Department of Veterans Affairs guarantee of home equity conversion mortgages for elderly veteran homeowners

(a)

Loan guarantee authorized

Subchapter II of chapter 37 of title 38, United States Code, is amended by adding at the end the following new section:

3715.

Guarantee of home equity conversion mortgages for elderly veteran homeowners

(a)

Loan guarantee

Upon receiving an application by a covered mortgagee and under such terms and conditions as the Secretary may prescribe, the Secretary may guarantee any home equity conversion mortgage that is made to an elderly veteran homeowner pursuant to the provisions of this section and conforms with all applicable provisions of this title. (b)

Standards for commitment

The Secretary shall establish standards under which the Secretary will commit to guarantee such home equity conversion mortgage made to an elderly veteran homeowner before the date on which the mortgage is executed, if the Secretary determines that the mortgage— (1)is likely to improve the financial situation or otherwise meet the special needs of the elderly veteran homeowner; (2)will include appropriate safeguards for the elderly veteran homeowner to offset the special risks associated with the mortgage; and (3)has such terms as the Secretary may establish to ensure that it is accepted in the secondary mortgage market. (c)

Mortgage eligibility

A home equity conversion mortgage may be guaranteed under this section if it— (1)is secured by a dwelling, farm residence, one-family residential unit in a condominium housing development or project, or manufactured home permanently affixed to a lot, that is owned and occupied by the eligible elderly veteran homeowner; (2)has been executed by an elderly veteran homeowner who— (A)has discussed with a loan counselor approved by the Secretary— (i)options other than a home equity conversion mortgage that are available to the homeowner, including other housing, social service, health, and financial options; (ii)other home equity conversion options that are or may become available to the homeowner, such as sale-leaseback financing, deferred payment loans, and property tax deferral; and (iii)the financial implications of entering into a home equity conversion mortgage; and (iv)any other information that the Secretary may require; (B)has received a disclosure that a home equity conversion mortgage may have tax consequences, affect eligibility for assistance under Federal and State programs, and have an impact on the heirs and estate of the homeowner; (C)has received the full disclosure described in subsection (e)(1); and (D)meets any additional requirements prescribed by the Secretary; (3)provides that prepayment, in whole or in part, may be made at any time during the period of the mortgage, without penalty; (4)provides for a fixed or variable interest rate or future sharing between the veteran and the covered mortgagee of the appreciation in the value of the property, as agreed upon by the veteran and the mortgagee; (5)provides for the satisfaction of the obligation in a manner satisfactory to the Secretary; (6)provides that the eligible elderly veteran homeowner is not liable for any difference between the net amount of remaining indebtedness under the mortgage and the amount recovered by the covered mortgagee from the net sales proceeds from the dwelling that is subject to the mortgage (based upon the amount of the accumulated equity selected by the veteran to be subject to the mortgage, as agreed upon by the veteran and the mortgagee); (7)contains such terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserve, delinquency charges, foreclosure proceedings, anticipation of maturity, additional and secondary liens, and other matters as the Secretary may prescribe; (8)provides for future payments to the veteran, based on accumulated equity (minus any applicable fees and charges), that are calculated according one of the following methods chosen by the homeowner: (A)payment based upon a line of credit; (B)payment on a monthly basis over a term specified by the homeowner; (C)payment on a monthly basis over a term specified by the homeowner and based upon a line of credit; (D)payment on a monthly basis over the tenure of the homeowner; (E)payment on a monthly basis over the tenure of the homeowner and based upon a line of credit; or (F)payment on any other basis that the Secretary considers appropriate; (9)provides that the homeowner may convert the method of payment chosen under paragraph (8) to any other method under such paragraph during the term of the loan, except that in the case of a fixed-rate home equity conversion mortgage, the Secretary may, by regulation, limit such convertibility; (10)contains such restrictions as the Secretary may determine are appropriate to ensure that the homeowner does not fund any unnecessary or excessive costs for obtaining the mortgage, including any costs of estate planning, financial advice, or other related services; and (11)satisfies any other requirements prescribed by the Secretary. (d)

Conditions of guarantee

(1)The Secretary shall require the covered mortgagee of a home equity conversion mortgage guaranteed under this section to make available to the elderly veteran homeowner— (A)at the time of the application for the loan in connection with the mortgage, a written list of the names and addresses of third-party information sources who are approved by the Secretary as responsible and able to provide the information required by subsection (e); (B)by not later than 10 days before closing on the loan, a statement informing the elderly veteran homeowner of such homeowner’s limited liability under the mortgage, as well as the homeowner’s rights, obligations, and remedies with respect to temporary absences from the home, late payments, and payment default by the lender, along with any conditions requiring satisfaction of the loan obligation and any other information that the Secretary may require; (C)by not later than January 31 of each year, an annual statement summarizing for the preceding calendar year the total principal amount paid to the homeowner under the loan secured by the home equity conversion mortgage, the total amount of deferred interest added to the principal, and the outstanding loan balance at the end of that year; and (D)before closing on the loan, a statement of the projected total cost of the mortgage to the veteran homeowner based upon the projected total future loan balance (such cost expressed as a single average annual interest rate for at least two different appreciation rates for the term of the mortgage) for not less than two projected loan terms, as determined by the Secretary, which shall include— (i)the cost for a short-term home equity conversion mortgage; and (ii)the cost for a loan term equaling the actuarial life expectancy of the veteran. (2)The Secretary may not guarantee a home equity conversion mortgage under this section unless such mortgage provides that the elderly veteran homeowner’s responsibility to satisfy the loan obligation is deferred until the homeowners death, the sale of the home, or the occurrence of certain other events specified in regulations by the Secretary. (e)

Information provided to homeowner

(1)The Secretary shall provide or arrange, before executing on a home equity conversion mortgage under this section, for a third-party to provide to the elderly veteran homeowner under the mortgage a full disclosure that clearly states— (A)all of the costs charged to the homeowner, including the costs of estate planning, financial advice, and other services that are related to the mortgage but are not required to obtain the mortgage; and (B)which of the costs under subparagraph (A) are required to obtain the mortgage and which are not required to obtain the mortgage; and (2)The Secretary may, in lieu of carrying out paragraph (1), adopt an alternative approach to educating an elderly veteran homeowner, but only if such alternative approach provides to the homeowner all of the information specified such paragraphs. For the purpose of carrying out the preceding sentence, the Secretary shall consult with industry representatives, consumer groups, representatives of counseling organizations, and other interested parties to identify alternative approaches to providing to the elderly veteran homeowner the information required under this subsection that may be feasible and desirable for home equity conversion mortgages guaranteed under this section. (f)

Limitation on amount of benefits

In no case may the benefit from a guarantee of a mortgage under this section exceed the maximum guarantee amount under section 3703 of this title. (g)

Additional authority

(1)To further the purposes of this section, the Secretary shall take any action necessary— (A)to provide any elderly veteran homeowner with funds to which the homeowner is entitled under a mortgage guaranteed under this section, but that the homeowner has not received because of the default of the party responsible for payment; (B)to obtain repayment from any source of any amount provided to a homeowner under subparagraph (A); and (C)to provide a covered mortgagee with funds to which the mortgagee is entitled under the terms of a mortgage guaranteed under this section. (2)Actions under paragraph (1) may include— (A)disbursing funds to the elderly veteran homeowner or covered mortgagee from the Veterans Housing Benefit Program Fund; (B)accepting an assignment of the guaranteed mortgage, notwithstanding that the homeowner is not in default under the terms of the mortgage, and calculating the amount and making the payment of a claim on such assigned mortgage; (C)requiring a subordinate mortgage from the homeowner at any time in order to secure repayments of any funds previously advanced or to be advanced to the homeowner; (D)requiring a subrogation to the Secretary of the rights of any parties to the transaction against any defaulting parties; and (E)imposing premium charges. (h)

Exemption from certain provisions of law

Section 137(b) of the Truth in Lending Act (15 U.S.C. 1647(b)) and any implementing regulations issued by the Board of Governors of the Federal Reserve System shall not apply to a mortgage guaranteed under this section. (i)

Authority To guarantee mortgages for refinancing

(1)The Secretary may, upon application by a covered mortgagee, guarantee any mortgage given to refinance an existing home equity conversion mortgage guaranteed under this section. (2)As a condition of guaranteeing a mortgage under this subsection, the Secretary shall require that the covered mortgagee of a home equity conversion mortgage guaranteed under this subsection provide to the elderly veteran homeowner, within an appropriate period of time and in a manner, a good faith estimate of— (A)the total cost of the refinancing; and (B)the increase in the homeowner’s principal limit as measured by the estimated initial principal limit on the mortgage to be guaranteed under this subsection, less the current principal limit on the home equity conversion mortgage that is being refinanced and guaranteed under this subsection. (3)The amount of the loan fee for a mortgage refinanced under this subsection shall be determined by the Secretary under section 3729 of this title. (4)In the case of an elderly veteran homeowner who applies for refinancing under this subsection, the Secretary may waive the requirement that the homeowner receive information under subsection (e), but only if— (A)the increase in the principal limit exceeds the amount of the total cost of refinancing by an amount to be determined by the Secretary; and (B)the time between the closing of the original home equity conversion mortgage being refinanced through the mortgage guaranteed under this subsection and the application for a refinancing mortgage guaranteed under this subsection does not exceed five years. (j)

Origination fee

The Secretary may establish a limit on the origination fee that may be charged to an elderly veteran homeowner for a mortgage guaranteed under this section, except that such limitation shall provide that the origination fee may be fully financed with the mortgage and shall include any fees paid to correspondent mortgagees approved by the Secretary. (k)

Fee waiver

(1)Notwithstanding section 3729 of this title, in the case of a mortgage guaranteed under this section for which the total amount (except as provided under paragraph (2)) of all future payments described in subsection (l)(4)(B) are to be used only to fund the cost of a qualified long-term care insurance contract that covers the elderly veteran homeowner or a member of the homeowner’s household residing in the property subject to the mortgage, the Secretary may not charge or collect the loan fee otherwise required under subparagraph (a) of such section. (2)A mortgage described in paragraph (1) may provide for financing of any amount used to satisfy outstanding mortgage obligations (in accordance with such limitations as the Secretary shall prescribe) and any amount used for initial service charges, appraisal, inspection, and other fees (as approved by the Secretary) in connection with such mortgage, and the amount of future payments shall be reduced accordingly. (3)For purposes of this subsection, the term qualified long-term care insurance contract has the meaning given such term in section 7702B of the Internal Revenue Code of 1986 (26 U.S.C. 7702B), except that such contract shall also meet the requirements of— (A)sections 9 (relating to disclosure), 24 (relating to suitability), and 26 (relating to contingent nonforfeiture) of the long-term care insurance model regulation promulgated by the National Association of Insurance Commissioners (as adopted as of September 2000); and (B)section 8 (relating to contingent nonforfeiture) of the long-term care insurance model Act promulgated by the National Association of Insurance Commissioners (as adopted as of September 2000). (l)

Definitions

For the purposes this section: (1)The term elderly veteran homeowner means any homeowner who is, or whose spouse is, a veteran who is eligible for housing loan benefits under this title and who is at least 62 years of age or such higher age as the Secretary may prescribe. (2)The term mortgage means a first mortgage or first lien— (A)on real estate, in fee simple; (B)on all stock allocated to a dwelling in a residential cooperative housing corporation; or (C)on a leasehold that is— (i)under a lease for not less than 99 years that is renewable; or (ii)under a lease having a period of not less than 10 years to run beyond the maturity date of the mortgage. (3)The term first mortgage means a first lien that is given to secure an advance on, or the unpaid purchase price of, real estate or all stock allocated to a dwelling unit in a residential cooperative housing corporation, under the laws of the State in which the real estate or dwelling unit is located, together with any credit instruments secured for such purpose. (4)The term home equity conversion mortgage means a housing loan, as defined in section 3701 of this chapter that— (A)is secured by a first mortgage; (B)provides for future payments to the homeowner based on accumulated equity; and (C)is made by— (i)a Federal land bank, National bank, State bank, private bank, building and loan association, insurance company, credit union, or mortgage and loan company, that is subject to examination and supervision by an agency of the United States or of any State; or (ii)a State; or (iii)a lender or mortgage broker approved by the Secretary pursuant to standards established by the Secretary.

(b)

Conforming amendment

Section 3701(a) of such title is amended by striking sections 3710(a) and 3712(a)(1) and inserting sections 3710(a), 3712(a)(1), and 3715. (c)

Clerical amendment

The table of sections at the beginning of such chapter is amended by inserting after the items relating to subchapter II the following new item:

3715. Guarantee of home equity conversion mortgages for elderly veteran homeowners.