89R2688 JAM-D

By: Parker S.B. No. 1492

A BILL TO BE ENTITLED

AN ACT

relating to housing finance corporations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter E, Chapter 341, Finance Code, is amended by adding Section 341.407 to read as follows:

Sec. 341.407. LOANS TO HOUSING FINANCE CORPORATION. An authorized lender, credit union, or other person involved in a transaction subject to this title may not make a loan to a housing finance corporation unless the corporation presents proof of compliance with Section 394.031(c) or (d), Local Government Code, as applicable.

SECTION 2. The heading to Section 394.031, Local Government Code, is amended to read as follows:

Sec. 394.031. EXERCISE OF POWERS; AREA OF OPERATION.

SECTION 3. Section 394.031, Local Government Code, is amended by adding Subsections (c) and (d) to read as follows:

(c) Subject to Subsection (d), the area in which a housing finance corporation may exercise its powers is limited to:

(1) for a housing finance corporation sponsored by a municipality under Section 394.011, the jurisdictional boundaries of the municipality that sponsored the corporation;

(2) for a housing finance corporation sponsored by a county under Section 394.011, the unincorporated areas of the county that sponsored the corporation; or

(3) for a housing finance corporation sponsored by more than one local government under Section 394.012:

(A) the jurisdictional boundaries of each municipal sponsor of the corporation; and

(B) the unincorporated areas of each county sponsor of the corporation.

(d) A housing finance corporation may exercise its powers outside an area described by Subsection (c) only if a resolution or order, as applicable, approving that exercise of power in the outside area is adopted by the governing body of each sponsoring local government and by the governing bodies of:

(1) each municipality that contains any part of the outside area in which the corporation proposes to operate; and

(2) if proposing to operate in the unincorporated area of a county, each county that contains any part of the outside area in which the corporation proposes to operate.

SECTION 4. Sections 394.032(a) and (e), Local Government Code, are amended to read as follows:

(a) Subject to the limitations of Sections 394.031(c) and (d), a [A] housing finance corporation may:

(1) make contracts and other instruments as necessary or convenient to the exercise of powers under this chapter;

(2) incur liabilities;

(3) borrow money at rates determined by the corporation;

(4) issue notes, bonds, and other obligations; and

(5) secure any of its obligations by the mortgage or pledge of all or part of the corporation's property, franchises, and income.

(e) A housing finance corporation may delegate to the Texas Department of Housing and Community Affairs the authority to act on its behalf in the financing, refinancing, acquisition, leasing, ownership, improvement, and disposal of home mortgages or residential developments, within [and outside] the jurisdiction of the housing finance corporation, including its authority to issue bonds for those purposes.

SECTION 5. Section 394.039, Local Government Code, is amended to read as follows:

Sec. 394.039. SPECIFIC POWERS RELATING TO FINANCIAL AND PROPERTY TRANSACTIONS. A housing finance corporation may:

(1) lend money for its corporate purposes, invest and reinvest its funds, and take and hold real or personal property as security for the payment of the loaned or invested funds;

(2) mortgage, pledge, or grant security interests in any residential development, home mortgage, note, or other property in favor of the holders of bonds issued for those items;

(3) purchase, receive, lease, or otherwise acquire, own, hold, improve, use, or deal in and with real or personal property or interests in that property, [wherever the property is located,] as required by the purposes of the corporation or as donated to the corporation; and

(4) sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all or part of its property and assets.

SECTION 6. Section 394.9025(b), Local Government Code, is amended to read as follows:

(b) Following a public hearing by the governing body of the applicable local government, a housing finance corporation may issue bonds to finance a multifamily residential development to be owned by the housing finance corporation in accordance with the requirements of this chapter [Section 394.004] if the housing finance corporation receives approval of the governing body of that [the] local government.

SECTION 7. Subchapter Z, Chapter 394, Local Government Code, is amended by adding Section 394.9026 to read as follows:

Sec. 394.9026. AUDIT REQUIREMENTS FOR MULTIFAMILY RESIDENTIAL DEVELOPMENTS OWNED BY HOUSING FINANCE CORPORATIONS. (a) In this section, "department" means the Texas Department of Housing and Community Affairs.

(b) A housing finance corporation that owns a multifamily residential development and claims an exemption for the development under Section 394.905(a) must annually submit to the department and the chief appraiser of the appraisal district in which the development is located an audit report for a compliance audit, prepared at the expense of the housing finance corporation and conducted by an independent auditor or compliance expert with an established history of providing similar audits on housing compliance matters, to determine whether the housing finance corporation is in compliance with the conditions imposed for the exemption by this chapter.

(c) Not later than the 60th day after the date of receipt of the audit conducted under Subsection (b), the department shall examine the audit report and publish a report summarizing the findings of the audit. The report must:

(1) be made available on the department's Internet website;

(2) be issued to the housing finance corporation that owns the development that is the subject of an audit, the comptroller, and the governing body of the housing finance corporation's sponsoring local government or governments; and

(3) describe in detail the nature of any failure to comply with the conditions imposed for the exemption by this chapter.

(d) If an audit report submitted under Subsection (b) indicates noncompliance with the conditions imposed by this chapter, a housing finance corporation:

(1) must be given:

(A) written notice from the department or appropriate appraisal district that:

(i) is provided not later than the 90th day after the date a report has been submitted under Subsection (b);

(ii) specifies the reasons for noncompliance;

(iii) contains at least one option for a corrective action to resolve the noncompliance; and

(iv) informs the housing finance corporation that failure to resolve the noncompliance will result in the loss of the exemption under Section 394.905(a);

(B) a period of 60 days after the date notice is received under this subdivision to resolve the matter that is the subject of the notice; and

(C) if a matter that is the subject of a notice provided under this subdivision is not resolved to the satisfaction of the department and appropriate taxing authority during the period provided by Paragraph (B), a second notice that informs the housing finance corporation of the loss of the exemption due to noncompliance with the conditions imposed by this chapter; and

(2) is considered to be in compliance with those conditions if notice under Subdivision (1)(A) is not provided as specified by Subparagraph (i) of that paragraph.

(e) An exemption under Section 394.905(a) does not apply for a tax year in which the department determines that, based on an audit conducted under Subsection (b), a multifamily residential development that is owned by a housing finance corporation created under this chapter is not in compliance with the conditions imposed for that exemption by this chapter.

(f) The initial audit report required by Subsection (b) is due not later than June 1 of the year following the first anniversary of:

(1) the date of acquisition for an occupied multifamily residential development that is acquired by a housing finance corporation; or

(2) the date a newly built multifamily residential development first becomes occupied by one or more tenants.

(g) Subsequent audit reports following the issuance of the initial audit report under Subsection (f) are due not later than June 1 of each year.

(h) An independent auditor or compliance expert may not prepare an audit under Subsection (b) for more than three consecutive years for the same housing finance corporation. After the third consecutive audit, the independent auditor or compliance expert may prepare an audit only after the second anniversary of the preparation of the third consecutive audit.

(i) The department shall adopt forms and reporting standards for the auditing process.

(j) An audit conducted under Subsection (b) is subject to disclosure under Chapter 552, Government Code, except that information containing tenant names, unit numbers, or other tenant identifying information may be redacted.

SECTION 8. Section 394.903, Local Government Code, is amended to read as follows:

Sec. 394.903. TRANSFER [LOCATION] OF [RESIDENTIAL DEVELOPMENT;] RESIDENTIAL DEVELOPMENT SITES. A [(a) A residential development covered by this chapter must be located within the local government.

[(b) The] local government may transfer any residential development site to a housing finance corporation by sale or lease. The governing body of the local government may authorize the transfer by resolution without submitting the issue to the voters and without regard to the requirements, restrictions, limitations, or other provisions contained in any other general, special, or local law. The site location is subject to the requirements of this chapter [may be located wholly or partly inside or outside the local government].

SECTION 9. Section 394.905, Local Government Code, is amended to read as follows:

Sec. 394.905. EXEMPTION FROM TAXES AND FEES [TAXATION]. (a) Notwithstanding any other law, the [The] housing finance corporation, all property owned by it, the income from the property, all bonds issued by it, the income from the bonds, and the transfer of the bonds are exempt, as public property used for public purposes, from license fees, recording fees, and all other taxes imposed by this state or any political subdivision of this state only if the property is located in an area in which the housing finance corporation is authorized to exercise its powers as described by Section 394.031(c) or the exemption is approved by each applicable governing body described by Section 394.031(d).

(b) The corporation is exempt from the franchise tax imposed by Chapter 171, Tax Code, only if the corporation is exempted by that chapter.

SECTION 10. (a) Sections 394.031(c) and (d), Local Government Code, as added by this Act, apply only to the exercise of power by a housing finance corporation made on or after the effective date of this Act. An exercise of power made before the effective date of this Act is governed by the law in effect on the date the power was exercised, and the former law is continued in effect for that purpose.

(b) Subject to Subsection (c) of this section, Section 394.905(a), Local Government Code, as added by this Act, applies only to a tax or fee imposed for a tax year or calendar year, respectively, that begins on or after the effective date of this Act.

(c) Section 394.905(a), Local Government Code, as added by this Act, applies only to a tax or fee to be imposed on a housing finance corporation with respect to an occupied residential development that is acquired by the corporation on or after the effective date of this Act or with respect to a newly built residential development for which a certificate of occupancy is issued on or after the effective date of this Act.

(d) Notwithstanding Section 394.9026(f), Local Government Code, as added by this Act, the initial audit report required to be submitted under Section 394.9026(b), Local Government Code, as added by this Act, for an occupied multifamily residential development that was acquired or for a newly built multifamily residential development that first became occupied, as applicable, before the effective date of this Act must be submitted by the later of:

(1) the date established by Section 394.9026(f), Local Government Code, as added by this Act; or

(2) June 1, 2026.

SECTION 11. 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, 2025.