85th TEXAS LEGISLATURE – 2017
INDEPENDENT BANKERS ASSOCIATION OF TEXAS
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The Independent Bankers Association of Texas (IBAT) has historically promoted a proactive legislative agenda at each session of the Texas Legislature. Perhaps as important, we will again be dealing with a number of legislative initiatives – some well-intentioned – impacting foreclosure processes, fees, taxation, lien law, credit allocation and a host of other issues. We will remain vigilant and engaged to protect the exclusive interests of the community banking industry.
IBAT will be focusing on the following proactive legislation in the 85th Texas Legislative Session:
Home Equity Enhancements. (HJR 99, SJR 60) IBAT, along with the other financial services trade groups, has been working collaboratively with the Texas Association of Realtors to address a number of issues impacting banks’ ability to make home equity loans in Texas, and as importantly, allowing Texas homeowners the ability to access what in most cases is their most significant asset.
This “agreed to” bill addresses the following issues:
- 3% Fee Cap. Fees paid by a borrower to initiate a home equity loan are capped in the Constitution at 3%. This has precluded those homeowners who wish to borrow a more modest amount on the equity in their homes from accessing this option. We are proposing that the fee cap be lowered to 2%, and that costs for survey, appraisal and title be excluded from the cap.
- “Seasoned Refinance”. A homeowner with an existing home equity loan in existence for at least one year will be able to refinance into a “traditional” mortgage, which in most cases will result in a lower interest rate and closing costs.
- Home Equity Lines of Credit (HELOC). Current law allows a homeowner to borrow up to 80% of the appraised value of their home, unless they have opted for a HELOC. However, additional advances cannot be made until the LTV is below 50%. This confusing requirement will be dropped, and homeowners with HELOCs will be able to draw up to 80% of LTV.
- Agriculture Use Property. Current law prohibits a home equity loan on property designated for agriculture use unless such property is used primarily for the production of milk. Under this proposal, all homestead property will be eligible for home equity loans.
Multi-party Account Disclosure. (HB 1752, SB 714) In a well-intentioned bill last session (SB 1791), the account opening process was significantly impacted by a new required form regarding multi-party account disclosures. The companion bills introduced will clarify, simplify and expedite the process, while still providing the customer with the necessary information to make an informed decision.
Multi-party Account Types. (HB 1954) The Probate Code and now the Estates Code include two account types that have created confusion to bankers and customers alike. This legislation will eliminate “trust account” and “convenience account” from statute, as these are antiquated terms that are no longer used. Existing accounts are grandfathered.
Disclosure of Interested Parties. (HB 1295) Last session, HB 1295 was introduced to provide full disclosure and transparency in government contracts (including public funds), and required reporting to the Texas Ethics Commission if the contract was in excess of $1 million. This bill as finally passed required a disclosure of insiders, which is filed with the Texas Ethics Commission. We appreciate the efforts of Representative Capriglione to exclude contracts with “federally insured financial institutions” in a clean-up bill filed this session.
Public Funds Investment. (HB 2647, HB 2648) IBAT is working with several parties to ensure that public entities can invest their funds with community banks on a fully secured basis and keep their funds working in their respective communities. Federal Home Loan Bank Letters of Credit have long been authorized and accepted as an alternate source of security for public funds deposits. We are seeking clarification to ensure these instruments are also acceptable for securing public fund investments. Additionally, we are seeking clarification that federally insured demand deposit accounts are an authorized investment for public entities.
Property Tax Lenders. (HB 2832, SB 1397) We continue to receive complaints from bankers who have had issues with property tax lenders. Additionally, there are concerns being raised by consumer advocates that such arrangements are creating additional financial difficulties for already stressed consumers and small businesses. These companion bills require a customer to notify existing lienholders 10 days prior to entering into a property tax loan to ensure they have all the information necessary to make an informed decision.
Right of a Merchant to Decline a Transaction. (HB 2839, SB 1381) Stolen and fraudulent debit and credit cards continue to create problems for both consumers and community banks. IBAT’s efforts to address this over the past several sessions have been met with formidable opposition. These companion bills simply state that a merchant may request photo identification, and may decline a transaction at point of sale. It is entirely permissive, there are no penalties and no shift in liability between the parties.
Data Security Breach. (HB 2333, SB 1409) IBAT, along with several other financial institution trade groups, has attempted over past sessions to bring some accountability to entities experiencing a security breach resulting in fraud losses and card reissue costs to financial institutions. In the event an entity accepting card payments opts to keep sensitive information and is breached, these companion bills set up a protocol for prompt notification to both the Attorney General and any affected financial institutions, as well as create a “Data Security Breach Victim Compensation Fund” to reimburse consumers and financial institutions for their costs incurred. A $50 per breached card civil penalty is assessed from which the Attorney General is directed to compensate the victims.
Bank Investments to Promote Public Welfare and Community Development. (HB 2831) State banks are more limited than national banks in their ability to make equity investments to promote public welfare and community development. These investments are important not only for the community and economic development, but are also a critical component of compliance with the “investment test” in the Community Reinvestment Act for banks with assets in excess of $1.226 billion. This proposal increases the aggregate investment in community development projects (excluding loans) to 15% of capital, providing parity with national bank limits.
Updated March 13, 2017
If you are interested in background information on any of the bills listed above, click here.
84th Texas Legislature