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Appendix D:
Legislation and Studies


Legislation Passed by the 2001 Texas Legislature

SB 317 and SB 272 instructed the Finance Commission of Texas to survey lenders in Texas and provide a report to the Texas Legislature in 2003 on predatory lending practices. The Finance Commission and the Texas Legislative Council created a memorandum of understanding so that the council produce, disseminate and conduct the survey and study for the Legislature with the assistance of the Texas Consumer Credit Commission. The Texas Mortgage Bankers Association provided a list of its mortgage lender members to the Consumer Credit Commission.[80]

SB 317 required that the Finance Commission of Texas agencies “collect data from entities making mortgage loans using the data formats of the HMDA of 1975 and other data fields...” The Finance Commission of Texas is currently collecting data from mortgage lenders and brokers about mortgage loans. In accordance with the Texas Legislature’s mandate to identify mortgage-lending patterns in Texas, the Finance Commission has asked for information from depository institutions, finance companies, mortgage brokers and mortgage bankers. This confidential survey will provide more comprehensive data than is provided by Home Mortgage Disclosure Act data and will enable researchers to study the relational aspects of mortgage lending such as the relationship between a borrower’s credit history and loan interest rate.Survey recipients were not required to provide data for all loans during 2000 and 2001, but only for a very specific period.

SB 1581 mandated that a lender provide a written notice to borrowers who apply to receive a home loan with an interest rate of 12 percent or greater. The bill’s effective date of September 1, 2001 created the need for rapid development of the new disclosure. On August 17, 2001, the Finance Commission of Texas and its regulatory agencies, the financial services industry in Texas and consumer groups in the state adopted the new notice to encourage consumers to be more knowledgeable about the lending process, contact their local housing counselor and shop lenders for the lowest mortgage rate available. A special toll-free consumer number was established 1-866-303-INFO as a new single point of access to the regulatory oversight agencies. A Spanish language version of the disclosure notice was also published. As of September 1, 2002, the Office of the Consumer Credit Commissioner began gathering data on loans that may be considered “high cost” home loans. They also maintain a list of HUD-approved housing counselors available on their Web site and the toll-free home loan hotline.


Agency Studies in 2001 and 2002

Analysis of Small Business Lending in Texas represented the fourth phase of the Texas Finance Commission's studies into the availability, quality and prices of financial services and the practices of business entities providing these services, focusing on non-agricultural small business lending. The University of Texas at El Paso’s Institute for Policy and Economic Development conducted the study, which consists of a comprehensive mail survey that generated 1,567 responses from businesses in Texas with less than 100 employees.

The primary objectives of the study were to discern the nature and characteristics of non-agricultural small business lending in Texas, including who receives and who provides credit. The study was also to identify the types of small business credit available in Texas, credit pricing, and to determine whether competitive market pressures influence this area of lending and if legitimate small business lending needs are being met.

Based on the scope of the study, three general conclusions resulted: (1) access to lending opportunities is primarily through traditional banking institutions; however, many small businesses are turning to other sources to obtain loans; (2) access to lending is broadly available even among small businesses that exhibit the most extreme set of conditions that work against loan approval; and (3) within some areas of the state there exist varying patterns and conditions that lead to differences in how small business lending is conducted.

In December 2002, the Texas Finance Commission released the results of a research study it commissioned on agricultural lending in Texas. Research on Agricultural Lending in the State of Texas, conducted by Analytica, Inc. of Houston, Texas, focused on three areas: 1) the collection of statistical data on agricultural businesses in Texas during the past 20 years, 2) federal government-sponsored agricultural lending and support programs and 3) a collection of current data to ascertain credit availability to agricultural businesses today. The study was part of a broader mandate in the Texas Finance Code requiring the Finance Commission to conduct research on: (1) the availability, quality and prices of financial services, including lending and depository services, offered to individual consumers, agricultural businesses and small businesses and (2) the practice of business entities in this state that provide financial services to individual consumers, agricultural businesses and small businesses. The study compiled historical data on agricultural production between 1910 and 2000 and data on agricultural lending from the Federal Reserve Bank between 1986 and 2002. It also drew upon interviews conducted with experts on agricultural production and lending in Texas and interviews with a random sample of the state’s ranchers and farmers. The historical data showed that Texas experienced a fairly stable demand in the last three years for agricultural loans, for the availability of funds, loan renewals and extensions, loan repayments, required collateral and loan-to-deposit ratios. However, the study also found that there has been a moderate increase in the total amount of agricultural loans and in the amount and number of these loans from the Farm Service Agency.[81]

Endnotes

[80] Mortgage bankers Association of America, http://www.mbaa.org. (Last visited January 3, 2003.)

[81] Analytica, Inc., Research on Agricultural Lending in the State of Texas: A Report for the Texas State Finance Commission, September 2002, pp. i-ii.