S.B. 521 78(R)    BILL ANALYSIS


S.B. 521
By: Staples
Financial Institutions
Committee Report (Unamended)


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. 

S.B. 521 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

S.B. 521 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.  The department shall issue a document of
title for a previously titled manufactured home at any subsequent sale of
the home regardless of whether the home is to be temporarily or
permanently installed on real property owned by the home buyer.   

Appraisal and Taxation

S.B. 521 amends Section 25.08, Tax Code to provide that a manufactured
home shall be listed together with the land on which it is affixed if 
_the homeowner has been issued a certificate of attachment by the
department; 
_the homeowner owns the land on which the home is affixed; and
_the land is not encumbered by a mortgage, deed of trust, or other
interest. 
A manufactured home is otherwise listed separately from the land in which
it is affixed.  This determination occurs regardless of the home's
classification under the Property Code.  The bill amends Section 32.014,
Tax Code, to provide that a tax lien attaches to the land on which a home
is affixed if the home is listed together with the land.  A tax lien does
not attach to the land on which a home is affixed if the home is listed
separately from the land.  The bill provides that Section 32.014, Tax Code
prevails over Chapter 1201, Occupations Code to the extent of any
conflict. 

The bill amends Section 32.03, Tax Code to define "unpaid taxes due" as
the sum of all unpaid taxes, penalties, and interest due for a previous
tax year plus all taxes due for the current tax year. If taxes have not
been levied in the current year, then an estimate is used to calculate
unpaid taxes due.  The bill provides that a bona fide purchaser for value
or the holder of a lien does not have to pay taxes if the chief appraiser
states that no unpaid taxes are due, except to the extent that tax
liability for a year exceeds "unpaid taxes due." 

Consumer Safeguards

S.B. 521 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 Section 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, a creditor
is not required to provide for the escrow of ad valorem taxes unless the
creditor does so for other loans secured by real property.  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

S.B. 521 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 application fee to cover necessary expenses. 

Penalties

S.B. 521 amends Section 1201.605, Occupations Code to permit the director
of the Manufactured Housing Board to assess administrative penalties
against retailers who fail to provide information to consumers as required
by statute.  The penalty may not exceed $1,000 for the first violation,
$2,000 for the second violation, and $4,000 for each subsequent violation.

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 $1,000
from $500.  The fine is increased to $2,000 for a second offense and
$4,000 for a subsequent offense.  A person commits an offense if the
person knowingly provides compensation to another for the illegal movement
of a manufactured home.  Such an offense is a misdemeanor punishable by a
fine of $1,000. 

Other Provisions

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 V.T.C.S. 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 and
taxation of manufactured homes take effect January 1, 2004.