H.B. No. 2761
AN ACT
relating to the amount of homeowners insurance required in
connection with certain financing arrangements.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. (a) Subchapter B, Chapter 549, Insurance Code,
is amended to conform to Section 1, Chapter 538, Acts of the 78th
Legislature, Regular Session, 2003, by adding Section 549.0551 to
read as follows:
Sec. 549.0551. REQUIRING CERTAIN AMOUNTS OF COVERAGE. (a)
A lender may not require as a condition of financing a residential
mortgage or providing other financing arrangements for residential
property, including a mobile or manufactured home, that a borrower
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.
(b) For purposes of this section, a lender may not include
the fair market value of the land on which a dwelling is located in
the replacement value of the dwelling and its contents.
(b) Section 1, Chapter 538, Acts of the 78th Legislature,
Regular Session, 2003, is repealed.
SECTION 2. Sections 549.056(a) and (d), Insurance Code, as
effective April 1, 2005, are amended to read as follows:
(a) This subchapter does not prevent a lender from requiring
evidence to be produced before the commencement or renewal of a risk
that insurance has been obtained that:
(1) has a fixed termination date;
(2) except as provided by Section 549.0551, provides
adequate coverage in an amount sufficient to cover the debt or loan;
and
(3) will not be canceled without reasonable notice to
the lender.
(d) Except as provided by Section 549.0551, this [This]
subchapter does not prevent a lender from providing, in accordance
with the terms of the mortgage, security agreement, deed of trust,
or other security instrument, insurance coverage adequate to
protect the lender's security interest in property in the event the
borrower fails to provide on or before the 15th day before the
termination date of an existing insurance policy an insurance
policy meeting the requirements established by the lender as
authorized by this chapter. A lender that provides insurance
coverage under this subsection may use information contained in the
existing policy for the purpose of determining that the insurance
coverage provided is adequate.
SECTION 3. To the extent of any conflict, this Act prevails
over another Act of the 79th Legislature, Regular Session, 2005,
relating to nonsubstantive additions to and corrections in enacted
codes.
SECTION 4. The amendment by this Act of Sections 549.056(a)
and (d), Insurance Code, is intended to clarify rather than change
the existing law.
SECTION 5. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 2761 was passed by the House on April
14, 2005, by the following vote: Yeas 140, Nays 0, 2 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 2761 was passed by the Senate on May
5, 2005, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor