HBA-TBM H.B. 2657 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2657 By: Ehrhardt Urban Affairs 3/26/2001 Introduced BACKGROUND AND PURPOSE Under current law the Texas Department of Housing and Community Affairs (TDHCA) is required to help individuals and families of low incomes to find affordable housing through state programs such as the LowIncome Housing Tax Credit Program, the HOME Investment Partnerships Program, the Multifamily Mortgage Revenue Bond Program, and the Housing Trust Fund Program. TDHCA also controls millions of dollars in federal housing funds that it is also required to distribute to assist Texans in finding affordable housing. In recent years, TDHCA has received criticism for the manner in which it provides funding. The single family mortgage bond program has been criticized as not providing funding to low-income families. House Bill 2657 modifies TDHCA's single family mortgage bond program to ensure that it is providing bonds to Texans with the greatest need. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the governing board of the Texas Department of Housing and Community Affairs in SECTION 2 (Section 2306.142, Government Code) of this bill. ANALYSIS House Bill 2657 amends the Government Code to require the Texas Department of Housing and Community Affairs (TDHCA) to issue single family mortgage revenue bonds (bonds) to borrowers who do not receive assistance from private home mortgage lenders or from other housing finance corporations. The bill requires the governing board of TDHCA (board) to adopt by rule a methodology for determining demand within economic and geographic submarkets in the state through a market study. The bill requires TDHCA to analyze using specified factors the potential market demand, loan availability, and private sector home mortgage lending rates available to borrowers who have low incomes and live in certain low income areas and in rural counties. Utilizing the market study and the analysis, the board is required to approve single family mortgage bond programs for underserved markets. In approving a bond program, the board is required to consider specific set-asides or reservations of mortgage loans for underserved submarkets. TDHCA is authorized to use any existing source of funds available to provide credit enhancement, down payment assistance, interest rate reduction, and payment of incentive lender points. TDHCA is required to provide direct assistance to borrowers through principal buydowns, down payment assistance, and credit enhanced products only to individual borrowers in underserved submarkets unless the board determines that the home mortgage credit needs of the submarkets have already been adequately served. The bill requires the board to certify that each bond issued by TDHCA is structured in a manner that serves the credit needs of underserved submarkets. Following board approval and certification of a bond issuance, TDHCA is required to submit the proposed bond issuance to the Texas Bond Review Board (BRB) for review and approval. The bill sets forth provisions for the allocation of mortgage bond loan volume. If the board determines in any year that the specified allocation of loan volume will make a bond issuance infeasible or damage the financial condition of TDHCA, the board is authorized to formally appeal lending requirements to BRB. The bill authorizes the BRB board to modify or waive the allocation levels at its sole discretion. Colonia self-help centers and such other community based and nonprofit institutions as the board deems appropriate are required to be originators of bond loans on behalf of TDHCA. The bill requires TDHCA to structure the single family mortgage bond issuances in such a manner as to fully recover the costs associated with conducting the required market studies and analyses. EFFECTIVE DATE September 1, 2001.