Adopted Sections
An agency may take final action on a section 30 days after a proposal has been 
published in the Texas Register. The section becomes effective 20 days after the 
agency files the correct document with the Texas Register, unless a later date 
is specified or unless a federal statute or regulation requires implementation 
of the action on shorter notice.
If an agency adopts the section without any changes to the proposed text, only 
the preamble of the notice and statement of legal authority will be published. 
If an agency adopts the section with changes to the proposed text, the proposal 
will be republished with the changes.
TITLE 10. COMMUNITY DEVELOPMENT
Part I. Texas Department of Housing and Community Affairs
(EDITOR'S NOTE: In 1991 the 72nd Legislature transferred the functions of the 
Texas Housing Agency and the Texas Department of Community Affairs to the Texas 
Department of Housing and Community Affairs. The new agency was created by 
Senate Bill 546. Under Title 10, Texas Housing Agency rules are being 
administratively transferred from Part IV. Texas Housing Agency to Part I. Texas 
Department of Housing and Community Affairs.
 The text is being reprinted without change.
 Old Chapter Numbers New Chapter Numbers
Chapter 121.         Chapter 21.
 Chapter 123.         Chapter 23.
 Chapter 125.         Chapter 25.
 Chapter 129.         Chapter 29.
 Chapter 131.         Chapter 31.
 Chapter 133.         Chapter 33.
 Chapter 137.         Chapter 37.
 Chapter 141.         Chapter 41.
 Chapter 147.         Chapter 47.
 Chapter 149.         Chapter 49.
Chapter 21. Introductory Provisions
sec.21.1. Purposes.  The purposes of these rules, regulations, and policies, 
referred toas "sections, ' are to implement the authority and duties assigned by 
the Texas Housing Agency Act, Texas Civil Statutes Article 1269l-6 and other 
laws, to the Texas Housing Agency, and to simplifyprocedures, avoid delays and 
unnecessary expense, and to establish general policies. To the end that these 
goals be attained, these sections shall be given a fair and impartial 
construction.
sec.21.2. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise:
   Act-The Texas Housing Agency Act.
   Agency-The Texas Housing Agency created by the Act.
   Board-The board of directors of the agency.
   Bond-Any type of interest-bearing obligation including without limitation any 
bond, note, bond anticipation note, or other evidence of indebtedness, whether 
general or special, whether negotiable or nonnegotiable in form, whether in 
bearer or registered form, whether in temporary or permanent form, whether with 
or without interest coupons, and regardless of the source of payment.
   Contested case -A proceeding, including but not restricted to ratemaking and 
licensing, in which the legal rights, duties, or privileges of a party are to be 
determined by the agency after an opportunity for adjudicative hearing.
   Director-A member of the board.
   Federal government -The United States of America, or any department, 
division, agency, or instrumentality, corporate or otherwise, of the United 
States of America.
   Federal mortgage -A mortgage loan for residential housing made by the federal 
government or for which there is a commitment by the federal government to make 
the mortgage loan.
   Federally insured mortgage-A mortgage loan for residential housing which is 
insured or guaranteed by the federal government or for which there is a 
commitment to insure or guarantee the mortgage by the federal government.
   Hearing examiner -The chairman of the board, the executive administrator, or 
the executive administrator.
   Housing development costs-The total of all costs incurred in financing, 
creating, or purchasing any housing development, including but not limited to a 
single-family dwelling, which is approved by the agency as reasonable and 
necessary. The costs may include but are not limited to:
(A) the value of land and any buildings on the land owned by the sponsor or the 
cost of land acquisition and any buildings on the land, including payments for 
options, deposits, or contracts to purchase properties on the proposed housing 
sites;
(B) cost of site preparation, demolition, and development;
(C) any expenses relating to the issuance of bonds;
(D) fees paid or payable in connection with the planning, execution, and 
financing of the housing development, such as those to the architects, 
engineers, attorneys, accountants, and the agency;
(E) cost of necessary studies, surveys, plans, permits, insurance, interest, 
financing, tax and assessment costs, and other operating and carrying costs 
during construction;
(F) cost of construction, rehabilitation, reconstruction, fixtures, furnishings, 
equipment, machinery, and apparatus related to the real property;
(G) cost of land improvements, including without limitation, landscaping and 
offsite improvements, whether or not the costs have been paid in cash or in a 
form other than cash;
(H) necessary expenses in connection with initial occupancy of the housing 
development;
(I) a reasonable profit and risk fee in addition to job overhead to the general 
contractor and, if applicable, a limited profit housing sponsor;
(J) an allowance established by the agency for working capital and contingency 
reserves and reserves for any anticipated operating deficits during the first 
two years of occupancy; and
(K) the cost of the other items, including tenant relocation, if tenant 
relocation costs are not otherwise being provided for, as the agency shall 
determine to be reasonable and necessary for the development of the housing 
development, less any and all net rent and other net revenues received from the 
operation of the real and personal property on the development site during 
construction.
   Housing development or housing project-Any real or personal property, 
project, building, structure, facilities, work, or undertaking, whether 
existing, new construction, remodeling, improvement, or rehabilitation, which 
meets or is designed to meet minimum property standards prescribed by the agency 
and which is financed pursuant to the provisions of the Act for the primary 
purpose of providing sanitary, decent, and safe dwelling accommodations for 
persons and families of low income and families of moderate income in need of 
housing. The term may include buildings, structures, land equipment, facilities, 
or other real or personal properties which are necessary, convenient, or 
desirable appurtenances, such as but not limited to streets, water sewers, 
utilities, parks, site preparation, landscaping, stores, offices, and other 
nonhousing facilities, such as administrative, community, and recreational 
facilities the agency determines to be necessary, convenient, or desirable 
appurtenances. Housing development and housing project include both single -
family dwellings and multifamily dwellings in rural and in urban areas.
   Housing sponsor -Individuals, including persons and families of low income or 
families of moderate income, joint ventures, partnerships, limited partnerships, 
trusts, firms, corporations, and cooperatives, approved by the agency as 
qualified either to own, construct, acquire, rehabilitate, operate, manage, or 
maintain a housing development, subject to the regulatory powers of the agency 
and other terms and conditions set forth in the Act.
   Land development -The process of acquiring land for residential housing 
construction and making, installing, or constructing nonresidential 
improvements, including, without limitation, waterlines and water supply 
installations, sewer lines and sewage disposal installations, steam, gas, and 
electric lines and installations, roads, streets, curbs, gutters, and sidewalks, 
whether on or off the site, which the agency deems necessary or desirable for 
housing developments to be financed by the agency.
   Mortgage-A mortgage, mortgage deed, deed of trust, or other instrument which 
constitutes a first lien:
(A) on real property; or
(B) on a leasehold under a lease having a remaining term which at the time the 
mortgage is acquired does not expire until after the maturity date of the 
interest-bearing obligations secured by the mortgage.
   Mortgage lender -Any bank or trust company, savings bank, mortgage company, 
mortgage banker, credit union, national banking association, savings and loan 
association, building and loan association, life insurance company, or other 
financial institution authorized to transact business in the state that is 
approved as a mortgage lender by the agency.
   Mortgage loan-An interest-bearing obligation secured by a deed of trust, a 
mortgage, bond, note, or other instrument which is a first lien on real property 
in the state.
   Municipality-Any city, town, or village in this state.
   Person-Any individual partnership, association, corporation, governmental 
subdivision, firm, trust, or agency.
   Persons and families of low income-Persons and families determined by the 
board to require assistance as is made available by the Act because of 
insufficient personal or family income taking into consideration, without 
limitation, such factors as:
(A) the amount of the total income of such persons and families available for 
housing needs;
(B) the size of the family;
(C) the cost and condition of housing facilities available;
(D) the ability of the persons and families to compete successfully in the 
private housing market and to pay the amounts required by private enterprise for 
sanitary, decent, and safe housing; and
(E) standards established for various federal programs determining eligibility 
based on income.
   Family of moderate income-A family:
(A) that is determined by the board to require assistance, taking into account 
the factors listed in the definition of persons and families of low income in 
this section; and
(B) that does not qualify as a family of low income.
   Public agency-Any board, authority, agency, department, commission, political 
subdivision, municipal corporation, district, public corporation, body politic, 
or instrumentality of the state including without limitation any county, home-
rule charter city, general-law city, town, or village, any housing authority, 
any state-supported educational institution of higher learning, any school, 
junior college, hospital, water, sewerage, waste disposal, pollution, road, 
navigation, levee, drainage, conservation, reclamation, or other district or 
authority, and any other type of political or governmental entity of the state.
   Real property-All land, including improvements and fixtures thereon, and 
property of any nature appurtenant thereto, or used in connection therewith, and 
every estate, interest, and right, legal or equitable, therein, including 
leasehold interests, terms for years, liens by way of judgment, mortgage, or 
otherwise.
   Reserve fund-The Texas Housing Agency Reserve Fund which may be created 
pursuant to the Act and which may be established by the agency with the state 
treasurer of the State of Texas out of proceeds from the sale of the agency's 
bonds or other resources, as additional security for the agency's bonds.
   Residential housing -A specific work or improvement within this state 
undertaken primarily to provide dwelling accommodations, including the 
acquisition, construction, reconstruction, remodeling, improvement, or 
rehabilitation of land, buildings, and improvements thereto, for residential 
housing, and such other nonhousing facilities as may be incidental or 
appurtenant thereto.
   State-The State of Texas.
sec.21.3. Business Offices and Mailing Address of the Agency. The agency's main 
office is located in the City of Austin, Texas. The agency may maintain other 
offices in the State of Texas as appropriate.
sec.21.4. Board Meetings.  Regular meetings of the board of directors of the 
agency will be held at times and places specified by resolution of the board. 
The chairman of the board, the executive administrator of the agency, or any 
three of the board directors may call special meetings of the board after due 
notice is given to the other directors and parties as required by law. All 
meetings are to be held in compliance with the Open Meetings Act, Texas Civil 
Statutes Article 6252 -17.
sec.21.5. Seal of Agency. The seal of the agency will be the words "Texas 
Housing Agency' encircling the oak and olive branches common to other official 
state seals.
sec.21.6. Secretary of State Liaison. The executive administrator or, in his or 
her absence, a representative designated by the administrator, shall serve as 
the liaison through whom all required documents may be submitted on behalf of 
the board to the secretary of state for filing and publication.
sec.21.7. Delegation of Responsibility. The board may delegate to any attorney 
licensed to practice law in the State of Texas the responsibility to hear and to 
write a report to the board on any matter before the board, including but not 
limited to consideration of a petition to the board for the adoption of a 
section.
sec.21.8. Public Records.  Information and data gathered, assembled, or 
maintained by the agency are public records available for inspection and copying 
during regular business hours; subject, however, to the limitations to this 
availability provided in the laws administered by the agency and the Open 
Records Act (Texas Civil Statutes Article 6252-17a).
sec.21.9. Copies and Certificates.
(a) Except as provided by the Open Records Act, the agency will furnish copies, 
certified or otherwise, as requested, of any of its proceedings or other 
official act of record or any information in the agency's files. Certified 
copies shall be made under the hand of the executive administrator and affixed 
with the agency's seal. As long as requests for copies by a person do not become 
burdensome, there is no charge for single copies of a reasonable number of pages 
of documents furnished to:
(1) a government agency when the subject of the documents is a matter within its 
jurisdiction; or
(2) any person when the subject of the documents relates to a matter affecting 
that person and when furnishing copies serves a public purpose.
(b) In all other cases, the executive administrator will furnish copies at the 
rates published by the State Purchasing and General Services Commission, or will 
arrange with a third party for copies to be made at the cost of the person 
requesting them. Fees for copies furnished by the agency shall not exceed those 
permitted in Texas Civil Statutes Article 3913. Fees for copies made by a third 
party shall not exceed the cost charged to the agency by such third party, 
except for the addition of applicable taxes. Copies of transcripts prepared by a 
court reporter may be obtained directly from the court reporter, or will be 
obtained from the court reporter by the agency and provided to the person 
requesting the transcript at the charge made by the court reporter. All copies 
for which there is a charge must be paid for in advance.
sec.21.10. Use and Effect. These sections may be used by the board as guides in 
the exercise of discretion where discretion is vested. They shall not be 
construed as a limitation or restriction on the exercise of discretion, nor 
shall they be construed to deprive the board of the exercise of any power, 
duties, and jurisdiction conferred by law, or to limit or restrict the amount 
and character of data or information which may be required for the proper 
administration of the law.
Chapter 23. General
sec.23.1. Submission of Documents. A person desiring to file briefs, affidavits, 
written statements, protests, comments, exhibits, technical reports, or any 
other document shall submit the document no later than the time of the hearing 
on the matter, provided that the board or the executive administrator may grant 
additional time for the submission of documents.
   
sec.23.2. Effective Time of Notice. Notice shall be effective when postmarked 
for delivery by first class or a higher class mail at the address reflected in 
the records of the agency.
sec.23.3. Computation of Time. In computing the time prescribed or allowed by 
these sections, orders of the board, or any applicable statute, the period shall 
not include the day of the act, event, or default in question, but does include 
the last day of the designated period, unless it is on a Saturday, Sunday, or 
legal holiday, in which case the period runs until the next day that is not a 
Saturday, Sunday, or a legal holiday.
sec.23.4. Notice of Hearings. Notice of all hearings shall be filed with the 
secretary of state for publication in the Texas Register. In a contested case, 
all parties must be afforded an opportunity for hearing after notice of at least 
10 days.
sec.23.5. Copy of Notice to Lieutenant Governor and Speaker. When the agency 
files notice of a proposed rule with the secretary of state, it shall also 
deliver a copy of the notice to the lieutenant governor and Speaker of the 
House.
sec.23.6. Material Available for Inspection. When a notice of hearing is given, 
materials pertinent to the subject of the hearing, including documents, studies, 
and other data, shall be made available to the public for review and study. As 
additional materials are received, they shall be made available for public 
review and study.
sec.23.7. Mailing of Notice. The notice of hearing shall be mailed to all 
persons who have made timely written requests for advance notice of agency 
actions and hearings. Failure to mail such notice, however, shall not invalidate 
any action taken or sections adopted. The executive administrator shall maintain 
a list of all persons who have requested notice of agency actions and hearings.
sec.23.8. Hearing Examiner.  The executive administrator may designate any 
attorney licensed to practice in this state as a hearing examiner. The examiner 
shall act independently of the staff in an impartial manner and shall be 
considered as assisting the board in its decision making.
sec.23.9. Testimony.  The testimony presented at a contested hearing must 
pertain to the subject matter described in the notice. Irrelevant, immaterial, 
or unduly repetitious evidence shall be excluded. The rules of evidence as 
applied in nonjury civil cases in the district court of this state shall be 
followed. When necessary to ascertain facts not reasonably susceptible of proof 
under those rules, evidence not admissible thereunder may be admitted, except 
when prohibited by statute, if it is of a type commonly relied upon by prudent 
men in the conduct of their affairs. The examiner shall give effect to the rules 
of privilege recognized by law. Objections to offers of evidence may be made and 
shall be noted in the record. Subject to these requirements, evidence may be 
received in written form if a hearing will be expedited and the interests of the 
parties will not be substantially prejudiced.
sec.23.10. Conduct and Decorum.
(a) Every party, witness, attorney, or other person shall comport himself or 
herself in all board proceedings with dignity, courtesy, and respect for the 
board, hearing examiner, and other participants.
(b) If he or she violates subsection (a) of this section, a party, witness, 
attorney, or other person may be excluded by the board from any hearing for such 
period and upon such conditions as are just, or may be subject to such other 
just, reasonable, and lawful disciplinary action as the board may prescribe.
sec.23.11. Appearance.  Any person who may be affected by or is interested in 
the proposed action may appear at a public hearing. A person may appear in 
person or by his or her authorized representative. A representative shall 
disclose his or her authority to speak for the person represented.
sec.23.12. Failure to Appear. Except for good cause and extenuating 
circumstances, the applicant or petitioner shall appear at the public hearing. 
Failure to so appear may be grounds for withholding consideration of a matter or 
for denial without prejudice.
sec.23.13. Affidavit by Representative. Whenever it is necessary or proper for 
any party to an application or proceeding to make an affidavit, it may be made 
by either the party or the party's representative, unless otherwise provided by 
statute.
sec.23.14. Attorney of Record.
   An attorney of record is one who has appeared in a proceeding or whose name 
is subscribed to any application or other pleadings or to some agreement of the 
parties filed in the proceedings. The attorney shall be considered to have 
continued as attorney of record to the end of the proceeding with the board 
unless there is a statement to the contrary appearing in the record.
sec.23.15. Lead Counsel.  A party represented by more than one attorney in a 
matter before the board may be required to designate a lead counsel who shall 
have control in the management of the matter, but all other attorneys for the 
party may take part in the proceeding in an orderly manner.
sec.23.16. Motions.  A motion, unless made during a hearing, shall be made in 
writing, set forth the relief or order sought, and be timely filed with the 
board. If parties have been designated, a copy shall be furnished by the movant 
to each applicant, petitioner, and other party of record. Any reply to the 
motion shall be timely filed with the board with a copy served on the movant. 
Failure to furnish copies may be grounds for withholding consideration of the 
motions or replies. Unless otherwise directed by the board, motions based on 
matters which do not appear of record must be supported by affidavit. When 
necessary in the judgment of the board, a hearing will be held to consider any 
motion.
sec.23.17. Subpoenas and Depositions. Subpoenas may be issued and depositions 
commissioned by the board in accordance with Texas Civil Statutes Article 6252 -
13a, sec.15.
sec.23.18. Oral Presentation.
(a) A person who wants to make an oral presentation shall so advise the hearing 
examiner. The hearing examiner shall administer oaths to each person who 
testifies and shall recognize and establish the order for presentation of 
evidence and argument.
(b) In order to prevent undue prolongation of a hearing, the hearing examiner, 
as appropriate, may limit the number of times a person may testify, the time 
period for presentations, and the time period for raising questions. The hearing 
examiner shall also have the authority to limit or exclude cumulative or unduly 
repetitious presentations.
sec.23.19. Exhibits.  Exhibits will not be so large as to encumber the records 
of the agency. Exhibits will be limited to factual material and relevant to the 
issues involved. The original of each exhibit offered must be tendered to the 
court reporter for identification; one copy will be furnished to the hearing 
examiner; and one copy to each party of record or representative. In the event 
an exhibit has been identified, objected to, and excluded, the hearing examiner 
will determine whether or not the party offering the exhibit withdraws the 
offer, and if so, the examiner will return the exhibit to the party. If the 
excluded exhibit is not withdrawn, it will be given an exhibit number for 
identification and will be included in the record to preserve the exception.
sec.23.20. Final Decisions.  All final decisions shall be taken by resolution 
adopted by the board, which shall be in writing or stated in the record. The 
affirmative vote of at least five directors is necessary to adopt a resolution. 
A final decision shall include findings of fact and conclusions of law 
separately stated. Findings of fact, if set forth in statutory language, shall 
be accompanied by a concise and explicit statement of the underlying facts 
supporting the findings. The decision shall also include a ruling on each 
proposed finding of fact submitted by a party. Parties not present at the 
announcement of a final decision shall be notified by mail of the decision. Upon 
written request, a copy of the decision or order shall be delivered or mailed to 
any party or attorney of record.
sec.23.21. Motions for Rehearing. A motion for rehearing is a prerequisite to a 
judicial appeal. A motion for rehearing must be filed within 15 days after the 
date of rendition of a final decision or order. Replies to a motion for 
rehearing must be filed with the executive administrator within 25 days after 
the date or rendition of the final decision or order, and board action must be 
taken within 45 days after the date of rendition of the final decision or order. 
If board action is not taken within the 45-day period, the motion for rehearing 
is overruled by operation of law 45 days after the date of rendition of the 
final decision or order. The executive administrator may by written order extend 
the period of time for filing the motions and replies and taking board action, 
except that an extension may not extend the period for board action beyond 90 
days after the date of rendition of the final decision or order. In the event of 
an extension, the motion for rehearing is overruled by operation of law on the 
date fixed by the order, or in the absence of a fixed date, 90 days after the 
date of the final decision or order. The parties may by agreement with the 
approval of the executive administrator provide for a modification of the times 
provided in this section. The motion for rehearing in a contested case may be 
considered by the board at a regularly called meeting of the board, or by mail, 
telephone, telegraph, or other suitable means of communication.
sec.23.22. Reporter and Transcript. The proceedings of any hearing or any part 
of them in a contested case will be transcribed on written request of any party. 
The party will furnish his own stenographic reporter unless express approval to 
utilize a reporter retained by the agency is obtained from the executive 
administrator. The cost of the original transcript will be assessed against the 
party requesting the transcription. The original transcript will be delivered to 
the executive administrator within 15 working days after the close of the 
hearing and will become the property of the agency and a part of the record. A 
stenographic reporter may sell a copy of the transcript to any party or person 
requesting the same. The executive administrator may exclude any stenographic 
reporter from a hearing for late delivery or poor workmanship exhibited in 
previous hearings. The agency may make a stenographic record of any proceedings 
without notice to the parties, or it may record such proceedings electronically 
at its discretion.
Chapter 25. Board Meetings.
 sec.25.1. Chairman.  The chairman of the board or the vice chairman, in the 
chairman's absence, presides at the meetings of the agency. While presiding, the 
chairman directs the order of the meeting, recognizes persons to be heard, 
limits time and takes other action to clarify issues, and preserves order.
sec.25.2. Executive Administrator.  The executive administrator attends all 
board meetings if possible and serves as a liaison between the board and the 
public.
sec.25.3. Transcript and Minutes.
(a) The executive administrator shall determine if a verbatim transcript is 
needed, and if so, the executive administrator shall arrange for a reporter. 
Such a transcript shall serve as minutes.
(b) If a reporter is not present, the executive administrator or a person 
designated by the executive administrator shall prepare minutes reflecting all 
actions taken and board members present.
sec.25.4. Agenda.  The agenda consists of items prepared by the staff prior to 
the hearing. Notice of all items to be considered is filed with the secretary of 
state's office, as required by statute.
sec.25.5. Registration Form.  The executive administrator will provide 
registration forms for board meetings and hearings. Any person desiring to speak 
on any agenda item fills out the registration form prior to the convening of the 
meeting and before entering the hearing room.
sec.25.6. Quorum.  A majority of the regular members of the board of directors 
constitutes a quorum. The board shall act and proceed by and through resolutions 
adopted by the board. The affirmative vote of at least five board members is 
necessary to adopt a resolution.
sec.25.7. Request for Action by the Board.  Any person who desires to have a 
matter placed on the agenda for action by the board shall make such request in 
writing to the executive administrator at least 15 days prior to the date set 
for the regular meeting of the board. In matters other than contested cases, the 
applicant shall provide, along with the request in writing, 15 copies of all 
information, data, or other material which the person desires the board to 
consider. In the event it is not possible to file such request 15 days in 
advance of the meeting date, a request may be made for emergency action of the 
board.
sec.25.8. Placing Matters on Agenda. The executive administrator shall 
determine, after receiving a written request for action, whether the matter 
shall be heard at the time requested, having due regard for the nature and 
complexity of the matter to be presented. In no event shall any requested matter 
be placed on the agenda of the board for its regular meeting at a time later 
than five days prior to the date on which such meeting is scheduled unless the 
chairman, or the vice chairman in the event of the inability of the chairman to 
act, acting on the advice of the executive administrator, determines that an 
emergency situation exists requiring immediate action by the board.
sec.25.9. Public Hearing Prior to Presentation to Board. In the event the 
executive administrator determines that a public hearing is required by law or 
is appropriate in order to more fully develop evidence bearing on the matter to 
be presented, the executive administrator shall call and hold such hearing in 
the name of the agency prior to presenting the matter for board consideration.
sec.25.10. Presentation to Board without Prior Public Hearing. If a matter which 
is not a contested case within the meaning of section 3(2) of the Administrative 
Procedure and Texas Register Act is brought before the board without prior 
public hearing, the board may:
(1) hear and decide the matter with such time limitations on oral presentation 
as the board deems necessary;
(2) postpone the matter for further hearing before the board; or
(3) refer the matter for hearing before a hearing examiner who will report to 
the board at a later time.
sec.25.11. Public Appearances.
(a) Any person speaking before the board begins by stating his or her name and 
the name of any person represented. The person states his or her position in 
respect to the issue briefly and concisely. The person's statement will be 
supported by such facts as will assist the board to arrive at a final decision 
concerning the matter under consideration. Statistics or facts will be written, 
typed, or printed, and submitted to the board. Briefs will be submitted under 
any procedural restrictions as the board announces at the hearing.
(b) Any testimony presented by a member of the public may be taken by the board 
under oath. Argument not reasonably deducible from facts before the board or 
which is merely critical of persons will be avoided.
(c) Persons wishing to speak before the board are subject to examination by 
members of the board or by the staff of the agency.
sec.25.12. Order of the Hearing.
(a) The chairman calls the hearing to order.
(b) After approval of the previous minutes, the chairman instructs the executive 
administrator to introduce the first item on the agenda.
(c) The executive administrator presents the agenda item or calls upon the 
appropriate staff member to make the presentation.
(d) Before a vote is taken on any item, the chairman may open the floor for 
discussion.
(e) If the floor is open for discussion, the chairman recognizes persons wishing 
to speak in a manner allowing equal opportunity for representation on both sides 
of an issue, and also regulates the order for the discussion of items.
(f) Upon completion of the staff presentation on an item and appropriate public 
comment, if any, the board upon motion of one of the directors, takes action 
deemed necessary to dispose of the item.
(g) After consideration of the formal agenda has been completed, the board 
considers requests by the public as time permits, under the topic "other 
business.
Chapter 29. Nonrulemaking Hearings
 sec.29.1. Calling the Hearing. A hearing may be called any time the board or 
the executive administrator determines a hearing to be required by law or to be 
appropriate with respect to the rules, regulations, orders, or other actions of 
the board. In addition, any interested person may petition the executive 
administrator to call and hold a public hearing.
sec.29.2. Petition for Hearing Other than a Petition for the Adoption of Rules. 
A petition for hearing other than for the adoption of rules shall be made by 
filing in writing with the executive administrator a plain and concise statement 
of the purpose of the request and the action requested of the agency as a result 
of the hearing.
sec.29.3. Action on Request for a Hearing.  After reviewing the petition and any 
other factors deemed necessary, the executive administrator shall decide whether 
to call a public hearing and provide written notification of the decision to the 
petitioner within 30 days after a receipt of the petition. The decision of the 
executive administrator to deny a request for hearing is appealable to the board 
within 30 days after notification of the decision. Such appeal is to be taken by 
written notification to the executive administrator.
sec.29.4. Presiding Officer.  Hearings will be conducted by a member of the 
board, the executive administrator, or a hearing examiner, any and all of whom 
are at times referred to in these sections as the examiner or presiding officer. 
The examiner shall have authority to administer oaths, to examine witnesses, and 
to rule upon the admissibility of evidence and amendments to pleadings. The 
examiner shall have the authority to recess any hearing from day to day. If the 
examiner is unable to continue presiding over a case at any time before the 
final decision, another examiner will be any function remaining to be performed 
without the necessity of repeating any previous proceedings.
sec.29.5. Official Notice.  Official notice may be taken of judicially 
cognizable facts, and such notice may be taken of generally recognized facts 
within the area of the agency's specialized knowledge. Parties shall be notified 
of the material noticed, including any staff memoranda or data, and they shall 
be afforded an opportunity to contest the material so noticed. The special 
skills and knowledge of the agency and its staff may be utilized in evaluating 
the evidence.
sec.29.6. Documentary Evidence.  Documentary evidence may be received in the 
form of copies or excerpts if the original is not readily available. On request, 
however, parties shall be given an opportunity to compare the copy with the 
original. When a large number of similar documents is offered, the examiner may 
limit those admitted to a number which are typical and representative, and may, 
in his or her discretion, require the abstracting of the relevant data from the 
documents and the presentation of the abstracts in the form of an exhibit; 
however, before making this requirement, the examiner shall see that all parties 
of record or their representatives are given an opportunity to examine the 
documents from which the abstracts are made.
sec.29.7. Evidence in Uncontested Proceedings. In any uncontested proceeding, 
the examiner may receive, unless prohibited by statute, any evidence of a form 
and character which would ordinarily be relied upon by a prudent person in the 
conduct of his or her affairs including, without limitation, affidavits, 
documents, and other forms of hearsay testimony deemed to be helpful, without 
regard to the legal rules of admissibility.
sec.29.8. Admissibility of Prepared Testimony and Exhibits.  When the proceeding 
will be expedited and the interests of the parties will not be prejudiced 
substantially, evidence may be received in written form. The prepared testimony 
of a witness upon direct examination, either in narrative or question-and-answer 
form, may be incorporated in the record as if read or received as an exhibit, 
upon the witness's being sworn and identifying the same as a true and accurate 
record of what his testimony would be if he were to testify orally. The witness 
shall be subject to cross-examination and his prepared testimony shall be 
subject to a motion to strike either in whole or in part.
sec.29.9. Witnesses Limited.  The examiner shall have the right in any 
proceeding to limit the number of witnesses whose testimony is merely 
cumulative.
Chapter 31. 1980 Series A Program Guidelines
sec.31.1. Introduction
(a) The Texas Housing Agency establishes and invites eligible lending 
institutions to apply for participation in the agency's Single Family Mortgage 
Purchase Program 1980 Series A (the "program') for the purchase of qualifying 
mortgage loans (the "mortgage loans') to finance the acquisition of owner-
occupied detached or attached single family residences or two-family attached 
residences ("residences') within the geographic limits of the State of Texas 
(the "state'). Mortgage loans will be originated and serviced by lending 
institutions participating in the program. Qualifying mortgage loans will be 
FHA, VA, or conventional mortgage loans which are made to "eligible borrowers,' 
as defined in the origination, sale, and servicing agreement (the "agreement') 
whose adjusted gross income did not exceed $25,000, plus $1,000 for each 
additional family member in excess of two, for the calendar year 1979. Each 
participant must reserve, until November 1, 1980, 25% of its allocation for 
eligible borrowers whose adjusted gross income was equal to or less than 
$19,500, plus $1,000 for each additional family member in excess of two, for the 
calendar year 1979. The maximum amount of a mortgage loan is $67,500. Mortgage 
loans are also subject to certain maximum loan limitations and certain loan-to-
value ratios and insurance requirements and other conditions of the agency, as 
more completely defined in the agreement. The agreement, copies of which are 
available from the executive administrator on request, is the principal document 
setting forth the rights and obligations of the participant under the program.
(b) The program will be administered by the agency with the assistance of its 
mortgage banking consultant and other consultants.
(c) The program will be funded by the agency's single family mortgage revenue 
bonds, 1980 Series A (the "bonds'), which will be issued and secured under a 
trust indenture.
(d) All capitalized terms used in this chapter, unless otherwise provided, shall 
have the meaning specified in the agreement.
sec.31.2. Commitment Procedure.
(a) Each lending institution desiring to participate in the program is requested 
to submit to the agency an executed copy of the advance commitment agreement, 
copies of which are available from the executive administrator upon request, 
indicating therein the aggregate principal amount of mortgage loans for which 
such lending institution is offering to originate, sell to, and service for the 
agency. Such amount shall not be less than $1 million nor more than $5 million.
(b) On or before 5 p.m. (central daylight time) September 8, 1980, the agency 
must receive the following:
(1) one copy of the advance commitment agreement properly executed by a vice 
president or other senior officer, attested and sealed;
(2) the commitment fee by check (which need not be a cashier's or certified 
check) payable to the order of the Texas Housing Agency in the amount of 2.5% of 
the principal amount of mortgage loans such institution has offered to 
originate, sell, and service;
(3) an opinion of counsel dated and signed in the form specified by the agency;
(4)  two copies of the agreement properly executed by a vice president or other 
senior officer, attested, sealed, and acknowledged;
(5) two copies of the completed lender questionnaire; and
(6) two copies of the latest audited financial statements of the institution.
(c) The materials described in subsection (b) of this section must be delivered 
to The Lomas and Nettleton Company, 2001 Bryan Tower, Suite 3600, P.O. Box 
225644, Dallas, Texas 75265, re: Texas Housing Agency. It is important that the 
envelope containing the materials be addressed exactly as specified in this 
subsection.
(d) The failure to deliver any of the items mentioned in this section on or 
before the date and time specified in subsection (b) of this section may result 
in such institution's name being withdrawn from consideration for participation 
in this program.
sec.31.3. Allocation Procedure.
(a) Following the date specified in sec.31.2(b)(2) of this title (relating to 
Commitment Procedure), the agency will review all of the information and 
materials submitted by interested lending institutions.
(b) The agency will allocate the minimum allocation amount ($1 million) to each 
acceptable lending institution, unless the agency receives advance commitment 
agreements and related materials from more than 125 lending institutions, in 
which event the agency will allocate the minimum allocations amount ($1 million) 
to the lending institutions drawn by lot. Due to the large number of lending 
institutions eligible to participate (approximately 500), and the expectation 
for the demand for funds to exceed the amount of funds anticipated to be 
available for the purchase of mortgage loans (approximately $125 million), it 
can be expected that only a portion of the lending institutions responding will 
receive an allocation. If less than 125 lending institutions respond, an amount 
greater than the minimum allocation amount may be allocated to some lending 
institutions, and the agency will determine what amount, if any, each lending 
institution will receive in excess of the minimum allocation amount up to but 
not in excess of the amount requested by such institution in its advance 
commitment agreement or the maximum allocation amount ($5 million), whichever is 
less.
(c) The agency will also establish a standby list of eligible lending 
institutions. The advance commitment agreements, commitment fees, and related 
documents of the lending institutions on such list will be retained by the 
agency until October 10, 1980. The agency will allocate to lending institutions 
on such standby list, in the order they were drawn by lot, any sums available 
over $125 million and any monies available as a result of lending institutions 
which received an allocation being eliminated from the program for any cause.
sec.31.4. Acceptance Procedure.
(a) After the agency has made its determination of allocations among the lending 
institutions accepted for participation in the program, the agency will mail by 
certified mail, return receipt requested, to each lending institution accepted 
for participation in the program (the "participant'), a notice of acceptance 
(the "notice of acceptance') of its advance commitment agreement in the form 
specified by the agency. The notice of acceptance shall specify the aggregate 
principal amount of mortgage loans committed to be purchased by the agency from 
such participant pursuant to the terms of the rules in this chapter, the 
advanced commitment agreement and the agreement. The notice of acceptance will 
also specify:
(1) the date on which participants may begin taking applications under the 
program;
(2) the date on which funds are expected to be available for the purchase of 
mortgage loans; and
(3) the maximum anticipated interest rate to be charged with respect to all 
mortgage loans to be submitted for purchase by the agency.
(b) Upon receipt of a notice of acceptance, each participant shall be committed 
to use its best efforts to originate and sell to the agency the aggregate 
principal amount of mortgage loans specified in its notice of acceptance and to 
service (subject to assignment pursuant to the agreement) all mortgage loans 
sold by it to the agency, subject to the following conditions:
(1) that the sale of the bonds is consummated on or before November 14, 1980;
(2) that the bonds are delivered pursuant to the purchase contract to be 
executed by the agency and the underwriters of the bonds at the bond sale; and
(3) that the interest rate on the mortgage loans does not exceed 12%.
(c) The agency will hold uncashed all checks submitted by lending institutions 
until the participants are selected for the program. All of the checks received 
from the lending institutions not selected for participation will be returned by 
mail to such lending institutions by October 1, 1980. The checks from all 
lending institutions selected for participation will be cashed and the monies 
therefrom held by the agency in escrow. Any portion of the commitment fee 
submitted by a participant with its advance commitment agreement which is in 
excess of the actual amount of such fee based upon participant's allocation will 
be refunded, without interest, by sending to such participant a check in the 
amount of such excess with the notice of acceptance.
(d) Prior to delivery of the bonds, participants may be called upon to deliver 
an updated certificate and/or an updated opinion of counsel to the effect that 
the information regarding the particular participant included in the lender 
questionnaire is accurate and complete in material respects as of such later 
date as specified in the requested updated certificate or opinion of counsel.
(e) Following the delivery of the bonds, the agency will send a notice to each 
participant advising of the availability of monies for the purchase of mortgage 
loans (the "notice of availability of funds') which will specify the exact 
interest rate to be charged on all mortgage loans and will contain a schedule of 
the mortgage loan submission and purchase dates.
sec.31.5. Program Guidelines.  The following comprises a description of the 
program guidelines as adopted by the agency for this program and includes the 
definition of certain of the terms relevant to the program and referred to in 
the agreement. The agreement and these guidelines should be read carefully in 
their entirety.
(1) Eligible lending institutions. To be accepted for participation in the 
program, lending institutions must:
(A) have maintained an office in the state since January 1, 1980; and
(B) be approved by FNMA or FHLMC as a seller and servicer.
(2) Origination and commitment period. The agency expects mortgage loans to be 
delivered for purchase within 60 days of the closing date. All mortgage loans 
must be originated and sold to the agency on or before May 15, 1981. In 
addition, all mortgage loans must be either originated or the subject of a 
commitment from a participant to the eligible borrower executed on or prior to 
December 31, 1980. Allocations not committed by December 15, 1980, may be 
reallocated by the agency to other participants. Commitment fees, if any, 
collected by the agency as a result of a reallocation between December 15, 1980, 
and December 31, 1980, will be paid to the participant whose allocation was 
reallocated. Commitment fees paid for allocations not committed by December 31, 
1980, will be retained by the agency and there will be no obligation on the part 
of the agency to return commitment fees collected by the agency, if any, as a 
result of any reallocations after December 31, 1980.
(3) Type of loans. Mortgage loans may be FHA (exclusive of FHA Section 245 
loans) , VA, and conventional, without any required mixture. The amount of any 
conventional mortgage loans may not exceed 95% of the sales price or appraised 
value of a residence, whichever is lower. A conventional mortgage loan with a 
loan to value ratio in excess of 80% must be covered by a private mortgage 
insurance policy in accordance with the agreement. In the case of mortgage loans 
guaranteed by VA, the guaranteed plus the amount of down payment, if any, must 
equal at least 25% of the sales price or appraised value, whichever is lower.
(4) Eligible loan area. The eligible loan area shall be the entire geographic 
limits of the State of Texas.
(5) Eligibility (maximum income and maximum loan amount). Mortgage loans must be 
made to eligible borrowers whose adjusted gross income did not exceed $25,000, 
plus $1,000 for each additional family member in excess of two, for the calendar 
year 1979. In addition, until November 1, 1980, a participant must reserve 25% 
of its allocation for the issuance of commitments to eligible borrowers whose 
adjusted gross income did not exceed $19,500, plus $1,000 for each additional 
family member in excess of two, for the calendar year 1979. Evidence of 
eligibility and adjusted gross income shall be the amount of adjusted gross 
income shown on the federal income tax return of the eligible borrower for 1979 
or such other evidence acceptable to the agency. The maximum mortgage loan 
amount may not exceed $67,500 or such lesser amount as conforms to the 
eligibility and credit underwriting standards specified in the agreement and, as 
required, the applicable requirements of FHA, VA, FNMA, FHLMC, or the private 
mortgage insurer, as the case may be, as of the closing date of the mortgage 
loan. Each eligible borrower must execute an affidavit of eligibility evidencing 
such person's belief that he qualifies as an eligible borrower.
(6) Term. Each mortgage loan shall be for a term of 30 years only.
(7) Prepayment. Mortgage loans will be prepayable, in whole or in part, at any 
time without penalty or premium.
(8) Loan origination guideline. Each participant shall originate all mortgage 
loans for purchase by the agency in accordance with the loan origination, 
eligibility, and credit underwriting standards in effect during the origination 
period under the program as set forth in the FNMA, FHA/VA mortgage selling 
contract supplement, the FNMA conventional home mortgage selling contract 
supplement, the FHLMC seller's guide conventional mortgages, or the FHLMC 
seller's guide FHA/VA (collectively referred to as "sellers' guides') with the 
exceptions as specifically noted in this subsection or which may be contrary to 
the express terms of the agreement. The submission of forms required by such 
sellers' guides shall not be required except as specifically requested by the 
agency. All references in the sellers' guides to FNMA or FHLMC shall be deemed 
to refer to the agency as appropriate under the circumstances. Notwithstanding 
the delivery procedures of section 4.06 of the agreement, the agency may, in its 
discretion, accept mortgage loan files which contain certified copies of the 
mortgage and the assignment of mortgage note and mortgage in lieu of the 
originals of same and/or the original or certified copy of a commitment for FHA 
insurance or VA guaranty in lieu of the certificate for same, and may approve 
the pertinent mortgage loans for purchase without such originals or certificate 
if the mortgage loan file is otherwise complete, all other mortgage loan 
documents are present and the mortgage loan otherwise qualifies for purchase 
under the agreement. The purchase of such mortgage loan is subject in all 
respects to section 4.09 of the agreement and the original mortgage and original 
assignment of mortgage note and mortgage with the certificate for FHA insurance 
or VA guaranty, if applicable, must be submitted to agency with 60 days from the 
purchase date of the subject mortgage loan. The agency shall, upon receipt of 
such originals and/or certificate, if applicable, file same with the related 
mortgage documents. Participants desiring to deliver mortgage loan files 
pursuant to this procedure shall submit a fee of $20 payable to the agency or 
its designee, for each mortgage loan file delivered by a participant without 
such originals or certificate. Such fee shall not be a charge or expense 
incurred by a participant for which participant may seek reimbursement from the 
mortgagor or the seller of the residence.
(9) Fees in origination. Participants may charge, to the extent permitted by 
law, fees in the following amounts:
(A) an origination fee not to exceed 1.0% of the original principal amount of a 
mortgage loan;
(B) a program participation fee not to exceed 2.75% of the original principal 
amount of a mortgage loan; and
(C) a warehouse fee, if any, in an amount to be determined by the agency. 
Participants may collect reasonable and customary charges actually paid by 
participants to unrelated third parties, in addition to the expenses provided 
for in section 4.04(i) of the agreement in an amount up to, but not in excess of 
$250. Participants may collect an amount not in excess of the program 
participation fee on the commitment date from the eligible borrower or the 
seller of the residence as they shall mutually agree and as permitted by law, to 
be applied as a credit against the origination fee and/or program participation 
fee, as appropriate, at the closing; provided that if the loan fails to close 
pursuant to the commitment and any of such monies are retained by participant, 
and if all or any portion of the amount so retained is subsequently recovered by 
the participant from another eligible borrower, such amount or portion thereof 
so recovered shall be refunded by participant to the person from whom it was 
originally collected.
(10) Concerning residences. Residences shall be single -family attached or 
detached structures or two-family attached structures. No participant may use 
more than 10% of its allocation for the issuance of commitments for take-out 
loans. As to any residence which would fit the definition of a unit of a 
condominium or of a planned unit development, as defined in the FNMA 
"Conventional Home Mortgage Selling Contract Supplement:'
(A) No mortgage loan made on a unit of any phase of a condominium regime or a 
planned unit development will be purchased until at least 51% of the units in 
such phase have been sold.
(B) No more than the lesser of 25 units or 25% of the units of any phase of a 
condominium regime or planned unit development may be the subject of mortgage 
loans originated under the program.
(C) For these purposes, a "phase' of a condominium regime or planned unit 
development shall mean a group of such units which are contemporaneously 
constructed and simultaneously subjected to the covenants, restrictions, and 
requirements of the homeowners' association of the condominium regime or planned 
unit development. In addition, no mortgage loan may be made with respect to a 
unit of a condominium or planned unit development unless the condominium or 
planned unit development in which such unit is located has been approved by FNMA 
or FHLMC, or participant certifies that such condominium or planned unit 
development would meet the requirements for approval by FNMA or FHLMC. Provided, 
however, upon certification by participant that a planned unit development is a 
"de minimis PUD,' or participant certifies that such condominium or planned unit 
development is acceptable to FHA for mortgage loans insured by FHA, then the 
restrictions in this subparagraph shall not apply to the units of such "de 
minimis PUD' or the units of such condominium or planned unit development which 
are insured by FHA insurance.
(i) For these purposes a "de minimis PUD' shall mean:
(I) a planned unit development which meets the definition of a "de minimis PUD,' 
as defined in the FNMA "Conventional Home Mortgage Selling Contract Supplement;' 
or
(II) a planned unit development:
(-a-) whose organizational or other relevant documents provide that the lien for 
any homeowner assessment or charge is subordinated to the lien of any purchase 
money mortgage; and
(-b-) the maximum permissible annual homeowner assessments and/or charges with 
respect to the property being financed, as of the closing date of the mortgage 
loans, is no greater than the lesser of $300 or .5 - 1.0% of the sales price of 
the residence.
(ii) Before closing a mortgage loan with respect to a unit of a condominium, 
planned unit development or "de minimus PUD,' participant must register the unit 
for eligibility in the program and remit $20 to the agency or its designee as an 
administrative fee for monitoring the various requirements set forth in this 
paragraph, which fee may be charged to the mortgagor or the seller of the 
residence.
(11) Permitted encumbrances. All mortgage loans must be secured by a first lien 
on the residence. Permitted encumbrances are those liens, covenants, conditions 
and restrictions, rights of way, easements, and other matters of public record 
as of the date of the recording of the related mortgage, which are permitted 
under the sellers' guides.
(12) Concerning refinancing. No refinancing of any outstanding indebtedness 
shall be permitted except in the case of a take -out loan. Participants may 
originate for sale to the agency take-out loans in an amount which will not 
exceed in the aggregate, 10% of their respective allocations. A take-out loan 
may be made to permit an eligible borrower to finance a residence which 
qualifies as a newly constructed residence under these program guidelines or to 
finance the purchase and remodeling of a residence, and retire any indebtedness 
thereon if such indebtedness arose after the issuance date and after the receipt 
of a commitment under the program which was used as a take-out of the 
construction loan. If warranted by the circumstances, an eligible borrower shall 
be considered as both a mortgagor and a seller with respect to take-out loans. 
For these purposes, a newly constructed residence shall mean any residence upon 
which, as of the issuance date, construction has not yet begun and which 
otherwise meets the tests of the paragraph. For purposes of these program 
guidelines and the agreement, an eligible borrower that receives a commitment 
for a take-out loan shall be deemed to be purchasing the residence which is the 
subject of the commitment.
(13) Mortgage documents. The mortgage documents shall be comprised of:
(A) the mortgage submission voucher complete with an executed officer's 
certification pertaining to the mortgage loan certifying to the representations 
contained in section 2.03 of the agreement;
(B) the original mortgage note endorsed as follows: "Pay, without recourse, to 
_________as Trustee for Texas Housing Agency';
(C) the original mortgage complete with recordation notation;
(D) the certificate of mortgage pool insurance policy;
(E) the VA loan guaranty certificate showing endorsement date, FHA mortgage 
insurance certificate showing FHA number for loan and applicable section of 
Housing Act, or evidence of private mortgage insurance, as applicable;
(F) a plat or survey dated within six months of the closing date certified by a 
licensed surveyor or engineer suitable for deletion of the survey exception 
under the title policy;
(G) the title policy;
(H) the original assignment of mortgage note and mortgage naming trustee as 
assignee, complete with recordation notation;
(I) the certificate of hazard insurance or evidence of mortgagee single interest 
hazard insurance or flood insurance, as required, and copies of any necessary 
notices to the insurance carrier;
(J) the affidavit of eligibility;
(K) if applicable, condominium, planned unit development or de minimis PUD 
letter, and/or certificate; and
(L) such other instruments or certificates as the agency may from time to time 
designate.
(14) Qualified insurers. Qualified insurances shall mean the following 
companies: American Mortgage Insurance Company of North Carolina, Commonwealth 
Mortgage Assurance Company, Foremost Guaranty Corporation, Mortgage Guaranty 
Insurance Corporation, PMI Mortgage Insurance Company, RMIC Insurance Company, 
Ticor Mortgage Insurance Co., Tiger Investors Mortgage Insurance, United 
Guaranty Residential Insurance Company of Iowa, Verex Assurance, Inc., and such 
other insurers as will not materially adversely affect the ratings on the bonds 
initially obtained, as determined from time to time by the agency.
(15) Purchase price and purchase dates. Mortgage loans will be purchased two 
times each month on the dates specified in the schedule of purchase dates 
provided to the participants with the notice of availability of funds. The first 
purchase date will be at least 30 days after the sale and delivery of the bonds. 
Each mortgage loan file must be eligible for purchase on such purchase date. The 
purchase price paid by the agency with respect to any mortgage loan will be an 
amount equal to the outstanding principal amount of the mortgage loan plus all 
accrued and unpaid interest thereon, provided, however, in the case of any 
mortgage loan which is secured by property which is located in a county of the 
state which is not included within a standard metropolitan statistical area, the 
agency will refund, on the purchase date, to the participant selling such 
mortgage loan, 1/5 of the commitment fee paid with respect to the outstanding 
principal amount of the mortgage loan.
(16) Service fees. The service fee shall be an amount equal to a monthly fee of 
1/12 of 3/8 of 1.0% of the unpaid principal balance of each mortgage loan as of 
the day preceding the last day on which a scheduled payment of principal was 
paid. The assumption and release fee shall be an amount not in excess of the 
greater of $100 or 1.0% of the outstanding principal balance on the mortgage 
loan as of the date of the assumption and release. Late charges may be collected 
for mortgage loans delinquent 15 days or more, and retained by participants, in 
amounts not in excess of 4.0% of the delinquent amount in the case of mortgage 
loans insured or guaranteed by FHA or VA and 5.0% of the delinquent amount in 
the case of conventional mortgage loans.
(17) Loan servicing guidelines. Participants shall service the mortgage loans in 
accordance with the servicing standards as set forth in the FNMA "Home Mortgage 
Servicing Contract Supplement' of the FHLMC "Servicers' Guide' (collectively the 
"servicing guides') as they may be in effect during the term of the program and 
except as such standards may be specifically modified in this chapter or may be 
contrary to the expressed terms of the agreement. Participants shall not be 
required to prepare, submit, or file any forms or other documents required by 
such servicing guides, except as specifically referenced in this chapter or in 
the agreement or as may reasonably be requested from time to time by the agency. 
All references in the servicing guides to FNMA or FHLMC shall be deemed to refer 
to the agency as appropriate under the circumstances. Each participant shall 
perform all of its duties in servicing mortgage loans for the agency with due 
care, diligence, and reasonable promptness and shall use at least the same 
degree of care in servicing mortgage loans hereunder as it would employ in 
servicing mortgage loans on behalf of FNMA or FHLMC.
Chapter 33. Guidelines For Multifamily Housing Revenue Bond
sec.33.1. Introduction.  The Texas Housing Agency through these sections is 
revising the guidelines for its multifamily housing revenue bond financing 
programs in order to continue to ensure that the maximum level of public purpose 
will be served by such programs. These sections shall apply to all multifamily 
housing developments whose purchase, construction, remodeling, improvement, or 
rehabilitation is financed by the agency under the Act, and shall supersede any 
other rule of the agency inconsistent therewith.
sec.33.2. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise:
   Act-The Texas Housing Agency Act, Texas Civil Statutes, Article 1269l -6 as 
it may be amended from time to time.
   Agency-The Texas Housing Agency created by the Act.
   Board-The board of directors of the agency.
   Bonds-Any type of interest-bearing obligations, including, without 
limitation, bonds, notes, bond anticipation notes, or other evidences of 
indebtedness, issued by the agency to finance a multi-family housing 
development.
   Code-The Internal Revenue Code of 1954, as amended.
   Elderly tenants -Eligible tenants who are individuals 60 years of age or 
older or families in which an individual of 60 years of age or older is head of 
the household.
   Eligible tenants -Persons and families of low income, within the meaning of 
the Act,  sec.2(q), and families of moderate income, within the meaning of the 
Act, sec.2(r), as determined by the board pursuant to the Act.
   Housing development or development-A multifamily housing development financed 
or to be financed by the agency pursuant to the provisions of the Act.
   Housing development costs-Costs incurred in financing, creating, or 
purchasing any housing development that fall within the definition of "housing 
development costs' contained in the Act, 2(i), and that are approved by the 
agency as reasonable and necessary.
   Housing sponsor -An individual, joint venture, partnership, limited 
partnership, trust, firm, corporation, or cooperative approved by the agency as 
qualified to own, construct, acquire, rehabilitate, operate, manage, or maintain 
a housing development, and who has applied to the agency for financing of a 
housing development.
   Lower-income tenants -Individuals of low and moderate income within the 
meaning of the Code, sec.103(b)(12)(c), and applicable regulations thereunder, 
whose aggregate adjusted income, computed in the manner prescribed in treasury 
regulations sec.1.167(k) -3(b)(3), does not exceed 80% of the median gross 
income for the area in which such individuals reside, adjusted for family size 
in the manner required by the Code, sec.103(b), and applicable regulations 
thereunder.
   Lower-income units -Units in a housing development that are occupied by 
lower-income tenants pursuant to sec.33.7(a) of this title(relating to Housing 
Development Occupancy).
sec.33.3. Application for Financing of a Housing Development.
(a) To make an initial application for financing for a housing development, a 
housing sponsor shall submit to the agency the following:
(1) a request for public hearing, signed by an authorized representative of the 
housing sponsor, in the form prescribed by the agency. The request shall contain 
information on the proposed housing development and housing sponsor and the 
development site, including but not limited to, the following: name of proposed 
housing development; city and county in which such development is to be located; 
address of development or sufficient crossroads information to identify the 
location of the development site; number of total acres in the development site; 
estimated amount of bonds to be issued by the agency to finance the housing 
development; total number of proposed dwelling units in the development; name of 
housing sponsor and, if the housing sponsor is other than an individual, the 
organizational form of the housing sponsor and the names of its principals; 
name, address and telephone number of a contact person who will represent the 
housing sponsor at the public hearing held by the agency on the housing 
development and who will receive all correspondence concerning such hearing; and 
the names of public officials representing the area in which the proposed 
housing development is to be located, with their district names and numbers 
(including U.S. congressperson, state senator and representative, mayor, county 
judge and superintendent of school district);
(2) a city location map showing the location of the site of the proposed housing 
development and, if appropriate, an additional map showing the relative location 
of the city location map to the boundaries of the city as a whole;
(3) a site development plan for the housing development;
(4) a nonrefundable application review fee in such amount as may be set from 
time to time by the agency;
(5) a nonrefundable public hearing fee in such amount as may be set from time to 
time by the agency;
(6) such additional material as the agency shall require to schedule and conduct 
a public hearing with respect to the housing development, including material for 
distribution to interested parties and a draft notice of public hearing for 
publication, all in the form prescribed by the agency.
(b) In connection with any application to the agency to finance a housing 
development, the housing sponsor shall submit to the agency, in a form approved 
by the agency, such information concerning the proposed housing development and 
the housing sponsor as the agency may require, including but not limited to, 
information on the planning and design of the development (including all 
amenities and common facilities), the development site and surrounding 
community, all associated housing development costs broken down by 
category(including supporting documentation), applicable zoning laws and other 
restrictions on use and operation, the estimated amount of the requested loan, 
the proposed use of all funds to be furnished by or on behalf of the agency in 
connection with the development, the projected construction schedule and 
completion date, a draw-down schedule of loan proceeds, revenue projections, 
initial rents of the units in the development, a profile of expected tenants 
(e.g., family size, age, income range), the proposed management of the 
development, the proposed financing structure, the experience and financial 
responsibility of the housing sponsor, evidence of compliance with applicable 
state and federal law in any housing development previously financed by the 
agency for the benefit of such housing sponsor or of an affiliated housing 
sponsor, and any information the agency may deem relevant to the market study to 
be performed pursuant to sec. 33.4 of this title (relating to Market Study).
sec.33.4. Market Study.
(a) Prior to entering any agreement with a housing sponsor to finance a housing 
development, the agency shall commission a study to be performed, at the expense 
of such housing sponsor, by a market appraiser selected by the agency in its 
sole discretion to evaluate the need for the housing development to provide 
decent, safe, and sanitary housing at rentals or prices that eligible tenants, 
and lower income tenants can afford. Such study shall include (but may not be 
limited to) an evaluation of the existing occupancy/vacancy rates in comparable 
multifamily residential rental developments in the market area in which the 
proposed housing development is to be located; projected absorption rates for at 
least one year from the date of such study for units in comparable multifamily 
residential rental developments in such market area that are suitable for 
occupancy be eligible tenants; and projected occupancy/vacancy rates for at 
least one year from the date of such study for multifamily residential rental 
developments comparable to the proposed housing development in the market area 
in which such development is to be located, taking into account projected 
construction periods and lease-up periods for comparable developments planned or 
under construction in such market area at the time of the study. The agency 
reserves the right to require the market study to address such other issues as 
may be relevant to the agency's evaluation of the need for the proposed housing 
development and the provision of financing assistance for its acquisition, 
construction, and improvement.
(b) As a condition precedent to entering any agreement with a housing sponsor to 
finance a housing development, the agency must receive from the market appraiser 
who performed the study described in subsection (a) of this section a 
certification, in a form approved by the agency, to the effect that the 
projected housing development costs of the housing development are reasonable; 
the estimated loan amount does not exceed 95% of the projected housing 
development costs of the development; the housing development, upon completion 
and considering vacancy and absorption rates, is not likely to result in a 
vacancy rate for comparable units within the housing development's competitive 
market area (i.e., standard, well maintained units within the housing 
development's competitive market area that are reserved for occupancy by lower -
income tenants, elderly tenants, and eligible tenants) that is unreasonable for 
that area; that the projected initial rents for the development are reasonably 
affordable by lower-income tenants and eligible tenants, respectively; and the 
information submitted by the housing sponsor on the housing development is 
credible and reasonably accurate, with any minor exceptions noted.
sec.33.5. Limitation on Loan Amounts. The total amount of any loan made by the 
agency to or for the benefit of a housing sponsor to finance a housing 
development shall not exceed 95% of the total housing development costs of such 
development.
sec.33.6. Bond Rating.  All publicly offered bonds issued by the agency to 
finance housing developments shall have a debt rating assigned by a nationally 
recognized credit rating agency of at least the equivalent of the A rating 
assigned by Standard & Poor's Corporation or the A rating assigned by 
Moody's Investors Service to long -term obligations. If such rating is based 
upon credit enhancement provided by an institution other than the housing 
sponsor, the form and substance of such credit enhancement shall be subject to 
approval by the board, which approval shall be evidenced by adoption by the 
board of a resolution authorizing the issuance of such bonds.
sec.33.7. Housing Development Occupancy.
(a) At least 25% of all completed units of each bedroom -number size in each 
housing development shall be rented or leased continuously during the qualified 
project period, within the meaning of the Code, sec.103(b), and applicable 
regulations thereunder, to lower-income tenants. For purposes of meeting the 
requirements of this subsection, a dwelling unit occupied by an individual or 
family who at the commencement of occupancy is a lower-income tenant shall be 
treated as occupied by a lower-income tenant throughout such individual's or 
family's tenancy in such unit, even though such individual or family 
subsequently ceases to qualify as a lower-income tenant. Moreover, such a 
dwelling unit shall be treated as occupied by a lower-income tenant until 
reoccupied, other than for a temporary period not exceeding 31 days, by another 
occupant, at which time the character of the unit shall be redetermined.
(b) The lower-income units in each housing development shall be dispersed 
throughout the development and the buildings comprising the development.
(c) At least 5.0% (or such lower percentage as the agency may establish under 
sec.33.10 of this title (relating to Elderly Tenant Survey)) of all completed 
units in each housing development that contains at least 20 units shall be 
rented or leased continuously during the qualified project period, within the 
meaning of the Code, sec.103(b), and applicable regulations thereunder, to 
elderly tenants.
(d) At least 10% of all dwelling units in each housing development shall contain 
at least three bedrooms and shall be suitable for occupancy by families with 
children.
(e) Subject to the provisions of the Act, sec.14, 100% of all occupied units in 
each housing development shall be occupied continuously while any bonds issued 
to finance such development are outstanding by eligible tenants.
sec.33.8. Amenities for Families with Children.  Each housing development, other 
than any housing development designed for occupancy primarily by the elderly, 
shall provide amenities, certified by the design architect of such development 
and approved by the agency, that are designed for families with children.
sec.33.9. Accessibility to Individuals with Physical Handicaps.  At least 3.0% 
of the units in each housing development must be certified by the design 
architect of such development as meeting the applicable standards of 
accessibility to individuals with physical handicaps.
sec.33.10. Elderly Tenant Survey. If a survey conducted by the housing sponsor 
and verified by the agency reveals that there is not a need for housing for 
elderly tenants in the area in which the housing development will be built or 
renovated sufficient to justify building or renovating and reserving at least 
5.0% of the units for elderly tenants, the agency may, on a showing of good 
cause by the housing sponsor, lower the requirement of sec.33.7(e) of this title 
(relating to Housing Development Occupancy) with respect to occupancy by elderly 
tenants to correspond to the amount of need found by the housing sponsor. The 
agency may require the housing sponsor to pay for any services provided by the 
Texas Department of Aging or any other entity in assessing the need for housing 
for elderly tenants in the housing development's locality; setting design and 
construction standards, providing planning assistance and publicizing the 
availability of such housing; and in otherwise providing for occupancy of the 
housing development by elderly tenants.
sec.33.11. Agency Review of Applications for Financing; Findings.
(a) In reviewing any application to the agency by a housing sponsor to finance a 
housing development, the agency, as required by the Act, sec.10(f), shall 
consider, based upon information submitted by the housing sponsor, the market 
study received pursuant to sec.33.4 of this title (relating to Market Study) and 
such other information as the agency deems relevant, among other things:
(1) whether the proposed housing development is well planned and well designed;
(2) the comparative need for housing for eligible tenants in the area to be 
served by the proposed housing development;
(3) the ability of the housing sponsor to carry out, operate, manage, and 
maintain the proposed housing development;
(4) The existence of zoning, protective covenants, or regulations that 
adequately protect the proposed housing development against detrimental future 
uses that could cause undue depreciation in the value of the housing 
development;
(5) the availability in urban areas of adequate parks, recreational areas, 
utilities, schools, transportation, and parking.
(b) Prior to issuing bonds to finance any housing development, the agency, as 
required by the Act, sec.15, shall find, based upon the information submitted by 
the housing sponsor pursuant to sec.33.3 of this title (relating to Application 
for Financing of a Housing Development), the market study received pursuant to 
sec.33.4 of this title (relating to Market Study), information presented to the 
agency at any public hearing on the proposed housing development or at any 
meeting of the board or otherwise, recommendations of the agency's staff and 
advisors, and such other information as the agency deems relevant, that:
(1) the housing development is necessary to provide decent, safe, and sanitary 
housing at rentals or prices that eligible tenants can afford;
(2) the housing sponsor will supply, in the housing development, well-planned 
and well-designed housing for eligible tenants and that the housing sponsor is 
financially responsible;
(3) the financing of the housing development pursuant to the provisions of the 
Act will constitute a public purpose and will provide a public benefit;
(4) the housing development will be undertaken within the authority conferred by 
the Act upon the agency and the housing sponsor.
sec.33.12. Housing Development Cost Requisitions and Limits.  Each housing 
sponsor of a housing development, the construction of which is financed by the 
agency, shall provide a sworn affidavit with each requisition of construction 
advances on a form prescribed by the agency that the amounts specified have been 
properly incurred and have not been the basis of any previous disbursements. The 
agency reserves the right to require that 95% (instead of the 90% minimum 
federal requirement) of housing development costs financed with bond proceeds 
must be qualified development costs, as such term is defined in the agreement 
pursuant to which such development is financed by the agency in accordance with 
the requirements of the Code. The agency may also periodically establish 
parameters on a development's maximum costs per unit or per square foot. These 
maximums may apply to "hard costs' (as defined by the board), to mortgage 
amounts, to total development costs (including financing-related expenses), and 
to such other cost components and totals as the board deems appropriate. Current 
limitations, if any, are available on request from the agency.
sec.33.13. Waiver of Rules. The Agency, in its discretion, may waive any one or 
more of the rules set forth in sec.sec.33.3, 33.4, 33.6-33.10 and 33.12 of this 
title (relating to Application for Financing of a Housing Development; Market 
Study; Bond Rating; Housing Development Occupancy; Amenities for Families with 
Children; Accessibility to Individuals with Physical Handicaps; Elderly Tenant 
Survey; and Housing Development Cost Requisitions and Limits)  in order to 
encourage the acquisition, construction, reconstruction, or rehabilitation of a 
housing development that would meet special needs in the provision of decent, 
safe, and sanitary housing for eligible tenants, including but not limited to, 
providing such housing in economically depressed or blighted areas, or providing 
housing designed and equipped for the elderly or the handicapped.
Chapter 37. 1983 Single Family Mortgage Purchase Program
sec.37.1. Introduction.  The Texas Housing Agency intends to issue bonds and use 
the proceeds to acquire single family mortgage loans. The following rules and 
regulations are subject to the terms of the origination, sale, and servicing 
agreement finally executed by the agency with participating lenders.
sec.37.2. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise.
   Act-The Texas Housing Agency Act, Texas Civil Statutes Article 1269l -6 as it 
may be amended from time to time.
   Agency-The Texas Housing Agency.
   Agreement-The origination, sale, and servicing agreement between a 
participant, the trustee, and the agency, and all exhibits, amendments, 
supplements, and all appropriate forms and reports prescribed by the agency.
   Bonds-The agency's single family mortgage revenue bonds, issued in series 
pursuant to an indenture between the agency and the trustee, to provide 
financing for single family residences located in Texas.
   Commitment-A binding written commitment, as customarily used by a 
participant, issued to a particular eligible borrower to finance the purchase of 
a particular residence with mortgage loan.
   FDIC-The Federal Deposit Insurance Corporation, or any successor thereto.
   FHLMC-The Federal Home Loan Mortgage Corporation, or any successor thereto.
   Indenture-That certain trust indenture by and between the agency and the 
trustee, pursuant to which the bonds are authorized to be issued and secured, as 
the same may be amended and supplemented from time to time.
   Lender's manual -The handbook or handbooks prepared by the agency and 
distributed to participating lenders that explains the program, prescribes 
origination, servicing, and other procedures, and provides reporting and other 
forms relating to the program, as amended and supplemented.
   Mortgage loan-A loan evidenced by a mortgage note, secured by a mortgage, 
made to finance an eligible borrower's purchase at a qualifying residence.
   Participants-The applicants accepted by the agency to participate as lenders 
in the program.
   Program-The agency's single family mortgage purchase program, with respect to 
one or more series of bonds, pursuant to which the agency will issue revenue 
obligations used to purchase qualifying mortgage loans.
   Tax code-The Internal Revenue Code of 1954, as amended, including applicable 
regulations.
   Trustee-Texas American Bank/Fort Worth, N.A., Fort Worth, Texas, and its 
successors in trust, under the indenture pertaining to a particular series of 
bonds.
   VA-The Veterans' Administration of the United States of America, or any 
successor thereto.
sec.37.3. Eligible Lending Institutions.
(a) To participate in the program, lending institutions must have maintained an 
office in Texas since June 30, 1982;
(b) To originate and service VA-guaranteed loans under the program, the lender 
must be VA-approved and must be a FNMA- or FHLMC-approved servicer of VA 
mortgage loans;
(c) To originate and service conventional loans under the program, the lender 
must be a FNMA- or FHLMC-approved seller and servicer of conventional mortgages; 
and
(d) Each lender must have delivered to the agency its corporate check in an 
amount equal to 3.5% of its maximum loan origination offer.
sec.37.4. Allocation Procedures.  The agency will allocate the lendable proceeds 
of the bonds, taking into account, among other things, the participation of a 
lender under the agency's 1982 Series A Single Family Mortgage Purchase Program, 
the ability of the lender to originate mortgage loans to eligible borrowers in 
targeted areas, and the overall demand for allocations. Allocations may be made 
to specific branch offices of a participant if the agency determines that such a 
procedure may help insure appropriate geographic dispersion of mortgage loans.
sec.37.5. Commitment and Origination Periods.
(a) Nontargeted areas. All mortgage loans in nontargeted areas must be 
originated by participants and purchased by the agency within 270 days of the 
issuance date of the bonds. The agency reserves the right to transfer a 
participant's unused and uncommitted nontargeted allocation at the end of the 
180th day following the issuance date, subject to the terms of the agreement.
(b) Targeted areas. As required by U.S. Treasury regulations, the agency must 
reserve up to 20% of the lendable proceeds of the bond issue, for at least one 
year after the issuance date of the bonds, for mortgage loans to be made for 
property in targeted areas. All mortgage loans in targeted areas must be 
originated by participants and purchased by the agency within 405 days of the 
issuance date. The agency reserves the right to transfer a participant's unused 
and uncommitted targeted allocation at the end of the 270th day following the 
issuance date, subject to the terms of the agreement.
(c) Program participation fees. The agency will retain program participation 
fees for allocations not used by a participant, except as provided in the 
agreement. Program participation fees paid for allocations subsequently 
transferred will be refunded to the transferor participant only to the extent 
provided in the agreement.
sec.37.6. Eligible Borrowers and Loans.
(a) Maximum income. The adjusted gross income of the eligible mortgage loan 
applicants may not exceed the limitations established by the agency, currently 
$33,000 for individuals and $42,000 for families for the 1982 tax year. Adjusted 
gross income means the income of an eligible borrower together with the income 
of all members of such person's household intending to reside with such person 
in the applicable residence. Evidence of eligibility is the adjusted gross 
income shown on the federal income tax return of the borrower(s) for 1982, or 
other evidence acceptable to the agency.
(b) Maximum mortgage loan. The amount of any conventional mortgage loan may not 
exceed 95% of the lesser of the sales price or appraised value of a residence. A 
mortgage loan with a loan -to-value ratio in excess of 80% must be covered by a 
private mortgage insurance policy in accordance with the agreement. The amount 
of any VA mortgage loan must be limited so that the sum of the VA guaranty plus 
any cash down payment equals or exceeds 25% of the sales price of a residence. 
The maximum amount of any mortgage loan is also limited by the underwriting 
standards specified in the agreement, as of the commitment date of the mortgage 
loan.
(c) Cosigners and guarantors. Participants may accept cosignors and guarantors 
on behalf of eligible borrowers in accordance with the agreement and provided:
(1) cosignor/guarantor is acting solely to provide additional security for the 
mortgage loan;
(2) cosignor/guarantor has no other financial interest in the residence;
(3) cosignor/guarantor will not occupy the residence as a permanent residence; 
and
(4) the eligible borrower has sufficient income to make at least 60% of the 
monthly payment on the mortgage loan, including taxes and insurance, and 
calculated as set forth in the mortgage note.
(d) Interest rate buy-downs. Participants may permit a seller to buy down the 
interest rate on a mortgage loan. No more than 40% of each lender's aggregate 
allocation may carry a buy-down. Article IV of the agreement, available on 
request from the agency, sets forth limitations on the use of buy-downs.
sec.37.7. Federal Mortgage Eligibility Requirements.
(a) Principal residence requirement.
(1) At the time the mortgage loan is executed, the residence must reasonably be 
expected to become the principal residence of the eligible borrower within a 
reasonable time after financing is provided. Whether a residence is used as a 
principal residence depends upon all the facts and circumstances of each case, 
including the good faith of the eligible borrower. This requirement may normally 
be met, however, if the eligible borrower executes an affidavit stating an 
intent to use the residence as a principal residence within 60 days after 
financing. A residence primarily intended for use in trade or business will not 
satisfy the principal residence requirement. Any use of a residence in a trade 
or business that qualifies under the Tax Code, sec.280A, for a deduction 
allowable for certain expenses incurred in connection with the business use of a 
home shall not fail the principal residence requirement unless more than 15% of 
the total area of the residence is reasonably expected to be so used. Furher, a 
residence used as an investment property or a recreational home does not satisfy 
the principal residence requirement.
(2) No part of the proceeds of the mortgage loan may be used to finance anything 
other than the residence. The proceeds of the mortgage loan may only finance 
land appurtenant to the residence if it is necessary to maintain the basic 
livability of the residence. The proceeds of the mortgage loan may not finance 
items of personal property (such as appliances, furniture, and the like), which 
under Texas law are not fixtures.
(b) Three-year requirement.
(1) At least 90% of the aggregate of mortgage loans (other than those made for 
targeted area residences) originated by a participant must be made to eligible 
borrowers who had no present ownership interest in a principal residence at any 
time during the three years prior to execution of the mortgage loan. The 
eligible borrower's interest in the financed residence will not be taken into 
account, subject to subsection (d) of this section. Each individual or family 
member applicant must be an eligible borrower who meets the three-year 
requirement. However, a person who cosigns or guarantees a mortgage note, but 
does not take an interest in the residence, need not meet the three-year 
requirement. Borrowers will be required to provide federal income tax returns, 
for the preceding three years, which show no interest or property tax deductions 
on a principal residence.
(2) Present ownership interests include, for example, the following:
(A) a fee simple interest;
(B) a joint tenancy, a tenancy in common, or tenancy by the entirety;
(C) the interest of a tenant-shareholder in a cooperative;
(D) a life estate;
(E) a land contract (i.e., a contract pursuant to which possession and the 
benefits and burdens of ownership are transferred although legal title is not 
transferred until some later time);
(F) an interest held in trust for the eligible borrower (whether or not created 
by the eligible borrower) that would constitute a present ownership interest if 
held directly by the eligible borrower.
(3) The following examples do not constitute present ownership interests:
(A) a remainder interest;
(B) a lease with or without an option to purchase;
(C) a mere expectancy to inherit an interest in a principal residence;
(D) the interest that a purchaser of a residence acquires on the execution of a 
purchase contract; and
(E) an interest in other than a principal residence during the previous three 
years.
(4) A loan applicant with a present ownership interest (within the three-year 
period) in a mobile home or other factory-made housing permanently affixed to 
real property owned by the loan applicant constitutes a present ownership 
interest in a principal residence that would violate the three-year requirement.
(5) The three-year requirement does not apply to a mortgage loan for a residence 
in a targeted area.
(c) Average area purchase price limitation. The acquisition cost of each 
financed residence must not exceed the applicable average area purchase price 
limitation, as most recently published by the Department of the Treasury and 
available on request from the agency. The price limitations for new residences 
apply to residences not previously occupied. The price limitations for existing 
residences apply to previously occupied residences. The agency reserves the 
right to revise the price limitations to reflect more recent statistical 
information by notice to the participants. The applicable price limitations are 
those in effect on the date of the financing commitment.
(d) New mortgage requirement. Each mortgage loan must be made to an eligible 
borrower who did not have a mortgage (whether or not paid off) on the residence 
securing the mortgage loan at any time prior to the execution of the mortgage 
loan. An existing mortgage includes a deed of trust, contract for deed, 
conditional sales contract, pledge, agreement to hold title in escrow, or any 
other form of owner financing, but does not include the replacement of a 
construction period loan, bridge loan, or similar temporary initial financing 
with a term not exceeding 24 months.
(e) Mortgage loan assumptions. Assumptions require prior approval from the 
agency, the pool insurer, and, when applicable, the private mortgage insurer, as 
well as satisfaction of all requirements of the Tax Code, sec.103A, including 
the principal residence requirement, the three-year requirement in nontargeted 
areas, and the average area purchase price limitation. The prescribed rider to 
the mortgage loan accelerates the mortgage loan if the mortgagor fails to occupy 
the residence as a principal residence or sells, rents, or otherwise transfers 
any interest in the property without the prior approval of the agency.
(f) Cooperation with agency. Participants must cooperate with the agency elects 
to credit or rebate excess investment earnings to eligible borrowers pursuant to 
the agreement.
sec.37.8. Types of Loans. Mortgage loans may be VA guaranteed or conventional.
sec.37.9. Term, Amortization, and Interest Rate of Mortgage Loans.  Each 
mortgage loan will have a term of 30 years at an expected mortgage rate of 
10.79%. Each mortgage loan must contain level monthly payment provisions.
sec.37.10. Prepayment Rights.  Mortgage loans may be prepaid, in whole or in 
part, at any time without penalty.
sec.37.11. Loan Origination Guidelines. Each participant must originate all 
mortgage loans for purchase by the agency in accordance with the agreement, the 
agency's lender's manual, and the loan origination, eligibility, and credit 
underwriting standards in effect during the origination period under the FNMA 
Home Mortgage Selling Contract Supplement or the FHLMC Seller's Guide Mortgages 
for conventional or VA loans, as appropriate(collectively referred to as 
"sellers' guides'), with the exceptions as specifically noted herein or in the 
agreement. The submission of forms prescribed by such sellers' guides generally 
will not be required. All references in the sellers' guides to FNMA or FHLMC 
will be deemed to refer to the agency. The acceptance of each mortgage loan by 
the agency is subject in all respects to Article IV of the agreement, which 
provides that a participant must repurchase a mortgage loan if any of the 
mortgage documents contain material defects or inaccuracies, which the 
participant cannot cure within 60 days of notification by the agency, or contain 
any untrue representation or warranty of the participant as to any material 
matter.
sec.37.12. Mortgage Loan Fees. Participants may charge each borrower a program 
participation fee of 3.5% and an origination fee of 1.0% of the principal amount 
of the mortgage loan. Participants may also collect reasonable and customary 
charges incurred by them as provided in  sec.4.06 of the agreement, and 
available on request from the agency.
sec.37.13. Reservation of Allocations; Application Procedure.  A participant may 
reserve up to 50% of its allocation to any entity or person for the origination 
of mortgage loans to eligible borrowers. At the time of allocation, the 
participant may recover, from the entity or person receiving a reservation, the 
portion of its program participation fee allocable to the reserved amount. 
Except as provided in the preceding sentence, the total amounts of each 
participant's allocation, must be made available to eligible borrowers on a 
first-come, first-served basis. The term of any reservation of a participant's 
allocation expires unless the participant originates and closes a mortgage loan 
within 120 days of the issuance date.
sec.37.14. Qualifying Residences.
(a) Residences must be single family owner-occupied attached or detached 
structures. Duplexes, triplexes, and quadruplexes may not be financed under this 
program.
(b)  As to any residence that would be a unit of a condominium development or of 
a planned unit development, as defined in the agreement:
(1) no more than 25% of each participant's allocation may be used for mortgage 
loans for such units without the written authorization of the agency;
(2) no mortgage loan made on a unit of any phase of a condominium or planned 
unit development will be accepted until at least 50% of the units in such phase 
have been sold; and
(3) no more than the lesser of 25 units or 30% of the units of any phase of a 
condominium or planned unit development may be the subject of mortgage loans 
originated under the program. (A "phase' is a group of such units that are 
contemporaneously constructed and simultaneously subjected to the covenants of 
the homeowners' association of the condominium or planned unit development.) In 
addition, no mortgage loan may be made with respect to such unit unless a 
qualified private mortgage insurer has approved the applicable condominium or 
planned unit development; provided, however, for a de minimis planned unit 
development as defined in the agreement, the agency may waive the above 
restrictions).
sec.37.15. Target Area Residences. The agency will reserve for one year up to 
20% of the lendable proceeds of its bond issue for mortgage loans in specified 
targeted areas. The agency will advertise the availability of funds for mortgage 
loans in targeted areas, and may refer applicants for mortgage loans to any 
participant. Participants must exercise diligence in seeking to finance 
residences in targeted areas. A list of targeted areas is available on request 
from the agency.
sec.37.16. Permitted Encumbrances.  A first lien on the residence must secure 
all mortgage loans. Permitted encumbrances include those liens, covenants, 
conditions and restrictions, rights of way, easements, and other matters of 
public record permitted under the sellers' guides.
sec.37.17. Qualified Mortgage Insurers. To be a qualified mortgage insurer 
requires approval by the agency. A list of approved and qualified mortgage 
insurers is available on request from the agency.
sec.37.18. Mortgage Document Delivery Procedures. The agency's lender's manual 
details the specific documents that a participant must submit with each mortgage 
loan to be purchased by the agency. The agency required three submission stages 
to facilitate purchase of mortgage loans. Prior to issuing a commitment to an 
eligible borrower, the loan must be approved for primary mortgage insurance, if 
necessary, and the agency's program compliance agent(pool insurer)  must approve 
the Packet A loan eligibility submission for program and pool insurance 
eligibility. Packet A must be delivered to the program compliance agent at least 
10 business days before the desired purchase date. Packet B preliminary loan 
closing documents for each group of mortgage loans must be delivered to the 
agency at least four business days before the desired purchase date. An original 
loan purchase schedule must accompany the group of loans. Each mortgage loan 
must have closed within 30 days of the desired purchase date to be eligible for 
purchase. Within 60 days of the purchase date, the participant must deliver 
Packet C final mortgage loan closing documents to the agency. If the agency 
considers any documents constituting the mortgage loan file materially defective 
or inaccurate, the participant must cure the defect within 60 days after notice. 
If not so cured, the participant must repurchase the mortgage loan from the 
agency (as set forth in Article IV of the agreement) at a price equal to 100% of 
the unpaid principal balance of such mortgage loan plus any accrued and unpaid 
interest to the date of repurchase.
sec.37.19. Purchase Price and Dates. The agency expects to purchase mortgage 
loans every other Friday on the dates specified in the schedule of purchase 
dates provided to participants in the agency's lender's manual. The participant 
must deliver the mortgage documents for each mortgage loan and a loan submission 
schedule of all mortgage loans to the agency at least four business days prior 
to a scheduled purchase date. The purchase price of a mortgage loan will be 100% 
of the outstanding principal balance plus all accrued and unpaid interest 
thereon. Mortgage loans must be delivered for purchase within 30 days of the 
closing of the mortgage loan.
sec.37.20. Servicing Fees.  Participants may retain a monthly servicing fee 
expected to be one-twelfth of 0. 33%, or such other amount as the agency may 
authorize, of the unpaid principal balance of each mortgage loan as of the day 
preceding the last day on which a scheduled payment of principal was made. 
Participants may collect and retain late charges, not in excess of 5.0% of the 
delinquent amount, for mortgage loans delinquent 15 days or more.
sec.37.21. Loan Servicing Guidelines. Participants must service mortgage loans 
in accordance with the servicing standards set forth in the FNMA Home Mortgage 
Servicing Contract Supplement or the FHLMC Servicer's Guide (collectively the 
"servicing guides') in effect during the term of the program, except as may be 
specifically modified in these rules, in the agency's lender's manual, or in the 
agreement. Participants must provide consolidated reports to the agency covering 
all loans originated under the program, irrespective of which branch office of 
the participant originated the mortgage loan. A participant may, in accordance 
with the agreement and with the consent of the agency, transfer all its 
servicing under the program to another participant. Participants need not 
prepare or file any forms or other documents required by the servicing guides, 
except as specifically required in the agreement or as the agency may reasonably 
request. All references in the servicing guides to FNMA or FHLMC will be deemed 
to refer to the agency. Each participant must perform all of its duties in 
servicing mortgage loans for the agency with due care, diligence, and reasonable 
promptness, and shall use at least the same degree of care as it would employ in 
servicing mortgage loans on behalf of FNMA or FHLMC.
sec.37.22. Late Charges by Agency. Participants must remit all collections 
received on mortgage loans to the trustee as provided in sec.6.03 of the 
agreement, which is available on request from the agency. Participants must 
deliver all remittances to the trustee in immediately available funds in Fort 
Worth, Texas, on or before the due dates as provided in the agreement. The 
agency reserves the right to impose late charges on participants who fail to 
remit timely mortgage loan reports or receipts.
Chapter 41. 1984 Single Family Mortgage Purchase Program
1984 Series A and 1984 Series B
sec.41.1. Introduction.  The Texas Housing Agency intends to issue bonds and use 
the proceeds to acquire single family mortgage loans. Sections 41.1 -41.22 are 
subject to the terms of the origination, sale, and servicing agreement, 
including the agency's origination and servicing manuals, finally executed by 
the agency with participating lenders.
sec.41.2. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise:
   Act-The Texas Housing Agency Act, Texas Civil Statutes Article 1269l -6, as 
it may be amended from time to time.
   Agency-The Texas Housing Agency.
   Agreement-The origination, sale, and servicing agreement between a 
participant, the trustee, and the agency, and all exhibits, amendments, 
supplements, and all appropriate manuals, forms, and reports prescribed by the 
agency.
   Bonds-The agency's single family mortgage revenue bonds, issued in series 
pursuant to an indenture between the agency and the trustee, to provide 
financing for single family residences located in Texas.
   Commitment-A binding written commitment, as customarily used by a 
participant, issued to a particular eligible borrower to finance the purchase of 
a particular residence with a mortgage loan.
   FDIC-The Federal Deposit Insurance Corporation, or any successor thereto.
   FHLMC-The Federal Home Loan Mortgage Corporation, or any successor thereto.
   FNMA-The Federal National Mortgage Association, or any successor thereto.
   Indenture-That certain trust indenture by and between the agency and the 
trustee, pursuant to which the bonds are authorized to be issued and secured, as 
the same may be amended and supplemented from time to time.
   Agency's manual -One or more handbooks prepared by the agency and distributed 
to participating lenders that explain the program, prescribe origination, 
servicing, and other procedures, and provide reporting and other forms relating 
to the program, as amended and supplemented.
   Mortgage loan-A loan evidenced by a mortgage note, secured by a mortgage or 
deed of trust, made to finance an eligible borrower's purchase of a qualifying 
residence.
   Participants-The applicants accepted by the agency to participate as lenders 
in the program.
   Program-The agency's Single Family Mortgage Purchase Program, with respect to 
one or more series of bonds, pursuant to which the agency will issue revenue 
obligations used to purchase qualifying mortgage loans from participating 
lenders.
   Tax Code-The Internal Revenue Code of 1954, as amended, including applicable 
regulations.
   Trustee-Texas American Bank/Fort Worth, N.A., Fort Worth, Texas, and its 
successors in trust, under the indenture pertaining to a particular series of 
bonds.
   VA-The Veterans Administration of the United States of America, or any 
successor thereto.
sec.41.3. Eligible Lending Institutions.
(a) To participate in the program, lending institutions must have maintained an 
office in Texas since June 30, 1983.
(b) To originate and service VA-guaranteed loans under the program, the lender 
must be VA-approved and must be a FNMA- or FHLMC- approved servicer of VA 
mortgage loans.
(c) To originate and service conventional loans under the program, the lender 
must be a FNMA- or FHLMC-approved seller and servicer of conventional mortgages.
(d) To be eligible for an initial allocation, each lender must have delivered to 
the agency its corporate check in an amount equal to 3.5% of its maximum loan 
origination offer.
sec.41.4. Allocation Procedures.  The agency will allocate the lendable proceeds 
of the bonds by taking into account, among other things, the ability of the 
lender to originate mortgage loans to eligible borrowers in targeted areas, and 
the overall demand for allocations. Allocations may be made to specific branch 
offices, but limited to one branch office per county, of a participant if the 
agency determines that such a procedure may help ensure appropriate geographic 
dispersion of mortgage loans.
sec.41.5. Commitment and Origination Periods.
(a) Nontargeted areas. All mortgage loans in non-targeted areas must be 
originated by participants and purchased by the agency within 270 days of the 
issuance date of the bonds. The agency reserves the right to transfer a 
participant's unused and uncommitted nontargeted allocation at the end of the 
180th day following the issuance date, subject to the terms of the agreement.
(b) Targeted areas. As required by U.S. Treasury regulations, the agency must 
reserve 20% of the lendable proceeds of the bond issue, for at least one year 
after the issuance date of the bonds, for mortgage loans to be made for property 
in targeted areas. All mortgage loans in targeted areas must be originated by 
participants and purchased by the agency within 405 days of the issuance date. 
The agency reserves the right to transfer a participant's unused and uncommitted 
target allocation at the end of the 270th day following the issuance date, 
subject to the terms of the agreement.
(c) Program participation fees. The agency will retain program participation 
fees for allocations not used by a participant, except as provided in the 
agreement. Program participation fees paid for allocations subsequently 
transferred will be refunded to the transferor participant only to the extent 
provided in the agreement.
sec.41.6. Eligible Borrowers and Loans.
(a) Maximum income. The adjusted gross income of the eligible mortgage loan 
applicants may not exceed the current limitations established by the agency. For 
the tax year 1983, these limitations are $33,000 for a person who occupies a 
dwelling alone, or $42,000 for two or more persons (none of whose individual 
adjusted gross income for the tax year 1983 exceeded $33,000) or a family. 
Adjusted gross income means the income of an eligible borrower together with the 
income of all members of such person's household intending to reside with such 
person in the applicable residence. Evidence of eligibility is the adjusted 
gross income shown on the federal income tax return of the borrower(s) for 1983, 
or other evidence acceptable to the agency.
(b) Maximum mortgage loan. The amount of any conventional mortgage loan may not 
exceed 95% of the lesser of the sales price or appraised value of a residence. A 
mortgage loan with a loan -to-value ratio in excess of 80% must be covered by a 
private mortgage insurance policy in accordance with the agreement. The amount 
of any VA mortgage loan must be limited so that the sum of the VA mortgage loan 
must be limited so that the sum of the VA guaranty plus any cash down payment 
equals or exceeds 25% of the sales price of a residence. The maximum amount of 
any mortgage loan is also limited by the underwriting standards specified in the 
agreement, as of the commitment date of the mortgage loan.
(c) Cosigners and guarantors. Participants may accept cosigners and guarantors 
on behalf of eligible borrowers in accordance with the agreement and provided:
(1) cosigner/guarantor is acting solely to provide additional security for the 
mortgage loan;
(2) cosigner/guarantor has no other financial interest in the residence;
(3) cosigner/guarantor will not occupy the residence as a permanent residence; 
and
(4) the eligible borrower has sufficient income to make at least 60% of the 
monthly payment on the mortgage loan, including taxes and insurance, and 
calculated as set forth in the mortgage note.
(d) Interest rate buy-downs. Participants may permit a seller to buy down the 
interest rate on a mortgage loan, subject to the terms of the agreement. No more 
than 40% of each lender's aggregate allocation may carry a buy-down.
(e) Employees of participants. A participant may not use any of its nonreserved 
allocation to originate a mortgage loan to any of its employees or to a person 
related within the third degree of affinity or consanguinity to one of its 
employees.
sec.41.7. Federal Mortgage Eligibility Requirements.
(a) Principal residence requirement.
(1) At the time the mortgage loan is executed, the residence must reasonably be 
expected to become the principal residence of the eligible borrower within a 
reasonable time after financing is provided. Whether a residence is used as a 
principal residence depends upon all the facts and circumstances of each case, 
including the good faith of the eligible borrower. This requirement may normally 
be met, however, if the eligible borrower executes an affidavit stating an 
intent to use the residence as a principal residence within 60 days after 
financing. A residence primarily intended for use in trade or business will not 
satisfy the principal residence requirement. Any use of a residence in a trade 
or business that qualifies under the Tax Code, sec.280A, for a deduction 
allowable for certain expenses incurred in connection with the business use of a 
home shall not fail the principal residence requirement unless more than 15% of 
the total area of the residence is reasonably expected to be so used. Further, a 
residence used as an investment property or a recreational home does not satisfy 
the principal residence requirement.
(2) No part of the proceeds of the mortgage loan may be used to finance anything 
other than the residence. The proceeds of the mortgage loan may only finance 
land appurtenant to the residence if it is necessary to maintain the basic 
livability of the residence. The proceeds of the mortgage loan may not finance 
items of personal property (such as appliances, furniture, and the like), which 
under Texas law are not fixtures.
(b) Three-year requirement.
(1) At least 90% of the aggregate of mortgage loans (other than those made for 
targeted area residences) originated by a participant must be made to eligible 
borrowers who had no present ownership interest in a principal residence at any 
time during the three years prior to execution of the mortgage loan. The 
eligible borrower's interest in the financed residence will not be taken into 
account, subject to subsection (d) of this section. Each individual or family 
member applicant must be an eligible borrower who meets the three-year 
requirement. Borrowers will be required to provide federal income tax returns, 
for the preceding three years, which show no interest or property tax reductions 
on a principal residence.
(2) Present ownership interests include, for example, the following:
(A) a fee simple interest;
(B) a joint tenancy, a tenancy in common, or tenancy by the entirety;
(C) the interest of a tenant-shareholder in a cooperative;
(D) a life estate;
(E) a land contract (i.e., a contract pursuant to which possession and the 
benefits and burdens of ownership are transferred although legal title is not 
transferred until some later time); and
(F) an interest held in trust for the eligible borrower (whether or not created 
by the eligible borrower) that would constitute a present ownership interest if 
held directly by the eligible borrower.
(3) The following examples do not constitute present ownership interests:
(A) a remainder interests;
(B) a lease with or without an option to purchase;
(C) a mere expectancy to inherit an interest in a principal residence;
(D) the interest that a purchaser of a residence acquires on the execution of a 
purchase contract; and
(E) an interest in other than a principal residence during the previous three 
years.
(4) A loan applicant with a present ownership interest (within the three-year 
period) in a mobile home or other factory-made housing permanently affixed to 
real property owned by the loan applicant constitutes a present ownership 
interest in a principal residence that would violate the three-year requirement.
(5) The three-year mortgage loan for a residence in a targeted area.
(c) Maximum acquisition cost limitation. The acquisition cost of each financed 
residence must not exceed the maximum acquisition cost limitations, as computed 
by using the average area purchase price data published by the Department of the 
Treasury and available on request from the agency. The acquisition cost 
limitations for new residences apply to residences not previously occupied. The 
acquisition cost limitations for existing residences apply to previously 
occupied residences. The agency reserves the right to revise these limitations, 
to reflect more recent statistical information, by notice to the participants. 
The applicable limitations are those in effect on the date of the commitment to 
provide financing to the eligible borrower.
(d) New mortgage requirement. Each mortgage loan must be made to an eligible 
borrower who did not have a mortgage (whether or not paid off) on the residence 
securing the mortgage loan at any time prior to the execution of the mortgage 
loan. An existing mortgage includes a deed of trust, contract for deed, 
conditional sales contract, pledge, agreement to hold title in escrow, or any 
other form of owner financing, but does not include the replacement of a 
construction period loan, bridge loan, or similar temporary initial financing 
with a term not exceeding 24 months.
(e) Mortgage loan assumptions. Assumptions require prior approval from the 
agency, the pool insurer, and, when applicable, the private mortgage insurer, as 
well as satisfaction of all requirements of the Tax Code, sec.103A, including 
the principal residence requirement, the three-year requirement in nontargeted 
areas, and the maximum acquisition cost limitations. The prescribed rider to the 
mortgage loan accelerates the mortgage loan if the mortgagor fails to occupy the 
residence as a principal residence or sells, rents, or otherwise transfers any 
interest in the property without the prior approval of the agency.
(f) Cooperation with agency. Participants must cooperate with the agency if the 
agency credits or rebates excess investment earnings to eligible borrowers 
pursuant to the agreement.
sec.41.8. Types of Loans. Mortgage loans may be VA guaranteed or conventional.
sec.41.9. Term, Amortization, and Interest Rate of Mortgage Loans.  Each 
mortgage loan will have a term of 30 years at an expected mortgage rate of less 
than 12.25%. Each mortgage loan must contain level monthly payment provisions.
sec.41.10. Prepayment Rights.  Mortgage loans may be prepaid, in whole or in 
part, at any time without penalty.
sec.41.11. Loan Origination Guidelines. Each participant must originate all 
mortgage loans for purchase by the agency in accordance with the agreement, the 
agency's lender's manual, and the loan origination , eligibility, and credit 
underwriting standards in effect during the origination period under the FNMA 
Home Mortgage Selling Contract Supplement or the FHLMC Seller's Guide Mortgages 
for conventional or VA loans, as appropriate(collectively referred to as 
"sellers' guides'), with the exceptions as specifically noted herein or in the 
agreement. The submission of forms prescribed by such sellers' guides generally 
will not be required. All references in the sellers' guides to FNMA or FHLMC 
will be deemed to refer to the agency. The acceptance of each mortgage loan by 
the agency is subject in all respects to the terms of the agreement, which 
provides that a participant must repurchase a mortgage loan if any of the 
mortgage documents contain material defects or inaccuracies, which the 
participant cannot cure within 60 days of notification by the agency, or contain 
any untrue representations or warranty of the participant as to any material 
matter.
sec.41.12. Mortgage Loan Fees. Participants may charge each borrower a program 
participation fee of 3.5% and an origination fee of 1.0% of the principal amount 
of the mortgage loans. Participants may also collect reasonable and customary 
charges incurred by them, as provided in the agreement.
sec.41.13. Reservation of Allocations; Application Procedure.  A participant may 
reserve up to 50% of its allocation to any entity or person for the origination 
of mortgage loans to eligible borrowers. At the time of allocation, the 
participant may recover, from the entity or person receiving a reservation, the 
portion of its program participation fee allocable to the reserved amount. 
Except as provided in the proceeding sentence, the total amounts of each 
participant's allocation must be made available to eligible borrowers on a 
first-come, first-serve basis. The term of any remaining reservation of a 
participant's allocation expires within 90 days of the issuance date, unless the 
participant has committed to make sufficient mortgage loans, or within 180 days 
of the issuance date, unless the participant has originated sufficient mortgage 
loans.
sec.41.14. Qualifying Residences.
(a) Residences must be single family owner-occupied attached or detached 
structures. Attached structures must meet the requirements of the FNMA Home 
Mortgage Selling Contract Supplement. Duplexes, triplexes, and quadruplexes may 
not be financed under the program.
(b) As to any residence that would be a unit of a condominium development or of 
a planned unit development, as defined in the agreement:
(1) no more than 25% of each participant's allocation may be used for mortgage 
loans for such units without the written authorization of the agency;
(2) no mortgage loan made on a unit of any phase of a condominium or planned 
unit development will be accepted until at least 50% of the units in such phase 
have been sold to one or more persons who intend to occupy the unit as a 
principal place of residence pursuant to an agreement of sale that creates a 
contractual obligation to complete the transaction; and
(3) no more than the lesser of 25 units or 30% of the units of any phase of a 
condominium or planned unit development may be the subject of mortgage loans 
originated under the program. (A "phase' is a group of such units that are 
contemporaneously constructed and simultaneously subjected to the convenants of 
the homeowners' association of the condominium or planned unit development.) In 
addition, no mortgage loan may be made with respect to such unit unless a 
qualified private mortgage insurer has approved the applicable condominium or 
planned unit development; provided, however, for a de minimis planned unit 
development as defined in the agreement, the agency may waive the restrictions 
in this section.
sec.41.15. Target Area Residences. The agency will reserve for one year up to 
20% of the lendable proceeds of its bond issue for mortgage loans in specified 
targeted areas. The agency will advertise the availability of fund for mortgage 
loans in targeted areas and may refer applicants for mortgage loans to any 
participants. Participants must exercise diligence in seeking to finance 
residences in targeted areas. A list of targeted areas is available on request 
from the agency.
sec.41.16. Permitted Encumbrances.  A first lieu on the residence must secure 
all mortgage loans. Permitted encumbrances include those liens, covenants, 
conditions and restrictions, rights of ways, easements, and other matters of 
public record permitted under the sellers' guides.
sec.41.17. Qualified Mortgage Insurers. To be a qualified mortgage insurer 
requires approval by the agency. A list of approved and qualified mortgage 
insurers is available on request from the agency.
sec.41.18. Mortgage Document Delivery Procedures.
(a) The agency's lender's manual details the specific documents that a 
participant must submit with each mortgage loan to be purchased by the agency. 
The agency requires three submission stages to facilitate purchase of mortgage 
loans. Prior to issuing a commitment to an eligible borrower, the loan must be 
approved for primary mortgage insurance, if necessary, and the agency's program 
compliance agent(pool insurer)  must approve the Packet A loan eligibility 
submission for program and pool insurance eligibility. Packet A must be 
delivered to the program compliance agent at least 10 business days before the 
desired purchase date.
(b) Packet B preliminary loan closing documents for each group of mortgage loans 
must be delivered to the agency at least four business days before the desired 
purchase date. An original loan purchase schedule must accompany the group of 
loans. Each mortgage loan must have closed within 60 days of the desired 
purchase date to be eligible for purchase at par plus accrued interest, or the 
participant will not be paid for additional accrued interest. Within 60 days of 
the purchase date, the participant must deliver Packet C final mortgage loan 
closing documents to the agency. If the agency considers any documents 
constituting the mortgage loan file materially defective or inaccurate, the 
participant must cure the defect within 60 days after notice. If not so cured, 
the participant must repurchase the mortgage loan from the agency, in accordance 
with the terms of the agreement, at a price equal to 100% of the of the unpaid 
principal balance of such mortgage loan plus any accrued and unpaid interest to 
the date of repurchase.
sec.41.19. Purchase Price and Dates. The agency expects to purchase mortgage 
loans every other Friday on the dates specified in the calendar or purchase 
dates provided to participants in the agency's origination manual. The 
participant must deliver the mortgage documents for each mortgage loan and a 
loan submission schedule of all mortgage loans to the agency at least four 
business days prior to a scheduled purchase date. The purchase price of a 
mortgage loans to the agency at least four business days prior to a scheduled 
purchase date. The purchase price of a mortgage loans will be 100% of the 
outstanding principal balance plus all, but for no more than 60 days of, accrued 
and unpaid interest thereon. Mortgage loans must be delivered for purchase 
within 60 days of the closing of the mortgage loan if the participant is to 
receive accrued interest to the purchase date.
sec.41.20. Servicing Fees.  Participants may retain a monthly servicing fee 
expected to be one-twelfth of 0. 33%, or such other amount as the agency may 
authorize, of the unpaid principal balance of each mortgage loan as of the day 
preceding the last day on which a scheduled payment of principal was made. 
Participants may collect and retain late charges, not in excess of 5.0% of the 
delinquent amount, for mortgage loans delinquent 15 days or more.
sec.41.21. Loan Servicing Guidelines. Participants must service mortgage loans 
in accordance with the servicing standards set forth in the FNMA Home Mortgage 
Servicing Contract Supplement or the FHLMC Servicer's Guide (collectively the 
"servicing guides') in effect during the term of the program, except as may be 
specifically modified in the agency's origination or servicing manuals, or in 
the agreement. Participants must provide consolidated reports to the agency 
covering all loans originated under the program, irrespective of which branch 
office of the participant originated the mortgage loan. A participant may, in 
accordance with the agreement and with the consent of the agency, transfer all 
its servicing under the program to another participant. Participants need not 
prepare of file any forms or other documents required by the servicing guides, 
except as specifically required in the agreement or as the agency may reasonably 
request. All references in the servicing guides to FNMA or FHLMC will be deemed 
to refer to the agency. Each participant must perform all of its duties in 
servicing mortgage loans for the agency with due care, diligence, and reasonable 
promptness, and shall use at least the same degree of care as it would employ in 
servicing mortgage loans on behalf of FNMA or FHLMC.
sec.41.22. Late Charges by Agency. Participants must remit all collections 
received on mortgage loans to the trustee as provided in sec.6.03 of the 
agreement, which is available on request from the agency. Participants must 
deliver all remittances to the trustee in immediately available fund in Fort 
Worth on or before the due dates as provided in the agreement. The agency 
reserves the right to impose late charges on participants who fail to remit 
timely mortgage loan reports or receipts.
Chapter 47. 1985 Single Family Mortgage Purchase Program
sec.47.1. Introduction.  The Texas Housing Agency intends to issue bonds and use 
the proceeds to, among other purposes, acquire single family mortgage loans. 
Sections 41.1-41.22 of this title (relating to 1984 Single Family Mortgage 
Purchase Program) are subject to the terms of the origination, sale, and 
servicing agreement, including the agency's origination and servicing manuals, 
as executed in final form by the agency with participating lenders.
sec.47.2. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise:
   Act-The Texas Housing Agency Act, Texas Civil Statutes, Article 1269l -6, as 
it may be amended from time to time.
   Agency-The Texas Housing Agency.
   Agreement-The origination, sale, and servicing agreement between a 
participant, the trustee and the agency, and all exhibits, amendments, 
supplements, and all appropriate manuals, forms, and reports prescribed by the 
agency.
   Bonds-The agency's single family mortgage revenue bonds, issued in series 
pursuant to an indenture between the agency and the trustee, to provide 
financing for single family residences located in Texas.
   Commitment-A binding written commitment, as customarily used by a 
participant, issued to a particular eligible borrower to finance the purchase of 
a particular residence with a mortgage loan.
   Conventional mortgage loan-A mortgage loan which is not insured by the FHA or 
guaranteed by the VA.
   FDIC-The Federal Deposit Insurance Corporation, or any successor thereto.
   FHA-The Federal Housing Administration of the Department of Housing and Urban 
Development of the United States of America, or any successor thereto.
   FHLMC-The Federal Home Loan Mortgage Corporation, or any successor thereto.
   FNMA-The Federal National Mortgage Association, or any successor thereto.
   Indenture-That certain trust indenture by and between the agency and the 
trustee, pursuant to which the bonds are authorized to be issued and secured, as 
the same may be amended and supplemented from time to time.
   Agency's manual -One or more handbooks, as amended and supplemented, prepared 
by the agency and distributed to participating lenders that explain the program, 
prescribe origination, servicing, and other procedures, and provide reporting 
and other forms relating to the program.
   Mortgage loan-A loan evidenced by a mortgage note, secured by a mortgage or 
deed of trust, made to finance an eligible borrower's purchase of a qualifying 
residence.
   Non-targeted area -An area other than a targeted area.
   Participants-The applicants accepted by the agency to participate as lenders 
in the program.
   Program-The agency's Single Family Mortgage Purchase Program, with respect to 
one or more series of bonds, pursuant to which the agency will issue revenue 
obligations used to purchase qualifying mortgage loans from participating 
lenders.
   Program participation fee-The fee equal to a percentage of each participant's 
allocation which is paid by said participant to the agency.
   Targeted area-A qualified census tract or an area of chronic economic 
distress.
   Tax Code-The Internal Revenue Code of 1954, as amended, including applicable 
regulations.
   Trustee-The financial institution or other entity, including its successors 
in trust, performing the trustee functions under the indenture pertaining to a 
particular series of bonds.
   VA-The Veterans Administration of the United States of America, or any 
successor thereto.
sec.47.3. Eligible Lending Institutions.
(a) To participate in the program, lending institutions must have maintained an 
office in Texas for approximately one year, as specified in the applicable 
agreement.
(b) To be eligible to originate and service loans under the program, the lender 
must be fully qualified by FNMA, FHLMC, FHA, or VA, as applicable, for the type 
of mortgage loans it intends to originate.
(c) To be eligible for an initial allocation, each lender must have delivered to 
the agency all required documents, including its corporate check in an amount 
equal to the program participation fee for its maximum loan origination offer.
sec.47.4. Allocation Procedures.  The agency intends to allocate the lendable 
proceeds of the bonds by taking into account, among other things, the ability of 
the lender to originate mortgage loans to eligible borrowers in targeted areas, 
and the overall demand for allocations. Allocations may be made to specific 
branch offices, but limited to one branch office per county, of a participant if 
the agency determines that such a procedure may help ensure appropriate 
geographic dispersion of mortgage loans.
sec.47.5. Commitment and Origination Periods.
(a) Nontargeted areas. All mortgage loans in nontargeted areas must be 
originated by participants and purchased by the agency within the time provided 
in the agreement. Subject to the terms of the agreement, the agency reserves the 
right to transfer a participant's unused and uncommitted nontargeted allocation.
(b) Targeted areas. As required by U.S. Treasury Regulations, the agency must 
reserve 20% of the lendable proceeds of the bond issue, for at least one year 
after the issuance date of the bonds, for mortgage loans to be made for property 
in targeted areas. All mortgage loans in targeted areas must be originated by 
participants and purchased by the agency within the time provided in the 
agreement. Subject to the terms of the agreement, the agency reserves the right 
to transfer a participant's unused and uncommitted targeted allocation.
(c) Program participation fees. The agency will retain program participation 
fees for allocations not used by a participant, except as provided in the 
agreement. Program participation fees paid for allocations subsequently 
transferred will be refunded to the transferor participant only to the extent 
provided in the agreement.
sec.47.6. Eligible Borrowers and Loans.
(a) Maximum Income. The adjusted gross income, as defined by the agency, of the 
eligible mortgage loan applicants may not exceed the current limitations 
established by the agency. Adjusted gross income currently includes the income 
of an eligible borrower together with the income of all members of such person's 
household intending to reside with such person in the applicable residence. 
Evidence of eligibility currently is the adjusted gross income shown on the 
federal income tax return of the borrower(s), or other evidence acceptable to 
the agency.
(b) Maximum mortgage loan. The amount of any conventional mortgage loan may not 
exceed 95%, or such other percentage set forth in the agreement, of the lesser 
of the sales price or appraised value of a residence. A conventional mortgage 
loan with a loan -to-value ratio in excess of 80%, or such other amount set 
forth in the agreement, must be covered by a private mortgage insurance policy 
in accordance with the agreement. The maximum amount of any mortgage loan is 
also limited by the underwriting standards specified in the agreement, as of the 
commitment date of the mortgage loan.
(c) Cosigners and guarantors. Participants may accept cosigners and guarantors 
on behalf of eligible borrowers in accordance with the agreement and provided 
the:
(1) cosigner guarantor is acting solely to provide additional security for the 
mortgage loan;
(2) cosigner guarantor has no other financial interest in the residence;
(3) cosigner guarantor will not occupy the residence as a permanent residence;
(4) eligible borrower has sufficient income to make at least 60% (or such other 
amount set forth in the agreement) of the monthly payment on the mortgage loan, 
including taxes and insurance, and calculated as set forth in the mortgage note; 
and
(5) borrower and the cosigner or guarantor meet the special income-to-debt ratio 
requirements of the FHA, VA, or private mortgage insurer, as applicable, and the 
mortgage pool insurer.
(d) Interest rate buy-downs. Participants may permit a seller to buy down the 
interest rate on a mortgage loan, subject to the terms of the agreement and the 
program. The agency may limit the percentage of each lender's aggregate 
allocation that may carry a buy-down.
(e) Public purpose initiatives. The agency may implement additional restrictions 
on the use of bond proceeds in order to enhance the public purpose initiatives 
of the program.
sec.47.7. Federal Mortgage Eligibility Requirements.
(a) Principal Residence Requirement.
(1) At the time the mortgage loan is executed, the residence must reasonably be 
expected to become the principal residence of the eligible borrower within a 
reasonable time after financing is provided. Whether a residence is used as a 
principal residence depends upon all the facts and circumstances of each case, 
including the good faith of the eligible borrower. This requirement may normally 
be met, however, if the eligible borrower executes an affidavit stating an 
intent to use the residence as a principal residence within 60 days after 
financing. A residence primarily intended for use in trade or business will not 
satisfy the principal residence requirement. Further, a residence used as an 
investment property or a recreational home does not satisfy the principal 
residence requirement.
(2) A residence financed with a mortgage loan must consist of real property, and 
improvements permanently affixed thereon, which are located in Texas.
(b) Three-year Requirement.
(1) At least 90% of the aggregate of mortgage loans originated in non-targeted 
area must be made to eligible borrowers who had no present ownership interest in 
a principal residence at any time during the three years prior to execution of 
the mortgage loan. Each individual or family member applicant must be an 
eligible borrower who meets the three-year requirement. However, a person who 
cosigns or guarantees a mortgage note, but does not take an interest in the 
residence, need not meet the three-year requirement. Borrowers will generally be 
required to provide federal income tax returns, for the preceding three years, 
which show no interest or property tax deductions on a principal residence.
(2) A loan applicant with a present ownership interest (within the three-year 
period) in a mobile home or other factory-made housing permanently affixed to 
real property owned by the loan applicant constitutes a present ownership 
interest in a principal residence that will violate the three-year requirement.
(3) The three-year requirement does not apply to a mortgage loan for a residence 
in a targeted area.
(c) Maximum Acquisition Cost Limitation. Under federal law, the acquisition cost 
of each financed residence must not exceed the maximum acquisition cost 
limitations, as computed by using the average area purchase price data published 
by the Department of the Treasury and available on request from the agency. The 
acquisition cost limitations apply to both newly constructed and existing 
housing. The agency reserves the right to revise these limitations by notice to 
the participants. In general, the applicable limitations are those in effect on 
the date of the commitment to provide financing to the eligible borrower.
(d) New Mortgage Requirement. Each mortgage loan must be made to an eligible 
borrower who did not have a mortgage (whether or not paid off) on the residence 
securing the mortgage loan at any time prior to the execution of the mortgage 
loan. An existing mortgage includes a deed of trust, contract for deed, 
conditional sales contract, pledge, agreement to hold title in escrow, or any 
other form of owner financing, but does not include the replacement of a 
construction period loan, bridge loan, or similar temporary initial financing 
with a term not exceeding 24 months.
(e) Mortgage Loan Assumptions. Assumptions require prior approval from the 
agency, the pool insurer, and, when applicable, the private mortgage insurer, as 
well as satisfaction of all requirements of the tax code, including the 
principal residence requirement, the three-year requirement in non-targeted 
areas and the maximum acquisition cost limitations. The prescribed rider to the 
mortgage loan accelerates the mortgage loan if the mortgagor fails to occupy the 
residence as a principal residence or sells, rents, or otherwise transfers any 
interest in the property without the prior approval of the agency.
(f) Cooperation with Agency. Participants must cooperate with the reasonable 
requests of the agency, including cooperation relating to the agency's 
obligations to credit or rebate excess investment earnings to eligible borrowers 
pursuant to the agreement.
sec.47.8. Types of Loans. Subject to the limits set forth in the agreement, 
mortgage loans may be FHA insured, VA guaranteed, or conventional.
sec.47.9. Term, Amortization, and Interest Rate of Mortgage Loans.  Each 
mortgage loan is anticipated to have a fixed term at a fixed mortgage rate and 
to contain level monthly payment provisions.
sec.47.10. Prepayment Rights.  Mortgage loans may be prepaid, in whole or in 
part, at any time. The lender and the agency may require a reasonable fee 
associated with the prepayment.
sec.47.11. Loan Origination Guidelines. Each participant must originate all 
mortgage loans for purchase by the agency in accordance with the agreement, the 
agency's lender's manual and the loan origination, eligibility and credit 
underwriting standards in effect during the origination period (collectively 
referred to as "sellers' guides'), with the exceptions as specifically noted 
herein or in the agreement. The submission of forms prescribed by the sellers' 
guides generally will not be required. All references in the sellers' guides to 
FNMA or FHLMC, or other mortgage purchaser, will be deemed to refer to the 
agency. The acceptance of each mortgage loan by the agency is subject in all 
respects to the terms of the agreement, which provides that a participant must 
repurchase a mortgage loan under certain circumstances.
sec.47.12. Mortgage Loan Fees. Participants may charge each borrower the program 
participation fee and the origination fee as defined and set forth in the 
agreement. Participants may also collect reasonable and customary charges 
incurred by them, as provided in the agreement.
sec.47.13. Reservation of Allocations; Application Procedure.  Subject to the 
terms of the agreement, a participant may reserve a specified portion of its 
allocation to any entity or person for the origination of mortgage loans to 
eligible borrowers. At the time of allocation, the participant may recover, from 
the entity or person receiving a reservation, the portion of its program 
participation fee allocable to the reserved amount. Except as provided in the 
preceding sentence or in the agreement, the total amounts of each participant's 
allocation must be made available to eligible borrowers on a first-come, first-
served basis. The terms of any remaining reservation of a participant's 
allocation expires as set forth in the agreement.
sec.47.14. Qualifying Residences.
(a) Each residence must be a single family owner-occupied attached or detached 
structure, a single family condominium unit, or a single unit in a planned unit 
development. Attached structures must meet the requirements of the FNMA home 
mortgage selling contract supplement or other applicable document. Duplexes, 
triplexes, and fourplexes may not be financed under the program, unless 
specified in the agreement.
(b) As set forth in the agreement, certain additional limitations apply to any 
residence that is a unit of a condominium development or of a planned unit 
development, as defined in the agreement. In addition, no conventional mortgage 
loan may be made with respect to such a unit unless a qualified private mortgage 
insurer has approved the applicable condominium or planned unit development; 
provided, however, for a de minimis planned unit development as defined in the 
agreement, the agency may waive the restrictions in this subsection.
sec.47.15. Target Area Residences. The agency will reserve for at least one year 
up to 20% of the lendable proceeds of its bond issue for mortgage loans in 
specified targeted areas. The agency intends to advertise the availability of 
funds for mortgage loans in targeted areas, and may refer applicants for 
mortgage loans to any participant. Participants must exercise diligence in 
seeking to finance residences in targeted areas. A list of targeted areas is 
available on request from the agency.
sec.47.16. Permitted Encumbrances.  A first lien on the residence must secure 
all mortgage loans. Permitted encumbrances include those liens, covenants, 
conditions, and restrictions, right of ways, easements, and other matters of 
public record permitted under the applicable sellers' guides.
sec.47.17. Qualified Mortgage Insurers. To be a qualified mortgage insurer 
requires approval by the agency. A list of approved and qualified mortgage 
insurers is available on request from the agency.
sec.47.18. Mortgage Document Delivery Procedures.
(a) The agency's lender's manual details the specific documents that a 
participant must submit with each mortgage loan to be purchased by the agency. 
Prior to issuing a commitment to an eligible borrower, the loan must be approved 
for primary mortgage insurance, if necessary, and the agency's program 
compliance agent (pool insurer), if applicable.
(b) If the agency considers any documents constituting the mortgage loan file 
materially defective or inaccurate, the participant must cure the defect within 
60 days after notice. If not so cured, the participant must repurchase the 
mortgage loan from the agency, in accordance with the terms of the agreement.
sec.47.19. Purchase Price and Dates. The agency expects to purchase mortgage 
loans every two weeks on the dates specified in the calendar of purchase dates 
provided to participants in the agency's origination manual.
sec.47.20. Servicing Fees.  Participants may retain a monthly servicing fee, as 
specified and authorized in the agreement, computed on the unpaid principal 
balance of each mortgage loan as of the day preceding the last day on which a 
scheduled payment of principal was made. Participants may collect and retain 
late charges, as specified in the agreement, for delinquent mortgage loans.
sec.47.21. Loan Servicing Guidelines. Participants must service mortgage loans 
in accordance with the servicing standards set forth in the FNMA home mortgage 
servicer's contract supplement or the FHLMC servicer's guide or other applicable 
document, (collectively the "servicing guides') in effect during the term of the 
program, except as may be specifically modified in the agreement or in the 
agency's origination or servicing manuals. Participants must provide 
consolidated reports to the agency covering all loans originated under the 
program, irrespective of which branch office of the participant originated the 
mortgage loan. A participant may, in accordance with the agreement and with the 
consent of the agency, transfer all its servicing under the program to another 
participant. Participants need not prepare or file any forms or other documents 
required by the servicing guides, except as specifically required in the 
agreement or as the agency may reasonably request. All references in the 
servicing guides to FNMA or FHLMC, or other mortgage purchaser, will be deemed 
to refer to the agency. Each participant must perform all of its duties in 
servicing mortgage loans for the agency with due care, diligence, and reasonable 
promptness, and shall use at least the same degree of care as it would employ in 
servicing mortgage loans on behalf of FNMA or FHLMC.
sec.47.22. Late Charges by Agency. As provided in the agreement, the agency 
reserves the right to impose late charges on participants who fail to remit 
timely mortgage loan reports or receipts.
Chapter 49. Low-Income Rental Housing Tax Credit
sec.49.1. Scope. The rules in this chapter apply to the allocation by the Texas 
Housing Agency of certain low-income rental housing tax credits authorized by 
applicable federal income tax laws. The Internal Revenue Code of 1986, sec.42, 
as amended, provides for credits against federal income taxes for owners of 
qualified low -income rental housing projects. That section provides for the 
allocation of the available tax credit amount by state housing credit agencies. 
Pursuant to Executive Order WPC-87-15 (August 4, 1987), the Texas Housing Agency 
was authorized to make housing credit allocations for the State of Texas. As 
required by the Code, sec.42(m)(1), the agency developed a qualified allocation 
plan which is set forth in sec.49.6 of this title (relating to Threshold 
Criteria; Evaluation Factors; Selection Criteria; Bonus Points; Final Ranking; 
Credit Amount; Tax Exempt Bond Financed Projects); such qualified allocation 
plan was adopted by the governor on May 17, 1990. Therefore, the purpose of the 
sections in this chapter is to establish procedures for applying for and 
obtaining an allocation of the low-income rental housing tax credit, along with 
insuring that the proper selection criteria, priorities, and preferences are 
followed in making such allocations. It is a goal of this agency, through these 
sections, to encourage diversity through broad geographic allocation of tax 
credits within the state. The sections are intended to promote maximum 
utilization of the available tax credit amount, consistent with ensuring that 
the tax credits are allocated to owners of projects that will serve the agency's 
public policy objectives of assisting in the provision of decent, safe, and 
sanitary housing for persons and families of low income and families of moderate 
income.
sec.49.2. Definitions.  The following words and terms, when used in this 
chapter, shall have the following meanings, unless the context clearly indicates 
otherwise.
   Agency--The Texas Housing Agency, a public and official governmental agency 
of the State of Texas created and organized under the Texas Housing Agency Act, 
Texas Civil Statutes, Article 12691-6, as amended.
   Agreement and election statement--An agreement between the agency, the 
project owner and all successors in interest to the project owner as to the 
aggregate housing credit allocation amount that will be allocated to the 
building or buildings comprising the project, and an irrevocable election by the 
project owner to fix the applicable credit percentage(s) for the project in the 
month in which the agreement is executed.
   Applicable fraction --The fraction used to determine the qualified basis of 
the qualified low-income building, which is the smaller of the unit fraction or 
the floor space fraction, as defined more fully in the Code, sec.42(c)(1).
   Applicable percentage --The percentage used to determine the amount of the 
low-income housing tax credit, as defined more fully in the Code,  sec.42(b).
   Application--An application in the form prescribed by the agency, including 
any required exhibits or other supporting materials, filed with the agency by a 
project owner requesting a housing credit allocation.
   Board--The board of directors of the agency.
   Building in default project--A project where the building(s)  is acquired 
from an insured depository institution in default (as defined in the Federal 
Deposit Insurance Act,  sec.3) or from a receiver or conservator of such an 
institution.
   Carryover allocation --An allocation of current year tax credit authority by 
the agency pursuant to the provisions of the Code, sec.42(h)(1)(E).
   Carryover allocation document--A carryover allocation document issued by the 
agency to a project owner pursuant to sec.49.4(j) of this title (relating to 
Applications; Market Study; Reservations; Notification; Commitments; Extensions; 
Carryover Allocations; Agreements and Elections; Extended Commitments).
   Code--The Internal Revenue Code of 1986, as the same may be amended from time 
to time, together with any applicable regulations, rules, rulings, revenue 
procedures, information statements or other official pronouncements issued 
thereunder by the United States Department of the Treasury or the Internal 
Revenue Service relating to the low-income rental housing tax credit program 
authorized by the Code, sec.42, thereof.
   Commitment letter --A commitment letter issued by the agency to a project 
owner pursuant to sec.49.4(g) of this title (relating to Applications; Market 
Study; Reservations; Notification; Commitments; Extensions; Carryover 
Allocations; Agreements and Elections; Extended Commitments).
   Compliance period --With respect to a project, the period of 15 taxable years 
beginning with the first taxable year of the credit period with respect to the 
project, during which the project owner is required by the Code, sec.42, to 
maintain the project as rental property and to satisfy certain low-income 
occupancy requirements, as more fully defined in the Code, sec.42(i)(1).
   Credit period- -With respect to a building within a project, the period of 10 
taxable years beginning with the taxable year the building is placed in service 
or, at the election of the project owner, the succeeding taxable year, as more 
fully defined in the Code, sec.42(f)(1).
   Eligible basis --With respect to a building within a project, the building's 
eligible basis as defined in the Code, sec.42(d).
   Extended low-income housing commitment agreement- -An agreement between the 
agency, the project owner and all successors in interest to the project owner 
concerning the extended low-income housing use of buildings within the project 
as provided in the Code, sec.42(h)(6).
   Governmental contribution --Any form of financial assistance or insurance 
made available by any federal agency or state or local governmental unit to a 
project owner in connection with a project, provided that the amount of such 
assistance or insurance equals or exceeds 5.0% of the total development cost of 
the project, and provided further that any project financed under of the Housing 
Act of 1949, sec.515, shall be deemed to have received a governmental 
contribution.
   Handicapped person --A person having an impairment that is expected to be of 
long-continued and indefinite duration, is a substantial impediment to his or 
her ability to live independently, and is of a nature that the ability to live 
independently could be improved by a stable residential situation, as more fully 
defined in 24 Code of Federal Regulations sec.841.1.
   Homeless person --An individual or family that lacks a fixed, regular, and 
adequate nighttime residence as more fully defined in 24 Code of Federal 
Regulations sec.841.1.
   Housing credit allocation--An allocation by the agency to a project owner of 
a low-income rental housing tax credit in accordance with sec.49.7 of this title 
(relating to Housing Credit Allocations).
   Housing credit allocation amount--With respect to a building within a 
project, the product of the applicable percentage and the qualified basis 
specified by the agency in making a housing credit allocation to the project 
owner.
   Local tax-exempt organization--A project owner which is described in the 
Code, sec.501(c)(3) or (4), and which has a scope of business operation limited 
to the State of Texas or the governmental unit wherein the project will be 
situated.
   Project--A low -income rental housing project the owner of which represents 
to be a qualified low -income housing project within the meaning of the Code, 
sec.42(g).
   Project owner- -Any individual, joint venture, partnership, corporation, 
cooperative, trust, or other person or entity that owns a project or expects to 
acquire a project pursuant to a purchase contract satisfactory to the agency.
   Qualified allocation plan--An allocation plan which set forth the selection 
criteria, priorities, and preferences provided in the Code, sec.42(m)(1).
   Qualified basis --With respect to a building within a project, the building's 
eligible basis multiplied by the applicable fraction, as more fully defined in 
the Code, sec.42(c).
   Qualified nonprofit organization--An organization that is described in the 
Code, sec.501(c)(3) or (4), that is exempt from federal income taxation under 
the Code, sec.501(a), and includes as one of its exempt purposes the fostering 
of low-income housing, as more fully defined in the Code, sec.42(h)(5)(C), and 
Temporary Treasury Regulation, sec.1.421T(C)(5)(ii).
   Qualified nonprofit project--A project with respect to which a qualified 
nonprofit organization is to materially participate (within the meaning of the 
Code, sec.469(h)), in the development and continuing operation of the project 
throughout the compliance period.
   Rehabilitation expenditure --Amounts incurred in connection with the 
rehabilitation of a project the owner of which represents to be rehabilitation 
expenditures within the meaning of the Code, sec.42(e).
   Reservation letter --A reservation letter issued by the agency to a project 
owner pursuant to sec.49.4(e) of this title (relating to Applications; Market 
Study; Reservations; Notification; Commitments; Extensions; Carryover 
Allocations; Agreements and Elections; Extended Commitments).
   Rural project- -A project located either outside the boundaries of any 
metropolitan statistical area (MSA) or primary metropolitan statistical area 
(PMSA) or within the boundaries of an MSA or a PMSA designated by the Farmers 
Home Administration (FmHA) as an eligible area for purposes of FmHA housing 
assistance programs.
   Selection criteria --The criteria used to determine housing priorities of the 
agency which are appropriate to conditions in the state.
   State housing credit ceiling--The limitation imposed by the Code, sec.42(h), 
on the aggregate amount of housing credit allocations that may be made by the 
agency during any calendar year, as determined from time to time by the agency 
in accordance with the Code, sec.42(h).
   Total housing development cost--The total of all costs incurred by the 
project owner in acquiring, constructing, rehabilitating, and financing a 
project, as determined by the agency based on the information contained in the 
project owner's application.
sec.49.3. State Housing Credit Ceiling
(a) The agency shall determine the state housing credit ceiling for each 
calendar year as provided in the Code, sec.42(h)(3)(c).
(b) The agency shall publish each such determination in the Texas Register as 
soon as may be practicable after the making of such determination.
(c) The aggregate amount of housing credit allocations made by the agency during 
any calendar year shall not exceed the state housing credit ceiling for such 
year as provided in the Code.
sec.49.4. Applications; Market Study; Reservations; Notification; Commitments; 
Extensions; Carryover Allocations; Agreements and Elections; Extended 
Commitments
(a) Any project owner requesting a housing credit allocation for a project must 
submit an application to the agency which application shall be executed by an 
authorized representative of the project owner. This application shall contain 
full and complete information as to each item specified in the application. When 
any item is marked "not applicable," the project owner shall explain in detail 
why such item is "not applicable." The agency reserves the right to request the 
project owner to provide any additional information it deems relevant as an 
addendum to the application.
(b) The market study requirement in the application shall comply with paragraphs 
(1)-(3) of this subsection as applicable.
(1) A market study prepared by a market appraiser selected by the agency is 
required as part of the complete application when the project contains more than 
75 units (if 75 or less units, a market study is optional at the determination 
of the agency), which market study shall be prepared at the expense of the 
project owner and which shall include:
(A) an evaluation of the existing occupancy/vacancy rates in comparable 
multifamily rental residential developments in the same market area as the 
proposed project;
(B) project absorption rates for at least one year from the date of the study 
for units in comparable multifamily rental residential developments in the same 
market area as the project that are suitable for occupancy by low and moderate 
income tenants;
(C) projected occupancy/vacancy rates for at least one year following the date 
of the study for the market area in which the project is located, taking into 
account projected construction periods and lease-up periods for comparable 
multifamily rental residential developments planned or under construction within 
such market area at the time of the study; and
(D) such other matters as the agency, in its sole discretion, may determine to 
be relevant to the agency's evaluation of the need for the project and the 
allocation of the requested housing credit allocation amount.
(2) A written certification is required, in a form prescribed by the agency, 
from the market appraiser who prepared the market study required under the 
preceding paragraph, stating that:
(A) the projected total housing development cost of the proposed project is 
reasonable;
(B) the proposed project, in light of vacancy and absorption rates for the 
applicable market area, is not likely to result in a vacancy rate for comparable 
units within such market area (i.e., standard, well-maintained units within such 
market area that are reserved for occupancy by low and moderate income tenants) 
that is unreasonable for such market area;
(C) the projected initial rents for the project are reasonably affordable by low 
and moderate income tenants; and
(D) the information submitted by the project owner with respect to the project 
is credible and reasonably accurate (with any exceptions noted).
(3) If a project owner requests a waiver of the required market study, the 
project owner shall provide the agency a separate written document, with any 
support information attached thereto, setting forth the exact reasons why such 
waiver is requested. The board, in its discretion, may waive any of the 
provisions of paragraph (1) of this subsection.
(c) A project owner may file an application at any time on or before October 31 
of the calendar year during which the project owner desires to receive a housing 
credit allocation, or at any time during the calendar year preceding the 
calendar year during which the project owner desires to receive a housing credit 
allocation.
(d) The agency may reject any application that is incomplete or that is not 
accompanied by the application fee specified in sec.49.10 of this title 
(relating to Application, Reservation, and Extension Fees).
(e) Within 10 calendar days after evaluation and ranking of an application as 
provided in sec.49.6 of this title (relating to Threshold Criteria; Evaluation 
Factors; Selection Criteria; Bonus Points; Final Ranking; Credit Amount; Tax 
Exempt Bond Financed Projects), the agency shall respond to the project owner in 
accordance with paragraph (1), 2), or(3) of this subsection, as applicable.
(1) Unless the entire state housing credit ceiling for the applicable calendar 
year has been reserved, committed, or allocated in accordance with this chapter, 
the agency shall issue a reservation letter to the project owner receiving a 
total of 14 points or more as provided in sec.49.6(b) of this title (relating to 
Threshold Criteria; Evaluation Factors; Selection Criteria; Bonus Points; Final 
Ranking; Credit Amount; Tax Exempt Bond Financed Projects). The reservation 
letter:
(A) shall confirm that the agency has received the project owner's application 
and has found the application to be in satisfactory form and to contain all 
required information; and
(B) shall reserve to the project owner the housing credit allocation amount 
specified therein, subject to the conditions set forth in sec.49.7(a) of this 
title (relating to Housing Credit Allocations) and to compliance by the project 
owner with the remaining requirements of this chapter, and subject further to 
approval by the board of the project owner's application. The reservation letter 
shall expire on the date specified therein, which shall be no later than the 
60th day following the date thereof or on the last business day of the 
applicable calendar year, whichever occurs first.
(2) If the entire state housing credit ceiling for the applicable calendar year 
has then been reserved, committed, or allocated in accordance with this chapter, 
the agency shall place an application receiving a total of 14 points or more as 
prescribed in sec.49.6(b) of this title (relating to Threshold Criteria; 
Evaluation Factors; Selection Criteria; Bonus Points; Final Ranking; Credit 
Amount; Tax Exempt Bond Financed Projects) on a waiting list and shall issue to 
the project owner a written notice of that action. If at any time prior to the 
last business day of the applicable calendar year, one or more reservation 
letters, commitment letters or carryover allocation documents expire and a 
sufficient amount of the state housing credit ceiling becomes available, then 
the agency shall issue a reservation letter to the project owner in the manner 
and with the effect described in paragraph (1) of this subsection.
(3)  Applications not receiving a total of 14 points but meeting threshold 
criteria will be held in reserve until November 1 or thereafter of the 
allocation year and considered at such time for issuance of a reservation letter 
as provided in sec.49.6(b) of this title (relating to Threshold Criteria; 
Evaluation Factors; Selection Criteria; Bonus Points; Final Ranking; Credit 
Amount; Tax Exempt Bond Financed Projects) if a sufficient amount of the state 
housing credit ceiling is available.
(f) On the date a reservation letter is issued to the project owner, the agency 
shall notify in writing the mayor or other equivalent chief executive officer if 
the project or a part thereof is located in a municipality, otherwise the agency 
shall notify the chief executive officer of the county in which the project or a 
part thereof is located, to advise such individual that the project or a part 
thereof will be located in his/her jurisdiction and request any comments which 
such individual may have concerning such project. Such comments shall be part of 
the documents required to be reviewed by the board under subsection (g) of this 
section if received by the agency within 20 days after same are mailed to said 
individual; otherwise, if comments are received by the agency after 20 days, 
same may be reviewed at the discretion of the board under subsection (g) of this 
section.
(g) As soon as may be practicable following receipt by the agency of the 
application required by subsection (a) of this section but in no event earlier 
than 20 days after notification is sent under subsection (f) of this section, 
the agency shall place the application on the agenda for review by the board at 
the next meeting of the board at which applications will be considered. Within 
10 calendar days after the board reviews the application, the agency shall act 
upon the application in accordance with either paragraph(1) or (2)  of this 
subsection, as applicable.
(1) If the board approves the application, the agency shall issue a commitment 
letter to the project owner which commitment letter:
(A) shall confirm that the agency has approved the application; and
(B) shall state the agency's commitment to make a housing credit allocation to 
the project owner in a specified amount, subject to the conditions set forth in 
sec.49.7(a) of this title (relating to Housing Credit Allocations) and to 
compliance by the project owner with the remaining requirements of this chapter. 
This commitment letter shall expire on the date specified therein, which shall 
be no later than the 210th day following the date thereof or on the last 
business day of the applicable calendar year, whichever occurs first.
(2) If the board disapproves or fails to act upon the application, the agency 
shall issue to the project owner a written notice so stating.
(h) A project owner may request the agency to extend the expiration date of any 
reservation letter or commitment letter by submitting a written request for such 
action, accompanied by the extension fee specified in sec.49.10 of this title 
(relating to Application, Reservation, and Extension Fees). The request shall 
specify the term of the extension requested and the reason or reasons why the 
project owner has been unable to satisfy the requirements of this chapter prior 
to the original expiration date. The agency may consider and grant such 
extension requests in its sole discretion; provided, however, that in no event 
shall the expiration date of a reservation letter or commitment letter be 
extended beyond the last business day of the applicable calendar year.
(i) A project owner, who has been issued a commitment letter which has not 
expired, may request the agency to execute an agreement and election statement 
which has been duly dated and signed by the project owner in duplicate and 
received by the agency in duplicate prior to the end of the month in which said 
agreement and election statement was so dated and signed by the project owner. 
Upon receipt thereof, the agency shall, if the project owner is in full 
compliance with the rules in this chapter and the commitment letter, execute 
such agreement and return one executed original to the project owner.
(j) A project owner who has been issued a commitment letter may request the 
agency to execute a carryover allocation document which has been properly 
completed, signed, dated, and certified by the project owner in triplicate 
original, and delivered to the agency prior to the expiration of the commitment 
letter but in no event shall the carryover allocation document be delivered to 
the agency later than December 20 of the calendar year in question.
(k) Prior to the issuance of a housing credit allocation and/or carryover 
allocation document to a project owner, the project owner shall date, sign, and 
acknowledge before a notary in duplicate original an extended low-income housing 
commitment agreement and deliver same to the agency. Upon receipt thereof, the 
agency shall, if the project owner is in full compliance with the rules and the 
commitment letter, execute such extended low-income housing commitment agreement 
and return one executed original to the project owner. The property owner shall 
then record said extended low-income housing commitment agreement in the real 
property records of the county where the project is located and return a copy of 
same, duly certified as to recordation by the appropriate county official, to 
the agency. Receipt of such certified recorded copy by the agency is required 
prior to issuance of the housing credit allocation and/or carryover allocation 
document.
sec.49.5. Set-asides, Reservations, and Preferences.
(a) Ten percent of the state housing credit ceiling for each calendar year shall 
be set aside exclusively for qualified nonprofit projects. The amount so 
reserved for qualified nonprofit projects shall be made available in accordance 
with the following limitation; until February 28 of each year, no reservation 
letter or commitment letter shall be issued with respect to any existing project 
of more than four units with respect to which the owner has requested an 
increase in the applicable fraction in excess of 60% (provided that this 
restriction shall not apply to any project with respect to which the project 
owner has received or expects to receive a governmental contribution).
(b) Ninety percent of the state housing credit ceiling for each calendar year 
shall be available for all projects (including qualified nonprofit projects), 
subject to the following reservations and preferences set forth in paragraphs 
(1)-(3) of this subsection.
(1) Until August 31 of each year, 20% of such amounts shall be reserved for 
rural projects, 30% shall be reserved for projects with respect to which the 
owner has received or expects to receive a governmental contribution, 25% shall 
be reserved for building in default projects or REO properties held by Fannie 
Mae, FHLMC, federally chartered banks or federally approved mortgage companies 
and savings and loan associations, and 25% for all other projects.
(2) Until February 28 of each year, no reservation letter or commitment letter 
shall be issued with respect to any existing project of more than four units 
with respect to which the owner has requested an increase in the applicable 
fraction in excess of 60%(provided, that this restriction shall not apply to any 
project with respect to which the project owner has received or expects to 
receive a governmental contribution).
(3) No reservation letter or commitment letter shall be issued with respect to 
any project the total development cost of which, as determined by the agency, or 
the acquisition, construction, or rehabilitation cost (excluding financing and 
other soft costs) of which, as determined by the agency, exceed the square foot 
limitations established from time to time by the board.
(c) The agency reserves the right to adopt and implement such other set-asides, 
reservations, and preferences as the agency may deem appropriate in connection 
with the making of housing credit allocations.
sec.49.6. Threshold Criteria; Evaluation Factors; Selection Criteria; Bonus 
Points; Final Ranking; Credit Amount; Tax Exempt Bond Financed Projects.
(a) Threshold criteria. To be considered for a reservation of tax credits, a 
project must first demonstrate that it meets the threshold criteria set forth 
below.
(1) Qualified residential rental project which meets the basic occupancy and 
rent restrictions of the Code, sec.42.
(2) Readiness to proceed as documented by:
(A) evidence of site control;
(B) zoning approval;
(C) evidence of availability of utilities to the site; and
(D) evidence of conditional or firm financing commitment.
(3) The intent to enter into an extended low-income housing commitment with the 
agency as provided in the Code,  sec.42(h)(6), subsequent to issuance of a 
commitment letter to the project owner.
(4) For nonprofit projects.
(A) The nonprofit must be a qualified nonprofit organization as defined in the 
Code, sec.42(h)(5)(C).
(B) The nonprofit must regularly, continuously, and substantially participate in 
the development and operation of the project throughout the compliance period.
(C) Only those applications meeting threshold criteria will be further 
considered. Project owners whose applications do not meet threshold criteria 
will be so informed in writing.
(b) Evaluation factors. The agency will consider applications for a housing 
credit allocation using the following evaluation and point system.
(1) Applications will be evaluated against other applications that are received 
in the same month and evaluated in the appropriate set aside category until 
August 31 of each year.
(2) Applications will be evaluated against the threshold criteria as they are 
received in the agency during the month. Applications not meeting the threshold 
criteria will be so notified in writing.
(3) Applications not meeting the threshold criteria may revise the application 
and reapply to the agency.
(4) The applications will then be ranked according to the seven selection 
criteria hereinafter set forth.
(5) The application will either receive a "yes" (one point unless otherwise 
indicated) or "no" (zero point) in each of the subcategories of the seven 
selection criteria.
(6) There will be five bonus categories in which the application can earn 
additional points.
(7) Applications receiving a total of 14 points, if a sufficient amount of state 
housing credit ceiling is available, will be issued a reservation letter as 
provided in sec.49.4(e) of this title(relating to Applications; Market Study; 
Reservations; Notification; Commitments; Extensions; Carryover Allocations; 
Agreements and Elections; Extended Commitments) and be eligible to move forward 
to an evaluation by the Ad Hoc Tax Credit Committee and a recommendation by such 
committee to the board concerning the issuance of a commitment letter at the 
next scheduled board meeting.
(8) Applications not meeting the required points and not receiving a reservation 
letter are eligible to revise the application and reapply to the agency.
(9) Applications not meeting the required points and not receiving a reservation 
letter or reapplying, will not be rejected but will be held in reserve until 
November 1 or thereafter of the allocation year and considered at such time if 
tax credits are available. At such time, applications will be considered in 
descending order based on the applications which received the highest number of 
points when initially evaluated.
(c) Selection criteria. The seven selection criteria, and subcategories thereof, 
are:
(1) project location:
(A) project is located in a qualified census tract in which 50% or more of the 
households have an income less that 60% of the area median gross income; or
(B) project is located in a difficult development area designated by the 
secretary of HUD as an area with high construction costs, land costs, and 
utility costs relative to area median gross income; or
(C) project will contribute significantly to economic development of the 
community:
(i) project supports neighborhood preservation or revitalization in a locally 
designated target area;
(ii) project is located in a state or federally designated enterprise zone; or
(iii) project is located in a census tract targeted under agency bond programs;
(D) project is a rural project as such term is defined in the rules;
(E) project provides desegregated housing opportunities for low income occupancy 
outside of qualified census tracts, difficult development areas, locally 
targeted areas, etc.;
(F) project provides scattered site, low density housing (less than 10 units per 
acre);
(2) housing needs characteristics:
(A) project is located in county in which the median age of the housing stock is 
23 years or older;
(B) project addresses local needs as evidenced by housing affordability using 
the Texas Housing Affordability Index developed by Texas A&M Real Estate 
Center or, if not available, an equivalent index;
(C) project is located in counties of the state where more than 25% of the 
occupied housing units are renter occupied;
(3) project characteristics:
(A) project is a federally assisted building in danger of having the mortgage 
assigned to HUD, FmHA, or a federal mortgage insurance fund;
(B) project is a low-income building eligible for prepayment of mortgage as 
provided in the Code, sec.42(d)(6)(C);
(C) project is housing that provides supportive services which supportive 
services may include meals, elderly, and/or child day care and transportation;
(D) for a property having 20 or more dwelling units, at least 10% of the units 
have three or more bedrooms and are suitable for occupancy by families with 
children unless a need for three bedroom units is not identified in the market 
study, or an appropriate local study or project is single-room occupancy or 
transitional housing;
(E) the project will be placed in service within the calendar year;
(F) project design promotes energy conservation as evidenced by information 
provided in the application;
(G) project retains existing federal, state, and local subsidies through the 
additional assistance of the tax credit as an area targeted for special 
assistance through some recognized local plan; or project encourages the use of 
private funds;
(4) sponsor (project owner) characteristics:
(A) project owner has a track record in successfully developing and placing in 
service housing of the type the project owner is proposing. (Applies to for-
profit project owners only);
(B) the management agent designated by the project owner has successful previous 
experience in continuing management of the housing type proposed. (Applies to 
for-profit project owners only);
(C) project owner has developed a management plan that specifies how the project 
will be managed. (Applies to for -profit and nonprofit project owners);
(D) project owner, and/or its general partners if a partnership, has financial 
viability as evidenced by current financial statements.(Applies to for-profit 
and nonprofit project owners);
(5) participation of local tax-exempt organizations:
(A) project owner has a track record in successfully developing and placing in 
service housing of the type the project owner is proposing;
(B) the management agent designated by the project owner has successful previous 
experience in continuing management of the housing type proposed;
(C) project owner has a community based board and/or project is sponsored and 
developed by a community development corporation;
(D) project is a joint venture project between a local tax-exempt organization 
and private for-profit entity with experience in the type of housing that is 
being proposed (one point);
(6) tenant populations with special housing needs:
(A) project is located in an area in which more than 14% of the population is 
over 65 years of age. Project is designed and equipped for elderly tenants 
according to the requirements listed in the Federal Fair Housing regulations 
regarding housing for older persons. There is a referral and marketing plan that 
includes plans for providing supportive services to elderly residents;
(B) in projects involving new construction, at least 10% of the units are 
accessible to handicapped persons. In projects involving rehabilitation, at 
least 10% of the units are designed to be accessible and adaptable for 
handicapped persons;
(C) project is designed and intended for use by agricultural workers;
(D) if projects are developed for individuals with mental handicaps certified by 
the Department of Mental Health and Mental Retardation, evidence is required 
that project owner is working with local MHMR authorities to determine housing 
needs;
(7) public housing waiting lists. Project owner has committed in writing to the 
local public housing authority of availability of units and agrees it will 
consider those households on the public housing authority waiting list for the 
occupancy of such units. Project owner has prepared a marketing plan with 
details and provided a copy to the local public housing authority and the 
agency.
(d) Bonus points. Bonus points are available, up to a maximum of three points, 
in the following categories:
(1) property is owned by an insured depository institution in default, or by a 
receiver or conservator of such an institution, or is an REO property held by 
Fannie Mae, FHLMC, federally chartered banks or by a federally approved mortgage 
company or savings and loan association (two points);
(2) property provides transitional housing for homeless persons with supportive 
services designed to assist tenants in locating and retaining permanent housing 
(one point);
(3) property is designed and intended for use by handicapped persons, including 
chronically mentally ill individuals, developmentally disabled individuals, and 
other disabled individuals (one point);
(4) property has minorities and/or women participating in the ownership of the 
development and management of the rental housing(one point);
(5) project owner offers a right of first refusal to tenants of the property to 
purchase the property after the end of the compliance period (one point).
(e) Final ranking. The agency will evaluate projects according to the strength 
of the project to meet the selection criteria. The results of the evaluation 
will be determined by the agency in its sole discretion and will not be subject 
to challenge or contest by any applicant. After evaluating and scoring all 
applications received each month, the agency will rank such applications 
according to the number of points received. Among those applications scoring 14 
points or greater, the agency will give preference in allocation credit dollar 
amounts to projects:
(1) which spend the highest percentage of credit dollar amounts on project costs 
other than the costs of intermediaries;
(2) serve the lowest income tenants; and/or
(3) obligate the project owner (as evidenced by some type of agreement) to serve 
qualified tenants for the longest period of time.
(f) Reporting noncompliance. In the event the agency becomes aware of 
noncompliance with the provisions of the Code, sec.42, by any project owner or 
other party associated with the project and/or project owner, the agency will 
notify the Internal Revenue Service in writing within 30 days.
(g) Credit amount. The agency shall issue tax credits only in the amount needed 
for the financial feasibility and viability of a project throughout the credit 
period. The issuance of tax credits or the determination of any allocation 
amount in no way represents or purports to warrant the feasibility or viability 
of the project by the agency.
(h) Tax exempt bond financed projects. Tax exempt bond financed projects which 
will not receive tax credits through the state allocation authority are also 
subject to the requirements for the allocation of a housing credit dollar amount 
under the allocation plan.
sec.49.7. Housing Credit Allocations.
(a) The housing credit allocation amount shall not exceed the dollar amount the 
agency determines is necessary for the financial feasibility of the project and 
its viability as a project throughout the credit period. Such determination 
shall be made by the agency at the time of issuance of the reservation letter, 
at the time of review by the board prior to issuance of commitment letter, at 
the time the agency makes a housing credit allocation and the date the building 
is placed in service. Any housing credit allocation amount specified in a 
reservation letter, commitment letter, allocation and/or carryover allocation 
document is subject to change by the agency dependent upon such determination. 
Such a determination shall be made solely at the discretion of the agency, 
considering the items specified in the Code, sec.42(m)(2)(B), and the agency in 
no way or manner represents or warrants to any project owner, sponsor, investor, 
lender, or other entity that the project is, in fact, possible or viable.
(b) The agency shall make a housing credit allocation to any project owner who 
holds a commitment letter which has not expired, upon receipt from the project 
owner of evidence satisfactory to the agency that one or more buildings within 
the project have been placed in service. Such evidence may be in the form of a 
certificate of occupancy issued by an appropriate local governmental unit or 
other written evidence satisfactory to the agency demonstrating that the 
building or buildings are ready and available for occupancy. The agency shall 
make each such housing credit allocation by mailing or delivering IRS Form 8609 
(or any successor form adopted by the Internal Revenue Service) to the project 
owner, with Part I thereof completed in all respects and signed by an authorized 
official of the agency. A separate housing credit allocation shall be made with 
respect to each building within a project which is eligible for a housing 
credit.
(c) The agency shall execute in triplicate, when the project owner is in full 
compliance with the rules in the chapter and the commitment letter, a carryover 
allocation document which has been properly completed, executed, and certified 
by the project owner, and return one executed original to the project owner. In 
this situation, the agency shall, pursuant to the Code,  sec.42(h)(1)(E), mail 
or deliver IRS Form 8609 (or any successor form adopted by the Internal Revenue 
Service) to the project owner, with Part I thereof completed in all respects and 
signed by an authorized official of the agency, in the calendar year that such 
buildings are placed in service provided that such buildings may not be placed 
in service later than the close of the second calendar year following the 
calendar year in which the allocation is made.
(d) In making a housing credit allocation, the agency shall specify a maximum 
applicable percentage, not to exceed the applicable percentage for the building 
permitted by the Code, sec.42(b), and a maximum qualified basis amount. In 
specifying the maximum applicable percentage and the maximum qualified basis 
amount, the agency shall disregard the first-year conventions described in the 
Code, sec.42(f)(2)(A) and sec.42(f)(3)(B). The housing credit allocation made by 
the agency shall not exceed the amount necessary to support the extended low-
income housing commitment specified in the Code, sec.42(h)(6)(c)(i).
sec.49.8. Agency Records; Certain Required Filings.
(a) At all times during each calendar year the agency shall maintain a record of 
the following:
(1) the cumulative amount of the state housing credit ceiling that has been 
reserved pursuant to reservation letters during such calendar year;
(2) the cumulative amount of the state housing credit ceiling that has been 
committed pursuant to commitment letters during such calendar year;
(3) the cumulative amount of the state housing credit ceiling that has been 
committed pursuant to carryover allocation documents during such calendar year;
(4) the cumulative amount of housing credit allocations made during such 
calendar years; and
(5) the remaining unused portion of the state housing credit ceiling for such 
calendar year.
(b) Not less frequently than quarterly during each calendar year, the agency 
shall publish in the Texas Register each of the items of information referred to 
in subsection (a) of this section.
(c) The agency shall mail to the Internal Revenue Service, not later than the 
28th day of the second calendar month after the close of each calendar year 
during which the agency makes housing credit allocations, a copy of each 
completed (as to Part I) IRS Form 8609 mailed or delivered by the agency to a 
project owner during such calendar year, along with a single completed IRS Form 
8610, Annual Low-Income Housing Credit Agencies Report, except when a carryover 
allocation is made by the agency, Form 8609 will be mailed or delivered to the 
project owner by the agency in the year in which the building(s) is placed in 
service, and thereafter a copy mailed to the Internal Revenue Service in the 
time sequence above mentioned. The original of the carryover allocation document 
will be filed by the agency with IRS Form 8610 for the year in which the 
allocation is made and an additional copy of said carryover allocation document 
will be filed with the Form 8609 that is issued to the project owner during the 
calendar year that the building is placed in service. The original of all 
executed agreements and election statements shall be filed by the agency with 
the agency's IRS Form 8610 for the year a housing credit allocation is made as 
provided in this section.
(d) The project owner shall be responsible to furnish to the agency by May 31 
following each calendar year during the compliance period copies of the 
completed Form 8609 with Schedule A, Annual Statement, and Form 8586 (or any 
successor form adopted by the IRS) filed with the IRS for the preceding tax 
year.
(e) Project inspections are required to show that the project is built according 
to required plans and specifications. A copy of all project inspections required 
and accepted by the lender financing the project shall be acceptable to the 
agency as a certification that the project is built to plans and specifications 
if such inspections are required by the lender during the construction of the 
project. At a minimum to be acceptable to the agency, such inspections must 
include an inspection at the start-up phase, the interim phase, and a final 
inspection at the time the project is placed in service. If no project 
inspections are required by the lender financing the project, the agency will 
require at least three inspections be made of the project; such inspections 
shall be at the start-up phase, the interim phase, and a final inspection at the 
time the project is placed in service, and shall be performed by an independent, 
third party inspector hired by the agency. The project owner shall pay all fees 
to cover the cost of said inspections.
(f) At the time each building in the project is placed in service, the project 
owner shall be responsible to furnish the agency a certified statement as to the 
costs attributable to said building.
sec.49.9. Agency Responsibilities.
(a) In making a housing credit allocation under this chapter, the agency shall 
rely upon information contained in the project owner's application to determine 
whether a building is eligible for the credit under the Code, sec.42. The 
project owner shall bear full responsibility for claiming the credit and 
assuring that the project complies with the requirements of the Code, sec.42, 
provided, however, that the agency will carry out its responsibilities under 
subsections (b) and (c) of this section. The agency shall have no responsibility 
for ensuring that a project owner who receives a housing credit allocation from 
the agency will qualify for the housing credit.
(b) Following the making of a housing credit allocation, the agency will review 
on an annual basis the copies of IRS Form 8609 with Schedule A and Form 8586 
furnished by the project owner for noncompliance with the code and review the 
housing credit allocation amount to the project owner when the buildings within 
a project are placed in service, if later than the date when a housing credit 
allocation is made, but otherwise will not actively monitor or investigate the 
continuing compliance of the project with the requirements of the Code, sec.42. 
It shall be the responsibility of the project owner to notify the agency in 
writing within the calendar year (such notice deemed given upon receipt by the 
agency) in which the building(s) in a project is placed in service when 
carryover allocations are made.
(c) In the event the agency becomes aware of noncompliance with the provisions 
of the Code, sec.42, by any project owner or other party associated with the 
project and/or project owner, the agency will notify the Internal Revenue 
Service in writing within 30 days.
sec.49.10. Application, Reservation, and Extension Fees.
(a) Each project owner that submits an application shall submit to the agency, 
along with such application, a nonrefundable application fee in an amount equal 
to the greater of $200 or $5.00 multiplied by the number of dwelling units in 
the project.
(b) Each project owner that receives a reservation letter shall submit to the 
agency, not later than 20 days after the date of the reservation letter, a 
reservation fee in an amount equal to the greater of $1,000 or 5.0% of the 
requested housing credit allocation amount. The agency shall refund one-half of 
the reservation fee to the project owner upon the making of a housing credit 
allocation to the project owner in accordance with this chapter. In the event 
that the agency does not make a housing credit allocation to the owner, the 
agency shall refund the reservation fee to the project owner in full, unless:
(1) the project owner withdraws the application;
(2) the project owner loses control of the project site, changes the project 
site, or substantially alters the composition of the project owner such that the 
agency revokes the reservation letter, commitment letter, or carryover 
allocation document; or
(3) the project owner fails to place in service, by the expiration date of the 
commitment letter, one or more of the buildings within the project for which the 
project owner has requested a housing credit allocation.
(c) Each project owner that requests an extension of the expiration date of a 
reservation letter or commitment letter shall submit to the agency, along with 
such request, a nonrefundable extension fee in an amount equal to the greater of 
$200 or $5.00 multiplied by the number of dwelling units in the project.
(d) The amounts of the application fee, reservation fee, and extension fee 
specified in this section may be revised by the agency from time to time as 
necessary to ensure that such fees cover the agency's administrative expenses 
for processing applications.
sec.49.11. Manner and Place of Filing Applications.
(a) All applications, letters, documents, or other papers filed with the agency 
will be received only between the hours of 8 a.m. and 5 p.m. on any day which is 
not a Saturday, Sunday, or a holiday established by law for state employees.
(b) All items submitted to the agency shall be mailed or delivered to Low Income 
Rental Housing Tax Credit Program, Texas Housing Agency, 811 Barton Springs 
Road, Suite 300, Austin, Texas 78704.
sec.49.12. Withdrawals, Amendments, Cancellations. A project owner may withdraw 
or amend an application prior to receiving a reservation, commitment, carryover 
allocation document or housing credit allocation, or may cancel a reservation 
letter or commitment letter by submitting to the agency a notice, as applicable, 
of withdrawal, amendment, or cancellation. An amendment of an application that 
results in an increase in the requested housing credit allocation amount or 
cause the application to be treated as having been filed on the date of the 
amendment.
sec.49.13. Waiver and Amendment of Rules.
(a) The board, in its discretion, may waive any one or more of these rules in 
cases of natural disasters such as fires, hurricanes, tornados, earthquakes, or 
other acts of nature as declared by federal or state authorities.
(b) The agency may amend this chapter at any time in accordance with the 
provisions of Texas Civil Statutes, Article 6252-13a.
TITLE 22. EXAMINING BOARDS
Part V. State Board of Dental Examiners
Chapter 103. Dental Hygiene
Examination-Application
22 TAC sec.103.15
The Texas State Board of Dental Examiners adopts the repeal of sec.103.15, 
without changes to the proposed text as published in the April 2, 1991, issue of 
the Texas Register  (16 TexReg 1923).
The board is repealing this rule as all pertinent information is covered in 
other rules.
The repeal will help to avoid redundancy within the rules.
No comments were received regarding adoption of the repeal.
The repeal is adopted under Texas Civil Statutes, Article 4551f(6)(a)-(c), which 
provide the Texas State Board of Dental Examiners with the authority to adopt 
and enforce such rules and regulations not inconsistent with the laws of the 
state as may be necessary for the performance of its duties and/or to ensure 
compliance with the state laws relating to the practice of dentistry to protect 
the public health and safety.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 1, 1991.
TRD-9112099
C. Thomas Camp
Executive Director
Texas State Board of Dental Examiners
Effective date: October 23, 1991
Proposal publication date: April 2, 1991
For further information, please call: (512) 477-2985
       
Worksheet and Schedule Examination Check-Steps
22 TAC sec.sec.103.21-103.23
The Texas State Board of Dental Examiners adopts the repeal of sec.sec.103. 21-
103.23, without changes to the proposed text as published in the April 2, 1991, 
issue of the Texas Register (16 TexReg 1923).
The board is repealing this rule as all pertinent information is covered in 
other rules.
The repeals will help to avoid redundancy within the rules.
No comments were received regarding adoption of the repeals.
The repeals are adopted under Texas Civil Statutes, Article 4551f(6)(a)-(c), 
which provide the Texas State Board of Dental Examiners with the authority to 
adopt and enforce such rules and regulations not inconsistent with the laws of 
the state as may be necessary for the performance of its duties and/or to ensure 
compliance with the state laws relating to the practice of dentistry to protect 
the public health and safety.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 1, 1991.
TRD-9112100
C. Thomas Camp
Executive Director
Texas State Board of Dental Examiners
Effective date: October 23, 1991
Proposal publication date: April 2, 1991
For further information, please call: (512) 477-2985
       
Conduct-Grading
22 TAC sec.103.31, sec.13.32
The Texas State Board of Dental Examiners adopts the repeal of sec.103.31 and 
sec.103.32, without changes to the proposed text as published in the April 2, 
1991, issue of the Texas Register (16 TexReg 1923).
The board is repealing this rule as all pertinent information is covered in 
other rules.
The repeals will help to avoid redundancy within the rules.
No comments were received regarding adoption of the repeals.
The repeals are adopted under Texas Civil Statutes, Article 4551f(6)(a)-(c), 
which provide the Texas State Board of Dental Examiners with the authority to 
adopt and enforce such rules and regulations not inconsistent with the laws of 
the state as may be necessary for the performance of its duties and/or to ensure 
compliance with the state laws relating to the practice of dentistry to protect 
the public health and safety.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 1, 1991.
TRD-9112098
C. Thomas Camp
Executive Director
Texas State Board of Dental Examiners
Effective date: October 23, 1991
Proposal publication date: April 2, 1991
For further information, please call: (512) 477-2985
       
Specific Examination Information for Dental Hygienists
22 TAC sec.103.41
The Texas State Board of Dental Examiners adopts the repeal of sec.103.41, 
without changes to the proposed text as published in the April 2, 1991, issue of 
the Texas Register  (16 TexReg 1924).
The board is repealing this rule as all pertinent information is covered in 
other rules.
The repeal will help to avoid redundancy within the rules.
No comments were received regarding adoption of the repeal.
The repeal is adopted under Texas Civil Statutes, Article 4551f(6)(a)-(c), which 
provide the Texas State Board of Dental Examiners with the authority to adopt 
and enforce such rules and regulations not inconsistent with the laws of the 
state as may be necessary for the performance of its duties and/or to ensure 
compliance with the state laws relating to the practice of dentistry to protect 
the public health and safety.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 1, 1991.
TRD-9112102
C. Thomas Camp
Executive Director
Texas State Board of Dental Examiners
Effective date: October 23, 1991
Proposal publication date: April 2, 1991
For further information, please call: (512) 477-2985
       
Other Examination Information
22 TAC sec.103.51
The Texas State Board of Dental Examiners adopts the repeal of sec.103.51, 
without changes to the proposed text as published in the April 2, 1991, issue of 
the Texas Register  (16 TexReg 1924).
The board is repealing this rule as all pertinent information is covered in 
other rules.
The repeal will help to avoid redundancy within the rules.
No comments were received regarding adoption of the repeal.
The repeal is adopted under Texas Civil Statutes, Article 4551f(6)(a)-(c), which 
provide the Texas State Board of Dental Examiners with the authority to adopt 
and enforce such rules and regulations not inconsistent with the laws of the 
state as may be necessary for the performance of its duties and/or to ensure 
compliance with the state laws relating to the practice of dentistry to protect 
the public health and safety.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 1, 1991.
TRD-9112101
C. Thomas Camp
Executive Director
Texas State Board of Dental Examiners
Effective date: October 23, 1991
Proposal publication date: April 2, 1991
For further information, please call: (512) 477-2985
       
TITLE 25. HEALTH SERVICES
Part II. Texas Department of Mental Health and Mental Retardation
Chapter 401. System Administration
Subchapter F. Internal Audit
25 TAC sec.sec.401.405, 401.407-401.409
The Texas Department of Mental Health and Mental Retardation (TDMHMR) adopts 
amendments to sec.sec.401.405 and 401.407-401.409, concerning internal audit, 
without changes to the proposed text as published in the July 5, 1991, issue of 
the Texas Register (16 TexReg 3760).
The amendments clarify report distribution requirements by referencing two 
documents: the Texas Internal Audit Act and Generally Accepted Government 
Auditing Standards. The amendments also require the director of internal audit 
to report on various aspects of internal audit's work to the chairman of the 
internal audit committee of the Texas Board of Mental Health and Mental 
Retardation at every meeting (or as requested by the committee).
No comments were received regarding adoption of the amendments.
The amendments are adopted under Texas Civil Statutes, Article 5547-202, which 
provide the Texas Board of Mental Health and Mental Retardation with rulemaking 
powers.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 4, 1991.
TRD-9112197
Ann Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Effective date: October 25, 1991
Proposal publication date: July 5, 1991
For further information, please call: (512) 465-4670
       
Chapter 404. Protection of Clients and Staff
Subchapter A. Client Abuse and Neglect in TDMHMR Facilities
25 TAC sec.sec.404.1-404.14
The Texas Department of Mental Health and Mental Retardation (TDMHMR) adopts the 
repeal of sec.sec.404.1-401.14, concerning client abuse and neglect in TDMHMR 
facilities, without changes to the proposed text as published in the May 14, 
1991, issue of Texas Register (16 TexReg 2646).
Key provisions of the sections are included in new sec. sec.404.1-404.20, 
concerning abuse and neglect of persons served by TDMHMR facilities, which are 
adopted contemporaneously in this issue of Texas Register.
No comments were received regarding adoption of the repeals.
The repeals are adopted under Texas Civil Statutes, Article 5547-202, which 
provide the Texas Board of Mental Health and Mental Retardation with rulemaking 
powers.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 4, 1991.
TRD-9112201
Ann Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Effective date: October 25, 1991
Proposal publication date: May 14, 1991
For further information, please call: (512) 465-4670
       
Subchapter A. Abuse and Neglect of Persons Served by TDMHMR Facilities
25 TAC sec.sec.404.1-404.20
The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new 
sec.sec.404.1-404.20, concerning abuse and neglect of persons served by TXMHMR 
facilities. Sections 404.3-404.14 and 404.16-404.18 are adopted with changes to 
the proposed text as published in the May 14, 1991, issue of  Texas Register (16 
TexReg 2646). Sections 404.1 404.2, 404.15, 404.19, and 404.20 are adopted 
without changes and will not be republished. Exhibit A, which is adopted by 
reference in the sections, is adopted with revisions. Two new exhibits are added 
to the subchapter and minor changes were made to other exhibits. The new 
sections replace existing Chapter 404, Subchapter A, which is contemporaneously 
repealed in this issue of the  Texas Register.
The title of the subchapter has been revised to reflect current department usage 
of TXMHMR as opposed to TDMHMR. Throughout the sections TXMHMR is used except in 
those instances when reference is made to existing documents which have TDMHMR 
in the title.
In sec.404.3, a definition of clinical issues has been added and the definition 
of designee has been modified to clarify that only designated responsibilities 
related to abuse and neglect reports and investigations are involved. The 
definition of sexual abuse has been deleted and the definition of sexual assault 
has been revised to reference the definition of the term as contained in the 
Penal Code; references to sexual abuse throughout the sections have been revised 
accordingly. The definition of sexual exploitation has been revised to include 
threatening activities. The definition of sexual contact has been deleted 
because it falls within the definition of sexual exploitation. The definitions 
of serious and non-serious injuries have been modified to allow greater 
physician discretion. A definition of prevention and management of aggressive 
behavior (PMAB) has been added.
In sec.404.4, it is clarified that any sexual assault or sexual exploitation 
involving a person served and an agent or contractor is to be considered Class I 
abuse. Under the definition of neglect in that section, the paraphrasing of 
definitions contained in the Family Code and the Human Services Code is deleted 
as being unnecessary. In sec.404.5, language has been added specifying that any 
pregnancy of a person served which could have occurred while the person was a 
resident of the facility and the diagnosis of a sexually transmitted disease in 
a person served which could have occurred while the person was a resident of the 
facility are to be reported as possible abuse or neglect. In addition, it is 
clarified that PMAB techniques are considered accepted forms of restraint and 
that theft of the property of a person served is to be handled administratively. 
The procedures to be followed by employees in reporting suspected instances of 
abuse or neglect are clarified in sec.404.6.
In sec.404.7, it is clarified that if the accused is an employee in a non-direct 
care post, the head of the facility may allow the employee to continue in the 
post pending investigation. The reporting responsibilities of the head of the 
facility to family members, guardian, spouse, or other relatives are clarified. 
Language is added specifying that the head of the facility is to report 
allegations involving ICF/MR programs to the Texas Department of Health. It also 
is clarified that only confirmed cases of abuse involving physicians or nurses 
are to be reported to the appropriate licensing authority. Additional language 
is added specifying that when the perpetrator is determined to be another person 
served, the allegation is to be referred to that person's treatment team or 
interdisciplinary team.
In sec.404.8, the composition of the Abuse and Neglect Committee (ANC), as well 
as the responsibilities of the ANC, the chairperson, and the facility 
investigator are more clearly defined. In  sec.404.9, the responsibilities of 
peer review committees, the medical and nursing directors, and the head of the 
facility are more clearly defined. In sec.404.11, language is revised for 
clarity regarding notification of parents, guardians, and relatives about 
allegations and it is more clearly delineated when reports of abuse and neglect 
are to be made to law enforcement officials.
In sec.404.12, the levels of possible disciplinary action are more precisely 
described and are revised to reflect recent statutory changes. In sec.404.13, 
the responsibilities of the Office of Consumer Services and Rights Protection 
are clarified. In sec.404.14, it is clarified that a complainant has a right to 
appeal the outcome of the investigation and to be notified of the outcome of the 
appeal. In sec.404.17, information from a recent opinion by the attorney general 
is added to clarify the nature of the information concerning an investigation 
that may be released to parents or guardians and that which must be kept 
confidential. The listing of exhibits in sec.404.18 is updated. References in 
sec.404.19 are updated.
Exhibit A has been revised to reflect the current terminology used by the 
department, e.g., person served versus client, and to delete provisions which 
have been incorporated into sections of the subchapter. References in the 
exhibit to interrogation have been deleted and language relating to interviewing 
has been revised to reflect a less adversarial approach. Clarifying language 
about appropriate forms to be used has been added to the section concerning 
physical examination of victims, and the dating chart for bruising has been 
deleted. Clarifying language regarding witnesses has been added to the section 
dealing with hearing guidelines.
A public hearing was held July 22, 1991, at TXMHMR Central Office, Austin, to 
accept public testimony concerning the proposed new sections. Testimony was 
given by Advocacy, Inc., Texas Alliance for Mentally Ill (TEXAMI), and nine 
individuals, including persons receiving services and family members. Written 
testimony was submitted by one individual who was unable to attend the hearing.
Much of the testimony by persons who have received or are receiving services and 
family members concerned repeated instances of alleged abuse and neglect by both 
staff and other persons served by the facilities. Those testifying described 
events which happened as long ago as a decade or more and as recently as this 
year. Most indicated the events were not isolated but were happening on a 
routine basis in all TXMHMR facilities. The commentary was extensive and largely 
anecdotal.
Written comments concerning the proposed new sections were received from 
Advocacy, Inc., the Association for Retarded Citizens/Austin; and the Office of 
the RAJ Court Monitor.
Several individuals stated that complaints of abuse and neglect frequently are 
ignored by facility staff and administration, and that if the complaint is 
acknowledged, the investigation and hearing process is handled poorly. One 
individual testified that staff, when questioned, always profess not to know 
what is contained in the rules or the law, and to never having seen the rules 
covering abuse and neglect. An individual commented on incidents involving the 
use of excessive restraint which was obviously punitive. Another individual 
commented on the lack of response on the part of the criminal justice system to 
charges of abuse which are ignored by facilities, and called for penalties for 
abuse and neglect to be strictly enforced. Several individuals requested that 
the investigator be independent of the facility and that the membership of the 
ANC not include facility staff or that, at the very least, several members of 
the ANC be drawn from local advocacy organizations or be members of the 
community independent of the facility.
The department responds that input by persons with mental illness or mental 
retardation and family members is critical to the process of providing the 
safest possible environment and in effecting meaningful changes to rules on 
abuse and neglect. The general character of the commentary suggests that the 
content of the rules is of little importance if the rules are not known and 
followed by all staff. The passage of House Bill 7 of the 72nd Texas Legislature 
requires the creation of a new regulatory and protective services agency to 
which the abuse and neglect investigatory function will be transferred this 
year. It is anticipated that the transfer of this function to an agency external 
to TXMHMR may be beneficial by relieving staff of the responsibility for self-
investigation and by introducing a higher level of objectivity into 
investigations.
Several individuals commented that the lack of adequate or appropriate services 
at facilities and in the community and the failure to provide services called 
for in treatment plans are prevalent forms of abuse and neglect. One individual 
commented that another form of abuse is the denial of access by persons served 
to toys provided by family members on the grounds that the toys are not "age 
appropriate." The department responds that lack of adequate service is always a 
concern to the department, but that these issues are outside the scope of the 
proposed subchapter. The failure to provide services directed by a person's 
treatment plan is adequately covered by the definition of neglect in  
sec.404.4(4). The question of "age appropriate" toys is outside the scope of the 
proposed subchapter.
One individual commented that a major problem existed with the maintenance of 
confidentiality of treatment records. The department responds that betraying the 
confidentiality of treatment records is a criminal offense and that the 
importance of maintaining confidentiality is stressed during the regular 
employee training described in sec.404.16.
Several individuals commented that investigations are not conducted in a timely 
manner and recommended that investigations should begin within 24 hours of 
allegation. One individual called for disciplinary action to be taken when staff 
do not comply with the timeframes. The department has amended references 
throughout the sections and Exhibit A to read, as appropriate, "immediately, if 
possible, but no more than one hour later" for the reporting of allegations and 
"immediately, if possible, but in no case more than 24 hours" for the 
commencement of investigations.
Another individual commented on the lack of sufficient investigators to 
accomplish the necessary work within timeframes. Another individual recommended 
that the hearing board conduct its own review of abuse and neglect reports, 
looking specifically for: when the incident occurred and when it was reported, 
when and how witness statements were obtained, when and which witnesses were 
interviewed by the ANC, and when the investigation was concluded and a final 
determination reached by the superintendent. The department responds that the 
rule is adopted as an interim measure and that the investigation process will be 
further reviewed and the policy amended with the anticipated transfer of 
authority for investigation to the new regulatory and protective services agency 
pursuant to House Bill 7.
Two commenters expressed concern that the option of obtaining an extension on 
the time allowed for investigation and consideration by the ANC is being 
exercised with increasing frequency and that this inhibits the ability to 
conduct an adequate investigation. One of the commenters recommended that 
investigations not completed within the designated time be referred to an 
outside, independent consultant and that the department conduct quarterly 
reviews of the timeliness of investigations with action to be taken against 
chronic violators. The department shares the concern and agrees that extensions 
should be obtained only when absolutely necessary. The issue of outside 
consultants will be resolved with the transfer of investigatory authority to 
another agency pursuant to HB 7.
One commenter suggested that the person receiving services and family members be 
informed that an employee may appeal through grievance procedures when an 
allegation against an employee has been confirmed and disciplinary action taken. 
The department responds that the person served receives this information, with 
the information passed on to parents and guardians as appropriate with regard to 
confidentiality.
Several individuals recommended that the person receiving services and family 
members be notified of the final decision regarding disciplinary action. They 
further recommended that the person and family members be notified of any 
related grievance hearing, be allowed to present a prepared statement to the 
hearing committee to be considered as evidence, and be notified of the ruling by 
the hearing officer and of final disposition by the commissioner of the 
employee's employment status. The department responds that sec.404.11 specifies 
that persons notified of the original allegation will be notified of the final 
results of the investigation. In sec.404.17, it is explained that a copy of the 
ANC's investigative report shall be released to the person served, parent, or 
legal guardian, but that neither the name of the perpetrator or the disciplinary 
action taken is to be released. Language has been added in sec.404.11 specifying 
that the person served or family members may request to be informed if a 
grievance hearing is requested by the employee. The employee has the option of 
requesting that the grievance hearing be closed to the public. Decisions about 
which witnesses are to be called to support the disciplinary action is left to 
the discretion of the facility.
An individual testified concerning the helplessness of children in the system, 
noting that on at least one occasion a female child was transported in the same 
vehicle as convicted felons. She recommended that children not be transported 
with convicted felons and that a female escort should be provided on those 
occasions when females are to be transported. The department agrees with the 
commenter's recommendations, but responds that these matters are outside the 
scope of this subchapter.
A commenter stated that changes in the proposal from the current subchapter do 
little to protect the victim. The department responds that the new rule has been 
revised to make it more victim-oriented and refers the commenter to the 
tightening of timeframes for reporting throughout the sections and to the 
specific steps to be taken regarding the reassignment of employees and granting 
of leave in sec.404.7, as examples.
A commenter requested that at ANC meetings the person receiving services should 
be represented by an advocate, attorney, or other representative of choice. The 
department agrees that all witnesses, including persons receiving services, are 
entitled to representation, and language has been amended to clarify this point.
A commenter stated that the sections do not adequately address situations in 
which the victim is not competent and does not have a parent or guardian, and 
suggested that either a local advocacy organization be asked to appoint an 
advocate or that the court be asked to appoint an attorney to represent the 
victim's rights. The commenter suggested that the same procedures be followed 
when the alleged perpetrator is a family member. The department responds that 
the client rights officer serves as advocate for a person served in such 
situations.
A commenter suggested that the ANC should have the authority to take remedial 
action and also should analyze what factors give rise to abuse/neglect. The 
department replies that language has been added in sec.404.8(f)(1)(F) clarifying 
that the ANC has authority to make recommendations based on the findings of its 
investigation and that implementation of these recommendations is monitored. The 
department's ability to collect and analyze data and information related to 
causes of abuse and neglect will be improved after the transition of 
investigatory responsibility to another agency pursuant to House Bill 7.
A commenter suggested that staff should make a special effort to explain to 
other residents on units where incidents have taken place what is being done to 
investigate and remedy the situation, and that the residents should be invited 
to speak privately with members of the ANC or a client rights officer. The 
department responds that these actions are implemented routinely during the 
investigation as the investigator or other staff interview other residents who 
might have knowledge of the alleged incident.
A commenter stated that the abuse and neglect investigation process should not 
be perceived as pitting persons served against staff, and suggested that persons 
served, staff, and family members need and have a right to more information 
about the process. The department responds that the process as described in the 
subchapter is intended to avoid adversarial situations. The department believes 
adequate steps are taken to inform persons receiving services, staff, and family 
members about the process.
A commenter recommended that if the facility's examining physician fails to 
confirm abuse that the facility provide further examination by an independent 
physician at the facility's expense. The department responds that a person 
served or parent/guardian/advocate may arrange for an independent examination, 
but that the facility is not obligated to assume the expense.
A commenter stated that it is not clear whether this subchapter governs 
investigations of abuse and neglect in private psychiatric hospitals with which 
the department contracts. The department responds that procedures described in 
Chapter 404, Subchapter C, concerning patient abuse in private psychiatric 
hospitals would apply.
Two commenters objected to the definition of allegation and requested that the 
phrase "having reasonable cause to believe" be deleted. The department responds 
that the definition is taken from statute, but that the phrase has been deleted 
here and throughout the sections.
A commenter recommended revisions to the definition of sexual exploitation. The 
department agrees and has modified the language as requested.
Two commenters requested that non-PMAB take-down techniques be scrutinized by 
the ANC committee. The department responds that the use of such techniques 
currently is tracked by Consumer Services and Rights Protection.
Two commenters requested the sections should emphasize that staff are to report 
allegations directly to the superintendent or designee and not go through the 
hierarchical chain of command. The department responds that the sections are 
clear on this point.
A commenter requested that the subchapter should direct complainants to make 
their concerns known to Advocacy, Inc., and provide the address and toll-free 
number. The department responds that federal law currently requires posting of 
notices in all facilities about how to contact Advocacy, Inc.
A commenter requested that types of disciplinary action be specified for the 
failure of staff to report suspected or known abuse, and that a record be 
maintained of such incidents. Another commenter stated that the rules should 
emphasize in the strongest possible language that any person not following these 
procedures is not only subject to immediate termination but also to criminal 
prosecution. The department responds that sec.404.6(a)(2) specifies that 
employees who do not follow specified procedures and timeframes for reporting 
allegations of abuse and neglect are subject to disciplinary action and possible 
criminal prosecution.
A commenter requested that clarification be offered as to when an accused 
employee may be allowed to remain in a position pending investigation. The 
department responds that language in sec.404.7(2) has been clarified as 
requested.
A commenter requested that documentation be required when access to a person 
served by a family member, friend, etc. suspected of abuse is restricted. The 
department agrees with the request and has added language as requested in 
sec.404. 7(2)(c).
A commenter requested language be added clarifying that ANC has the 
responsibility to not only investigate alleged incidents of abuse and/or 
neglect, but also to ensure that any rights issues that become evident are 
addressed and corrective action taken. The department responds that language has 
been added in sec.404.8 and sec.404.13 clarifying the roles of ANC and CSRP 
regarding the point. In addition, Exhibit A specifies under "The Investigative 
Process" that all allegations of rights violations are to be referred to the 
facility's rights officer.
A commenter requested that for ANC hearings, current pictures of employees be 
provided for ID purposes, that site diagrams and reenactments be used, and that 
witnesses not be allowed to converse while awaiting their turn to testify. In 
addition, the commenter requested that timely notice of hearings be provided to 
witnesses who have left the facility. The department responds that in Exhibit A, 
a discussion of procedures and guidelines for the ANC review has been modified 
to list the use of site diagrams, photographs, and reenactments as possible ways 
in which evidence may be introduced during a hearing. In addition, a site 
diagram is required, if appropriate, on the report of suspected abuse/neglect 
form, which is new Exhibit B. Identifications made using photographs are not 
considered the best form of identification. Language addressing timely notice 
has been added in sec.404.8(f)(1)(c). Clarifying language has been added to 
Exhibit A stressing that witnesses are not to converse concerning the allegation 
while waiting to testify.
A commenter suggested specific criteria by which allegations are to be 
considered without merit. The department responds language has been revised in 
sec.404.8(f)(1)(d) to require that justification for such a decision be included 
in the written report.
A commenter noted that information in the sections is in conflict with Exhibit A 
regarding the initial investigation and decisions concerning "allegations 
without merit." The department agrees that there is a conflict and that language 
regarding "The Investigative Process" in Exhibit A has been appropriately 
amended.
A commenter noted that in instances of sexual abuse where penetration is the 
only physical injury noted, this fact should be required documentation on the 
ANIA report form. The department responds that term "sexual abuse" has been 
deleted from the sections, and the legal term "sexual assault," in which 
penetration is the key concept, is used throughout the sections. Training 
materials being prepared on the use of the ANIA form stresses that sexual 
assault, which is classified in sec.404.4 as Class 1 abuse, is always to be 
coded as a serious physical injury in client abuse and neglect reporting system.
A commenter requested that all photographs of injuries be taken within 24 hours 
of discovery. The department responds that language in sec.404.8(f)(1)(e) (ii) 
has been modified as requested.
A commenter requested clarification as to whether the treating physician or the 
physician who completes the exam following an allegation of abuse is to complete 
the injury report form, and further requested that a determination of the 
severity of injuries be required. The department responds that the language of 
the definitions of serious and non-serious physical injury in  sec.404.3 
adequately conveys this information.
A commenter requested that language be inserted requiring the head of the 
facility to document reasons, based on specific evidence, for overturning a 
decision of the ANC, and that such documentation be included in the final abuse 
and neglect report. The department has amended the language as requested in 
sec.404.8(f)(2).
One commenter expressed concern with the proposed peer review processes for 
abuse and neglect allegations involving physicians and nurses, and suggested 
that the processes parallel the abuse and neglect process, meeting the same 
procedural requirements. Another commenter recommended that the peer review 
committees be composed of peers from outside the department. The department 
responds that the investigatory process for peer review parallels the ANC 
process. The peer review determination is intended to meet statutory 
requirements regarding allegations of "reportable conduct" on the part of 
physicians and nurses. With the transfer of investigatory responsibilities to a 
new agency pursuant to House Bill 7, changes in the ANC and the peer review 
processes are anticipated.
A commenter requested that the "qualified individual" appointed as an 
investigator should be a physician or nurse in instances requiring peer review. 
The department responds that the individual may be a physician or nurse but 
doesn't have to be.
A commenter requested that if the abuse or neglect allegations involve the 
clinical practice of the physician, the person receiving services should be 
assigned a different physician until the investigation is complete. The 
department responds that the matter is dealt with in sec.404.7(2) which 
specifies that the head of the facility is to determine whether an accused 
employee is to be placed on leave, reassigned, etc., for the duration of the 
investigation.
A commenter requested clarification on whether a referral to peer review is 
instead of or in addition to an investigation by the ANC, and whether the peer 
review committee will have the authority and responsibility to confirm abuse or 
neglect through its investigation. The commenter also suggested that peer review 
committee members receive the same amount, frequency, and quality of training as 
the ANC members. The department responds that the existing language explicitly 
states that if the issue is clinical, the referral goes to the peer review 
committee. No training is specified for ANC members.
A commenter requested clarification as to whom complaints should be made in 
instances of abuse and neglect in contract facilities and how collaborative 
investigations are to be conducted. The department responds that language 
regarding reporting has been clarified in sec.404.10 and that the language in 
the section specifies that all reporting and investigative procedures described 
in the subchapter are to be followed.
A commenter requested clarification as to whether confirmed allegations are to 
be referred to law enforcement when confirmed by the head of the facility or by 
the commissioner after an employee grievance hearing is completed. The 
department responds that language in sec.404.11(4) and (5) has been amended to 
clarify that only confirmation by the head of the facility is necessary for an 
allegation to be reported to the appropriate law enforcement agency. It is 
emphasized, however, that allegations of sexual assault and other crimes are 
reported to law enforcement immediately.
A commenter requested that Consumer Services and Rights Protection in Central 
Office be required to monitor the frequency with which decisions of the ANC are 
overturned by the head of the facility and the number of occasions where 
disciplinary action is overturned due to grievance hearings. The department 
responds that with the transfer of investigatory responsibilities to the new 
regulatory and protective agency, consideration of the recommendations will be 
made in the development of the transition plan.
A commenter suggested that process described in the subchapter is inadequate 
under the due course of law provisions of the Texas Constitution, and suggested 
that persons receiving services should be able to appeal decisions to the 
courts. The department responds that nothing in these sections or in statute 
prevents the filing of a lawsuit.
A commenter suggested that the subchapter needs to specify how often this 
subchapter will be reviewed with all employees. The department responds that the 
proposed language in sec.404.16(c) specifies that training occur "not less than 
once each calendar year."
The new sections are adopted under Texas Civil Statutes, Article 5547-202, which 
provides the Texas Board of Mental Health and Mental Retardation with rulemaking 
powers.
sec.404.3. Definitions.  The following words and terms, when used in this 
subchapter, shall have the following meanings, unless the context clearly 
indicates otherwise.
   Absent-A term in the client assignment and registration system used to 
describe when a person is physically away from a campus-based location, formerly 
known as "furlough."
   Adult-A person 18 years of age or older.
   Agent-Any individual not employed by the facility but working under the 
auspices of the facility, such as volunteers, students, etc.
   Allegation-A report by a person believing that a person receiving services 
has been or is in a state of abuse, exploitation, or neglect as defined in this 
subchapter.
   Child-A person under 18 years of age who is not and has not been married or 
who has not had the disabilities of minority removed for general purposes.
   Client abuse and neglect reporting system (CANRS)-A subsystem of CARE 
developed to record incidents involving abuse or neglect of persons served by 
facilities.
   Client assignment and registration system (CARE) -The on-line data entry 
system developed to provide demographic and other data about persons served by 
the department.
   Clinical issues -Issues related to unsafe nursing or medical practice or 
violations of the Nursing Practice Act or Medical Practice Act.
   Confirmed-Term used to describe an allegation of abuse or neglect which is 
supported by the preponderance of the evidence.
   Contractor-Any school, organization, entity, or individual associated by 
contract in a working alliance with a facility.
   Department-The Texas Department of Mental Health and Mental Retardation.
   Designee-A staff member immediately available who assume designated 
responsibilities of the head of the facility.
   Exploitation-The illegal or improper act or process of using the resources of 
a person served for monetary or personal benefit, profit, or gain.
   Facility-Any institution, program, or service operated by the department.
   Head of the facility-The superintendent or director of a facility.
   Investigator-A TXMHMR employee or independent contractor (consultant) with 
expertise in conducting investigations, training, experience, and demonstrated 
competence in the area of investigation.
   Negligence-An action that a person of ordinary prudence would not have taken 
under the same or similar circumstances, or the failure to take an action that a 
person of ordinary prudence would have taken under the same or similar 
circumstances.
   Nonserious physical injury-Any injury determined not to be serious by the 
examining physician. Examples of nonserious injury may include the following: 
superficial laceration, contusion, abrasion.
   Peer review-A review of clinical and/or medical practice(s) by peer 
physicians or nurses.
   Perpetrator unknown -Term used to describe instances in which abuse or 
neglect is confirmed but positive identification of the responsible person 
cannot be made, and in which self-injury has been eliminated as the cause.
   Person served-Any person receiving services from the department, including 
those persons who are absent who are still carried on the rolls of the facility.
   Prevention and management of aggressive behavior (PMAB) -The department's 
proprietary risk management program which uses the least intrusive, most 
effective options to reduce the risk of injury for persons receiving services 
and for staff from acts or potential acts of aggression.
   Retaliatory action -Any action intended to inflict emotional or physical harm 
or inconvenience on an employee or person served that is taken because he or she 
has reported abuse or neglect. This includes, but is not limited to, harassment, 
disciplinary measures, discrimination, reprimand, threat, and criticism.
   Serious physical injury-An injury determined to be serious by the examining 
physician. Examples of serious injury may include to the following: fracture; 
dislocation of any joint; internal injury; any contusion larger than 2 1/2 
inches in diameter; concussion; second or third degree burn.
   Sexual assault -A criminal act as defined in the Texas Penal Code, 
sec.22.011, a copy of which is included as an attachment in Exhibit A.
   Sexual exploitation -Any act in which a less able individual is coerced, 
manipulated, or otherwise used sexually, or is threatened with the same by a 
more physically and intellectually advanced or more socially able individual.
   Sexually transmitted disease-Any infection of a person served, with or 
without symptoms or clinical manifestations, that is or may be transmitted from 
one person to another during or as a result of sexual contact between persons.
   Unconfirmed-Term used to describe an allegation of abuse or neglect which is 
not supported by the preponderance of the evidence.
sec.404.4. Classification of Abuse and Neglect. When the perpetrator is an 
employee, contractor, or agent, or the perpetrator is unknown, confirmed abuse 
or neglect shall be classified in accordance with the "Procedures and Techniques 
for Investigation of Abuse and Neglect," which is herein adopted by reference in 
sec.404.18 of this title (relating to Exhibits) as Exhibit A.
(1) Class I abuse means any act or failure to act performed knowingly, 
recklessly, or intentionally, including incitement to act, which caused or may 
have caused serious physical injury to a person served; Without regard to 
injury, any sexual assault or sexual exploitation involving between an employee, 
agent, or contractor and a person served will be considered to be Class I abuse.
(2) Class II abuse means:
(A) any act or failure to act performed knowingly, recklessly, or intentionally, 
including incitement to act, which caused or may have caused nonserious physical 
injury to a person served, or
(B) exploitation.
(3) Class III abuse means any use of verbal or other communication to curse, 
vilify, or degrade a person served, or to threaten a person served with physical 
or emotional harm, or any act which vilifies, degrades, or threatens a person 
served with physical or emotional harm.
(4) Neglect means negligence which causes or could predictably lead to any 
physical or emotional injury to a person served.
sec.404.5. Prohibition Against Abuse and Neglect of Persons Served by 
Facilities, Facility Contractors, and Agents.
(a) Abuse or neglect of persons served by facilities, facility contractors, and 
agents is prohibited and shall be grounds for appropriate action, including 
reporting to law enforcement authorities; reporting to governing boards for 
professional practice; and, additionally for employees, disciplinary action up 
to and including termination.
(b) Any pregnancy of a person served, provided there is medical verification 
that the conception could have occurred while the person was a resident of the 
facility, or any diagnosis of a sexually transmitted disease in a person served 
which could have occurred while the person was a resident of the facility shall 
be reported in keeping with the provisions of this subchapter as possible Class 
I abuse or neglect. Additional reporting requirements for the head of the 
facility are described in Chapter 404, Subchapter G of this title (relating to 
Unusual Incidents Involving Persons Served by TXMHMR Facilities).
(c) Abuse does not include:
(1) the proper use of restraints or seclusion, including prevention and 
management of agressive behavior, and the approved application of behavior 
modification techniques as described in Chapter 405, Subchapter F of this title 
(relating to Restraint and Seclusion Mental Health Facilities) and Chapter 405, 
Subchapter HH of this title (relating to Restraint and Seclusion Mental 
Retardation Facilities);
(2) other actions taken in accordance with the rules of the department; or
(3) such actions as an employee may reasonably believe to be immediately 
necessary to avoid imminent harm to self, persons served, or other individuals 
if such actions are limited only to those actions reasonably believed to be 
necessary under the existing circumstances.
(d) All theft of property belonging to a person served shall be handled 
administratively in accordance with department personnel procedures.
sec.404.6. Reporting Responsibilities of All TXMHMR Employees.
(a) Each employee who suspects or has knowledge of, or who is involved in an 
allegation of, abuse or neglect shall make a verbal report to the head of the 
facility or designee immediately, if possible, but in no case more than one hour 
after the incident. The employee shall submit a written incident report to the 
head of the facility or designee within two hours. Employees who become aware of 
a situation at any time after the fact shall make a verbal report to the head of 
the facility or designee immediately, if possible, but in no case more than one 
hour after learning of the incident. The employee shall submit a written 
incident report to the head of the facility or designee within two hours. The 
"Report of Suspected Abuse/Neglect" form, which is attached as Exhibit B, should 
be made available to all staff to expedite this process. However, lack of 
availability of this form should not impede the reporting of abuse and neglect.
(1) The head of the facility or designee shall note the date and time of day the 
abuse or neglect allegedly occurred and the date and time of day the verbal and 
written reports are received. This information will be forwarded to the 
investigator for inclusion in the investigative case file.
(2) Failure to make such reports within the allotted time period without 
sufficient justification shall be considered a violation of this subsection and 
make the employee subject to disciplinary action and possible criminal 
prosecution.
(b) Without regard to the identity of the perpetrator, suspected sexual assault 
or sexual exploitation shall be reported to the head of the facility or designee 
immediately, if possible, but in no case more than one hour later by the person 
making the allegation. If the person making the allegation is not an employee, 
e.g., a person receiving services, a guest, etc., staff shall assist the 
individual in making the report, if necessary.
(c) In addition to reporting to the head of the facility or the designee, any 
person who believes that any abuse or neglect has occurred involving a person 
served may also make such concerns known to the Public Responsibility Committee 
as described in Chapter 403, Subchapter P of this title (relating to Public 
Responsibility Committees).
(d) If there is reason to suspect that a person served was abused, neglected, or 
exploited during an absence from the facility with a family member or guardian, 
the employee shall immediately, if possible, but in no case more than one hour 
later contact the Department of Human Services (1-800-252-5400) and the head of 
the facility or designee.
(e) Anonymous allegations will be received and investigated following the same 
procedures that are used when the complainant is known.
(f) An allegation that sexual assault has been committed by a person receiving 
services shall be reported and investigated following the procedures outlined in 
this subchapter with the understanding that negligence on the part of staff may 
have made it possible for the assault to have occurred. Other aggressive 
behaviors by persons receiving services shall be reported and investigated 
according to sec.404.244 of this title (relating to Reporting Injuries and 
Incidents Involving Persons Served) and sec.404.245 of this title (relating to 
Reporting a Criminal Act).
sec.404.7. Responsibilities of the Head of the Facility or Designee: Immediate 
Actions Required. Immediately upon receiving an allegation of abuse or neglect, 
if possible, but in no case more than one hour later, the head of the facility 
or designee shall take the following actions.
(1) When the head of the facility or designee receives an allegation that any 
abuse-related crime has been committed, the allegation shall be immediately, if 
possible, but in no case more than one hour later reported to the appropriate 
local or state law enforcement agencies. For ICF/MR programs, the head of the 
facility will notify the Texas Department of Health (TDH) pursuant to the 
provisions of the memorandum of understanding between the department and TDH 
with an effective date of September 1, 1991, and any amendments thereto.
(2) The head of the facility or designee shall make basic determinations of 
whether the person accused is an employee, a person receiving services from the 
facility, or another person, and whether the person is known or unknown to the 
victim.
(A) If the accused is an employee, the head of the facility or designee will 
determine whether action should be taken regarding the employee, which may 
include immediately granting the employee emergency leave, reassigning the 
employee to a non-direct care area, or allowing the employee to continue in a 
non-direct care post pending investigation.
(B) If the accused is a person receiving services, the head of the facility or 
designee will take immediate appropriate action to protect the victim, e.g., 
one-on-one observation of the accused and/or the victim, separation, etc. For 
cases in which the accused is a person served, the head of the facility or 
designee shall immediately, if possible, but in no case more than 24 hours 
later, refer the allegation to that person's treatment team or interdisciplinary 
team.
(C) If the accused is another person who is known but who is neither a staff 
member nor a person receiving services, e.g., family member, friend, etc., the 
head of the facility or designee will effect a restriction on that person's 
access to the victim pending investigation. The restriction should be documented 
in the record of the person served, with a copy included in the final report.
(3) For cases in which the accused is an employee, contractor, agent, or 
individual other than a person served, the head of the facility or designee 
shall immediately, if possible, but in no case more than one hour later, report 
the allegation of abuse and neglect to the chairperson of the Client Abuse and 
Neglect Committee, the composition and function of which is discussed in 
sec.404. 8 of this title (relating to Abuse and Neglect Committee and Facility 
Investigator), or the investigator.
(4) The head of the facility or designee shall immediately, if possible, but in 
no case later than 24 hours after receiving the report of abuse/neglect, notify 
the parents, guardian, spouse, or other appropriate relative of the alleged 
victim, unless specifically prohibited by Chapter 403, Subchapter K of this 
title (relating to Client-Identifying Information), Chapter 405, Subchapter L of 
this title (relating to Client Rights Mental Health Services), or Chapter 405, 
Subchapter Y of this title (relating to Client Rights Mental Retardation 
Services).
(5) If the allegation involves physical abuse, sexual assault, or sexual 
exploitation, the head of the facility or designee will ensure necessary 
immediate and ongoing medical and/or psychological attention is obtained for the 
victim, and, as needed, for the perpetrator, if a person receiving services, 
e.g. , screening and treatment for sexually transmitted diseases, psychological 
counseling and support, etc., consistent with the procedures described in 
"Procedures and Techniques for Investigation of Abuse and Neglect," which is 
referenced in sec.404.18 of this title (relating to Exhibits) as Exhibit A.
(6) If the allegation appears to involve medical or nursing practice of a 
physician or registered nurse, the head of the facility or designee shall:
(A) immediately, if possible, but in no case more than one hour later refer the 
allegation to the medical director or nursing director, as appropriate, for 
review for possible peer review as required in sec.404.9 of this title (relating 
to Peer Review).
(B) ensure that reports of confirmed cases of abuse or neglect are made as 
required by law to the licensing authority for the discipline under review, e. 
g., to the Board of Medical Examiners for physicians, and to the Board of Nurse 
Examiners for registered nurses.
sec.404.8. Abuse and Neglect Committee and Facility Investigator.
(a) Appointment. The head of a facility shall appoint a multidisciplinary 
committee or committees to assist in the investigation of alleged incidents of 
abuse and/or neglect. The committee shall be called the Abuse and Neglect 
Committee (ANC).
(b) Composition. The committee shall be comprised of at least three but not more 
than five persons.
(1) One member of the committee shall be a member of the public responsibility 
committee for the facility. All other members of the committee shall be staff 
persons with representation from each of the following classifications:
(A) clinical/administrative; and
(B) direct care.
(2) One person shall be designated to act as chairperson and shall be required 
to ensure that records of all investigations conducted by the committee are 
maintained. When the chairperson is away from the facility, one of the committee 
members shall be appointed acting chairperson.
(c) Terms. The term of membership shall be one year. The head of the facility 
may reappoint the same staff members for more than one term.
(d) Facility investigator. The head of the facility will employ one or more 
investigators, or will appoint a qualified individual to conduct a particular 
investigation.
(e) Consultants. The head of the facility may retain a consultant for the 
purpose of assisting the committee in conducting investigations pursuant to this 
subchapter.
(f) Responsibilities.
(1) The committee and the facility investigator shall fully investigate alleged 
incidents of abuse or neglect.
(A) Consistent with the provisions contained in "Procedures and Techniques for 
Investigation of Abuse and Neglect," which is referenced in sec.404.18 of this 
title (relating to Exhibits) as Exhibit A, the facility investigator shall begin 
the initial investigation immediately, if possible, but in no case more than one 
hour later, including investigations of sexual assault or sexual exploitation.
(B) The initial investigative report, including witness statements and all 
evidence collected, shall be submitted to the ANC chair no later than five 
working days after receipt of the allegation. If additional time is required, 
written justification will be submitted to the head of the facility for approval 
or disapproval and this will be included in the final report.
(C) The committee shall review the evidence gathered by the investigator, 
interview all available witnesses, make a final determination of findings, and 
submit a final report to the head of the facility within five working days after 
receipt of the designated investigator's report. If the committee is unable to 
complete its investigation within five working days, written justification will 
be submitted to the head of the facility for approval or disapproval and this 
will be included in the final report. Timely notice of the ANC hearing is to be 
provided to all witnesses, including those who may have left the facility since 
the allegation.
(D) If the initial investigation, including written witness statements and all 
evidence gathered, indicates that the allegation is obviously without merit, the 
investigation may be closed subsequent to the report being reviewed and signed 
by the chairperson of the committee, a public responsibility committee member, 
and the head of the facility. The reasons for the determination, based on 
specific evidence, will be included in the report. A copy of the report of all 
such investigations shall be sent to the Office of Consumer Services and Rights 
Protection in Central Office. Ten percent of these investigative reports shall 
be submitted by the chairperson to the full committee for review to ensure that 
the criteria for closing an investigation are being met.
(E) Investigative procedures outlined in "Procedures and Techniques for 
Investigation of Abuse and Neglect," which is referenced in sec.404.18 of this 
title (relating to Exhibits) as Exhibit A, are to be followed in all 
investigations.
(i) Written statements shall be obtained from all witnesses and any other 
persons who may provide collateral information.
(ii) All injuries shall be photographed as soon as possible but in no instance 
more than 24 hours after discovery of the injury. Photographs of all injuries 
sustained shall be submitted with the investigative report sent to the Office of 
Consumer Services and Rights Protection, Central Office.
(iii) The physician's exam and treatment of abuse-related injuries shall be 
documented on the client injury/incident report form, which is referenced in 
sec.404.18 of this title (relating to Exhibits) as Exhibit C, and attached to 
the investigative report submitted to the Office of Consumer Services and Rights 
Protection, Central Office. The physician's remarks during or following the 
examination should address the injury's cause, age, and treatment, to the extent 
that can be determined, as well as the timing of the medical exam with regard to 
the date the injury was received. All clinical issues will be referred to the 
medical/clinical director or designee for consultation.
(F) The ANC will articulate concerns and make recommendations regarding 
preventive measures, e.g., refresher prevention and management of agressive 
behavior training for an employee involved in an abuse-related takedown, changes 
in unit procedures, etc.
(i) The chairperson is responsible for ensuring that the implementation of the 
committee's recommendations and recommendations resulting from articulated 
concerns regarding preventive measures is monitored and their effectiveness 
evaluated.
(ii) A quarterly report detailing the recommendations will be submitted to the 
head of the facility, with a copy sent to the Office of Consumer Services and 
Rights Protection.
(2) The ANC shall report to the head of the facility whether it is of the 
opinion that there is cause to believe that abuse or neglect has occurred in the 
incident investigated. Such opinion is not binding on the head of the facility; 
however, the head of the facility shall document the reasons, based on specific 
evidence, for overturning the decision of the committee. Such documentation will 
be included in the final abuse and neglect report.
(3) The ANC shall indicate "perpetrator unknown" in those instances where the 
preponderance of evidence exists to confirm abuse or neglect, but positive 
identification of the person(s) responsible cannot be determined and self-injury 
has been eliminated as the cause.
(g) Rights of employees. The rights of employees summoned to appear before the 
abuse and neglect committee are outlined in the memo titled "Procedures in 
Client Abuse Investigations and Thurston Rebuttal Proceedings," which is herein 
adopted by reference as Exhibit D and which is referenced in sec.404.18 of this 
title (relating to Exhibits) as Exhibit D.
sec.404.9. Peer Review.
(a) When the head of the facility or designee refers an allegation to the 
medical director or nursing director for determination for possible 
investigative peer review as described in sec.404.7(6) of this title (relating 
to Responsibilities of the Head of the Facility or Designee: Immediate Actions 
Required), the head of the facility or designee will at the same time appoint a 
qualified individual to serve as facility investigator.
(1) The designated investigator shall confer with the medical director or 
nursing director and begin the initial investigation immediately, if possible, 
but in no case more than one hour later, consistent with the provisions 
contained in "Procedures and Techniques for Investigation of Abuse and Neglect," 
which is referenced in sec.404.18 of this title (relating to Exhibits) as 
Exhibit A.
(2) The investigator's initial report, including witness statements, all 
evidence collected, and classification of the allegation as described in 
sec.404. 4 of this title (relating to Classification of Abuse and Neglect), 
shall be presented to the head of the facility no later than five days after 
receipt of the allegation. If additional time is required, written justification 
will be submitted to the head of the facility for approval or disapproval and 
this will be included in the final report.
(b) The head of the facility, in collaboration with the facility investigator 
and the medical director or nursing director, will make a determination as to 
whether the abuse or neglect allegation involves clinical issues.
(1) If the abuse or neglect allegation does not involve clinical issues, the 
head of the facility will refer it directly to ANC for investigation as 
described in sec.404.8 of this title (relating to Abuse and Neglect Committee 
and Facility Investigator).
(2) If the abuse or neglect allegation involves the clinical practice of a 
physician, the head of the facility will refer it to the medical director for 
referral to the chairperson of the investigative medical peer review committee 
for determination as described in Operating Instruction 408 2, governing 
investigative medical peer review, which is herein adopted by reference as 
Exhibit E and which is referenced in sec.404.18 of this title (relating to 
Exhibits) as Exhibit E.
(3) If the abuse or neglect allegation involves the clinical practice of a 
nurse, the head of the facility will refer it to the nursing director for 
referral to the chairperson of the nursing peer review committee for 
determination as described in Operating Instruction 408 1, governing 
professional nursing quality assurance, which is herein adopted by reference as 
Exhibit F and which is referenced in sec.404.18 of this title (relating to 
Exhibits) as Exhibit F.
(c) The investigator will participate as a nonvoting member of the investigative 
peer review committee. The investigator will facilitate and consult with the 
committee regarding investigative techniques. The investigator shall comply with 
rules of confidentiality.
(d) Within five working days of the referral, the findings of the peer review 
process will be reported to the medical director or nursing director, as 
appropriate, and to the head of the facility. If the committee is unable to 
complete its investigation within five working days, written justification will 
be submitted to the head of the facility for approval or disapproval and this 
will be included in the final report.
(e) If the initial investigation, including written witness statements and all 
evidence gathered, indicates that the allegation is obviously without merit, the 
investigation may be closed subsequent to the report being reviewed and signed 
by the chairperson of the peer review committee, the medical director or nursing 
director, as appropriate, and the head of the facility.
sec.404.10. Abuse and Neglect Investigative Procedures for Facility Contractors.  
For purposes of reporting, investigating, and preventing abuse and neglect by 
contractors or agents of state facilities, the procedures described in this 
subchapter for employees of facilities shall be followed.
(1) Independent school districts (ISDs). An allegation that an ISD employee has 
committed abuse or neglect shall be reported to the Texas Department of Human 
Services, which has principle responsibility for investigation, and the ISD.
(2) Contractors. An allegation that an employee of a contractor has committed 
abuse or neglect shall be investigated and reported following all procedures 
prescribed in this subchapter. Allegations shall be investigated in a 
collaborative effort by the administrator of the contract provider and the 
facility abuse and neglect committee, with the head of the facility or designee 
coordinating the investigation.
(A) An employee of a contract provider who has knowledge of or is involved in 
abuse or neglect shall make a report to the administrator of the contract 
provider immediately, if possible, but in no case more than one hour later. The 
administrator will immediately, if possible, but in no case more than one hour 
later report the allegation to the head of the facility. If the allegation 
involves the administrator, the allegation shall be reported to the head of the 
facility or designee.
(B) If the allegation is made by a state facility employee, the head of the 
facility or designee immediately, if possible, but in no case more than one hour 
later will inform the administrator of the contract provider and coordinate a 
collaborative effort to investigate the incident.
(C) The decision made by the head of the facility, based on the investigative 
report, shall be discussed with the administrator of the contract provider, at 
which time agreement shall be reached regarding the action to be taken, if any.
sec.404.11. Responsibilities of Head of the Facility or Designee: Following 
Investigation.  Upon completion of the investigation of any allegation, the head 
of the facility or designee shall take the following actions.
(1) Unless specifically prohibited by Chapter 403, Subchapter K of this title 
(relating to Client-Identifying Information), Chapter 405, Subchapter L of this 
title (relating to Client Rights Mental Health Services), or Chapter 405, 
Subchapter Y of this title (relating to Client Rights Mental Retardation 
Services), the head of the facility or designee shall ensure that the parents, 
guardian, spouse, or other appropriate relatives who were notified of the 
allegation are promptly notified of the final results of the investigation.
(2) The head of the facility or designee shall ensure that, if requested, the 
parents, guardian, spouse, or other appropriate relatives are notified in a 
timely manner if a grievance is filed by the employee regarding the findings.
(3) The head of the facility or designee shall submit to the director of the 
Office of Consumer Services and Rights Protection two copies of:
(A) the Client Abuse/Neglect Report (AN-1-A), which is referenced in sec.404.18 
of this title (relating to Exhibits) as Exhibit G;
(B) the investigative report, including a statement of the allegation, a summary 
of the investigative methodology, the findings of fact and/or the conclusions of 
the Abuse and Neglect Committee (ANC), an analysis of the evidence, the ANC's 
finding regarding whether abuse occurred, and any concerns and recommendations 
for corrective and preventive actions;
(C) the client injury/incident report, which is referenced in sec.404.18 of this 
title (relating to Exhibits) as Exhibit C; and
(D) all witness statements and supporting documents.
(4) When abuse of a child is alleged, the head of the facility shall submit a 
"Final Report of Suspected Child Abuse and Neglect in a Child Care Facility," 
which is referenced in sec.404.18 of this title (relating to Exhibits) as 
Exhibit H, to the Office of Consumer Services and Rights Protection to be 
forwarded to the Office of Youth Care Investigation (Attorney General's Office).
(5) In cases of abuse or neglect previously reported to a law enforcement 
agency, a copy of the final investigative report shall be submitted to the 
appropriate law enforcement agency.
sec.404.12. Responsibilities of Head of the Facility or Designee: Disciplinary 
Action.  The head of the facility or designee in the absence of the head of the 
facility shall be responsible for taking prompt and proper disciplinary action 
when a charge of abuse or neglect is confirmed.
(1) Disciplinary action shall be based on criteria including, but not limited 
to:
(A) the seriousness of the abuse and/or neglect;
(B) the circumstances surrounding the event;
(C) the employee's record; and
(D) if a second violation, the length of time between violations.
(2) When the head of the facility determines that abuse or neglect has occurred, 
the following disciplinary action shall be taken.
(A) Class I abuse. The employee shall be dismissed from employment.
(B) Class II abuse. If the act of abuse is the employee's first violation, the 
employee shall be placed on suspension for up to 10 days, demoted, or dismissed. 
If the employee is exempt under the provisions of the Fair Labor Standards Act 
(FLSA), the suspension shall be in compliance with relevant provisions of the 
FLSA and current TXMHMR personnel policies. If the act of abuse is the 
employee's second violation, regardless of the class of the first violation, the 
employee shall usually be dismissed from employment.
(C) Class III abuse. If the act of abuse is the employee's first violation, the 
employee shall receive a written reprimand which shall become a part of the 
employee's personnel file and may be placed on suspension for up to 10 days. If 
the act of abuse is the employee's second violation, the employee shall be 
placed on suspension for up to 10 days, demoted, or dismissed from employment.
(D) Neglect. The employee shall receive a written reprimand, be placed on 
suspension for up to 10 days, demoted, or dismissed from employment. If the 
neglectful act is the employee's second violation, regardless of the first 
violation, the employee shall usually be dismissed from employment.
(3) When disciplinary action is taken against an employee based on abuse or 
neglect, the head of a facility shall notify the disciplined employee in writing 
of any right to a grievance hearing the employee may have under the department's 
internal policies and procedures relating to employee grievances.
sec.404.13. Responsibilities of the Office of Consumer Services and Rights 
Protection.  The Office of Consumer Services and Rights Protection shall:
(1) monitor statistical trends in abuse and neglect;
(2) review all abuse and neglect investigations and make recommendations to 
facilities concerning corrective and preventive actions (including rights 
violations which may require further action);
(3) determine closure on all investigations;
(4) report all allegations of abuse involving a child to the Office of Youth 
Care Investigation in the Attorney General's Office;
(5) report all allegations of abuse involving adults served by the department to 
the Adult Protective Services division of the Texas Department of Human Services 
(DHS); and
(6) ensure that appropriate reports of abuse regarding registered nurses or 
physicians are made to the respective boards of examiners.
sec.404.14. Appeals Process.
(a) A complainant who makes an allegation of abuse or neglect is to be notified 
of the right to appeal the outcome of an investigation.
(b) A complainant who makes an allegation of abuse or neglect and wishes to 
appeal the findings shall request a review of the completed investigation by 
notifying the Office of Consumer Services and Rights Protection, Texas 
Department of Mental Health and Mental Retardation, P.O. Box 12668, Austin, 
Texas 78711.
(c) If the appeal process occurs, the complainant shall be notified of the 
outcome.
(1) If the incident involves a person under the age of 18, the complainant may 
further request a review from the Office of Youth Care Investigation, Attorney 
General's Office, P.O. Box 12548, Austin, Texas 78711.
(2) If the incident involves a person 18 years or older, the complainant may 
further contact the Office of Adult Protective Services, Department of Human 
Services, P.O. Box 2960, Austin, Texas 78769.
sec.404.16. Staff Training in Identifying and Reporting Abuse and Neglect.
(a) This subchapter shall be thoroughly and periodically explained to all 
employees of each facility as follows.
(1) All new employees, contractors, and agents shall receive the instruction on 
the content of this subchapter during their orientation training and prior to 
beginning work that involves direct contact with any person served. 
Acknowledgment of this instruction shall be certified by the employee, 
contractor, or agent using the orientation to Chapter 404, Subchapter A form, 
which is referenced in sec.404.18 of this title (relating to Exhibits) as 
Exhibit I, and filed.
(2) Orientation shall include a thorough explanation of the definitions 
contained in these rules, including the categories or classes of abuse or 
neglect, the disciplinary consequences of abuse or neglect, and the procedures 
for reporting incidents of abuse or neglect.
(3) Within 60 days after the effective date of this subchapter, all current 
employees shall receive a copy of this subchapter and be briefed on its contents 
by the head of the facility or designee. Within six months following the 
effective date of this subchapter, all current employees shall receive refresher 
training on identifying and reporting abuse and neglect. Acknowledgment of this 
instruction shall be certified by the employee using the orientation to Chapter 
404, Subchapter A form, which is referenced in sec.404.18 of this title 
(relating to Exhibits) as Exhibit I and filed in the employee's record.
(b) Those employees in frequent contact with persons served shall receive 
additional instruction on the prevention and therapeutic management of 
aggressive, combative behavior or similar volatile situations as a unit of 
training within the employee's six-month probationary period of employment. 
Training shall comply with training standards promulgated by the department.
(c) All supervisory personnel shall have a continuing responsibility to keep 
employees currently informed on rules governing abuse or neglect and shall 
insure that each employee receives training on identifying and reporting abuse 
and neglect not less than once each calendar year. Such training shall be 
reported to the facility office for staff development.
(d) Instructional materials, audiovisual, and/or other training aids concerning 
this subchapter shall be approved by the deputy commissioner of Human Resources, 
Central Office, in concurrence with the Office of Legal Services and the Office 
of Consumer Services and Rights Protection.
(e) A record shall be kept by the facility office for staff development on each 
employee receiving orientation, annual training, or additional instruction in 
compliance with this section, including the date training was provided and the 
name of the individual conducting the training.
sec.404.17. Confidentiality of Investigative Process and Report.
(a) The reports, records, and working papers used by or developed in the 
investigative process and the resulting final report regarding abuse and neglect 
are confidential and may be disclosed only as provided under law. Information 
discussed during the deliberation of the Abuse and Neglect Committee (ANC) may 
not be discussed outside the purview of those deliberations with the exception 
of the concerns and recommendations which are to be addressed by the appropriate 
person(s) or as otherwise allowed in sec.404.7 of this title (relating to 
Responsibilities of the Head of the Facility or Designee: Immediate Actions 
Required) and in sec.404.8 of this title (relating to Abuse and Neglect 
Committee and Facility Investigator.)
(b) Some information may be released as follows:
(1) Parents/guardians shall be told that an abuse or neglect allegation has been 
made, with a description of the nature of the allegation and any action taken 
such as medical treatment provided or remedial measures.
(2) Upon request, copies of the investigative report shall be released to the 
person served, parent, or legal guardian in accordance with Attorney General 
Opinion OR 90-562, a copy of which is attached as Exhibit J.
(3) The complainant shall be notified of the findings, but neither the 
perpetrator's name nor the disciplinary action taken shall be released to the 
complainant. The name of the person served may be used in informing the 
complainant of the findings.
(4) The accused shall be informed of the investigative findings. If disciplinary 
action is taken and the employee files a grievance, the employee may listen to 
the tapes of the ANC hearing and read the investigative report, but may not 
obtain a copy of either the tape or the report.
sec.404.18. Exhibits.  Copies of the following exhibits are available from the 
Texas Department of Mental Health and Mental Retardation, P.O. Box 12668, 
Austin, Texas 78711.
(1) Exhibit-A Procedures and Techniques for Investigation of Abuse and Neglect;
(2) Exhibit B-"Report of Suspected Abuse/Neglect" Form;
(3) Exhibit C-Client Injury/Incident Report;
(4) Exhibit D-Procedures in Client Abuse Investigations and Thurston Rebuttal 
Proceedings;
(5) Exhibit E-Operating Instruction 408 2, governing investigative medical peer 
review;
(6) Exhibit F-Operating Instruction 408 1, governing professional nursing 
quality assurance;
(7) Exhibit G-Client Abuse/Neglect Report (AN-1-A);
(8) Exhibit H-final report of suspected child abuse and neglect in a child care 
facility;
(9) Exhibit I-Orientation to Chapter 404, Subchapter A certification form; and 
(10) Exhibit J Attorney General Opinion OR 90-562.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 4, 1991.
TRD-9112200
Ann Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Effective date: October 25, 1991
Proposal publication date: May 14, 1991
For further information, please call: (512) 465-4670
       
Subchapter G. Unusual Incidents at TDMHMR Facilities
25 TAC sec.sec.404.241-404.256
The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts the 
repeal of sec.sec.404.241-404.256, concerning unusual incidents at TDMHMR 
facilities, without changes to the proposed text as published in the May 14, 
1991, issue of the Texas Register.
Key provisions of the sections which deal with persons served by TXMHMR 
facilities are included in new sec.sec.404.241-404.249, concerning unusual 
incidents involving persons served by TXMHMR facilities, which are adopted 
contemporaneously in this issue of Texas Register.
No comments were received regarding adoption of the repeals.
The repeals are adopted under Texas Civil Statutes, Article 5547-202, which 
provide the Texas Board of Mental Health and Mental Retardation with rulemaking 
powers.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 4, 1991.
TRD-9112198
Ann Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Effective date: October 25, 1991
Proposal publication date: May 14, 1991
For further information, please call: (512) 465-4670
       
Subchapter G. Unusual Incidents Involving Persons Served by TXMHMR Facilities
25 TAC sec.sec.404.241-404.249
The Texas Department of Mental Health and Mental Retardation (TXMHMR) adopts new 
sec.sec.404.241-404.249, concerning unusual incidents involving persons served 
by TXMHMR facilities. Sections 404.242-404.248 are adopted with changes to the 
proposed text as published in the May 14, 1991, issue of the Texas Register. 
Sections 404.241-404.249 are adopted without changes and will not be 
republished. The new sections replace existing Chapter 404, Subchapter G, which 
is contemporaneously repealed in this issue of the Texas Register.
The title of the subchapter has been revised to reflect current department usage 
of TXMHMR as opposed to TDMHMR. References have been changed accordingly 
throughout the sections.
In sec.404.242, the application of the rule has been revised to clarify that the 
provisions of the subchapter pertain to community-based and outreach programs of 
TXMHMR facilities.
In sec.404.243, a definition of designee has been added. The definition of 
person served has been amended to include the application to community-based and 
outreach services. The definition of sexual assault has been revised to 
reference the definition of the term as contained in the Penal Code. The 
definition of sexual contact has been deleted because it falls within the 
definition of sexual exploitation. The definition of sexual exploitation has 
been expanded to include the threat of being used sexually. The definitions of 
serious and non-serious injuries have been modified to allow greater physician 
discretion. The definition of unusual incidents has been revised to bring the 
references to pregnancy and sexually transmitted disease into conformity with 
the department's abuse and neglect rule.
The process of reporting injuries and incidents involving persons served as 
outlined in sec.404.244 has been amended to outline the path the client 
injury/incident report form travels between its completion and its arrival at 
the office of the facility safety officer. It was clarified that the head of the 
facility or designee should be notified of any serious injury, sexual assault, 
sexual exploitation, pregnancy, or sexually transmitted disease involving a 
person served within one hour of its discovery/diagnosis. Clarifying information 
surrounding confidentiality was added to the subsection addressing notification 
of parents or interested parties. Language has been added clarifying that the 
head of the facility or designee is to report pregnancy, sexual abuse, sexual 
exploitation, and serious injuries resulting from aggression between persons 
served or alleged abuse or neglect to the Texas Department of Health.
Section 404.245 has been revised to place parameters on when criminal acts must 
be reported to the appropriate law enforcement agency.
The requirement that unauthorized departures be reported on the unauthorized 
departure report form was deleted from sec.404.246 because the form is not used 
systemwide and the departure is automatically reported through the CARE system. 
A timeline was placed on reporting the departure to the appropriate law 
enforcement agency, and it was clarified that the head of the facility (or 
designee) should make the report.
Throughout the sections, the department has amended references to "promptly" and 
"immediately" to read, as appropriate, "immediately, if possible, but in no case 
more than one hour later" or "immediately, if possible, but in no case more than 
24 hours later." In  sec.404.244, language regarding reporting procedures has 
been clarified. In sec.404.247 the list of exhibits was updated. The reference 
listing was updated and clarified in sec.404.248.
Written comments concerning the proposed new sections were received from 
Advocacy, Inc., and the Office of the RAJ Court Monitor.
A commenter stated that it is confusing for the subchapter to exist separate 
from the department's rule on abuse and neglect and to not cross-reference that 
rule. The department agrees that it is awkward to have two rules addressing the 
same events. However, the purpose of the abuse and neglect rule is to set out 
investigatory procedures for incidents that are allegedly abusive or neglectful. 
The purpose of this subchapter is to set out procedures for handling unusual 
circumstances in which injury to or death of a person served has occurred, 
including, but not limited to, situations of abuse or neglect. With the passage 
of House Bill 7 of the 72nd Texas Legislature, the department anticipates 
substantive and organizational changes to both documents with the possibility 
that they will be collapsed into one document. Language has been added in 
sec.404. 244 referencing the subchapter on abuse and neglect in TXMHMR 
facilities.
A commenter requested that specific times for reporting incidents be included in 
sec.404.244. The commenter further requested that notification of parents or 
other interested parties by phone should be followed with a written letter 
within 24 hours. The department responds that language regarding reporting 
timelines has been included as requested and that with the cross-referencing to 
the abuse and neglect rule, the importance of prompt notification is 
appropriately emphasized. Timelines related to the reporting of the death of a 
person served are handled in existing and proposed sections about death in 
TXMHMR facilities. However, the department believes it is unlikely that any 
additional information would be available within 24 hours of a phone report to 
warrant a follow-up letter, and that such information, if available, would be 
more appropriately conveyed by immediate phone notification, as well.
A commenter requested that the definitions of non-serious physical injury, 
serious physical injury, sexual assault, sexual contact, and sexual exploitation 
should at least cross-reference, if not incorporate, the delineation of the 
classes of abuse. The department responds that several of the definitions have 
been revised as previously discussed, and that language has been added to 
sec.404. 244 which references the abuse and neglect rule.
A commenter requested that the reporting and investigation of incidents 
involving any kind of harm to persons served should apply to facilities with 
which the department contracts and private facilities licensed by the 
department. The department responds that in regard to contractors, the reporting 
and investigation of injuries which are a result of abuse are covered by the 
abuse and neglect rule. Provisions for the reporting and investigation of deaths 
of persons served by contract providers is covered in the new death rule which 
the department plans to propose soon. With regard to the investigation of 
injuries which are not abuse related, the department will give further 
consideration to that issue in the next revision of this subchapter. The 
transfer of investigatory responsibilities to the new regulatory agency pursuant 
to House Bill 7 could impact this concern.
A commenter requested that a facility's designated abuse/neglect investigator 
routinely review all unusual incidents. The department responds that with the 
transfer of responsibilities to the new regulatory agency pursuant to House Bill 
7, the facility investigator function will be reviewed with due consideration 
given to commenter's recommendation.
The new sections are adopted under Texas Civil Statutes, Article 5547-202, which 
provide the Texas Board of Mental Health and Mental Retardation with rulemaking 
powers.
sec.404.242. Application.  This subchapter shall apply to all facilities of the 
Texas Department of Mental Health and Mental Retardation including their 
community services and outreach programs.
sec.404.243. Definitions.  The following words and terms, when used in this 
subchapter, shall have the following meanings, unless the context clearly 
indicates otherwise.
   Client Assignment and Registration System (CARE) -The on-line data entry 
system developed to provide demographic and other data about persons served by 
the department.
   Client injury reporting system (CIRS)-A subsystem of CARE developed to record 
injuries and incidents involving persons served by facilities.
   Commissioner-The commissioner of the department.
   Department-The Texas Department of Mental Health and Mental Retardation.
   Designee-A staff member immediately available who assume designated 
responsibilities of the head of the facility.
   Facility-Any state hospital, state school, state center, or other entity 
which is now or hereafter made a part of the department.
   Nonserious physical injury-Any injury determined not to be serious by the 
examining physician. For purposes of CIRS, a registered nurse may make this 
determination if the injured person is not seen by a physician except in those 
instances of suspected abuse or neglect which require a physician's examination. 
Examples of nonserious injury may include the following: superficial laceration, 
contusion, abrasion.
   Person served-A person receiving mental health or mental retardation 
services, in residence or through outpatient or community services programs, 
from a facility of the department.
   Serious physical injury-An injury determined to be serious by the examining 
physician. Examples of serious injury may include the following: fracture; 
dislocation of any joint; internal injury; any contusion larger than 2 1/2 
inches in diameter; concussion; second or third degree burn.
   Sexual assault -A criminal act as defined in the Texas Penal Code, 
sec.22.011.
   Sexual exploitation -Any act in which a less able individual is coerced, 
manipulated, or otherwise used sexually, or is threatened with the same by a 
more physically and intellectually advanced or more socially able individual.
   Sexually transmitted disease-Any infection of a person served, with or 
without symptoms or clinical manifestations, that is or may be transmitted from 
one person to another during or as a result of sexual contact between persons.
   Unauthorized departure which might have unusual consequences The unauthorized 
departure of a person served which causes a reasonably prudent staff member who 
has knowledge of the person's condition to believe that harm or injury to the 
person or to others may occur as a result of the unauthorized departure, e.g., 
the unauthorized departure of a person who the treatment staff believes to be a 
danger to self or to others, or the unauthorized departure of a person who 
requires maintenance medication such as insulin. Unusual incident includes:
(A) the death of a person served resulting from other than natural causes;
(B) an injury to a person served, from whatever cause;
(C) a criminal act by a person served or a criminal act by any individual 
against a person served;
(D) the unauthorized departure of a person served who is unable to ensure 
personal safety and/or is considered to be a danger to self or to others;
(F) any sexual assault involving persons served;
(F) sexual exploitation;
(G) pregnancy of a person served, regardless of the identity of the perpetrator, 
provided there is medical verification that conception could have occurred while 
the person was a resident of a TXMHMR facility; and
(H) the diagnosis of a sexually transmitted disease, provided that it could have 
occurred while the person was a resident of a TXMHMR facility.
sec.404.244. Reporting Injuries and Incidents Involving Persons Served.
(a) All deaths of persons served shall be reported in accordance with 
sec.405.264(f) of this title (relating to Actions Taken Upon Death of a Client 
on Facility Grounds).
(b) All serious and nonserious injuries, sexual assaults, sexual exploitation, 
pregnancy, or sexually transmitted diseases involving a person served shall be 
reported on the client injury/incident report form, which is referenced in 
sec.404.247 of this title (relating to Exhibits) as Exhibit A.
(1) The client injury/incident report form should follow the person served 
through the assessment and/or treatment process and be returned immediately to 
the unit/program personnel for any action following the assessment and/or 
treatment.
(2) The client injury/incident report form should be forwarded to the facility 
safety officer or designee within 48 hours of the assessment and/or treatment.
(3) The information on the client injury/incident report form shall be entered 
into the client injury reporting system (CIRS) as described in the CIRS User's 
Manual.
(4) The original of the client injury/incident report form may be maintained in 
either the ward chart or the master record of the person served or in the office 
of the facility safety officer.
(c) If the incident is suspected to be the result of abuse or neglect, it should 
be reported immediately, if possible, but in no case more than one hour later, 
following reporting procedures described in Chapter 404, Subchapter A, 
concerning abuse and neglect of persons served by TXMHMR Facilities.
(d) A verbal report of any serious injury, sexual assault, sexual exploitation, 
pregnancy, or sexually transmitted disease involving a person served will be 
made to the head of the facility or designee immediately, if possible, but in no 
case more than one hour later.
(e) The head of the facility or designee shall immediately, if possible, but in 
no case later than 24 hours after receiving the report of a serious injury, 
sexual assault, pregnancy, or sexually transmitted disease, notify the parent, 
legal guardian, managing conservator, or other interested person for whom 
release has been authorized, unless specifically prohibited by Chapter 403, 
Subchapter K of this title (relating to Client- Identifying Information), 
Chapter 405, Subchapter L of this title (relating to Client Rights Mental Health 
Services), or Chapter 405, Subchapter Y of this title (relating to Client Rights 
Mental Retardation Services).
(f) For ICF/MR programs, the head of the facility or designee will notify the 
Texas Department of Health (TDH) of any pregnancy, sexual abuse, or sexual 
exploitation involving a person served, or of any serious injuries resulting 
from aggression between persons served or alleged abuse or neglect, pursuant to 
the provisions of the memorandum of understanding between the department and the 
Texas Department of Health with an effective date of September 1, 1991, and any 
amendments thereto.
(g) In cases of sexually transmitted disease, the head of the facility shall 
immediately, if possible, but in no case more than 24 hours later, notify the 
facility director of infection control or designee.
(h) The facility safety officer will analyze trends in injuries to persons 
served, make recommendations for corrective measures, and evaluate the 
effectiveness of the corrective measures. The safety officer will report all 
patterns in injuries involving a particular person served to that person's 
qualified mental retardation professional or treatment team for corrective 
action.
sec.404.245. Reporting a Criminal Act.
(a) A criminal act by or against a person served, including sexual assault, 
shall be reported immediately, if possible, but in no case more than one hour 
later by telephone to the appropriate local law enforcement agency.
(b) The criminal act also shall be reported on the criminal occurrence report 
form, which is referenced in sec.404.247 of this title (relating to Exhibits) as 
Exhibit B. The original report shall be mailed to the appropriate deputy 
commissioner. One copy shall be mailed to the Office of Legal Services in 
Central Office, and another copy shall be retained in the central files of the 
facility.
sec.404.246. Reporting An Unauthorized Departure Which Might Have Unusual 
Consequences.  The head of the facility or designee shall immediatelyible, if 
possible, but in no case more than one hour later make a missing person report 
to the appropriate law enforcement agency upon discovering an unauthorized 
departure which might have unusual consequences for a person served who:
(1) is unable to ensure personal safety and/or is considered to be a danger to 
self or to others; and
(2) is receiving court-ordered inpatient or residential services or is 
voluntarily receiving mental retardation residential services.
sec.404.247. Exhibits.  The following forms are herein adopted by reference and 
are available from the Texas Department of Mental Health and Mental Retardation, 
P.O. Box 12668, Austin, Texas 78711:
(1) Exhibit A-client injury/incident report;
(2) Exhibit B-criminal occurrence report.
sec.404.248. References.  Reference is made to the following statutes, rules of 
the department, and other TXMHMR documents:
(1) Title 7, Chapter 551, sec.551.025, Health and Safety Code (formerly Texas 
Civil Statutes, Article 5561k;
(2) Texas Civil Statutes, Article 601b, sec.sec.8.01-8.08 and sec.8.10;
(3) Texas Penal Code, Chapter 22, sec.22.011;
(4) Chapter 404, Subchapter A of this title (relating to Abuse and Neglect of 
Persons Served by TDMHMR Facilities);
(5) Chapter 403, Subchapter K of this title (relating to Client-Identifying 
Information);
(6) Chapter 405, Subchapter L of this title (relating to Client Rights Mental 
Health Services);
(7) Chapter 405, Subchapter Y of this title (relating to Client Rights Mental 
Retardation Services);
(8) Chapter 405, Subchapter K of this title (relating to Client Deaths);
(9) CIRS User's Manual.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 4, 1991.
TRD-9112199
Ann Utley
Chairman
Texas Board of Mental Health and Mental Retardation
Effective date: October 25, 1991
Proposal publication date: May 14, 1991
For further information, please call: (512) 465-4670
       
TITLE 28. INSURANCE
Part I. Texas Department of Insurance
Chapter 19. Agents Licensing
Subchapter M. Licensing and Regulation of Managing General Agents
28 TAC sec.sec.19.1201-19.1206
The State Board of Insurance adopts new sec.sec.19.1201-19.1206, concerning 
licensing and regulation of managing general agents, with changes to the 
proposed text as published in the April 23, 1991, issue of the Texas Register  
(16 TexReg 2267).
Sections 19.1201-19.1206 concern licensing and regulation of managing general 
agents. The new sections are necessary to apply and promote consistent standards 
and the regulation of the activities of managing general agents in compliance 
with the mandates of the Managing General Agents' Licensing Act (the Insurance 
Code, Article 21.07-3). The new sections are also necessary to regulate 
effectively the provisions of contracts between managing general agents and 
insurers required to comply with Insurance Code, Article 21.07-3, sec.3A, and 
provide for adoption of forms to be used in regulating the activities of 
managing general agents. These regulations will provide for increased oversight 
of the activities of managing general agents and their relationship to insurers 
and will thus afford greater protection for the public and decrease the 
likelihood of insolvencies of insurers.
The new sections define the terms used in this subchapter, provide for adoption 
by reference of forms needed to effect regulation of MGAs, provide rules 
governing the provisions of contracts between MGAs and insurers, provide for 
regulation of the escrow accounts to be established by the MGAs, and provide 
that the errors and omissions policies used to satisfy financial responsibility 
requirements will show the Texas Department of Insurance as a certificate holder 
and provide notification to that agency of any cancellation or non-renewal 
notice. A specific section by section description of the new sections follows. 
New sec.19.1201 sets forth general provisions concerning these new sections and 
concerning regulation of managing general agents under these new sections. New 
sec.19.1202 defines the terms "Act", "affiliate", "board", "carrier", 
"commissioner", "company", "control", "insurer", "loss reserves", "MGA", 
"managing general agent", and "person." The definitions are generally consistent 
with definitions in the Managing General Agents' Licensing Act (the Act) and 
include a clarification of the definition of managing general agent (MGA) in the 
Act. This clarification is necessary to assure that it is clear that a non-
resident agent may not act as an MGA. The definition of "affiliate" is 
consistent with the definition in the Insurance Code, Article 21.49-1, and the 
definitions of "control" and "person" are also consistent with that article. The 
definition "loss reserves" is defined with reference to the Insurance Code, 
Article 21.39. New sec.19.1203 adopts and incorporates by reference certain 
forms to be utilized in fulfilling regulatory filing requirements. New 
sec.19.1204 sets forth mandatory provisions to be included in each contract 
between an MGA and an insurer. New sec.19.1205 sets forth requirements for 
utilization of escrow accounts for the placement of fiduciary monies and other 
monies. This section sets forth methods of accounting for these funds to the 
State Board of Insurance and to the insurer that the MGA represents. New 
sec.19.1206 provides that the Texas Department of Insurance shall be a 
certificate holder for any errors and omissions policy used to satisfy the 
Insurance Code, Article 21.07-3, sec.4c(a)(1) , and shall receive a copy of any 
cancellation or non-renewal notice. The following changes have been made in 
these sections as a result of comments. For clarification, definitions of 
"control" and "person" have been added to sec.19. 1202. In sec.19.1204(b)(4), 
language was added to indicate that the time period for the remission of funds 
to the insurer runs from the time the coverage is issued and not the time the 
coverage is effective. Section 19.1204(b)(13) has been changed to provide that 
the provisions related to profit sharing relate only to profit sharing between 
insurers and affiliated MGAs. Section 19.1204(b) (13)(A), (14), and (15)(A) and 
(B) have been changed to indicate that the references to premiums, loss 
reserves, and claims in those sections relate to the period on which profits are 
to be paid. Section 19.1204(b)(17) has been changed to indicate that the claims 
settlement authority must be stated in the maximum dollar amount of such 
authority per claim which cannot exceed 1.0% of the insurer's policyholder 
surplus or $30,000 dollars, whichever is greater. Section 19.1204(b)(19) has 
been changed to indicate that the examinations which insurers shall cause to be 
conducted of MGAs are to be conducted on a semi-annual basis for non-affiliated 
MGAs and on an annual basis for affiliated MGAs. Section 19.1204(c) has been 
changed to clarify the fact that those provisions are permissive and that the 
contracts may authorize MGAs to pay reinsurance premiums if the MGA is not an 
affiliate. Section 19.1204(d) has been added to indicate that a written contract 
that provides that the MGA may not place business with the insurer need not 
comply with the requirements of sec.19. 1204. The word "renewal" in sec
Commenting for the sections was the Office of Consumer Protection. Objecting to 
the sections as proposed were American International Group; Baskin & Novakof; 
Cravens, Dargan Company; Elton George and Company; Signal Aviation Underwriters; 
the Texas County Mutual Association; Texas Surplus Lines Association; and 
Thompson, Coe, Cousins, and Irons.
In general, the Office of Consumer Protection commented in support of the rules, 
but preferred a $20,000 claims settlement limit in sec.19.1204(b)(17), that the 
profit-sharing provisions apply to all MGAs in sec.19.1204(b)(13), (14) and 
(15), and that semi-annual examinations be made of all MGAs in sec.19.1204(b) 
(19). That office also suggested several clarifying wording changes to various 
sections of the rules. The Texas County Mutual Association and the Texas Surplus 
Lines Association testified against some of the sections; however, both 
organizations expressed approval for the rules in general and suggested 
clarifying wording for some of the sections. The Texas Surplus Lines 
Association, American International Group, Elton George and Company, Signal 
Aviation Underwriters and Texas County Mutual Association commented against the 
profit-sharing requirements in sec.19.1204(b)(13), (14) and (15), recommending 
that there be no specific requirements, or if there are such requirements, that 
they be limited to affiliates; commented against the claims settlement authority 
limits in  sec.19.1204(b)(17) and commented against semi-annual examinations for 
non-affiliates in sec.19.1204(b)(19). Cravens, Dargan Company commented against 
the sections relating to claims settlement authority in sec.19.1204(b)(17) and 
profit-sharing requirements in sec.19.1204(b)(13), (14), and (15). Thompson, 
Coe, Cousins, and Irons suggested the addition of sec.19.1204(d) without 
indicating a position for or against the other sections, and Baskin & Novakof 
requested different wording for sec.19.1205(b), but did not express disagreement 
with that section nor indicate any position on the other sections. An individual 
representing agents supplying insurance on financial institutions testified 
against the profit-sharing requirements of sec.19.1204(b)(13), (14), and (15). 
Concerning sec.19.1202, comments were made about the distinctions between 
affiliates and non-affiliates and one comment was made suggesting that the term 
"affiliate" should be changed to "solely owned" with respect to examinations. 
The board responds to the comments concerning affiliates by adding two new 
definitions in sec.19.1202 to the proposed rules covering the terms "control" 
and "person" both of which are part of the definition of "affiliate". The board 
believes that the definition of "affiliate" should remain as defined, but 
definitions for "control" and "person" should be added to be consistent with 
other statutes dealing with affiliates and making the definition of "affiliate" 
clearer, rather than changing the word "affiliate" in this section to "solely-
owned" as was suggested. Concerning sec.19.1204 (a), comments were received 
concerning the provisions of the sections relating to pre-existing contracts. 
Some commenters believed that the legislative language did not authorize the 
rules to apply to all existing contracts whereas other commenters initially 
indicated that all pre-existing contracts should be covered, but subsequently 
supported the proposed rules as written in this area. In response to comments 
concerning the rules' application to existing contracts, the board believes that 
the proposed provisions in sec.19.1204(a)(1)-(2) are consistent with the 
legislative intent and language and those provisions therefore are not being 
changed. Concerning sec.19.1204(b)(4), a comment was received that remitting of 
funds should be timed from the date of issuance rather than the effective date. 
Commenters indicated that some insurance was sold to be effective on a certain 
date but was not paid for until a later date. The board concurs with the 
suggestion that timing of the remitting of funds should run from the date of 
issuance and sec.19.1204(b)(4) has been changed accordingly. Concerning 
sec.19.1204(b)(13), (14), and (15), comments were received for and against the 
sections dealing with the profit-sharing provisions. The commenters in favor of 
the restrictions on profit-sharing asked th
The new sections are adopted under the Insurance Code, Article 21.07-3, 
sec.sec.3A, 3C, 4A, 11, 11A, and 21; Article 1.14-2, sec.15A; and Article 21.70; 
and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. The Insurance Code, 
Article 21.07-3, sec.3A, provides that the State Board of Insurance may 
promulgate rules providing requirements for contracts between managing general 
agents and insurers; sec.3C provides requirements for records, escrow accounts, 
account reports, offsets, and the fiduciary nature of funds held by an MGA for 
an insurer; sec.4A provides requirements for persons other than an MGA to share 
in an MGA's profits; sec.11 contains requirements for notice of the appointment 
of an MGA by an insurer; sec.11A provides for notification of withdrawal of 
authority and balances due from an agent; and sec.21 provides that the State 
Board of Insurance may establish and amend reasonable rules and regulations for 
administration of the Managing General Agents' Licensing Act. The Insurance 
Code, Article 1.14-2, sec.15A provides for notice and reporting to the board by 
surplus lines agents and Article 21.70 provides for notice of revocation of 
authority of agents and overdue balances from agents by property and casualty 
insurers. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5, require and 
authorize each state administrative agency to adopt rules of practice setting 
forth the nature and requirements of available procedures, and prescribe the 
procedure for adoption of rules by state administrative agencies.
sec.19.1201. General Provisions.
(a) Statutory basis and purpose. This subchapter implements the Managing General 
Agents' Licensing Act (the Insurance Code, Article 21.07-3). The Managing 
General Agents' Licensing Act (Act) was first enacted in 1967 as Chapter 757 at 
page 2048 of the Acts of the Sixtieth Legislature and first became effective on 
August 28, 1967.
(b) Severability. Where any terms or sections of this subchapter are determined 
by a court of competent jurisdiction to be inconsistent with the Managing 
General Agents' Licensing Act, as identified by this subchapter, the Act will 
apply and the remaining terms and provisions of this subchapter shall continue 
in effect.
(c) Effect of rules. The sections set out in this subchapter are prescribed to 
govern the performance of appropriate statutory and regulatory functions and are 
not to be construed as limitations upon the exercise of statutory authority by 
the State Board of Insurance (board) or the Commissioner of Insurance 
(commissioner).
(d) Violation. A violation of any lawful rule, regulation, or order of the 
Commissioner or Board made pursuant to this subchapter constitutes a violation 
of the Managing General Agents' Licensing Act.
sec.19.1202. Definitions concerning licensing and Regulation of Managing General
Agents. The following words and terms, when used in this subchapter, shall have 
the following meanings, unless the context clearly indicates otherwise.
   Act-The Managing General Agents' Licensing Act (the Insurance Code, Article 
21.07-3).
   Affiliate-An affiliate of, or person affiliated with, a specific person, is a 
person that directly, or indirectly through one or more intermediaries, 
controls, or is controlled by, or is under common control with, the person 
specified.
   Board-The State Board of Insurance.
   Carrier-A company, as defined in this section.
   Commissioner-The Commissioner of Insurance.
   Company-Any insurance company, corporation, inter-insurance exchange, mutual, 
reciprocal, association, county mutual insurance company, Lloyds, or other 
insurance carrier licensed to transact business in the State of Texas, 
excepting, however, those which write only life, health, and accident insurance 
and variable life insurance and variable annuity contracts.
   Control-The possession, direct or indirect, of the power to direct or cause 
the direction of the management and policies of a person, whether through the 
ownership of voting securities, by contract other than a commercial contract for 
goods or non-management services, or otherwise, unless the power is the result 
of an official position with or corporate office held by the person. The term 
"control" shall include the terms "controlling", "controlled by", and "under 
common control with". Control shall be presumed to exist if any person, directly 
or indirectly, or with members of the person's immediate family, owns, controls, 
or holds with the power to vote, or if any person other than a corporate officer 
or director of a person holds proxies representing, 10 percent or more of the 
voting securities or authority of any other person, or if any person by contract 
or agreement is designated as an attorney-in-fact for a Lloyd's Plan insurer 
under Insurance Code, Article 18.02 or for a reciprocal or interinsurance 
exchange under Insurance Code, Articles 19. 02 and 19.10. This presumption may 
be rebutted by a showing that control does not exist in fact. The commissioner 
may determine, after furnishing all persons in interest notice and opportunity 
to be heard and making specific findings of fact to support such determination, 
that control exists in fact, notwithstanding the absence of presumption to that 
effect, where a person exercises directly or indirectly either alone or pursuant 
to an agreement with one or more other persons such a controlling influence over 
the management or policies of an authorized insurer or an MGA as to make it 
necessary or appropriate in the public interest or for the protection of the 
policyholders of the insurer that the person be deemed to control the insurer or 
MGA.
   Insurer-A company, as defined in this section.
   Loss reserves-Has the meaning given to that phrase in the Insurance Code, 
Article 21.39.
   MGA-A managing general agent, as defined in this section.
   Managing general agent-Any person, firm, or corporation who has supervisory 
responsibility for the local agency and field operations of an insurance company 
or carrier within this state, or any part thereof, or who is authorized by a 
company or carrier to accept or process in its behalf insurance policies 
produced and sold by other agents. The term does not include an agent licensed 
under the Insurance Code, Article 1.14-2, 21.11, or 21.14, unless that agent 
accepts 50% or more of that agent's total annual business or does more than 
$500,000 of total annual business, whichever amount is less, as measured by 
premium volume from insurance policies produced and sold by other agents. An 
agent licensed under the Insurance Code, Article 21.11, who does business in 
conformance with the Insurance Code, Article 21.11, is not considered to derive 
any income from policies produced by other agents, as that term is used in the 
Managing General Agents' Licensing Act, sec.2(a); however, the agent is 
considered to derive its income from policies sold by such other agents. A 
managing general agent may perform any of the following acts for a company or 
carrier: receive and pass upon daily reports and monthly accounts; receive and 
be responsible for agency balances; handle the adjustment or direct local 
recording agents, state agents, or special agents within this state, or any part 
thereof. Person-An individual, a corporation, a partnership, an association, a 
joint stock company, a trust, an incorporated organization, any similar entity 
or any combination of the foregoing acting in concert, but not any securities 
broker performing no more than the usual and customary broker's function.
sec.19.1203. Adoption by Reference of Forms Relating to Licensing and Regulation 
of Managing General Agents.  The State Board of Insurance adopts and 
incorporates herein by reference forms for use in administrative licensing and 
regulation of managing general agents. These forms are published by the State 
Board of Insurance and may be obtained from the Agents' Licensing Division, Mail 
Code 014-3, State Board of Insurance, 333 Guadalupe Street, Austin, Texas 78701-
1998. The forms adopted by reference are specifically identified in paragraphs 
(1)-(3) of this section as follows:
(1) Appointment Application for Licensing of Managing General Agents;
(2) Notice to State Board of Insurance by Managing General Agents or Surplus 
Lines Agents; and
(3) Notice to State Board of Insurance by Insurance Companies Licensed under 
Authority of the Insurance Code, Chapters 5, 6, 7, 8, 15, 16, 17, 18, or 19.
sec.19.1204. Contract Provisions.
(a) This subsection imposes the requirements set out in paragraph (1) and 
paragraph (2) of this subsection upon contracts between an MGA and insurers in 
effect prior to the effective date of this subchapter.
(1) Oral contract. Every oral contract between an MGA and an insurer in effect 
prior to the effective date of this subchapter must be reduced to writing and 
must comply with the Act and with the provisions of this subchapter within 90 
days following the effective date of this subchapter, regardless of the intended 
renewal date of the contract.
(2) Written contract. For any written contract between an MGA and an insurer 
entered into prior to September 1, 1989, the following actions must be taken.
(A) If the written contract does not address any area which the Act or this 
subchapter requires the contract to address, the MGA and the insurer must enter 
into a separate written contract or adopt amendments to the existing contract 
which address such area and which are in compliance with the Act and this 
subchapter. The written contract must be entered into or amendments adopted 
within 90 days from the effective date of this subchapter.
(B) If the written contract addresses an area which is covered by the Act and 
this subchapter, and if the contract does not comply with the Act or this 
subchapter, the written contract must be filed by the MGA with the Agents' 
Licensing Division of the State Board of Insurance, for information.
(C) If any written contract entered into prior to September 1, 1989, is amended 
or changed subsequent to the effective date of the Act, any amendment or change 
must be in writing and must comply with the Act and this subchapter.
(b) The provisions required by paragraphs (1)-(24) of this subsection are 
mandatory and must be included in each contract between a managing general agent 
and an insurer. These provisions are mandated not in order to limit the 
negotiation process between an MGA and an insurer, but in order to assure that 
minimum standards are utilized in each contract. Each MGA contract may contain 
provisions in addition to those listed in this section.
(1) The contract must state that all amendments and changes to the contract must 
be in writing and specify the effective date.
(2) The contract shall specify the party that is responsible for carrying out 
each particular function. If both parties share responsibility for a particular 
function, the contract shall specify the extent of each party's responsibility.
(3) The contract shall include a provision for termination of the contract; may 
define events of default; may specify cures for events of default; and may 
define the rights and obligations of parties during a period of default. The 
contract must state that the insurer may suspend the authority of the MGA during 
the pendency of any dispute regarding any event of default.
(4) The contract must specify the frequency with which the MGA must remit funds 
due to the insurer. In no event may the period of time for the MGA to remit 
funds to the insurer exceed 90 days from the end of the month in which the 
coverage is issued.
(5) The contract must state that, on not less than a monthly basis, the MGA 
shall submit an account report to the insurer. The report shall detail all 
transactions as set out in the Insurance Code, Article 21.07-3, sec.3C(a), and 
shall include both insurance and reinsurance transactions. The MGA may satisfy 
this requirement by confirming the insurer's rendering of such account. The 
account must be received by or confirmed to the insurer not later than 60 days 
from the close of the month for which business is reported. The insurer must 
maintain the account on file for at least three years and must make the account 
available to the commissioner for review.
(6) The contract must specify whether or not the MGA may appoint or terminate 
the appointment of agents.
(7) The contract must state that an MGA may not bind reinsurance or 
retrocessions on behalf of the insurer, may not commit the insurer to 
participation in insurance or reinsurance syndicates, and may not collect a 
payment from a reinsurer or commit the insurer to a claim settlement with a 
reinsurer without the prior written approval of the insurer. The contract must 
state that, if prior approval is given, the MGA must promptly forward a report 
to the insurer.
(8) The contract must state that the MGA may not assign the contract directly or 
indirectly in whole or in part without prior written approval of the insurer.
(9) Where electronic claims files are in existence, the contract must address 
the timely transmission of the data.
(10) The contract must include, if such authority is granted, appropriate 
authority and limitations under which the MGA is to operate, including the 
maximum annual premium volume, the basis of the rates to be charged, the lines 
of insurance which may be written, maximum limits of liability, applicable 
exclusions, territorial limitations, policy cancellation provisions, the maximum 
policy period, and control of policy issuance. In accordance with the authority 
and limitations, appropriate underwriting guidelines will be developed by the 
insurer and MGA and incorporated into the contract by reference.
(11) The contract shall prohibit the MGA from ceding reinsurance on behalf of 
the insurer to a company that would not qualify for reinsurance credit under the 
Insurance Code, Article 3.10 or Article 5.75-1, and the rules of the State Board 
of Insurance promulgated thereunder. The contract must specify the conditions 
under which the MGA may place reinsurance and the contract must comply with all 
provisions of the Insurance Code, including Article 21.07-3, sec.3B, and the 
rules of the State Board of Insurance adopted thereunder.
(12) The contract must provide that the MGA shall not be required to return, as 
commission or return commission, monies greater than the total commission paid 
or otherwise payable to the MGA.
(13) The contract must provide that, if a provision or separate written contract 
allows for payment of profit sharing between an insurer and an affiliated MGA 
before all reported claims are closed, including payment of all losses and loss 
adjustment expenses, then no payment shall be made before:
(A) one year from the expiration, anniversary, or closing date on which premiums 
for the period on which profits are to be paid are based for property, inland 
marine, or auto physical damage; or
(B) three years from such date for automobile liability; or
(C) five years from such date for liability other than automobile; or
(D) two years from such date for any other non-liability lines.
(14) The contract must provide that, if the MGA has claim settlement authority 
including the setting of loss reserves, the insurer must review and verify every 
open reserve for the period on which profits are to be paid prior to calculation 
and payment of such profit sharing under paragraph (13) of this section.
(15) The contract must provide that, if the MGA has claim settlement authority 
including the setting of loss reserves, the insurer may elect to:
(A) make no payment of the profit sharing under paragraph (13) of this 
subsection until all reported claims for the period on which profits are to paid 
are closed; or
(B) pay a portion of the profit sharing on the dates shown in paragraph (13) of 
this subsection and the remaining portion(s) on future anniversaries of such 
dates until all reported claims for the period on which profits are to be paid 
are closed.
(16) The contract must specify that the records to be maintained separately for 
each insurer as specified in the Insurance Code, Article 21.07-3, sec.3C(b), 
include underwriting files and that the separate records of business for each 
insurer must be maintained for at least five years or until the completion of a 
financial examination by the insurance department of the state in which the 
insurer is domiciled, whichever is longer.
(17) The contract must state whether or not the MGA has claims settlement 
authority and, if so, must state the maximum dollar amount, of such authority, 
per claim, which in no event shall exceed 1.0% of the insurer's policyholder 
surplus as of December 31 of the last completed calendar year, or $30,000, 
whichever is greater.
(18) If a contract permits the managing general agent to settle claims on behalf 
of the insurer, the contract shall state that the managing general agent must 
send a copy of a form reporting to the insurer, within 30 days of determination, 
that:
(A) the claim involves a coverage dispute;
(B) the claim involves a demand in excess of policy limits; or includes 
allegations of bad faith, violations of the Deceptive Trade Practices Act, or 
violations of the Insurance Code, Article 21.21.
(19) The contract must specify the frequency with which the insurer shall cause 
to be conducted examinations of MGAs with which it is doing business in 
accordance with the following schedule.
(A) If the contract is with an MGA that is not an affiliate of the insurer, the 
contract must specify that the insurer shall cause to be conducted a semi-annual 
examination of such non-affiliated MGA if such non-affiliated MGA has done 
business with the insurer during the previous six months.
(B) If the contract is with an MGA that is an affiliate of the insurer, the 
contract must specify that the insurer shall cause to be conducted an annual 
examination of such affiliated MGA with which the insurer had done business 
during the previous year.
(C) If the insurer's aggregate premium volume increases by 30% in any 30-day 
period, the insurer shall cause to be conducted an examination within 90 days of 
any Texas MGA that writes more than 20% of the insurer's volume and that has 
experienced an increase of 20% in premium volume during the same 30 day period.
(20) The contract must specify that the examinations required in paragraph (19) 
of this subsection must adequately provide the commissioner with the information 
required under subparagraphs (A)-(E) of this paragraph; must be made available 
to the commissioner for review; must remain on file with the insurer for at 
least three years; and must, at a minimum, contain the following information 
required by subparagraphs (A)-(E) of this paragraph:
(A) claims procedures;
(B) timeliness of claims payments; i.e., lag time between date claim is reported 
and date claim is paid;
(C) timeliness of premium reporting and collection;
(D) compliance with underwriting guidelines as developed in accordance with 
paragraph (10) of this subsection; and
(E) reconciliation of policy inventory.
(21) The contract must state that the MGA must notify the insurer in writing 
within 30 days if there is a change in:
(A) ownership of 10% or more of the outstanding stock of the MGA;
(B) any principal officer of the MGA; or
(C) any director of the MGA.
(22) The contract shall not allow an MGA to offset balances due under any 
contract with any offset due under any other contract.
(23) The contract must state that the MGA holds all funds of the insurer in a 
fiduciary capacity.
(24) The contract must state that the insurer retains final authority over 
disputes concerning claims settlement and setting of loss reserves.
(c) The provisions of paragraph (1) and paragraph (2) of this subsection are 
permissive and may be included in a contract between a managing general agent 
and an insurer. These two permissive contract terms are included in order to 
clarify that these terms are acceptable as written in this subsection. This 
subsection is not intended to preclude the inclusion of other provisions in the 
contract in addition to those listed in this subsection .
(1) The contract may authorize the MGA to accept premiums net of commissions due 
to agents and to retain from the premiums, as received, commissions due the MGA 
as specified in the contract.
(2) The contract may authorize an MGA to pay reinsurance premiums if the MGA is 
not an affiliate, as defined in this subchapter, of the insurer or of the 
reinsurer.
(d) A written contract between an MGA and an insurer which provides that the MGA 
may not place business with the insurer need not comply with the requirements of 
this section.
sec.19.1205. Escrow Accounts.
(a) Separate and identifiable escrow accounts are allowed if such accounts meet 
all requirements of the Insurance Code, Article 21.07-3, and this subchapter.
(b) The managing general agent shall maintain all escrow accounts in a bank that 
is a member of the Federal Reserve System and whose accounts are insured by the 
Federal Deposit Insurance Corporation. Such accounts may consist of any one or 
all of the following vehicles listed in paragraphs (1)-(7) of this subsection:
(1) checking accounts;
(2) pass book savings accounts;
(3) money market accounts;
(4) certificates of deposit;
(5) United States Treasury bills, notes, or bonds;
(6) real estate repurchase agreements for which the underlying collateral is 
United States government securities;
(7) non-assessable money market mutual funds which are primarily invested in 
United States government securities.
(c) Other than as specified in subsection (b) of this section, the MGA may not 
place fiduciary monies from or in any escrow account into accounts or 
investments:
(1) that consist of common or preferred stock or so-called junk bonds, to 
include at a minimum, but not be limited to, all those securities rated category 
number 3 and below by the Securities Valuation Office of the National 
Association of Insurance Commissioners; or
(2) that are primarily invested in common or preferred stock or so-called junk 
bonds as described in paragraph (1) of this subsection.
(d) All monies received by an MGA on behalf of an insurer, including without 
limitation, all premiums, policy fees, salvage and subrogation recoveries and 
reinsurance recoveries, shall be deposited in the escrow account required by the 
Insurance Code, Article 21.07-3, sec.3C(c).
(e) All withdrawals from the escrow account required by the Insurance Code, 
Article 21.07-3, sec.3C(c), must be evidenced by detailed accounting which 
clearly reflects each withdrawal. Funds may be withdrawn from the escrow account 
only for the following purposes listed in paragraphs (1)-(8) of this subsection:
(1) accounts due to insurers;
(2) commissions to agents and managing general agents and expenses, such as fees 
for inspections, premium audits, and motor vehicle reports, specified within the 
terms of the MGA contract;
(3) return premiums;
(4) loss and loss adjustment expenses;
(5) money deposited in error;
(6) withdrawals of any interest belonging to the MGA;
(7) withdrawals from escrow accounts for the purposes of making investments 
authorized under this subchapter;
(8) payment of reinsurance premiums authorized by  sec.19.1204 of this title 
(relating to Contract Provisions); provided, however, that the MGA must report 
the payment of such premiums to the insurer on a monthly basis.
(f) Ownership of the interest on the escrow account required by the Insurance 
Code, Article 21.07-3, sec.3C(c), belongs to the MGA unless otherwise specified 
in the contract.
sec.19.1206. Errors and Omissions Policies. For any errors and omissions policy 
used to satisfy the financial responsibility requirement under the Insurance 
Code, Article 21.07-3, sec.4C(a)(1), the State Board of Insurance shall be a 
certificate holder and shall receive a copy of any cancellation or non-renewal 
notice.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112176
Angelia Johnson
Assistant Chief Clerk
Texas Department of Insurance
Effective date: October 24, 1991
Proposal publication date: April 23, 1991
For further information, please call: (512) 463-6327
       
TITLE 34. PUBLIC FINANCE
Part V. Texas County and District Retirement System
Chapter 103. Calculations of Types of Benefits
34 TAC sec.103.1
The Texas County and District Retirement System adopts an amendment to 
sec.103.1, without changes to the proposed text as published in the August 27, 
1991, issue of the Texas Register (16 TexReg 4677).
The amendment is adopted to adjust the tables upon which disability retirement 
benefits are calculated to more closely reflect the anticipated future mortality 
experience of future disability retirees.
Disability retirement benefits on disability retirements on which the first 
benefit is payable on or after January 1, 1992, will be calculated with a 30% 
reserve refund assumption for the standard benefit, and on the basis of the UP-
1984 table with age setbacks as set forth in the section.
No comments were received regarding adoption of the amendment.
The amendment is adopted under the Texas Government Code, sec.845.102, which 
provides the board of trustees of the Texas County and District Retirement 
System with the authority to adopt rules necessary or desirable for effective 
administration of the system.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 1, 1991.
TRD-9112118
J. Robert Brown
Director
Texas County and District Retirement System
Effective date: October 1, 1991
Proposal publication date: August 27, 1991
For further information, please call: (512) 476-6651
       
TITLE 37. PUBLIC SAFETY AND CORRECTIONS
Part XIII. Fire Department Emergency Board
Chapter 401. General Provisions
Subchapter A. Organization of the Board
37 TAC sec.sec.401.3, 401.5, 401.15, 401.23
The Fire Department Emergency Board adopts amendments to  sec.sec.401.3, 401.5, 
401.15, and 401.23, without changes to the proposed text as published in the 
April 5, 1991, issue of the Texas Register (16 TexReg 1962).
Because the board is a newly created state agency, the general provisions have 
been adopted to establish the organization of the board, meeting procedures, 
personnel policies, and the board seal.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the amendments.
The amendments are adopted under the Texas Government Code, sec.sec.417.02, 
which provide the Fire Department Emergency Board with the authority to adopt a 
seal and rules for the administration of the Texas Government Code 
sec.sec.417.021-417. 040.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112143
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Subchapter B. Powers and Duties of the Board
37 TAC sec.401.47, sec.401.59
The Fire Department Emergency Board adopts amendments to  sec.401.47 and 
sec.401.59, without changes to the proposed text as published in the April 5, 
1991, issue of the Texas Register (16 TexReg 1963).
Because the board is a newly created state agency it is necessary to implement 
the board's statutory mandate by adopting rules relating to the board's power 
and duties, including the establishment of board committees, agency 
investigatory authority, and financial matters.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the amendments.
The amendments are adopted under the Texas Government Code, sec.417.029, which 
provides the Fire Department Emergency Board with the authority to adopt rules 
for the administration on the Texas Government Code, sec.sec.417.021-417.040, 
and administer oaths and take testimony on matters within the board's 
jurisdiction.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-91122142
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Chapter 405. Applications Provisions
Subchapter A. General Applications Provisions
37 TAC sec.405.1, sec.405.5
The Fire Department Emergency Board adopts amendments to  sec.405.1 and 
sec.405.5, without changes to the proposed text as published in the April 5, 
1991, issue of the Texas Register (16 TexReg 1963).
Because the board is a newly created state agency designed to fund fire fighters 
equipment and training to eligible organization, it was necessary to adopt 
funding application procedures regarding receipt of forms, review of conditions 
and effect action on applications for loans, grants, or scholarships.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the amendments.
The amendments are adopted under the Texas Government Code, sec.417.29 and 
sec.417.035, which provides the Fire Department Emergency Board with the 
authority to adopt rules for administration on the Texas Government Code, 
sec.sec.417.021-417.040, and to prescribe the form and procedures for 
applications for loans, grants, and scholarships.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112141
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Subchapter B. Applications Requirements
37 TAC sec.405.33
The Fire Department Emergency Board adopts an amendment to sec.405.33, without 
changes to the proposed text as published in the April 5, 1991, issue of the 
Texas Register  (16 TexReg 1963).
Because the board is a newly created state agency established to provide funding 
for training and equipment for eligible firefighting organizations, it was 
necessary to adopt rules relative to application requirements, disclosure of 
financial records, criteria for issuance of financial assistance and the burden 
of proof to establish compliance with applicable criteria.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the amendment.
The amendment is adopted under the Texas Government Code, sec.sec.417.029, 417. 
032, 417.034, 417.036, which provides the Fire Department Emergency Board with 
the authority to establish rules for the administration on the Texas Government 
Code,  sec.sec.417.021-417.040, establish guidelines for determining eligibility 
for financial assistance for equipment, facilities, education, and training.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112140
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Subchapter C. Application Procedures
37 TAC sec.sec.405.55, 405.57, 405.63
The Fire Department Emergency Board adopts amendments to  sec.sec.405.55, 405, 
57, and 405.63, without changes to the proposed text as published in the April 
5, 1991, issue of the Texas Register (16 TexReg 1963).
Because the board is a newly created state agency established to provide funding 
for training and equipment for eligible firefighting organizations, it was 
necessary to adopt rules relative to application procedures for receiving 
financial assistance from the board, including format for submission and 
detailing the particular information to be included in the application.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the amendments.
The amendments are adopted under the Texas Government Code, sec.sec.417.029, 
417. 032, 417.034, 417.035, and 417.036, which provides the Fire Department 
Emergency Board with the authority to establish rules for the administration on 
the Texas Government Code, sec.sec.417.021-417.040, establish guidelines for 
determining eligibility for financial assistance for equipment, facilities, 
education, and training, and prescribe the form and procedures for submitting 
and processing applications.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112139
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Chapter 407. Funding Standards for Equipment, Facilities, Education, and 
Training
Subchapter A. Equipment
37 TAC sec.407.1
The Fire Department Emergency Board adopts new sec.407.1, without changes to the 
proposed text as published in the April 5, 1991, issue of the Texas Register  
(16 TexReg 1964).
Because the board is a newly created state agency established to provide funding 
for training and equipment for eligible firefighting organizations, it was 
necessary to adopt rules in order to take action on application for board 
funding which would protect the health, safety, and welfare of Texas citizens by 
providing funding for firefighting equipment, facilities, and/or training.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the new section.
The new section is adopted under the Texas Government Code, sec.417.032(c) and 
sec.417.034(c), which provides the Fire Department Emergency Board with the 
authority to establish rules for the administration on the Texas Government 
Code, sec. sec.417.021-417.040, establish guidelines for determining eligibility 
for financial assistance for equipment, facilities, education, and training, and 
prescribe the form and procedures for submitting and processing applications.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112136
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Subchapter B. Facilities
37 TAC sec.407.31
The Fire Department Emergency Board adopts new sec.407.31, without changes to 
the proposed text as published in the April 5, 1991, issue of the Texas Register  
(16 TexReg 1964).
Because the board is a newly created state agency established to provide funding 
for training and equipment for eligible firefighting organizations, it was 
necessary to adopt rules in order to take action on application for board 
funding which would protect the health, safety, and welfare of Texas citizens by 
providing funding for firefighting equipment, facilities, and/or training.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the new section.
The new section is adopted under the Texas Government Code, sec.417.032(c) and 
sec.417.034(c), which provides the Fire Department Emergency Board with the 
authority to establish rules for the administration on the Texas Government 
Code, sec. sec.417.021-417.040, establish guidelines for determining eligibility 
for financial assistance for equipment, facilities, education, and training, and 
prescribe the form and procedures for submitting and processing applications.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112137
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202
       
Subchapter C. Education and Training
37 TAC sec.407.61
The Fire Department Emergency Board adopts new sec.407.61, without changes to 
the proposed text as published in the April 5, 1991, issue of the Texas Register  
(16 TexReg 1965).
Because the board is a newly created state agency established to provide funding 
for training and equipment for eligible firefighting organizations, it was 
necessary to adopt rules in order to take action on application for board 
funding which would protect the health, safety, and welfare of Texas citizens by 
providing funding for firefighting equipment, facilities, and/or training.
Long term effects on the program will provide better fire protection for all of 
Texas. Adequately trained and equipped firefighters and more local fire 
protection will result in fewer injuries, deaths, and less property damage due 
to fire and should ultimately be reflected in lower fire insurance premiums.
No comments were received regarding adoption of the new section.
The new section is adopted under the Texas Government Code, sec.417.032(c) and 
sec.417.034(c), which provides the Fire Department Emergency Board with the 
authority to establish rules for the administration on the Texas Government 
Code, sec. sec.417.021-417.040, establish guidelines for determining eligibility 
for financial assistance for equipment, facilities, education, and training, and 
prescribe the form and procedures for submitting and processing applications.
This agency hereby certifies that the rule as adopted has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on October 3, 1991.
TRD-9112138
A. Joseph Anthony
Executive Director
Fire Department Emergency Board
Effective date: October 24, 1991
Proposal publication date: April 5, 1991
For further information, please call: (512) 452-0202