SRC-AMY H.B. 1338 78(R)   BILL ANALYSIS


Senate Research Center   H.B. 1338
78R9345 KCR-DBy: Taylor (Averitt)
Business & Commerce
5/17/2003
Engrossed


DIGEST AND PURPOSE 

Homeowners insurance policies and personal property policies used in Texas
that are "replacement cost coverage" or that have replacement cost
endorsements require a dwelling to be insured for an amount close to the
dollar figure needed to replace the dwelling in the event of a total loss.
This requirement allows a consumer, in the event of a loss, to restore a
home to its condition before a loss, including in the event of a fire or
tornado. However, some lenders have required consumers to insure their
homes for an amount that at least equals the loan value. Considering the
value of land, there are cases where this requirement results in the
consumer being required to purchase a higher level of insurance for a home
than is needed to replace the home in the event of a total loss.  H.B.
1338 provides that no lender may require, in connection with certain
financing arrangements, a borrower to purchase homeowners, mobile or
manufactured home, or other residential property insurance coverage in an
amount that exceeds the replacement value of the dwelling and its
contents.  


RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to
a state officer, institution, or agency. 
 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 2, Article 21.48A, Insurance Code, by adding
Subsection (g) to provide that no lender, as a condition of financing a
residential mortgage or providing other financing arrangements for
residential property, including a mobile or manufactured home, may require
a borrower to purchase homeowners insurance coverage, mobile or
manufactured home insurance coverage, or other residential property
insurance coverage in an amount that exceeds the replacement value of the
dwelling and its contents, regardless of the amount of the mortgage or
other financing arrangement entered into by the borrower.  Prohibits a
lender from including the fair market value of the land on which a
dwelling is located in the replacement value of the dwelling and its
contents. 

SECTION 2.  Effective date:  upon passage or September 1, 2003. 
            Makes application of this Act prospective to January 1, 2004.