SRC-LBB C.S.S.B. 1211 78(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 1211
78R12320 DWS-DBy: Van de Putte
Business & Commerce
4/16/2003
Committee Report (Substituted)


DIGEST AND PURPOSE 

Currently, Texas law limits collateral protection insurance for real
property to the amount of the lender's interest in the collateral while
the debtor's equity in the property is completely unprotected.  Homeowners
are having difficulty finding insurers willing to write homeowners
insurance coverage in Texas.  Consequently, many borrowers are without
insurance coverage for their homes except that which may be force placed
by their lenders.  C.S.S.B. 1211 authorizes a creditor, at the creditor's
option, with respect to collateral protection insurance covering real
property, to obtain insurance that will cover either the replacement cost
of improvements or the amount of unpaid indebtedness. 

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 307.051, Finance Code, by amending
Subsection(e) and adding Subsection (e-1), as follows: 

(e)  Prohibits a premium for collateral protection insurance covering
collateral other than real property from being based on an amount that
exceeds the actual amount of unpaid indebtedness of the debtor as of the
effective date of the policy. 

(e-1)  Authorizes a creditor, at the creditor's option, with respect to
collateral protection insurance covering real property, to obtain
insurance that will cover either the replacement cost of improvements or
the amount of unpaid indebtedness, subject to policy limits.  Requires the
debtor to be obligated to reimburse the creditor for the premium,
interest, and any other charges incurred by the creditor in connection
with the placement of the insurance.  Authorizes the creditor to use the
previous evidence of insurance coverage furnished by the debtor to
determine the sufficient level of replacement cost coverage to be
provided.  

SECTION 2.  Amends Sections 307.052(a) and (b), Finance Code, as follows:

(a)  Replaces the phrase "equal to the debtor's indebtedeness to the
creditor" with "the creditor specifies," in Subdivision (A)(i). 

(b)  Includes in the items the creditor must provide on a notice to each
debtor  "if collateral protection insurance covering real property is
obtained under Section 307.051(e-1), that coverage may be available to the
debtor through the Texas FAIR plan at a lower cost and contact information
about the Texas Fair Plan." 

SECTION 3.  Makes application of this Act prospective.

SECTION 4.  Effective date:  upon passage or September 1, 2003.