of real estate loans at
potentially lower interest rates than chattel loans. The substitute adds
language changing the notice to 12-point type.
The substitute adds provisions making the escrow of ad valorem taxes for a
chattel loan mandatory; escrow is made optional for real estate loans.
The substitute deletes the provisions of the original limiting the
liability of an employer if its employees complete the certification and
continuing education program. The substitute clarifies that a license is
suspended, and not forfeited as in the original, if a licensee does not
complete that program. The substitute adds provisions providing for
graduated penalties for retailers which fail to provide consumers with
information as directed by law.
The substitute adds the provision increasing penalties for moving a
manufactured home without a permit. The substitute provides for immediate
effect for most provisions, and adds language relating to the bill's
interaction with certain nonsubstantive revisions.