CHAPTER 2304. HOUSING REHABILITATION

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GOVERNMENT CODE

TITLE 10. GENERAL GOVERNMENT

SUBTITLE G. ECONOMIC DEVELOPMENT PROGRAMS INVOLVING BOTH STATE

AND LOCAL GOVERNMENTS

CHAPTER 2304. HOUSING REHABILITATION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 2304.001. SHORT TITLE. This chapter may be cited as the

Texas Housing Rehabilitation Act.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.002. PURPOSES. (a) The purposes of this chapter are

to provide a means by which the deterioration of housing and the

decline of residential areas throughout the state can be arrested

and prevented.

(b) The purposes of this chapter are public purposes for which

money may be borrowed, loaned, and spent.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.003. DEFINITIONS. In this chapter:

(1) "Borrower" means a household whose application for a housing

rehabilitation loan is approved under this chapter by a local

government.

(2) "Department" means the Texas Department of Housing and

Community Affairs.

(3) "Fund" means the Texas housing rehabilitation loan fund.

(4) "Household" means one or more persons owning housing.

(5) "Housing" means a structure that is on a permanent

foundation and that consists of one to four family units used

only for residential purposes.

(6) "Housing rehabilitation" means the repair, renovation, or

other improvement of housing to make the housing decent, safe,

sanitary, and more habitable.

(7) "Housing rehabilitation loan" means a loan made under this

chapter.

(8) "Local agency" means a:

(A) nonprofit organization whose principal purpose is to improve

housing conditions; or

(B) local housing authority, urban renewal agency, or other

public entity.

(9) "Local government" means a county or municipality.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.004. GENERAL POWERS OF DEPARTMENT. (a) The

department has the powers necessary or appropriate to carry out

the purposes of this chapter.

(b) The department may:

(1) make an agreement with any other person in carrying out its

powers or duties under this chapter;

(2) spend funds appropriated to it by the legislature to pay for

staff, travel expenses, supplies or equipment, or contracts for

services necessary to carry out its powers or duties under this

chapter; or

(3) seek and accept funds from any source.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.005. AUTHORITY OF DEPARTMENT TO ADOPT MINIMUM HOUSING

CODE STANDARDS. The department shall adopt the minimum housing,

building, fire, and related code standards that apply in

designated areas for which a housing rehabilitation plan is

approved by the department and for which local government

standards are not in effect.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.006. LIMITATION ON CONSTRUCTION OF HOUSING OR

ACQUISITION OF PROPERTY BY DEPARTMENT. (a) The department may

not construct housing.

(b) The department may not acquire housing except to enforce a

lien under Subchapter D.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.007. PROHIBITION ON BORROWING, INCURRING OBLIGATIONS,

OR PLEDGING CREDIT. The department may not borrow money, incur

monetary obligations, or pledge in any manner the credit or

taxing power of the state or a political subdivision of the

state.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.008. ALLOCATION OF AVAILABLE LOAN FUNDS. If the

amount of housing rehabilitation loans anticipated to be made in

a fiscal year exceeds the estimated available funds for that

year, the department shall allocate the estimated available funds

for that year among the local governments that have filed housing

rehabilitation area plans with the department. In allocating the

available funds, the department shall take into account the

probable amount of housing rehabilitation loans to be made by

each local government.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.009. RELATIONSHIP OF DEPARTMENT AND LOCAL GOVERNMENTS.

(a) The department shall adopt standards and procedures for the

administration of this chapter by a local government or local

agency.

(b) The department may provide technical assistance to a local

government.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.010. DESIGNATION OF LOCAL AGENCY BY LOCAL GOVERNMENT.

The governing body of a local government may designate one or

more local agencies to exercise a power or duty of the local

government under this chapter. The governing body may withdraw

the delegated power or duty at any time.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.011. EDUCATION PROGRAM CONDUCTED BY LOCAL GOVERNMENT.

A local government engaged in housing rehabilitation under this

chapter shall conduct a general education program to inform

residents in designated areas of methods for maintaining their

housing and of the availability of housing rehabilitation loans.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

SUBCHAPTER B. HOUSING REHABILITATION LOAN FUND

Sec. 2304.021. FUND. (a) The Texas housing rehabilitation loan

fund is in the state treasury.

(b) The department may designate separate accounts in the fund

and the purposes of the accounts.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.022. DEPOSITS TO FUND. The following money shall be

credited to the fund:

(1) money appropriated by the legislature for housing

rehabilitation loans;

(2) money received from other sources for the purpose of making

housing rehabilitation loans;

(3) money received from borrowers as payments on their housing

rehabilitation loans;

(4) income from the transfer of interests in property acquired

in connection with housing rehabilitation loans; and

(5) interest earned on deposits and investments of the fund.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.023. PURPOSES OF FUND. The fund may be used only for:

(1) financing housing rehabilitation loans, including the

administrative charge imposed under Section 2304.068 by a local

government; and

(2) paying the expenses incurred by the department in connection

with the acquisition or disposition of real property under this

chapter.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.024. INVESTMENT AND DISBURSEMENT OF FUND. The

comptroller shall invest and disburse the money credited to the

fund on the written authorization of the executive director of

the department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 8.72, eff.

Sept. 1, 1997.

SUBCHAPTER C. HOUSING REHABILITATION AREA PLAN

Sec. 2304.041. DESIGNATION OF AREA AND PREPARATION OF PLAN. (a)

A local government may allow households in a specific area

within its boundaries to apply for housing rehabilitation loans

by:

(1) designating the specific area; and

(2) preparing a housing rehabilitation plan for the designated

area.

(b) A local government may designate more than one area within

its boundaries.

the standards established by the department. The area plan must

be in the form prescribed by the department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.042. CONTENTS OF AREA PLAN. A housing rehabilitation

area plan must contain relevant information about the area,

including:

(1) a description of the physical, social, and economic

characteristics of the area;

(2) a description of the housing conditions in the area;

(3) an assessment of the need for housing rehabilitation loans

in the area, including:

(A) the number and characteristics of households in the area;

and

(B) the average and total loan amounts needed;

(4) a description of the methods by which the local government

preparing the plan will determine whether the rehabilitation of

housing in the area is economically feasible;

(5) a description of the methods by which:

(A) rehabilitation work will be supervised; and

(B) compliance with departmental regulations governing

materials, fixtures, and rehabilitation contracts will be

ensured;

(6) a description of the methods and procedures that will be

used to enforce:

(A) local housing, building, fire, and related codes; or

(B) the standards adopted by the department under Section

2304.005, if codes of those types have not been enacted;

(7) an assessment of the need for additional public improvements

and public services in the area and a description of the specific

means by which the improvements and services will be provided;

and

(8) a description of the methods by which private investment to

improve conditions in the area will be encouraged.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.043. APPROVAL OF AREA PLAN. (a) A local government's

area plan must be approved by resolution or order of the

governing body of the local government and must be submitted to

the department for review.

(b) The department shall approve the plan if the area meets the

standards established by the department and if the plan contains

the required information.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.044. REJECTION OF AREA PLAN. (a) The department

shall return a housing rehabilitation area plan to the local

government submitting it if the area for which the plan is

prepared does not meet the department's standards or if the plan

does not contain the required information. The department shall

include with the returned plan a list of deficiencies.

(b) An area plan may be corrected and resubmitted for approval

by the department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

SUBCHAPTER D. HOUSING REHABILITATION LOANS

Sec. 2304.061. PRIMARY USE FOR LOAN. A housing rehabilitation

loan must be used primarily to make housing comply with

applicable state, county, or municipal housing codes or

standards, including building, fire, health, housing maintenance,

or similar codes.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.062. DEPARTMENT LOAN RULES. (a) The department shall

adopt rules governing the making and servicing of a housing

rehabilitation loan and the foreclosure of a loan in default. The

rules must include:

(1) the requirement that a housing rehabilitation loan be

evidenced by a promissory note payable to the state and be

secured by a lien on real property in the state; and

(2) the standards under which a household in an area designated

by a local government may qualify for a housing rehabilitation

loan.

(b) In adopting the standards under Subsection (a)(2), the

department shall take into account:

(1) household gross income;

(2) household income available for housing needs;

(3) household size;

(4) the value and condition of the housing to be rehabilitated;

and

(5) the ability of households to compete successfully in the

private housing market and to pay for sanitary, decent, and safe

housing in that market.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.063. LOAN APPLICATION. A household may apply to the

local government in which the household's housing is located for

a housing rehabilitation loan if the housing is located in a

designated area for which an area plan has been approved by the

department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.064. LOCAL GOVERNMENT APPROVAL OF LOAN. (a) A local

government may approve or disapprove a housing rehabilitation

loan application authorized by Section 2304.063. The approval or

disapproval must be given in accordance with the rules adopted by

the department under Section 2304.062.

(b) The local government shall notify the department of the

approval of a loan application and the amount of the approved

loan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.065. DEPARTMENT APPROVAL. The department may not

approve a housing rehabilitation loan unless it finds that:

(1) the benefit to an area designated under Section 2304.041

will exceed the financial commitment of the department; and

(2) the approval of the loan will be of benefit to the state and

its taxpayers.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.066. DISBURSEMENT OF LOAN FUNDS. (a) The executive

director of the department shall authorize the comptroller to

disburse to a local government from the housing rehabilitation

loan fund the amount of a housing rehabilitation loan approved by

the local government under this chapter if the department

receives from the local government a notice of the local

government's approval of the loan.

(b) The executive director may not authorize the disbursement of

funds for a housing rehabilitation loan if:

(1) the department finds that the local government that approved

the loan is not making a good faith effort to substantially

comply with the applicable housing rehabilitation area plan or

the rules adopted by the department; or

(2) the remaining part of the fund allocated to the local

government under Section 2304.008 is insufficient to allow the

payment of the approved amount.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 8.73, eff.

Sept. 1, 1997.

Sec. 2304.067. LIMIT ON AMOUNT OF LOAN. The amount of a housing

rehabilitation loan may not exceed:

(1) the amount determined by subtracting the amount of all other

outstanding indebtedness secured by the property covered by the

loan from the market value of the rehabilitated property as

determined by the local government approving the loan; or

(2) the amount determined by adding the amount of the housing

rehabilitation contract made and approved under Subchapter E for

the property to the amount of the administrative charge imposed

under Section 2304.068 in connection with the loan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.068. ADMINISTRATIVE CHARGE IMPOSED BY LOCAL

GOVERNMENT. (a) A local government may impose a charge to cover

its administrative expenses incurred in connection with a housing

rehabilitation loan made by the local government.

(b) The local government may deduct the charge from the amount

loaned.

contract for housing rehabilitation the borrower makes with a

contractor.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.069. INTEREST RATE. (a) The department shall set the

minimum and maximum interest rates for housing rehabilitation

loans.

(b) A local government shall set the interest rate for a housing

rehabilitation loan it approves under this chapter. The rate must

be within the minimum and maximum rates set by the department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.070. TERM OF LOAN. A local government shall set the

term of a housing rehabilitation loan it approves under this

chapter. The term may not exceed 20 years.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.071. INSTALLMENT PAYMENTS. A housing rehabilitation

loan must be repaid in installments.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.072. LOAN TO BE SECURED. A housing rehabilitation

loan must be secured as required by this chapter and the rules

adopted under this chapter.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.073. OTHER LOAN CONDITIONS. For a housing

rehabilitation loan a local government approves under this

chapter, the local government shall establish other necessary

conditions relating to the repayment of the loan according to

this chapter and the regulations of the department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.074. ADJUSTMENTS IF BORROWER UNABLE TO REPAY LOAN. A

local government may allow for the deferment of payments or may

adjust the interest rate or term of a housing rehabilitation loan

approved by the local government if the borrower is unable to

make the required payments.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.075. DISPOSITION OR ENCUMBRANCE OF PROPERTY BY

BORROWER. The department may adopt regulations governing the

disposition or further encumbrance by the borrower of property

subject to a lien that secures a housing rehabilitation loan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.076. CONDITIONS UNDER WHICH LOAN BECOMES IMMEDIATELY

DUE. (a) A borrower must agree that if the borrower voluntarily

destroys, moves from, or relinquishes ownership of the

rehabilitated housing on or before the first anniversary of the

date the rehabilitation is completed:

(1) the borrower's housing rehabilitation loan becomes

immediately due and payable; and

(2) an interest surcharge is added sufficient to make the total

interest paid equal an amount determined by the prevailing

interest rates for rehabilitation loans from private sources at

the time of the sale.

(b) The local government that approved the loan may waive the

interest surcharge if:

(1) the local government finds that the borrower must sell the

housing because of financial hardship or similar circumstances;

and

(2) the department consents to the waiver.

loan may, with the consent of the department, take the following

action if the borrower dies or the borrower sells or gives away

property encumbered by the loan:

(1) declare all or part of any deferred payments due and

payable;

(2) declare the balance of the loan due and payable; or

(3) allow a buyer, donee, or other successor in title who

qualifies under Section 2304.062 to assume the loan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.077. ACQUISITION OF PROPERTY TO PROTECT LOAN. The

department may acquire title to any project by foreclosure if

necessary to protect a housing rehabilitation loan made for the

project by the department and to pay the costs arising from the

foreclosure.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.078. ACQUISITION OF PROPERTY TO ENFORCE LIEN. To

enforce a lien under this chapter, the department may acquire

housing by:

(1) foreclosure of a mortgage;

(2) a sale under a deed of trust; or

(3) a voluntary conveyance from a borrower in full or partial

settlement of a housing rehabilitation loan.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.079. PUBLIC SALE OR AUCTION OF ACQUIRED PROPERTY. (a)

If the department acquires housing in the enforcement of a lien

under this chapter, it shall within six months after the

acquisition offer the housing for public sale or auction.

(b) The department must provide notice of the public sale or

auction by having a notice published in a newspaper of general

circulation in the county in which the property is located. The

notice must be published once a week for three consecutive weeks

before the date of the sale or auction and must contain:

(1) a description of the property;

(2) a description of the procedures for submitting competitive

bids for the property; and

(3) a statement of the time and location of the sale or auction.

property.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.080. PRIVATE SALE. (a) If a sale of property cannot

be made by a public sale or auction as provided by Section

2304.079, the department may negotiate with a party for the

expeditious sale of the property. In the negotiations, the

department shall give priority to selling the property to a

purchaser who will be required to pay ad valorem taxes on the

property.

(b) If a sale to that kind of purchaser is not practicable, the

department shall attempt to sell the property to a purchaser who

is exempt from ad valorem taxes but who will make payments in

lieu of taxes on the property.

may sell the property to any purchaser.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.081. CONTRACT FOR SERVICING LOAN. A local government

may contract with any entity for the servicing of a housing

rehabilitation loan approved by the local government.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.082. AUDIT OF LOANS. The department shall audit the

local administration of housing rehabilitation loans to determine

if a good faith effort is being made to comply with the

applicable housing rehabilitation plan and the rules adopted by

the department.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

SUBCHAPTER E. HOUSING REHABILITATION CONTRACTS

Sec. 2304.101. STANDARDS FOR CONTRACTORS AND CONTRACTS. The

department shall adopt standards for:

(1) the selection of contractors to perform housing

rehabilitation under this chapter;

(2) housing rehabilitation contracts between borrowers and

contractors; and

(3) materials and fixtures used in performing housing

rehabilitation under this chapter.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.102. LOCAL GOVERNMENT APPROVAL AND SUPERVISION OF

CONTRACTS. (a) A borrower and a contractor may not contract for

housing rehabilitation that is to be financed by a housing

rehabilitation loan unless the local government responsible for

approving the loan approves the proposed contract in accordance

with the standards adopted by the department.

(b) The local government shall supervise all work performed

under the contract. The contractor is not entitled to payment

until the work has been approved by the local government, and the

borrower is not liable to the contractor for any work not

approved by the local government.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.103. ADVERTISING REQUIREMENT FOR CERTAIN CONTRACTS. A

contract for housing rehabilitation that involves the expenditure

of more than $3,000 and that is to be financed by loan funds

applied by the department may not be made unless advertised in

the same way as a contract under Chapter 252, Local Government

Code.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

Sec. 2304.104. PERFORMANCE AND PAYMENT BONDS. The provisions of

Chapter 2253 relating to performance and payment bonds apply to a

construction contract governed by this subchapter.

Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,

1993.

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