CHAPTER 394. HOUSING FINANCE CORPORATIONS IN MUNICIPALITIES AND COUNTIES

State Codes and Statutes

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LOCAL GOVERNMENT CODE

TITLE 12. PLANNING AND DEVELOPMENT

SUBTITLE C. PLANNING AND DEVELOPMENT PROVISIONS APPLYING TO MORE

THAN ONE TYPE OF LOCAL GOVERNMENT

CHAPTER 394. HOUSING FINANCE CORPORATIONS IN MUNICIPALITIES AND

COUNTIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 394.001. SHORT TITLE. This chapter may be cited as the

Texas Housing Finance Corporations Act.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.002. PURPOSE; LEGISLATIVE FINDINGS. (a) The purpose

of this chapter is to provide a means to finance the cost of

residential ownership and development that will provide decent,

safe, and sanitary housing at affordable prices for residents of

local governments.

(b) The legislature finds that residential ownership and

development:

(1) promotes the public health, safety, morals, and welfare;

(2) relieves conditions of unemployment and encourages the

increase of industry, commercial activity, and other economic

development to reduce the adverse effects of unemployment;

(3) provides for efficient and well-planned urban growth and

development, including the elimination and prevention of

potential urban blight and the proper coordination of industrial

facilities with public services, mass transportation, and

residential development;

(4) assists persons of low and moderate income to acquire and

own decent, safe, sanitary, and affordable housing; and

(5) preserves and increases the ad valorem tax bases of local

governments.

described by Subsection (b) is a public purpose and function and

lessens the burdens of government. The legislature further finds

that:

(1) the creation of a housing finance corporation is for the

benefit of the people of the state, improves the public health

and welfare, and promotes the economy;

(2) those purposes are public purposes; and

(3) the corporation, as a public instrumentality and nonprofit

corporation, performs an essential governmental function on

behalf of and for the benefit of the general public, the local

government, and this state.

(d) It is the intent of the legislature to authorize local

governments to create and use public nonprofit corporations to

issue obligations to accomplish the results described by

Subsection (b).

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.003. DEFINITIONS. In this chapter:

(1) "Bond" means a revenue bond authorized under this chapter

and includes a note and any other limited obligation payable as

provided by this chapter.

(2) "Development cost" means the sum total of reasonable or

necessary costs incidental to the provision, acquisition,

construction, reconstruction, rehabilitation, repair, alteration,

improvement, and extension of a residential development. The term

includes:

(A) the cost of studies, surveys, plans, and specifications;

(B) underwriting fees;

mortgage banking, and administrative services;

(D) the cost of legal, accounting, marketing, and other special

services that relate to residential development or are incurred

in connection with the issuance and sale of bonds;

(E) necessary application fees and other fees paid to federal,

state, and local government agencies for approvals required for

construction, for assisted financing, or for other purposes;

(F) financing, acquisition, demolition, construction, equipment,

and site development costs for new and rehabilitated buildings;

(G) relocation costs for utilities, public ways, and parks;

(H) construction costs for recreational, cultural, and

commercial facilities;

(I) rehabilitation, reconstruction, repair, or remodeling costs

for existing buildings and all other necessary and incidental

expenses, including trustee and rating agency fees and an initial

bond and interest reserve together with interest on bonds issued

to finance a residential development to a date 12 months after

the estimated date of completion;

(J) premiums for mortgage insurance or other insurance with

respect to bonds; and

(K) other expenses considered appropriate by a housing finance

corporation to carry out the purposes of this chapter.

(3) "Economically depressed or blighted area" means:

(A) an area determined by the issuer to be a qualified census

tract or an area of chronic economic distress under Section 143,

Internal Revenue Code of 1986 (26 U.S.C.A. Section 143);

(B) an area established within a municipality that has a

substantial number of substandard, slum, deteriorated, or

deteriorating structures, that suffers from a high relative rate

of unemployment; or

created under Chapter 695, Acts of the 66th Legislature, Regular

Session, 1979 (Article 1066d, Vernon's Texas Civil Statutes).

(4) "Elderly person" means a person who is 60 years of age or

older.

(5) "Federally assisted new community" means an area:

(A) that receives federal assistance in the form of loan

guarantees under Title X of the National Housing Act (12 U.S.C.A.

Section 1749aa et seq.); and

(B) a part of which has received grants under Section 107(a)(1),

Housing and Community Development Act of 1974 (42 U.S.C.A.

Section 5307(a)(1)).

(6) "Home" means real property and improvements on that property

consisting of not more than four connected dwelling units, which

may include condominium units, located within a local government

and owned by one mortgagor who occupies or intends to occupy one

of the units.

(7) "Home mortgage" means an interest-bearing loan to a

mortgagor, or a participation in such a loan, that is:

(A) made to purchase, improve, or construct a home;

(B) evidenced by a promissory note;

other instrument that constitutes a lien on the home; and

(D) except as provided by Section 394.906, guaranteed or insured

by the United States, an instrumentality of the United States, or

a private mortgage insurance or surety company to the extent the

loan amount exceeds 80 percent of the lesser of the appraised

value of the home at the time the loan is made or the sale price

of the home.

(8) "Housing finance corporation" means a public, nonprofit

corporation organized under this chapter.

(9) "Lending institution" means a bank, trust company, savings

bank, national banking association, savings and loan association,

mortgage banker, mortgage company, credit union, life insurance

company, or other financial institution or government agency that

customarily provides services or assistance in mortgage financing

on single family residential housing or multifamily residential

housing located in the local government. The term includes a

holding company for such an institution.

(10) "Local government" means any municipality or county.

(11) "Mortgagor" means a person of low or moderate income whose

adjusted gross aggregate income, together with the adjusted gross

aggregate income of all persons who intend to reside with that

person in one dwelling unit, did not, for the preceding tax year,

exceed the maximum amount established as constituting moderate

income by the housing finance corporation's rules, resolutions

relating to the issuance of bonds, or financing documents

relating to the issuance of bonds. In an economically depressed

or blighted area or in a federally assisted new community located

within a home-rule municipality, the term includes:

(A) a person whose adjusted gross aggregate income exceeds the

amount constituting moderate income if at least 90 percent of the

total mortgage amount available under a home mortgage revenue

bond issue is designated for persons of low or moderate income;

(B) a person permitted to be a mortgagor under Section 143,

Internal Revenue Code of 1986 (26 U.S.C.A. Section 143), as it

applies to that area or community.

(12) "Person" means, if used in reference to a mortgagor or

owner of a home, a natural person or a trust for the benefit of a

natural person.

(13) "Residential development" means the acquisition,

construction, reconstruction, rehabilitation, repair, alteration,

improvement, or extension of any of the following items or any

combination of the following items for the purpose of providing

decent, safe, and sanitary housing and nonhousing facilities that

are an integral part of or are functionally related to any

affordable housing project, whether in one or multiple locations,

including any facilities used for the purpose of delivering

tenant services, as defined by Section 2306.254, Government Code:

(A) land, an interest in land, a building or other structure,

facility, system, fixture, improvement, addition, appurtenance,

or machinery or other equipment;

(B) real or personal property considered necessary in connection

with an item described by Paragraph (A); or

related and subordinate to an item described by Paragraph (A).

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1999, 76th Leg., ch. 1250, Sec. 1, eff. Sept. 1,

1999; Acts 2001, 77th Leg., ch. 113, Sec. 1, eff. May 11, 2001.

Sec. 394.004. APPLICATION OF CHAPTER TO CERTAIN RESIDENTIAL

DEVELOPMENTS. This chapter applies only to a residential

development at least 90 percent of which is for use by or is

intended to be occupied by persons of low and moderate income

whose adjusted gross income, together with the adjusted gross

income of all persons who intend to reside with those persons in

one dwelling unit, did not for the preceding tax year exceed the

maximum amount constituting moderate income under the housing

finance corporation's rules, resolutions relating to the issuance

of bonds, or financing documents relating to the issuance of

bonds.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.005. APPLICATION OF CHAPTER TO PROPERTY IN CERTAIN

MUNICIPALITIES. This chapter does not apply to property located

within a municipality with more than 20,000 inhabitants as

determined by the housing finance corporation's rules,

resolutions relating to the issuance of bonds, or financing

documents relating to the issuance of bonds, unless the governing

body of the municipality approves the application of the chapter

to that property.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

SUBCHAPTER B. INCORPORATION OF HOUSING FINANCE CORPORATIONS

Sec. 394.011. APPLICATION FOR INCORPORATION. (a) The governing

body of a local government shall consider a written application

for the incorporation of a housing finance corporation filed with

the governing body by at least three residents of the local

government who are citizens of this state and at least 18 years

of age.

(b) If the governing body by resolution determines that the

formation of the housing finance corporation is wise, expedient,

necessary, or advisable and approves the form of the proposed

articles of incorporation of the corporation, the articles may be

filed as provided by this chapter. A corporation may not be

formed unless the application is filed with the governing body

and the governing body adopts the resolution.

finance corporation does not preclude the approval by the

governing body of the articles of incorporation of additional

corporations that have names or designations sufficient to

distinguish them from previously created corporations. The

governing body may not permit the incorporation on its behalf of

more than one corporation that has the power to make or acquire

home mortgages, or to make loans to lending institutions, the

proceeds of which are to be used to make home mortgages or to

make loans on residential developments.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.012. APPLICATION FOR INCORPORATION OF, AND OTHER

SPECIAL PROVISIONS FOR, JOINT CORPORATION. (a) The governing

bodies of more than one local government may consider a written

application for the incorporation of a joint housing finance

corporation to act on behalf of the local governments filed by at

least three residents of each sponsoring local government who are

citizens of this state and at least 18 years of age.

(b) If each governing body by resolution determines that the

formation of the joint housing finance corporation is wise,

expedient, necessary, or advisable and approves the form of the

proposed articles of incorporation of the joint corporation, the

articles may be filed as provided by this chapter. The joint

corporation may not be formed unless the application is filed

with the governing body of each sponsoring local government and

each governing body adopts the resolution.

housing finance corporation does not preclude the approval by the

governing body of the articles of incorporation of additional

corporations that have names or designations sufficient to

distinguish them from previously created corporations. A

governing body that creates the joint corporation may not later

create a corporation that has the power to make home mortgages or

to make loans to lending institutions, the proceeds of which are

to be used to make home mortgages or to make loans on residential

developments.

(d) Each incorporator or director of the joint housing finance

corporation must reside in a sponsoring local government. The

initial directors of the joint corporation shall be appointed by

all the sponsoring local governments. Succeeding directors shall

be appointed by one or more of the sponsoring local governments

as provided in the articles of incorporation or the bylaws of the

joint corporation.

(e) The sponsoring local governments of the joint housing

finance corporation are considered to be one local government for

the purposes of this chapter. If the action of the governing body

of a local government is required, this chapter requires the

action to be taken by the governing body of each sponsoring local

government of the joint corporation.

(f) The joint housing finance corporation has all the powers

granted to a housing finance corporation under this chapter. The

joint corporation acts on behalf of each of the sponsoring local

governments as provided by the articles of incorporation.

(g) The net earnings of the joint housing finance corporation

and funds and properties of the joint housing finance corporation

on dissolution shall be disbursed to the sponsoring local

governments as provided by the articles of incorporation.

(h) For the purposes of determining the applicable population

for Section 1372.026, Government Code, the joint housing finance

corporation may only consider areas in its own state planning

region.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1997, 75th Leg., ch. 1420, Sec. 10, eff. June 20,

1997; Acts 2001, 77th Leg., ch. 1420, Sec. 8.344, eff. Sept. 1,

2001.

Sec. 394.013. INCORPORATORS. Three or more residents of the

local government who are at least 18 years of age may act as

incorporators of the housing finance corporation by signing,

verifying, and delivering in duplicate to the secretary of state

the articles of incorporation for the corporation. An

incorporator may be a member of the governing body, an officer,

or an employee of the local government.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.014. ARTICLES OF INCORPORATION. (a) The articles of

incorporation of the housing finance corporation must contain:

(1) the name of the corporation;

(2) a statement that the corporation is a public, nonprofit

corporation;

(3) the period of duration, which may be perpetual;

(4) a statement that the corporation is organized solely to

carry out the purposes of this chapter;

(5) a statement that the corporation is to have no members;

(6) any provision not inconsistent with law, including any

provision required or permitted under this chapter to be included

in the bylaws, for the regulation of the internal affairs of the

corporation;

(7) the street address of the corporation's initial registered

office, which must be located in the local government, and the

name of its initial registered agent at that address;

(8) the number of directors constituting the initial board of

directors and the names and addresses of those directors, with a

statement that each of them resides in the local government;

(9) the name and street address of each incorporator with a

statement that each of them resides in the local government; and

(10) a statement that a resolution approving the form of the

articles of incorporation has been adopted by the governing body

of the local government and the date of the adoption of the

resolution.

(b) A housing finance corporation may exercise any power

prescribed by this chapter regardless of whether the power is

stated in its articles of incorporation. The articles may

prohibit the exercise of any power prescribed by this chapter.

in the number of directors may be made only by amendment to the

articles, a change in the number of directors may be made by an

amendment to the bylaws. In all other cases if a provision of the

articles is inconsistent with the bylaws, the articles provision

controls.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.015. FILING OF ARTICLES OF INCORPORATION; ISSUANCE OF

CERTIFICATE OF INCORPORATION. (a) Duplicate originals of the

articles of incorporation must be delivered to the secretary of

state. If the secretary of state finds that the articles of

incorporation conform to this chapter, the secretary shall, when

a $25 fee is paid:

(1) endorse on each duplicate original the word "Filed" and the

date of the filing;

(2) file one of the duplicate originals in the office of the

secretary of state; and

(3) issue a certificate of incorporation, to which the secretary

shall affix the other duplicate original.

(b) The secretary of state shall deliver the certificate of

incorporation, with the affixed duplicate original, to the

incorporators or their representatives.

corporate existence begins. The certificate of incorporation is

conclusive evidence that all conditions precedent required to be

performed by the local government and the incorporators have been

met and that the housing finance corporation is properly

incorporated under this chapter.

(d) The housing finance corporation constitutes a public

instrumentality and a nonprofit corporation under the name stated

in the articles of incorporation. The corporation does not

constitute a municipality, county, or other political corporation

or subdivision of this state. The corporation may issue bonds and

carry out the public purposes for which it is incorporated on

behalf of and for the benefit of the general public, the local

government, and this state.

(e) A copy of the articles of incorporation shall be delivered

to the Texas Department on Aging.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.016. AMENDMENT OF ARTICLES OF INCORPORATION. (a) The

articles of incorporation may be amended at any time in the

manner provided by this section.

(b) The board of directors of the housing finance corporation

may file a written application with the governing body of the

local government requesting permission to amend the articles and

specifying the proposed amendment. The governing body shall

consider the application. If the governing body by resolution

determines that the making of an amendment is wise, expedient,

necessary, or advisable, authorizes the amendment, and approves

the form of the amendment the board of directors may amend the

articles by adopting the amendment at a meeting and delivering

articles of amendment to the secretary of state.

amend the articles of incorporation to change the structure,

organization, programs, or activities of the housing finance

corporation, including the power to terminate the corporation,

subject to any limitation on the impairment of contracts. The

governing body shall deliver the articles of amendment to the

secretary of state.

(d) The articles of amendment must be executed in duplicate. The

president or vice-president of the housing finance corporation

and the secretary or assistant secretary of the corporation must

execute articles of amendment adopted by the board of directors.

The presiding officer of the governing body of the local

government and the local government's secretary or clerk must

execute articles of amendment adopted by the governing body. The

articles of amendment must be verified by one of the officers

signing the articles. The articles of amendment must contain:

(1) the name of the corporation;

(2) if the amendment alters an original or amended provision of

the articles of incorporation, an identification by reference to

or description of the altered provision and a statement of the

text as amended;

(3) if the amendment is an addition to the original or amended

articles of incorporation, a statement of that fact and the full

text of the added provision; and

(4) the date of the meeting of the board of directors or the

governing body at which the amendment was adopted and a statement

that the amendment received a majority vote of the corporation's

directors or the governing body's members in office.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.017. FILING OF ARTICLES OF AMENDMENT; ISSUANCE OF

CERTIFICATE OF AMENDMENT. (a) Duplicate originals of the

articles of amendment must be delivered to the secretary of

state. If the secretary of state finds that the articles of

amendment conform to law, the secretary shall, when a $25 fee is

paid:

(1) endorse on each duplicate original the word "Filed" and the

date of the filing;

(2) file one of the duplicate originals in the office of the

secretary of state; and

(3) issue a certificate of amendment, to which the secretary

shall affix the other duplicate original.

(b) The secretary of state shall deliver the certificate of

amendment, with the affixed duplicate original, to the housing

finance corporation or its representative.

amendment takes effect and the articles of incorporation are

amended accordingly.

(d) An amendment does not affect an existing cause of action or

any pending action to which the housing finance corporation is a

party, or the existing rights of persons other than members. If

the amendment changes the housing finance corporation's name, the

change does not abate a suit brought by or against the

corporation under its former name.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

SUBCHAPTER C. CORPORATE ADMINISTRATION AND OPERATION

Sec. 394.021. BOARD OF DIRECTORS. (a) A housing finance

corporation must have a board of directors in which all the

powers of the corporation are vested. The board may consist of

any number of directors, all of whom must be residents of the

local government. A director may be a member of the governing

body, an officer, or an employee of the local government.

(b) Members of the initial board of directors hold office for

the period specified in the articles of incorporation. After the

initial directors, the governing body of the local government

shall appoint directors in the manner and for the terms provided

by the articles of incorporation or the bylaws. Directors may be

divided into classes, and the terms of office of the various

classes may differ.

director is elected or appointed and until the director's

successor is elected or appointed and has qualified. A director

may be removed from office under any removal procedure provided

by the articles of incorporation or the bylaws. The governing

body shall fill any vacancy in the board of directors by

appointment in the manner provided by the articles of

incorporation or the bylaws.

(d) A majority of the directors constitutes a quorum. The

directors may take action by a majority vote when a quorum is

present. Board meetings may be held inside or outside this state.

A regular meeting may be held with or without notice as provided

by the bylaws. A special meeting may be held on notice as

provided by the bylaws.

(e) The officers of a housing finance corporation consist of a

president, one or more vice-presidents, a secretary, a treasurer,

and other officers and assistant officers as considered

necessary. Each officer shall be elected or appointed in the

manner and for the term provided by the articles of incorporation

or the bylaws.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.022. ORGANIZATIONAL MEETING. (a) After the issuance

of the certificate of incorporation, the board of directors named

in the articles of incorporation, at the call of a majority of

the incorporators, shall hold an organizational meeting to adopt

bylaws, elect officers, and consider other issues that come

before the meeting. The meeting may be held inside or outside

this state.

(b) The incorporators who call the meeting must give at least

three days' notice of the meeting to each director by mailing to

the director a notice that states the time and place of the

meeting.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.023. DISPOSITION OF CORPORATE EARNINGS. (a) The

housing finance corporation may not pay dividends. The net

earnings of the corporation may not be distributed to or benefit

the directors or officers of the corporation or any person except

as reasonable compensation for services rendered to the

corporation.

(b) If the board of directors determines that sufficient

provision has been made for full payment of the expenses, bonds,

and other obligations of the corporation, any net corporate

earnings accruing after the determination shall be paid to the

local government. The local government shall use amounts received

under this subsection only to provide for the housing needs of

individuals and families of low and moderate incomes, including

single-family units and mixed income multifamily projects found

by the local government to serve the interests of low and

moderate income individuals and families if the single-family and

multifamily projects have as a major purpose the provision of

safe, sanitary, and decent housing for individuals and families

of low income.

transferring corporate property as provided by a contract made by

the corporation.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1995, 74th Leg., ch. 951, Sec. 7, eff. June 16,

1995.

Sec. 394.024. REGISTERED OFFICE AND AGENT. The housing finance

corporation shall maintain a registered office and a registered

agent as provided by Article 2.05, Texas Non-Profit Corporation

Act (Article 1396-2.05, Vernon's Texas Civil Statutes). The

corporation may change its registered office or agent as provided

by Article 2.06 of that Act. Process may be served on the

corporation as provided by Article 2.07 of that Act.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.025. CORPORATE BOOKS AND RECORDS. A housing finance

corporation shall keep complete books and records of account and

shall keep minutes of the proceedings of its board of directors.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.026. DISSOLUTION OF CORPORATION. (a) If the board of

directors determines by resolution that the purposes for which

the housing finance corporation was formed have been

substantially met and that all bonds issued by and all

obligations incurred by the corporation have been fully paid, the

directors shall execute a certificate of dissolution stating

those facts and declaring that the corporation is dissolved. The

directors shall file the certificate for recording in the office

of the secretary of state. The directors shall execute the

certificate under the corporation's seal.

(b) On the filing of the certificate of dissolution, the

corporation is dissolved. The title to all funds and property

owned by the corporation at the time of dissolution vests in the

local government to be used exclusively by the local government

to provide for the housing needs of individuals and families of

low and moderate incomes, including single-family units and mixed

income multifamily projects found by the local government to

serve the interests of low and moderate income individuals and

families if the single-family and multifamily projects have as a

major purpose the provision of safe, sanitary, and decent housing

for individuals and families of low income. The funds and

property shall be promptly delivered to the local government.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1995, 74th Leg., ch. 951, Sec. 8, eff. June 16,

1995.

Sec. 394.027. ANNUAL REPORT. (a) Before August 31 of each

year, a housing finance corporation shall file with the Texas

Department of Housing and Community Affairs a report in

accordance with this section. The department by rule shall

prescribe the form of the report.

(b) The report must include for each single-family home mortgage

loan made by the housing finance corporation during the preceding

12 months ending June 30 of the year the report is filed, the

data reported by originating lenders under the Federal Home

Mortgage Disclosure Act.

housing units financed by the housing finance corporation

information similar to the geographic and demographic information

contained in the Texas Department of Housing and Community

Affairs compliance monitoring form and tenant income

certification, including household size, total household income,

and project location.

Added by Acts 1995, 74th Leg., ch. 951, Sec. 9, eff. June 16,

1995.

SUBCHAPTER D. CORPORATE POWERS

Sec. 394.031. EXERCISE OF POWERS. (a) A housing finance

corporation may exercise any powers incidental to or necessary

for the performance of the powers prescribed by this subchapter

and may exercise other powers necessary or appropriate to carry

out the purposes for which the corporation is organized.

(b) A housing finance corporation may exercise powers under this

chapter by resolution of the board of directors. The resolution

takes effect immediately on adoption.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.032. GENERAL POWERS. (a) A housing finance

corporation may:

(1) make contracts and other instruments as necessary or

convenient to the exercise of powers under this chapter;

(2) incur liabilities;

(3) borrow money at rates determined by the corporation;

(4) issue notes, bonds, and other obligations; and

(5) secure any of its obligations by the mortgage or pledge of

all or part of the corporation's property, franchises, and

income.

(b) A housing finance corporation may plan, research, study,

develop, and promote the establishment of residential

development.

public welfare or for charitable, scientific, or educational

purposes.

(d) A housing finance corporation may enter into contracts to

perform services for any other housing finance corporation or any

individual or entity acting on behalf of any other housing

finance corporation or, with respect to residential development,

any housing authority, nonprofit enterprise, or similar entity.

(e) A housing finance corporation may delegate to the Texas

Department of Housing and Community Affairs the authority to act

on its behalf in the financing, refinancing, acquisition,

leasing, ownership, improvement, and disposal of home mortgages

or residential developments, within and outside the jurisdiction

of the housing finance corporation, including its authority to

issue bonds for those purposes.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1989, 71st Leg., ch. 258, Sec. 1, eff. Aug. 28,

1989; Acts 1997, 75th Leg., ch. 1420, Sec. 11, eff. June 20,

1997.

Sec. 394.033. CORPORATE NAME; DURATION; SEAL. (a) A housing

finance corporation may have perpetual succession under its

corporate name, unless a limited period of duration is stated in

the articles of incorporation, and may sue and be sued, and

complain and defend, under its corporate name.

(b) A housing finance corporation may have a corporate seal,

which may be altered at will, and may use the seal by causing it,

or a facsimile of it, to be impressed on, affixed to, or

otherwise reproduced on any instrument required to be executed by

the corporation's officers.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.034. OFFICERS; AGENTS. A housing finance corporation

may elect or appoint corporate officers or agents for a period

determined by the corporation, define their duties, and may set

their compensation.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.035. BYLAWS. A housing finance corporation may make,

amend, and repeal bylaws, not inconsistent with the articles of

incorporation or this chapter, for the administration and

regulation of the corporation's affairs.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.036. ACCEPTANCE OF FINANCIAL ASSISTANCE. (a) A

housing finance corporation may apply for and accept, on its own

behalf or on behalf of another person, advances, loans, grants,

contributions, guarantees, rent supplements, mortgage assistance,

and other forms of financial assistance from the federal

government, the state, a county, a municipality, or any other

public or quasi-public body, corporation, or foundation, or from

any other public or private source, for any of the purposes of

this chapter.

(b) The corporation may include reasonable and appropriate

terms, not inconsistent with the purposes of this chapter, in any

contract for financial assistance obtained under this section.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.037. BONDS. (a) A housing finance corporation may

issue bonds to defray, in whole or in part:

(1) the development costs of a residential development;

(2) the costs of purchasing or funding the making of home

mortgages, either on a first-come, first-served basis or by

selling lender commitments, including the costs of studies and

surveys, insurance premiums, financial advisory services,

mortgage banking services, administrative services, underwriting

fees, legal services, accounting services, and marketing services

incurred in connection with the issuance and sale of the bonds,

including bond and interest reserve accounts, capitalized

interest accounts, and trustee, custodian, and rating agency

fees; or

(3) any other costs associated with the provision of decent,

safe, and sanitary housing and nonhousing facilities that are an

integral part of or are functionally related to an affordable

housing project.

(b) The corporation may pledge all or a part of the revenues,

receipts, or resources of the corporation, including any revenues

or receipts received from residential development or home

mortgages, to the prompt payment of bonds authorized under this

chapter and to the interest and any redemption premiums on those

bonds. It may issue bonds to refund in whole or in part at any

time any bonds previously issued under this chapter by the

corporation.

issued under this chapter.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1997, 75th Leg., ch. 1420, Sec. 12, eff. June 20,

1997; Acts 2001, 77th Leg., ch. 113, Sec. 2, eff. May 11, 2001.

Sec. 394.038. ACQUISITION OF SHARES OR OBLIGATIONS. A housing

finance corporation may purchase, receive, subscribe for, or

otherwise acquire, own, hold, vote, use, employ, mortgage, lend,

pledge, sell, or otherwise dispose of, and otherwise use and deal

in and with:

(1) shares and other interests in or obligations of other

domestic or foreign corporations, whether profit or nonprofit,

associations, partnerships, or individuals; or

(2) direct or indirect obligations of the United States or of

any other government, state, political subdivision of a state,

territory, government district, or any instrumentality of such a

governmental entity.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.039. SPECIFIC POWERS RELATING TO FINANCIAL AND PROPERTY

TRANSACTIONS. A housing finance corporation may:

(1) lend money for its corporate purposes, invest and reinvest

its funds, and take and hold real or personal property as

security for the payment of the loaned or invested funds;

(2) mortgage, pledge, or grant security interests in any

residential development, home mortgage, note, or other property

in favor of the holders of bonds issued for those items;

(3) purchase, receive, lease, or otherwise acquire, own, hold,

improve, use, or deal in and with real or personal property or

interests in that property, wherever the property is located, as

required by the purposes of the corporation or as donated to the

corporation; and

(4) sell, convey, mortgage, pledge, lease, exchange, transfer,

and otherwise dispose of all or part of its property and assets.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.040. TRANSACTIONS WITH LENDING INSTITUTIONS. (a) A

housing finance corporation may make, contract to make, but is

not required to make, and enter into advance commitments to make

home mortgages originated, administered, and serviced by lending

institutions. It may pay the reasonable value of services

rendered under those contracts. It may acquire, contract to

acquire, and enter into advance commitments to acquire, by

assignment or other means, home mortgages owned by lending

institutions at purchase prices and on other terms determined by

the corporation or its agent.

(b) The corporation may require each lending institution from

which home mortgages are proposed to be purchased or to which

loans are made to submit evidence satisfactory to the corporation

of the ability and intention of the lending institution to make

home mortgages, and require the submission, within the time

specified by the corporation for making disbursements for home

mortgages, of evidence satisfactory to the corporation of the

making of home mortgages and of the compliance with the standards

and requirements established by the corporation under Section

394.041.

terms that, in addition to other provisions determined by the

corporation, require:

(1) the institutions to use substantially all of the net

proceeds of the loans, directly or indirectly, to make home

mortgages in an aggregate principal amount substantially equal to

the amount of the net proceeds; and

(2) the loans to be fully secured, to the extent not secured by

home mortgages, in the same manner as deposits of public funds of

the local government.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1997, 75th Leg., ch. 1420, Sec. 13, eff. June 20,

1997.

Sec. 394.041. STANDARDS FOR MORTGAGES OR LOANS. A housing

finance corporation may establish by rule, in resolutions or

financing documents relating to the issuance of bonds, standards

and requirements applicable to making or purchasing home

mortgages or making loans to lending institutions as considered

necessary or desirable by the corporation, including standards

and requirements related to:

(1) the time within which lending institutions must make

commitments and disbursements for home mortgages;

(2) the location and other characteristics of homes financed by

home mortgages;

(3) the terms of home mortgages made or acquired;

(4) the amounts and types of insurance coverage required on

homes, home mortgages, and bonds;

(5) the representations and warranties of lending institutions

confirming compliance with the standards and requirements;

(6) restrictions as to interest rates and other terms of home

mortgages or as to the return realized on those mortgages by

lending institutions;

(7) the type and amount of collateral security required on a

loan from the corporation and to assure repayment of bonds; and

(8) other matters regarding the making or purchasing of home

mortgages or the making of loans to lending institutions as the

corporation considers relevant.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.042. DISPOSAL OF RESIDENTIAL DEVELOPMENTS OR HOME

MORTGAGES. (a) A housing finance corporation may sell and

convey any residential development or home mortgage, including a

sale and conveyance subject to a mortgage, pledge, or security

interest, as provided in the resolution relating to the issuance

of bonds and for the prices and at the times determined by the

board of directors.

(b) The corporation may rent, lease, sell, or otherwise dispose

of any residential development or home mortgages in whole or in

part, or lend sufficient funds to any person to defray in whole

or in part the development costs of any residential development

or the costs of purchasing home mortgages, so that the rent or

other revenue derived from the residential development or home

mortgages, combined with any insurance proceeds, reserve

accounts, and earnings on those accounts, is designed to produce

revenues and receipts at least sufficient to provide for the

prompt payment on maturity of principal, interest, and any

redemption premiums on bonds issued to finance those costs.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

SUBCHAPTER E. HOUSING FINANCE CORPORATION BONDS

Sec. 394.051. BONDS; INVESTMENT. (a) A housing finance

corporation may issue its bonds by resolution of the board of

directors for the purposes prescribed by this chapter. The

resolution takes effect immediately on adoption. The bonds bear

interest at a rate authorized by Chapter 1204, Government Code,

and are subject to the following terms provided by the

resolution:

(1) the time at which the bonds are payable;

(2) the number of series in which the bonds are issued;

(3) the dates that the bonds bear;

(4) the time of maturity of the bonds;

(5) the medium of payment and the place of payment of the bonds;

(6) any registration privileges;

(7) terms of redemption at certain premiums;

(8) manner of execution of the bonds;

(9) covenants and other terms of the bonds; and

(10) the form of the bonds, either coupon or registered.

(b) The bonds may be sold at public or private sale in the

manner and on the terms provided by the resolution. Pending the

preparation of definitive bonds, any interim receipts or

certificates in the form and with the provisions provided by the

resolution may be issued to the purchasers of bonds sold under

this chapter.

finance corporation may issue in a calendar year to defray costs

described by Section 394.037(a)(2) may not exceed the total of:

(1) the cost of issuance of the bonds, any reserves or

capitalized interest required by the resolutions authorizing the

bonds, plus any bond discounts; and

(2) the largest of:

(A) $20 million;

(B) the product of $150 and the population of the local

government as determined by the corporation's rules, resolutions

relating to the issuance of bonds, or financing documents

relating to the issuance of the bonds; or

the market demand for home mortgages during that calendar year as

determined by the corporation's rules, resolutions relating to

the issuance of bonds, or financing documents relating to the

issuance of the bonds.

(d) A determination made under Subsection (c)(2)(B) or (c)(2)(C)

is conclusive.

(e) The housing finance corporation shall notify the Texas

Department on Aging of each bond issuance and shall deliver to

the department a copy of each certificate of resolution

authorizing the issuance and any other information required by

the department.

(f) The housing finance corporation, or any trustee or custodian

on behalf of the corporation, may invest any funds held by it as

provided by the resolution authorizing the issuance of the bonds.

(g) The housing finance corporation is not required to acquire

or hold title to a residential development, a home mortgage, or

any interest in the development or mortgage.

(h) The housing finance corporation is not required to sell

commitments to lenders to originate home mortgages. A housing

financing corporation may establish a program so that lenders

will utilize the proceeds of the bonds to originate home

mortgages on a first-come, first-served basis.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1997, 75th Leg., ch. 1420, Sec. 14, eff. June 20,

1997; Acts 2001, 77th Leg., ch. 1420, Sec. 8.345, eff. Sept. 1,

2001.

Sec. 394.052. BOND COVENANTS. (a) A resolution authorizing the

issuance of bonds under this chapter may contain covenants

relating to:

(1) the use and disposition of the bond proceeds and of the

revenue and receipts from any residential development or home

mortgages for which the bonds are issued, including the creation

and maintenance of reserves;

(2) the issuance of other or additional bonds relating to any

residential development or to any rehabilitation, improvement,

renovation, or enlargement of, or addition to, a residential

development;

(3) the maintenance and repair of a residential development or

any homes;

(4) the insurance carried on any residential development, home,

home mortgage, or bonds, and the use and disposition of insurance

money;

(5) the appointment of one or more banks or trust companies

located inside or outside this state that have the necessary

trust powers as trustee or custodian for the benefit of the

bondholders, paying agent, or bond registrar, and the investment

of any funds held by the trustee or custodian;

(6) the appointment of one or more mortgage bankers to provide

necessary administrative and mortgage servicing functions to

assure the proper administration of the corporation's portfolio

of home mortgage loans for the benefit of the bondholders;

(7) the maximum interest rate payable on any home mortgage; and

(8) the terms on which the bondholders or the trustees for the

bonds are entitled to the appointment of a receiver by a court of

competent jurisdiction.

(b) The terms established under Subsection (a)(8) relating to

the appointment of a receiver may provide that the receiver may:

(1) enter and take possession of all or part of the residential

development or home mortgage;

(2) maintain, lease, sell, or otherwise dispose of the

development or mortgage;

(3) prescribe rentals or other payments; and

(4) collect, receive, and apply all income and other revenues

that arise from the development or mortgage after the receiver

takes possession.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.053. VALIDITY OF BONDS; SIGNATURES. (a) Bonds issued

under this chapter must bear the actual or facsimile signature of

the housing finance corporation's officers designated in the

resolution authorizing the bonds. The validity of a signature of

an officer of the corporation is not affected by the fact that

before the delivery of the bond or its payment, a person whose

signature appears on the bond ceases to be an officer.

(b) The validity of the bonds is not dependent on or affected by

the validity or regularity of any proceedings relating to the

residential development or home mortgages for which the bonds are

issued.

bonds contain a statement that they are issued under this

chapter. The statement is conclusive evidence of the validity of

the bonds and the regularity of their issuance.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.054. SECURITY FOR BONDS. (a) A resolution authorizing

the issuance of bonds under this chapter may require that the

principal of and interest on the bonds be secured by a mortgage,

pledge, security interest, insurance agreement, or indenture of

trust that covers the residential development or home mortgages

for which the bonds are issued and may include any improvements

or extensions made after the bonds are issued. A security

instrument may contain covenants and agreements to properly

safeguard the bonds as provided by the resolution authorizing the

bonds and shall be executed in the manner provided by the

resolution.

(b) This chapter, the resolution, and the mortgage, pledge,

security interest, or indenture of trust constitute a contract

with the bondholders that continues in effect until the principal

of and interest on the bonds and any redemption premiums have

been fully paid or provision for payment has been made.

indenture of trust, and the duties under this chapter of the

housing finance corporation and its officers and other

authorities are enforceable as provided by the resolution, the

instrument, or this chapter by any bondholder by mandamus, by

foreclosure of the mortgage, pledge, security interest, or

indenture of trust, or by any other appropriate action in a court

of competent jurisdiction. The resolution or the mortgage,

pledge, security interest, or indenture of trust may provide that

the remedies and rights to enforcement may be vested in a

trustee, with full power of appointment, for the benefit of all

the bondholders. The trustee is subject to the control of a

number of bondholders or bond owners as provided in the

resolution or instrument.

(d) Bonds issued under this chapter may be secured by a pledge

of or a lien on all or part of the revenues, receipts, or other

resources of the housing finance corporation, including the

revenues and receipts derived from the residential development or

home mortgages or from any notes or other obligations of lending

institutions with respect to which the bonds have been issued.

The board of directors may provide in the resolution authorizing

the bonds for the issuance of additional bonds equally and

ratably secured by a lien on the revenues and receipts or may

provide that the lien on the revenues and receipts is

subordinate. Subordinate lien bonds may also be issued unless

prohibited by a bond resolution.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.055. LIABILITY FOR BONDS AND CONTRACTS; DEBT NOT

CREATED. (a) Bonds issued under this chapter are limited

obligations of the housing finance corporation and are payable

solely from the revenue, receipts, and other resources pledged to

their payment. A bondholder may not compel the local government

to pay the bond, the interest, or any redemption premium.

(b) The local government and this state are not liable in any

way regarding bonds issued by the housing finance corporation. An

agreement or obligation of the corporation does not constitute,

within the meaning of a statutory or constitutional provision, an

agreement, obligation, or debt of the state or the local

government.

statutory or constitutional provision, an indebtedness, an

obligation, or a loan of credit of the state, the local

government, or any other municipality, county, or other municipal

or political corporation or subdivision of the state. The bonds

do not create a moral obligation on the part of any of those

governmental entities with respect to the payment of the bonds.

Those governmental entities may not make payments with respect to

the bonds.

(d) The face of each bond must plainly state that it has been

issued under this chapter and that it does not constitute, within

the meaning of any statutory or constitutional provision, an

indebtedness, an obligation, or a loan of credit of the state,

the local government, or any other municipality, county, or other

municipal or political corporation or subdivision of the state.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.056. BOND AS SECURITY. (a) A bond issued under this

chapter or a coupon representing interest on the bond is, when

delivered, a security as that term is defined under Chapter 8 of

the Uniform Commercial Code (Chapter 8, Title 1, Business &

Commerce Code) and is an exempt security under The Securities Act

(Article 581-1 et seq., Vernon's Texas Civil Statutes).

(b) A contract made under this chapter is not a security under

The Securities Act.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.057. BOND AS AUTHORIZED INVESTMENT OR AS SECURITY FOR

DEPOSIT. (a) Bonds issued under this chapter are legal and

authorized investments for any bank, savings bank, trust company,

savings and loan association, insurance company, fiduciary,

trustee, guardian, or sinking fund of a municipality, county,

school district, or other political corporation or subdivision of

the state.

(b) The bonds are eligible to secure the deposit of any public

funds of this state or of a municipality, county, school

district, or other political corporation or subdivision of the

state, and are lawful and sufficient securities for the deposits

at face value if accompanied by all unmatured coupons, if any,

appurtenant to the bonds.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

SUBCHAPTER Z. MISCELLANEOUS PROVISIONS

Sec. 394.901. DESIGNATION OF AREA AS ECONOMICALLY DEPRESSED OR

BLIGHTED; NOTICE. (a) To designate an area as economically

depressed or blighted under the meaning provided by Section

394.003(3)(B) or (C), the governing body of the affected

municipality must hold a public hearing and must find that the

area substantially impairs or arrests the sound growth of the

municipality or that it constitutes an economic or social

liability and is, in its current condition and use, a menace to

the public health, safety, morals, or welfare.

(b) The governing body shall give notice of the hearing as

provided by Chapter 551, Government Code, except that the notice

must be published at least 10 days before the date of the

hearing.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.95(78), eff.

Sept. 1, 1995.

Sec. 394.902. HOUSING FOR ELDERLY. (a) The housing finance

corporation shall require that at least five percent of the units

in a multifamily residential development be built or renovated

and be reserved for the lifetime of the development for occupancy

by elderly persons of low income or by families of low or

moderate income in which an elderly person is the head of a

household if the development:

(1) contains at least 20 units; and

(2) is financed by bonds issued under this chapter as a result

of an official decision to issue bonds that occurs on or after

January 1, 1986.

(b) Instead of requiring a reservation of units as required

under Subsection (a), the housing finance corporation may collect

a fee equal to one-tenth percent of the total principal amount of

the loan made for the multifamily residential development. The

corporation shall collect the fee from the person who receives

the loan at the time the loan is delivered. Immediately after the

receipt of the fee, the corporation shall remit the fee to the

Texas Department on Aging. The department shall deposit all funds

received under this subsection to the credit of a special account

in the general revenue fund. Funds in the special account may be

used only to assist in obtaining housing for elderly persons or

families in which an elderly person is the head of a household.

under Subsection (a), the design engineer for the development

must certify to the corporation that the reserved units in the

development meet standards set by the Texas Department on Aging

for elderly persons.

(d) The governing body of the local government that authorizes,

sponsors, or otherwise participates in the creation of the

housing finance corporation shall cooperate with the Texas

Department on Aging to implement this section and shall submit to

the department an annual report relating to the number of

developments financed under this chapter, the number of units

reserved for the elderly persons or for families in which an

elderly person is the head of the household, the amount of fees

collected, and other information required by the department.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.9025. MULTIFAMILY RESIDENTIAL DEVELOPMENT. (a)

Following a public hearing, a housing finance corporation may

issue bonds to finance a multifamily residential development to

be owned by the housing finance corporation if at least 50

percent of the units in the multifamily residential development

are reserved for occupancy by individuals and families earning

less than 80 percent of the area median family income.

(b) Following a public hearing by the governing body of the

local government, a housing finance corporation may issue bonds

to finance a multifamily residential development to be owned by

the housing finance corporation in accordance with Section

394.004 if the housing finance corporation receives approval of

the governing body of the local government.

Added by Acts 2001, 77th Leg., ch. 1493, Sec. 3, eff. Aug. 31,

2002.

Sec. 394.903. LOCATION OF RESIDENTIAL DEVELOPMENT; RESIDENTIAL

DEVELOPMENT SITES. (a) A residential development covered by

this chapter must be located within the local government.

(b) The local government may transfer any residential

development site to a housing finance corporation by sale or

lease. The governing body of the local government may authorize

the transfer by resolution without submitting the issue to the

voters and without regard to the requirements, restrictions,

limitations, or other provisions contained in any other general,

special, or local law. The site may be located wholly or partly

inside or outside the local government.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987.

Sec. 394.904. EXEMPTION FROM REQUIREMENTS AND RESTRICTIONS

APPLYING TO PUBLIC PROPERTY. (a) The acquisition, construction,

or rehabilitation of a private residential development or a home

is not subject to requirements relating to public buildings,

structures, grounds, works, or improvements imposed by the laws

of this state, or to any other similar requirements.

(b) Any competitive bidding requirement or restriction imposed

on the procedure regarding the award of contracts for that

acquisition, construction, or rehabilitation or regarding the

lease, sale, or other disposition of property of the local

government is not applicable to any action taken under this

chapter.

Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1,

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

State Codes and Statutes

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