[Congressional Record Volume 143, Number 94 (Monday, July 7, 1997)]
[Senate]
[Pages S6907-S6910]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER (by request):
  S. 986. A bill to amend title 38, United States Code, to make certain 
improvements in the housing loan programs for veterans and eligible 
persons, and for other purposes; to the Committee on Veterans' Affairs.

[[Page S6908]]

          the veterans' housing loan improvements act of 1997

  Mr. SPECTER. Mr. President, as chairman of the Committee on Veterans' 
Affairs, I have today introduced, at the request of the Secretary of 
Veterans Affairs, S. 986, the proposed Veterans' Housing Loan 
Improvements Act of 1997. The Secretary of Veterans Affairs submitted 
this legislation to the President of the Senate by letter dated June 4, 
1997.
  My introduction of this measure is in keeping with the policy which I 
have adopted of generally introducing--so that there will be specific 
bills to which my colleagues and others may direct their attention and 
comments--all administration-proposed draft legislation referred to the 
Committee on Veterans' Affairs. Thus, I reserve the right to support or 
oppose the provisions of, as well as any amendment to, this 
legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record, together with the transmittal letter and the 
enclosed section-by-section analysis of the draft legislation which 
accompanied it.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 986

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; REFERENCES TO TITLE 38, UNITED STATES 
                   CODE.

       (a)  Short Title.--This Act may be cited as the ``Veterans' 
     Housing Loan Improvements Act of 1997.''
       (b) References to Title 38.--Except as otherwise may be 
     specifically provided, whenever in the Act an amendment or 
     repeal is expressed in terms of an amendment to, or repeal 
     of, a section or other provision, the reference shall be 
     considered to be made to a section or other provision of 
     title 38, United States Code.

     SEC. 2. LOAN FEE.

       (a) Section 3729 is amended by striking out everything 
     after the catchline, and inserting in lieu thereof:
       ``(a)(1) Except as provided in subsection (c) of the 
     section, a fee shall be collected from each person obtaining 
     a housing load guaranteed, insured, or made under this 
     chapter, and each person assuming a loan to which section 
     3714 of this title applies. Such a loan may not be 
     guaranteed, insured, made, or assumed until the fee payable 
     under this section has been remitted to the Secretary.
       ``(2) The fee may be included in the loan and paid from the 
     proceeds thereof.
       ``(b)(1) The amount of the fee shall be determined from the 
     table in subsection (d) of this section. The fee is expressed 
     as a percentage of the total amount of the loan guaranteed, 
     insured, or made, or, in the case of a loan assumption, the 
     unpaid principal balance of the loan on the date of the 
     transfer of the property.
       ``(2) Any reference to a section in the Type of Loan column 
     in subsection (d) of this section refers to a section of this 
     title.
       ``(3) For the purposes of this section:
       ``(A) The term `Active Duty Veteran' means any veteran 
     eligible for the benefits of this chapter other than a 
     Reservist;
       ``(B) The term `Reservist' means a veteran described in 
     section 3701(b)(5)(A);
       ``(C) The term `Other Obligor' means a person who is not a 
     veteran, as defined by section 101 or other provision of this 
     chapter;
       ``(D) The term `initial loan described in section 3710' 
     means a loan obtained by a veteran pursuant to section 3710 
     of this title if the veteran has never obtained a loan 
     guaranteed under section 3710 or more under section 3711;
       ``(E) the term `subsequent loan described in section 3710' 
     means a loan obtained by a veteran pursuant to section 3710 
     title if the veteran has previously obtained a loan 
     guaranteed under section 3710 or made under section 3711. The 
     term shall not refer to an interest rate reduction 
     refinancing loan;
       ``(F) The term `interest rate reduction refinancing loan' 
     means a loan described in section 3710(a)(8), 
     3710(a)(9)(B)(i), 7310(a)(11), 3712(a)(1)(F), or 3762(h);
       ``(G) The term `0-down' means a downpayment, if any, of 
     less than 5 percent of the total purchase price or 
     construction cost of the dwelling;
       ``(H) The term `5-down' means a downpayment of at least 5 
     percent but less than 10 percent of the total purchase price 
     or construction cost of the dwelling;
       ``(I) The term `10-down' means a downpayment of 10 percent 
     or more of the total purchase price or construction cost of 
     the dwelling;
       ``(c) A fee may not be collected under this section from a 
     veteran who is receiving compensation (or who but for the 
     receipt of retirement pay would be entitled to receive 
     compensation) or from a surviving spouse of any veteran 
     (including a person who died in the active military, naval, 
     or air service) who died from a service-connected disability.
       ``(d) The following table establishes the percentages of 
     fees to be collected under this section:

                            ``LOAN FEE TABLE                            
------------------------------------------------------------------------
                                            Active                      
              ``Type of loan                 duty    Reservist    Other 
                                            veteran              obligor
------------------------------------------------------------------------
``Initial loan described in section                                     
 3710(a) to purchase or construct a                                     
 dwelling with 0-down, or any other                                     
 initial loan described in section                                      
 3710(a).................................      2.00       2.75        NA
``Subsequent loan described in section                                  
 3710(a) to purchase or construct a                                     
 dwelling with 0-down, or any other                                     
 subsequent loan described in section                                   
 3710(a).................................      3.00       3.00        NA
``Loan described in section 3710(a) to                                  
 purchase or construct a dwelling with 5-                               
 down....................................      1.50       2.25        NA
``Loan described in section 3710(a) to                                  
 purchase or construct a dwelling with 10-                              
 down....................................      1.25       2.00        NA
``Interest rate reduction refinancing                                   
 loan....................................      0.50       0.50        NA
``Direct loan made under section 3711....      1.00       1.00        NA
``Manufactured home loan described in                                   
 section 3712 (other than an interest                                   
 rate reduction refinancing loan)........      1.00       1.00        NA
``Loan to Native American veteran made                                  
 under section 3762 (other than an                                      
 interest rate reduction refinancing                                    
 loan)...................................      1.25       1.25        NA
``Assuming a loan to which section 3714                                 
 applies.................................      0.50       0.50      0.50
``Loan made under section 3733(a)........      2.25       2.25      2.25
------------------------------------------------------------------------

       ``(e) Notwithstanding subsection (d) of this section, the 
     Secretary, by regulation, may prescribe a different 
     percentage for the fee applicable to loans made under section 
     3733(a), if the Secretary finds a different amount is 
     necessary so that the fee charged for such loans is 
     consistent with the fees charged by other departments of the 
     Government for similar loans available to the public, or if 
     the Secretary determines that considerations of the market 
     for properties sold by the Secretary necessitate a different 
     fee.''.
       (b) This section applies to any loan closed after September 
     30, 1997.

     SEC. 3. EXTENSION OF NO-BID FORMULA.

       Section 3732(c) is amended by striking out paragraph (11) 
     in its entirety.

     SEC. 4. ENHANCED VENDEE LOAN SALES.

       Section 3720(h) is amended by:
       (a) striking out paragraph (2) in its entirety; and
       (b) striking out ``(h)(1)'' and inserting in lieu thereof 
     ``(h)''.

     SEC. 5. REPEAL OF LOAN DEBT COLLECTION RESTRICTIONS.

       Subchapter III of chapter 37 is amended by striking out 
     section 3726 in its entirety.

     SEC. 6. ACCOUNT CONSOLIDATION.

       (a) Subchapter III of chapter 37 is amended by striking out 
     sections 3723, 3724, and 3725 in their entirety.
       (b) Such subchapter is further amended by inserting after 
     section 3721 the following new section:

     ``Sec. 3722. Veterans Housing Benefit Program Fund

       ``(a) There is hereby established in the Treasury of the 
     United States a fund known as the Veterans Housing Benefit 
     Program Fund.
       ``(b) The Veterans Housing Benefit Program Fund shall be 
     available to the Secretary, without fiscal year limitation, 
     for all housing loan operations under this chapter, 
     consistent with the Federal Credit Reform Act of 1990.
       ``(c) There shall be deposited in the Veterans Housing 
     Benefit Program Fund:
       ``(1) All money as of September 30, 1997, in: (A) the 
     Direct Loan Revolving Fund established by section 513 of the 
     Servicemen's Readjustment Act of 1944; (B) the Department of 
     Veterans Affairs Loan Guaranty Revolving Fund established by 
     section 7(a) of Public Law 86-665; and (C) the Guaranty and 
     Indemnity Fund established by section 302(a)(1) of Public Law 
     101-237;
       ``(2) All money hereafter appropriated for such Fund;
       ``(3) All fees collected by the Secretary on or after 
     October 1, 1997, pursuant to section 3729, or any other 
     provision of law or regulation established by the Secretary 
     imposing fees on persons or other entities participating in 
     the housing loan program under this chapter; and
       ``(4) All other amounts received by the Secretary on or 
     after October 1, 1997, incident to housing loan operations 
     under this chapter including, but not limited to, collections 
     of principal and interest, proceeds from the sale, rental, 
     use, or other disposition of property acquired under this 
     chapter, proceeds from the sale of loans pursuant to sections 
     3720(h) and 3733(a)(3), and penalties collected pursuant to 
     section 3710(g)(4)(B).
       ``(d) For purposes of this section, the term `housing loan' 
     shall not include a loan made pursuant to subchapter V of 
     this chapter.''.
       (c) The amendments made by this section shall take effect 
     October 1, 1997.

     SEC. 7. EXTENSION OF PILOT PROGRAM FOR DIRECT LOANS TO NATIVE 
                   AMERICAN VETERANS.

       Section 3761(c) is amended by striking out ``1997.'' and 
     inserting in lieu thereof ``1999.''.

     SEC. 8. CONFORMING AMENDMENTS.

       (a) Section 2106(e) is amended by striking out ``either the 
     direct loan or loan guaranty revolving fund established by 
     section 3723 or 3724 of this title, respectively.'' and 
     inserting in lieu thereof ``the Veterans Housing Benefit 
     Program Fund established by section 3722 of this title.''.
       (b) Section 3703(e)(1) is amended by striking out 
     ``3729(c)(1)'' and inserting in lieu thereof ``3729(c)''.
       (c) Section 3711(k) is amended by striking out ``and 
     section 3723 of this title'' both places it appears.
       (d) Section 3720 is amended by striking out subsection (e) 
     in its entirety and inserting in lieu thereof--
       ``(e) [Repealed.]''.
       (e) Section 3727(c) is amended by striking out ``funds 
     established pursuant to sections 3723 and 3724 of this title, 
     as applicable.'' and inserting in lieu thereof ``fund 
     established pursuant to section 3722 of this title.''.

[[Page S6909]]

       (f) Section 3733(a)(6) is amended by--
       (1) striking out ``Department of Veterans Affairs Loan 
     Guaranty Revolving'' and inserting in lieu thereof ``Veterans 
     Housing Benefit Program''; and
       (2) striking out ``3724(a)'' and inserting in lieu thereof 
     ``3722(a)''.
       (g) Section 3733 is further amended by striking out 
     subsection (e) in its entirety.
       (h) Section 3734 is amended by--
       (1) striking out, in the catchline, ``Loan Guaranty 
     Revolving Fund and the Guaranty and Indemnity'' and inserting 
     in lieu thereof ``Veterans Housing Benefit Program'';
       (2) striking out, in subsection (a)(1), ``Loan Guaranty 
     Revolving Fund and the Guaranty and Indemnity'' and inserting 
     in lieu thereof ``Veterans Housing Benefit Program'';
       (3) striking out, in subsection (a)(2), ``funds,'' and 
     inserting in lieu thereof ``fund,'';
       (4) striking out, in subsection (b), ``each'' and inserting 
     in lieu thereof ``the''; and
       (5) striking out, in paragraph (2) of subsection (b), 
     subparagraphs (B), (C), and (D) in their entirety, and 
     redesignating subparagraphs (E), (F), and (G) as (B), (C), 
     and (D), respectively.
       (i) Section 3735(a)(3)(A)(i) is amended by striking out 
     ``Loan Guaranty Revolving Fund and the Guaranty and 
     Indemnity'' and inserting in lieu thereof ``Veterans Housing 
     Benefit Program''.
       (j) The catchline for section 3763 is amended by striking 
     out ``Housing'' and inserting in lieu thereof ``Native 
     American veteran housing''.
       (k) The table of sections for subchapter III of chapter 37 
     is amended by--
       (1) striking out the items relating to sections 3722, 3723, 
     3724, 3725, and 3726 and inserting in lieu thereof--

``3722. Veterans Housing Benefit Program Fund.
``[3723. Repealed.]
``[3724. Repealed.]
``[3725. Repealed.]
``[3726. Repealed.]'';

       (2) striking out, in the item relating to section 3734, 
     ``Loan Guaranty Revolving Fund and the Guaranty and 
     Indemnity'' and inserting in lieu thereof ``Veterans Housing 
     Benefit Program''; and
       (3) inserting at the end thereof the following new item:

``3736. Portfolio Loan Servicing.''.

       (l) The table of sections for subchapter V of chapter 37 is 
     amended by striking out, in the item related to section 3763, 
     ``Housing'' and inserting in lieu thereof ``Native American 
     veteran housing''.
       (m) Section 7(h)(2)(B) of Public Law 102-54, as amended (38 
     U.S.C. 1718 note), is amended by striking out ``Loan Guaranty 
     Revolving'' and inserting in lieu thereof ``Veterans Housing 
     Benefit Program''.
                                                                    ____


                      SECTION-BY-SECTION ANALYSIS

       Sec. 1. Subsection (a) provides that the draft bill may be 
     cited as the ``Veterans' Housing Loan Improvements Act of 
     1997.''
       Subsection (b) provides that, unless otherwise specified, 
     whenever in the Act an amendment or repeal is expressed in 
     terms of an amendment to, or repeal of, a section or other 
     provision, the reference shall be considered to be made to a 
     section or other provision of title 38, United States Code.
       Sec. 2. Subsection (a) of section 2 would replace the 
     existing section 3729, which imposes fees on most persons 
     obtaining or assuming a loan guaranteed or made by VA, with 
     new, simplified language. The new section 3729 would contain 
     an easy to read chart showing the appropriate fee depending 
     on the type of loan and category of borrower.
       The revised section would make permanent the increases in 
     the fees enacted by section 12007 of the Omnibus Budget 
     Reconciliation Act of 1993 (OBRA 93). That enactment 
     increased the fees for most VA guaranteed housing loans by 75 
     basis points, or 0.75 percent of the loan amount, and imposed 
     a fee of 3 percent of the loan on most veterans who had 
     previously obtained a VA housing loan. These provisions are 
     now set to expire on September 30, 1998.
       In addition, the revised section 3729 increases the fee 
     from 1.00 to 2.25 percent on loans made by VA in connection 
     with the sale of VA-owned properties (vendee loans). Vendee 
     loans are available to members of the public and are not a 
     veterans benefit. This new fee would be set at the maximum 
     initial mortgage insurance premium that the Federal Housing 
     Administration (FHA) is permitted to charge for most single 
     family mortgages. FHA also charges annual premiums that would 
     not be authorized for VA. This section would also give VA 
     discretion to issue regulations changing the fee charged for 
     vendee loans if VA finds that a different amount is necessary 
     so that this fee is consistent with the fees charged by other 
     departments for similar loans, or if the Secretary determines 
     that considerations of the market for properties sold by VA 
     necessitate a different fee.
       Except as noted above, the fee structure remains unchanged. 
     The exemption from the fee in the current law given to 
     certain disabled veterans and surviving spouses remains 
     unchanged.
       Subsection (b) would make the increased fee for vendee 
     loans apply to all loans closed on or after October 1, 1997.
       Sec. 3. Section 3 would repeal paragraph (11) of section 
     3732(c). This would make the no-bid formula permanent. As 
     amended by section 12006 of OBRA 93, the no-bid formula 
     requires VA to consider, in addition to other costs, VA's 
     loss on the resale of the property. The no-bid formula 
     currently applies to all loans closed before October 1, 1998, 
     regardless of the date the loan is terminated. This amendment 
     would repeal the sunset.
       Sec. 4. Section 4 would make permanent VA's authority, 
     contained in 38 U.S.C. Sec. 3720(h), to guarantee the 
     certificates sold to investors when VA vendee loans are 
     securitized. Since June 1988, vendee loans have been sold to 
     a trust, which issues securities based on the pooled loans. 
     Prior to the enactment of Public Law 102-291 in 1992, VA 
     provided a full faith and credit guaranty on the vendee loans 
     sold to the trust. VA could not, however, directly guarantee 
     the certificates issued by the trust. Guaranteeing the 
     certificates rather than the loans significantly increases 
     the VA's net proceeds from such sales, but does not 
     significantly change VA's exposure to loss. VA's authority to 
     guarantee the certificates currently has a sunset of December 
     31, 1997.
       Sec. 5. Section 5 would repeal section 3726. Section 3726 
     currently prohibits VA, in most cases, from offsetting 
     against Federal payments, other than VA benefits, debts owed 
     to the Government resulting from the foreclosure of VA 
     guaranteed or direct housing loans. This provision would 
     permit VA to collect these debts by offsetting Federal 
     salaries and income tax refunds as permitted by other Federal 
     debt collection laws. The right of veterans to challenge the 
     existence and amount of the debt through VA's normal 
     administrative process, including review by the Court of 
     Veterans Appeals, and to seek waiver of the debt under 
     current law would not be altered.
       Sec. 6. Section 6 would consolidate the funding sources for 
     the VA housing loan programs (except the pilot program for 
     direct loans to native American Veterans) into a new fund in 
     the Treasury.
       Subsection (a) would repeal sections 3723, 3724, and 3725 
     which provide for the Direct Loan Revolving Fund (DLRF), the 
     Loan Guaranty Revolving Fund (LGRF), and the Guaranty and 
     Indemnity Fund (GIF), respectively. Those three funds 
     currently provide the source of moneys for the VA housing 
     loan programs (except the pilot program for direct loans to 
     Native American veterans).
       Subsection (b) would add a new section 3722 which would 
     establish in the Treasury a new fund to be known as the 
     ``Veterans Housing Benefit Program Fund.'' This new fund, 
     consistent with the Federal Credit Reform Act of 1990, would 
     be available, without fiscal year limitation, for all VA 
     housing loan operations (except the pilot program for direct 
     loans to Native American veterans).
       The total available balances of the DLRF, LGRF, and GIF as 
     of September 30, 1997, would be deposited into this new fund. 
     Beginning October 1, 1997, all appropriations to the VA 
     housing loan program would go into this new fund. In 
     addition, beginning on that date, the new Veterans Housing 
     Benefit Program Fund would receive all income from the loan 
     program including, but not limited to, loan repayments, 
     income from the sale, rental, or other use of acquired 
     foreclosed properties, income from the sale of loans, and 
     loan user fees.
       Subsection (c) would make this section effective October 1, 
     1997.
       Sec. 7. Section 7 would extend for two years; i.e., until 
     September 30, 1999, the sunset for VA's pilot program 
     (sections 3761-3764) to make direct loans to Native American 
     veterans living on trust land.
       Sec. 8. Section 8 would make conforming amendments to 
     various sections of title 38 and other statutes.
       Subsection (a) would make a conforming amendment to section 
     2106(e).
       Subsection (b) would make a conforming amendment to section 
     3703(e)(1).
       Subsection (c) would make a conforming amendment to section 
     3711(k).
       Subsection (d) would repeal the obsolete subsection (e) of 
     section 3720. That subsection authorized VA to sell 
     participation certificates in connection with the Federal 
     National Mortgage Association. Such certificates have not 
     been sold since the 1960s and all outstanding certificates 
     have been redeemed.
       Subsection (e) would make a conforming amendment to section 
     3727(c).
       Subsection (f) would make conforming amendments to section 
     3733(a)(6).
       Subsection (g) would also remove the obsolete section 
     3733(e). That provision, pertaining to the crediting of the 
     proceeds from the sale of loans by VA, was repealed by 
     implication by the Federal Credit Reform Act of 1990.
       Subsection (h) would make conforming amendments to section 
     3734. It would also strike out the requirement for VA to 
     report to the Congress regarding Government credits and 
     investment income to the GIF, which were repealed by 
     implication by the Federal Credit Reform Act of 1990.
       Subsection (i) would make a conforming amendment to section 
     3735(a)(3)(A)(i).
       Subsection (j) would make a technical correction to the 
     catchline for section 3763.
       Subsection (k) would make conforming amendments to the 
     table of sections for subchapter III of chapter 37.
       Subsection (l) would make a conforming amendment to the 
     table of sections for subchapter V of chapter 37.
       Subsection (m) would make a conforming amendment to section 
     7(h)(2)(B) of Public Law 102-54, as amended, (38 U.S.C. 
     Sec. 1718 note).

[[Page S6910]]

     
                                                                    ____
                            The Secretary of Veterans Affairs,

                                     Washington, DC, June 4, 1997.
     Hon. Albert Gore, Jr.,
     President of the Senate,
     Washington, DC.
       Dear Mr. President: There is transmitted herewith a draft 
     bill ``[t]o amend title 38, United States Code, to make 
     certain improvements in the housing loan programs for 
     veterans and eligible persons, and for other purposes.'' I 
     request that this bill be referred to the appropriate 
     committee for prompt consideration and enactment.
       This measure, entitled the ``Veterans' Housing Loan 
     Improvements Act of 1997,'' would make amendments to the 
     Department of Veterans Affairs' housing loan programs that 
     would save costs, provide management efficiencies, and extend 
     the sunset on two expiring authorities.
       The draft bill would permanently extend several cost-saving 
     measures originally enacted by the Omnibus Budget 
     Reconciliation Act (OBRA) of 1993, increase the funding fee 
     for ``vendee'' loans available to the general public, 
     consolidate the funding for the housing loan program into one 
     new account, and permit VA to collect housing loan debts 
     through offset against other Federal payments in the same 
     manner as all other Federal debts are now being collected. 
     The bill would also make permanent VA's enhanced vendee loan 
     sales authority, and extend for 2 years the pilot program for 
     direct loans to Native American veterans.
       A detailed section-by-section analysis of the draft bill is 
     enclosed.
       VA estimates that enactment of the draft bill would produce 
     first year loan subsidy savings of approximately $156 million 
     in FY 1998 and $3.283 billion over five years. Extending the 
     OBRA 93 provisions, increasing the fee on vendee loans, and 
     allowing VA to collect housing loan debts by setoff will 
     produce subsidy savings. There is no additional subsidy 
     appropriation required to extend the pilot program for direct 
     loans to Native American veterans since the program has not 
     fully expended the subsidy initially appropriated by Public 
     Law 102-389.
       The Office of Management and Budget advises that there is 
     no objection to the submission of this draft bill to the 
     Congress, and that it's enactment would be in accord with the 
     Administration's program.
           Sincerely,
                                                      Jesse Brown.
       Enclosures.
                                 ______