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We are in the final countdown to the end of the 80th Session of the Texas Legislature. Memorial Day just can’t come too soon! Tempers are short, and days are long. Here is the current state of play on the IBAT agenda and other items of interest.
PROACTIVE AGENDA
We are most pleased to report that our primary bills are passed and on their way to the Governor. These include HB 944, which prohibits financial institutions (including ILCs) from branching on the premises of a commercial affiliate; HB 1490, which deletes banks from the onerous conflicts reporting for public contracts with local governmental entities; and HB 2219, which clarifies that if a bank has a registered agent, that is the only person who should be served with process for the bank.
HOME EQUITY
HJR 72, which cleans up some of the home equity issues raised by recent litigation, is proceeding through the process. It has passed the House and should be voted out of the Senate Business & Commerce Committee on Friday. Senator Carona is the sponsor in the upper chamber. There will be some tweaking and some legislative history making to clarify several points. As passed by the House, the law clearly permits applications to be oral but they must be reduced to writing and provided to the borrower before closing (either with the settlement statement or earlier, depending on bank practices). Copies of the executed documents may be provided by a title company acting as closer on a transaction. HELOCs may be accessed by checks, so long as they are requested by the borrower and not just sent out unsolicited. The author and another senator will engage in discussions on the floor to clarify as legislative history that the change on ag use valuation (timing=date of closing) is not a change but rather a clarification of existing law. See earlier bulletins for the other, major changes.
The very important technical corrections bill, HB 3928, is on the Senate Intent Calendar for today. Doesn’t mean it will get to the floor today, but it does mean it’s cleared for debate. There are several outstanding issues to be resolved, we are optimistic that an agreement will be reached in the very near future.
As noted earlier, corrective language that would restore the current treatment of loans and securities for apportionment purposes continues to be part of the bill and has not been compromised as the Senate has made several changes to other provisions.
The wheels are wobbling on these bills. Reps. Eiland and Paxton amended SB 1520 (by Wentworth) on the House floor, taking out important notices and protections that we thought were agreed upon. We are urging Sen. Wentworth to NOT concur in the changes but to restore the bill to the passed Senate version. HB 2138 (licensing of tax lien financers) is in the Senate Jurisprudence Committee and may be amended.
It appears that compromises have been worked out on various civil and criminal bills to make sure that inadvertent mistakes by parties (like title companies and appraisers) would not create liability. At the same, there would be new tools to address this growing area of concern.
Boy, there are way too many items in this category! Somehow bills that seemed okay when filed get just a little amendment on them, and suddenly we have a serious concern on our hands. The last two weeks have been full of negotiations and redrafting of corrective language. Here are some of the items that we think that we have fixed lately . . .
HB 2671 by Swinford would create a new type of ag cooperative with rather broad powers. Unfortunately, those powers appeared to include deposit taking, lending, and trust powers, making them a new, unregulated bank competitor. We believe that the offensive sections (creating these powers) are either now deleted or defanged. Full committee action is pending in the Senate.
POSSUM KINGDOM LAND PURCHASES
SB 1326 by Estes would permit lessees of property at Possum Kingdom acquire title from the Brazos River Valley Authority. Unfortunately, the bill as passed in the Senate had a potentially negative impact on pre-existing lienholders who had financed improvements (read: homes) for the lessees. We very much appreciate Senator Estes and his staff working with us on corrective language to fix this unintended consequence.
HB 2738 by Solomons provides some important clarity as to the responsibilities and duties of trustees in foreclosure sales. However, one section appeared to inadvertently eliminate attorneys as trustees! Language was added in committee to fix this.
TEXAS WINDSTORM INSURANCE POOL
HB 2960 makes the funding for the pool more sound by authorizing the issuance of bonds in the event that assessments are inadequate to cover losses due to wind (i.e. hurricanes) for properties in the cat pool. So far, so good. However, the notice to the insured states that in the event of a truly catastrophic event, the taxpayers will not back the pool, and insureds may not get their losses covered! We don’t think that is the intent of the pool. We have asked Sen. Fraser to clarify this on the floor.
HB 3282 would make sure that certain financial advisors to public entities would be regulated by the State Securities Board. We have worked with the promoters of this bill to amend it to make sure that a financial advisor is not required for a public entity seeking traditional bank loans and deposits.
SB 231 by Harris clarifies the coverage of child support liens. Unfortunately, the bill was amended by the House Juvenile Justice Committee to expand the lien to accounts as to which the obligor has a beneficial or community property interest. How would a bank know that? (Short answer: it doesn’t.) We have requested that Sen. Harris strip out the House amendments.
Remember that IBAT will be publishing a White Paper at the end of the session and will be conducting a telephone seminar on June 12 to review the highlights of the session and how you and your bank will be impacted. Mark the date, and watch for more info shortly.
Karen Neeley
General Counsel
Independent Bankers Association of Texas
Cox Smith Matthews Incorporated
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