[We are reblogging this post from our Hermit Haus Redevelopment blog, since it may be of interest to people who would like help with problem properties.]

I have it on good authority that people of Texas, both investors and “normal people,” scored a victory yesterday with the defeat of SB 1994, although the Senate’s bill history page has not been updated to reflect that data. SB 1994 has gone down to defeat, and we can continue to help people who need our help.

The bill has been defeated for now, but it could still come back to life!

Background

SB 1994, introduced in the Texas Senate earlier this year, would have effectively made doing wrap-around mortgages illegal in Texas. Senators Zaffirini, Rodríguez, and Kirk Watson had good intentions in drafting the bill. But we all know where the road paved with good intentions ends up.

The bill was an overreaction to fraudulent practices by swindlers, especially in the El Paso region. These criminals were selling “owner financed” properties to unsuspecting buyers. They collected payments from the buyers but never paid the underlying (wrapped) mortgages. This evil practice resulted in families who were current on their obligations being foreclosed on.

SB 1994 was written to protect these innocent buyers, but it was written sloppily. Even though it really would have indeed increased the penalties on these crooks, it would have also eliminated their “legal competition, by making it functionally illegal for the large number of honest investors, that use these transactions legitimately, to help distressed sellers and less-than-perfect buyers alike with wrap-around mortgages,” according to investor coach Phil Grove.

Taking Action

A group of investors from around the state organized to show that there were better ways to protect buyers than by criminalizing an effective technique. Grove and his wife Shenoah committed $40,000 of their own money to hire lobbyist Janis Carter. Carter and more than 100 investors from around the state who showed at a Committee meeting were able to convince the Investments & Financial Services Committee that the bill was one-sided and needed more work before becoming law. The Committee delayed the vote to pass to the full Senate.

Last night, Grove wrote to the investor community, “As it turns out, the delay of the passage of the bill was fatal. With time running out on the legislative session, as of 5-29-17, the bill has officially died!”

It’s Not Over

Like zombies and vampires, bills can rise from the dead. SB 1994 will almost certainly come back to life in some form in the next legislative session. It could arise in its current dangerous form. The banking lobbyists could influence the senators to write something even more destructive. Or the senators could listen to the people and change the bill to actually protect the people it claims to protect without hurting them in the long run.

No matter what, we all have to be prepared.

Texas Real Estate Investors – Legislative Advocacy Group (TREILAG) is being formed to keep us all informed about laws pending in the Texas Legislature that affect the real estate community. TREILAG will comprise members of several Real Estate Investor Associations (REIAs) and is being organized as a non-profit. I have joined this new organization and will keep you informed of its actions and effectiveness. I encourage you to join, too.


Lee Bruns is a managing partner at Hermit Haus Redevelopment. He specializes in the financial aspects of the business.