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A BILL TO BE ENTITLED
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AN ACT
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relating to certain authorized investments for domestic life, |
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health, and accident insurers. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 425.118, Insurance Code, is amended by |
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amending Subsections (d) and (e) and adding Subsections (d-1) and |
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(e-1) to read as follows: |
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(d) An obligation secured by a first lien on a leasehold |
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estate in real property must be payable in one or more installments |
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of an amount or amounts sufficient to ensure that, at any time |
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during [after the expiration of two-thirds of] the original term of |
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the obligation, the principal balance on the obligation is not |
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greater than the principal balance would have been if the |
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obligation had been amortized over the original term of the |
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obligation in equal monthly, quarterly, semiannual, or annual |
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payments of principal and interest with payments of interest only |
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for the first five years of the original term of the obligation. |
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(d-1) Subsections (c) and (d) do not apply to an obligation |
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secured by a first lien on a leasehold estate in real property if: |
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(1) the amount of the obligation does not exceed 75 |
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percent of the value of the leasehold estate; |
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(2) the lease agreement provides that the fee simple |
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estate in the real property transfers automatically to the lessee |
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on or before the expiration of the term of the leasehold estate, |
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including any renewal options exercisable by the lessee; or |
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(3) the lease agreement provides that the lessee has |
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an option to purchase the fee simple estate in the real property on |
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or before the expiration of the term of the leasehold estate, |
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including any renewal options exercisable by the lessee, for an |
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amount that is less than 10 percent of the appraised value of the |
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real property, and the insurance company has a contractual right if |
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the lessee does not exercise that option to acquire the fee simple |
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estate in the real property for that same amount, by assignment from |
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the lessee or otherwise. |
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(e) Except as provided by Subsection (e-1), if [If] any part |
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of the value of buildings is to be included in the value of real |
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property or a leasehold estate in real property to secure an |
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obligation under this section: |
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(1) the buildings must be covered by adequate property |
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insurance, including fire and extended coverage insurance, issued |
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by: |
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(A) an insurer authorized to engage in business |
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in this state; or |
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(B) an insurer recognized as acceptable to issue |
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that coverage by the insurance regulatory official of the state in |
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which the real property is located; |
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(2) the amount of insurance provided by one or more |
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policies may not be less than the lesser of: |
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(A) the unpaid balance of the obligation; or |
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(B) the insurable value of the buildings; and |
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(3) the loss clause under each policy must be payable |
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to the insurance company as the company's interest may appear. |
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(e-1) The property insurance otherwise required for |
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purposes of Subsection (e) is not required if the borrower |
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maintains a net worth as indicated in the borrower's audited |
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financial statements for the most recent fiscal year of at least |
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three times the amount of the indebtedness. |
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SECTION 2. Section 425.118, Insurance Code, as amended by |
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this Act, applies only to an investment made on or after the |
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effective date of this Act. An investment made before the effective |
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date of this Act is governed by the law as it existed immediately |
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before that date, and that law is continued in effect for that |
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purpose. |
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SECTION 3. This Act takes effect September 1, 2017. |