HBA-TYH H.B. 1547 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1547 By: Danburg Financial Institutions 2/26/1999 Introduced BACKGROUND AND PURPOSE In 1997, the 75th Legislature passed a constitutional amendment allowing home equity lending and reverse annuity mortgages. It was intended to preserve as many homeowners' rights as possible. In 1998, the Senate Interim Committee on State Affairs heard testimony regarding the passage and implementation of home equity lending in Texas. The committee's meetings centered around three principal issues: lack of regulating authority, one-acre urban homestead limitation, and the inability to insure reverse annuity mortgages. In November 1997, H.J.R. 31 was approved by the voters. When H.J.R. 31 passed the legislature, an attempt to clarify the language in the constitution through enabling legislation was unsuccessful. Lenders find themselves in a situation of uncertainty because there is no enabling legislation designating regulatory oversight in home equity lending procedures. Many lenders, including smaller community banks, feel that the Texas home lending law is too restrictive and that interpretation of the law by the courts may result in varying interpretations in different parts of the state. H.B. 1547 authorizes the Finance Commission of Texas and the Credit Union Commission to adopt rules, consistent with Section 50 (Homestead; Extension of Credit Secured by Lien; Protection from Forced Sale; Mortgages, Trust Deeds, and Liens), Article XVI, Texas Constitution, to interpret home equity lending law. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Finance Commission of Texas in SECTION 1 (Section 11.306, Finance Code) and the Credit Union Commission in SECTION 2 (Section 15.402, Finance Code)of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter D, Chapter 11, Finance Code, by adding Section 11.306, as follows: Sec. 11.306. HOME EQUITY LENDING RULES. (a) Authorizes the Finance Commission of Texas (commission) to adopt rules, consistent with Section 50, Article XVI, Texas Constitution, to interpret Subsections (a)(5)-(7) and (e)-(p) of that section. Provides that the rules apply to all persons subject to those subsections, except to a credit union. (b) Authorizes the banking commissioner, savings and loan commissioner, and consumer credit commissioner to propose rules and submit other recommendations to the commission under this section. SECTION 2. Amends Section 15.402, Finance Code, by adding Subsection (d), as follows: (d) Authorizes the Credit Union Commission to adopt rules applicable to credit unions, consistent with Section 50, Article XVI, Texas Constitution, to interpret Subsections (a)(5)-(7) and (e)-(p) of that section. SECTION 3. Provides that this Act takes effect on the date on which the constitutional amendment proposed by __J.R. No. _____, 76th Legislature, Regular Session, 1999, takes effect. Provides that if that amendment is not approved by the voters, this Act has no effect. SECTION 4.Emergency clause.