[Congressional Record Volume 142, Number 120 (Thursday, September 5, 1996)]
[Senate]
[Pages S9967-S9968]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WARNER (for himself and Mr. Thurmond):
  S. 2057. A bill to amend title 38, United States Code, to make 
permanent the authority of the Secretary of Veterans Affairs guarantee 
loans with adjustable rate mortgages; to the Committee on Veterans 
Affairs.


  the va adjustable rate mortgage program reauthorization act of 1996

  Mr. WARNER. Mr. President, I rise today to introduce on behalf of 
myself and Senator Thurmond a bill to permanently reauthorize the VA 
Adjustable Rate Mortgage Program.
  This program was created in the 102d Congress to guarantee adjustable 
rate mortgages for a 3-year period ending September 30, 1995. The 
program allowed a maximum of 1-percent increase annually with a 5-
percent maximum increase on the interest rate over the life of the 
loan. These annual and lifetime caps are identical to those contained 
in the FHA Adjustable Rate Mortgage Program, which is a permanent 
program.
  Adjustable rate mortgages have proven to be a valuable and essential 
home mortgage financing tool for American families, particularly in 
times of rising interest rates. Adjustable rate mortgages allow 
borrowers to obtain home loans with interest rates below those required 
for normal fixed interest rate loans.
  During the 3-year period that the VA Adjustable Rate Mortgage Program 
was in effect, large numbers of veterans took advantage of this 
financing tool, with 131,250 VA adjustable rate mortgages being 
originated nationwide, totaling $14.9 billion. In Virginia alone, 
10,599 loans granted totaling over $1.2 billion. Over 58 percent of 
these loans nationally were made to first-time home buyers.
  The VA Home Loan Guaranty Program was created by the Congress in 1944 
to ensure that veterans returning home from World War II would have an 
opportunity to achieve the American dream of owning a home. This 
benefit was established for our veterans because their service to our 
country denied them the opportunity to save the necessary funds for a 
down payment for a home or to establish a credit rating. The program 
has since been extended to benefit all of the men and women who have 
served their country honorably in the Armed Forces. Since the program's 
inception, 14.8 million loans totaling $515 billion have been made to 
veterans.
  This bill simply guarantees that the home loans that are available to 
American veterans are affordable. I urge my

[[Page S9968]]

colleagues to join Senator Thurmond and myself in supporting a program 
that has proven to be successful and beneficial to the most deserving 
of Americans, our veterans, by permanently reauthorizing the VA 
Adjustable Rate Mortgage Program.
  Mr. THURMOND. Mr. President, I rise today to introduce legislation, 
with Senator Warner, that will permanently extend the authority of the 
Secretary of Veterans Affairs [VA] to guarantee loans with adjustable 
rate mortgages [ARMS].
  The Veterans Home Loan Program Amendments of 1992 made significant 
changes to the VA Home Loan Program. Included in that bill were 
provisions establishing a demonstration project authorizing VA to 
guarantee ARMS during fiscal years 1993-95.
  The Loan Guaranty Program is a benefit of great value to veterans and 
to the Nation. This program provides housing credit assistance to 
satisfy the mortgage credit needs of veterans and members of the Armed 
Forces. It provides private capital on more liberal terms than are 
generally available to nonveterans, without the assumption of undue 
risks by the Federal Government. Veterans are assisted primarily 
through the use of the Government's guaranty on loans instead of the 
substantial down payment and other investment safeguards applicable to 
conventional mortgage transactions. Since the program's inception in 
1944, the VA has guaranteed nearly 15 million loans totaling more than 
$500 billion.
  The ARM program offers veterans another choice in the mortgage 
market, particularly when interest rates are high. It is particularly 
useful to first-time home buyers who can obtain loans with interest 
rates generally lower than fixed rate loans. The VA ARM allows a 
maximum of 1 percent interest annually with a 5-percent maximum 
interest rate increase over the life of the loan. These annual and 
lifetime caps are identical to those contained in the Federal Housing 
Administration [FHA] ARM program, which is permanently authorized.
  During the pilot program, the popularity of ARMS was well 
established. According to VA statistics, during fiscal year 1995, 
approximately 20 percent of all loans guaranteed were ARMS. This was 
double the ration of ARMS to all loans guaranteed in fiscal year 1994. 
During the test period of 1993-95, ARMS totaling $14.9 billion were 
guaranteed. In South Carolina, nearly 2,000 ARMS were originated, with 
a value of more than $181 million.
  Mr. President, this bill will permanently authorize a worthy program. 
ARMS are a valuable financing tool for American families. They are used 
extensively nationwide by conventional and FHA home buyers. This bill 
will permit qualified veterans to take advantage of ARMS, if they so 
choose. I urge my colleagues to join Senator Warner and me in the 
permanent reauthorization of the VA Adjustable Rate Mortgage Program.

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