H. Rept. 116-138 - PROTECTING AFFORDABLE MORTGAGES FOR VETERANS ACT OF 2019116th Congress (2019-2020)
Committee Report
Hide Overview| Report Type: | House Report |
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| Accompanies: | H.R.1988 |
| Committees: | House Veterans' Affairs Committee |
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116th Congress } { Rept. 116-138
HOUSE OF REPRESENTATIVES
1st Session } { Part 1
======================================================================
PROTECTING AFFORDABLE MORTGAGES FOR VETERANS ACT OF 2019
_______
July 9, 2019.--Ordered to be printed
_______
Mr. Takano, from the Committee on Veterans' Affairs, submitted the
following
R E P O R T
[To accompany H.R. 1988]
[Including cost estimate of the Congressional Budget Office]
The Committee on Veterans' Affairs, to whom was referred
the bill (H.R. 1988) to clarify seasoning requirements for
certain refinanced mortgage loans, and for other purposes,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Hearings......................................................... 3
Subcommittee Consideration....................................... 3
Committee Consideration.......................................... 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 3
Statement of General Performance Goals and Objectives............ 4
New Budget Authority, Entitlement Authority, and Tax Expenditures 4
Earmarks and Tax and Tariff Benefits............................. 4
Committee Cost Estimate.......................................... 4
Congressional Budget Office Estimate............................. 4
Federal Mandates Statement....................................... 7
Advisory Committee Statement..................................... 7
Constitutional Authority Statement............................... 7
Applicability to Legislative Branch.............................. 7
Statement on Duplication of Federal Programs..................... 8
Disclosure of Directed Rulemaking................................ 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill as Reported............. 8
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protecting Affordable Mortgages for
Veterans Act of 2019''.
SEC. 2. SEASONING REQUIREMENTS FOR CERTAIN REFINANCED MORTGAGE LOANS.
(a) Ginnie Mae.--Paragraph (1) of section 306(g) of the National
Housing Act (12 U.S.C. 1721(g)(1)) is amended by striking the second
sentence (as added by section 309(b) of Public Law 115-174).
(b) Veterans Loans.--Section 3709 of title 38, United States Code, is
amended by striking subsection (c) and inserting the following:
``(c) Loan Seasoning.--Except as provided in subsection (d) and
notwithstanding section 3703 of this title or any other provision of
law, a loan to a veteran for a purpose specified in section 3710 of
this title that is a refinance may not be guaranteed or insured under
this chapter until the date that is the later of--
``(1) the date on which the borrower has made at least six
consecutive monthly payments on the loan being refinanced; and
``(2) the date that is 210 days after the first payment due
date of the loan being refinanced.''.
(c) Rule of Construction.--Nothing in this Act may be construed to
restrict or otherwise modify any authority of the Government National
Mortgage Association.
Purpose and Summary
H.R. 1988, the ``Protect Affordable Mortgages for Veterans
Act of 2019'' was introduced by Representative David Scott,
along with Representative Mike Levin, Chairman of the
Subcommittee on Economic Opportunity, Representative Andy Barr,
and Representative Lee Zeldin, on March 28, 2019. H.R. 1988
clarifies loan seasoning requirements of VA Home Loans, as
created by the ``Economic Growth, Regulatory Relief, and
Consumer Protection Act,'' Public Law 115-174.
Background and Need for Legislation
The measure clarifies loan seasoning requirements of VA
Home Loans, as created by Section 309 of Public Law 115-174.
The loan seasoning requirements were created to curb abuses by
lenders who were targeting veterans for refinancing their VA
Home loan multiple times in quick succession by slightly
lowering the interest rate, but adding fees to the loan amount,
which ended up costing the veteran more. Unfortunately, the
language in PL 115-174 was not specific on when the loan
seasoning period started (the day the first payment was due,
versus the day the first payment was actually made), so there
were about 2,500 loans that were created before the Government
National Mortgage Association (GINNIE MAE) issued further
guidance, which are in violation of GINNIE MAE regulations.
This bill clarifies PL 115-174, and brings those
approximately 2,500 loan into good standing, so that the
lenders do not have to call them in, forcing the veterans to
find a new home loan, which would be at a higher interest rate
than their current loan (because interest rates have gone up.)
If this fix does not go into effect by the end of May, the
Inspector General with jurisdiction over GINNIE MAE (the U.S.
Department of Housing and Urban Development's Inspector
General) has directed that these loans be pulled from the
GINNIE MAE mortgage backed securities pools, which would in
effect, force the lenders to call in the loans on the veterans.
Hearings
For the purposes of section 103(i) of H. Res. 6 of the
116th Congress--the following hearings and meetings were used
to develop or consider H.R. 1988.
On April 9, 2019, the Subcommittee on Economic Opportunity
conducted a legislative hearing on various bills introduced
during the 116th Congress, including H.R. 1988.
The following witnesses testified:
Ms. Margarita Devlin, Principal Deputy Under
Secretary for Benefits, Veterans Benefits
Administration, U.S. Department of Veterans Affairs.
Ms. Ashlynne Haycock, Deputy Policy Director, Education
Support Services, Tragedy Assistance Program for
Survivors (TAPS). Mr. Patrick Murray, Deputy Director,
National Legislative Service, The Veterans of Foreign
Wars. Mr. John Kamin, Credentialing and Education
Policy Associate, National Veterans Employment and
Education Division, The American Legion. Ms. Rebecca
Burgess, Program Manager Citizenship Project, American
Enterprise Institute.
Statements for the record were submitted by:
Disabled American Veterans.
Subcommittee Consideration
On May 1, 2019, the Subcommittee on Economic Opportunity
met in an open markup session, a quorum being present, and
ordered H.R. 1988 reported favorably to the Committee on
Veterans' Affairs by voice vote.
During the May 1, 2019 consideration, the Subcommittee
considered H.R. 1988 as introduced. No amendments were offered.
Committee Consideration
On May 8, 2019, the Committee on Veterans' Affairs met in
an open markup session, a quorum being present, and ordered
H.R. 1988, as amended, reported favorably to the House of
Representatives by voice vote.
During the May 8, 2019 consideration, the Subcommittee
considered H.R. 1988 as an amendment in the nature of a
substitute to correct drafting errors. No other amendments were
offered.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report the legislation and amendments
thereto. There were no recorded votes taken on amendments or in
connection with ordering H.R. 1988 reported to the House. A
motion by Ranking Member Phil Roe of Tennessee to report H.R.
1988 favorably to the House of Representatives was agreed to by
voice vote.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the descriptive portions of
this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are to clarifies loan seasoning
requirements of VA Home Loans, as created by Section 309 of
Public Law 115-174.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Earmarks and Tax and Tariff Benefits
H.R. 1988 does not contain any Congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI of the Rules of the House of
Representatives.
Committee Cost Estimate
The Committee adopts as its own the cost estimate on H.R.
1988 prepared by the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974.
Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause (3)(c)(3) of rule XIII of the Rules
of the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has requested
and received a cost estimate for this bill from the Director of
Congressional Budget Office. The Congressional Budget Office
cost estimate finds that the legislation results in additional
offsetting collections from Ginnie Mae's program of $3 million
in 2019 and would have no significant net effect on the federal
budget.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 5, 2019.
Hon. Mark Takano,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1988, the
Protecting Affordable Mortgages for Veterans Act of 2019.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Robert Reese.
Sincerely,
Phillip L. Swagel,
Director.
Enclosure.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Bill summary: H.R. 1988 would authorize the Government
National Mortgage Association (Ginnie Mae) to guarantee
securities that contain certain mortgages refinanced by the
Department of Veterans Affairs (VA) mortgage guarantee program.
Estimated Federal cost: The estimated budgetary effect of
H.R. 1988 is shown in Table 1. The costs of the legislation
fall within budget function 370 (commerce and housing credit).
TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 1988
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By fiscal year, millions of dollars--
--------------------------------------------------------------------------------------------------
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2019-2024 2019-2029
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Decreases in Direct Spending
Estimated Budget Authority........................... -3 0 0 0 0 0 0 0 0 0 0 0 -3
Estimated Outlays.................................... -3 0 0 0 0 0 0 0 0 0 0 0 -3
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Basis of estimate: For this estimate, CBO assumes that H.R.
1988 will be enacted near the end of fiscal year 2019 and that
Ginnie Mae will securitize the additional VA mortgages in
fiscal year 2019.
Background: Ginnie Mae guarantees securities backed by
pools of mortgages that are insured by federal agencies such as
VA. Typically, 98 percent of VA mortgages are pooled into
mortgage-backed securities (MBSs) and guaranteed by Ginnie Mae
in the first few months after they are originated. In May 2018
the Congress enacted legislation (Public Law 115-174) that
prohibited VA from refinancing existing VA mortgages until they
were determined to be seasoned and also prohibited Ginnie Mae
from guaranteeing MBSs containing such mortgages. A mortgage is
considered to be seasoned when the borrower has made six months
of payments or when 210 days have passed since the first
monthly payment was made; whichever occurs later.
In the weeks before P.L. 115-174 was enacted, CBO estimates
about 2,500 unseasoned mortgages with a total value of about
$630 million were refinanced under VA's mortgage program.
According to Ginnie Mae, because those VA mortgages were
unseasoned when they were refinanced they are not eligible to
be included in MBSs guaranteed by Ginnie Mae.
Direct spending: H.R. 1988 would authorize Ginnie Mae to
guarantee MBSs containing those unseasoned mortgages from the
weeks before P.L. 115-174 was enacted. Under the bill, CBO
estimates that 98 percent of those mortgages, with a value of
about $620 million, would be included in Ginnie Mae's MBS
program in 2019. After 2019, no additional mortgage guarantees
would stem from enacting H.R. 1988 because the seasoning
restrictions for mortgages refinanced by VA would still apply.
In exchange for the Ginnie Mae guarantee, issuers pay a fee
on the pooled mortgages that back those securities. CBO
estimates that the net present value of the fees collected by
Ginnie Mae will exceed the cost of any default losses on those
securities in each year. Using the methodology specified in the
Federal Credit Reform Act (FCRA), CBO estimates that Ginnie
Mae's MBS program will have a subsidy rate of -0.44 percent in
2019. A negative subsidy for a federal credit program can occur
if the net present value of the up-front and annual fees
charged for a loan guarantee is greater than the estimated
default costs associated with that guarantee.\1\ Multiplying
the $620 million in mortgages that CBO estimates would be
guaranteed by Ginnie Mae under H.R. 1988 by the subsidy rate of
-0.44 percent results in additional offsetting collections
(which are recorded in the budget as reductions in direct
spending) from Ginnie Mae's MBS program of $3 million in 2019.
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\1\A present value expresses a flow of past and future income or
payments as a single amount received or paid at a specific time. The
value depends on the rate of interest, known as the discount rate, used
to translate past and future cash flows into current dollars at that
time. Under current law, the budgetary effects for Ginnie Mae's
guarantees are calculated under procedures specified in FCRA. Under
FCRA, projected future cash flows are discounted to the present using
interest rates on Treasury Securities.
---------------------------------------------------------------------------
Alternative budgetary treatment: The estimated cost of H.R.
1988 depends on the method used to calculate the subsidy rate
for MBSs guaranteed by Ginnie Mae. Under current law, the
budgetary effects of Ginnie Mae's program are measured in the
budget according to the procedures established in FCRA.
However, as required by S. Con. Res 71, the Concurrent
Resolution on the Budget for Fiscal Year 2018, CBO also has
prepared a cost estimate for H.R. 1988 using a fair-value
approach to estimating the budgetary effect on Ginnie Mae.
The fair-value approach is an alternative to the approach
specified in FCRA. Both approaches rely on the same projections
of future cash flows for guarantee programs, and both account
for the lifetime cost of the new guarantees made in a given
year (including the expected cost of losses net of fees
collected). The fair-value estimates differ from FCRA estimates
by recognizing that the government's assumption of financial
risk has a cost that exceeds the average amount of losses that
would be expected from defaults. The higher financial risk is
reflected in higher fees private entities charge for similar
guarantees on the basis of market prices. In practice, the main
difference between FCRA estimates and fair-value estimates is
the discount rate used to calculate the present value of
estimated future guarantee costs and receipts. Fair-value
estimates use higher discount rates that incorporate a premium
for market risk.
Using the fair-value approach, CBO estimates that the
subsidy rate for Ginnie Mae guarantees is effectively zero
because Ginnie Mae's fees are similar to what a private entity
would charge for guaranteeing the same MBSs. Thus, under the
fair-value method of estimating the subsidy rate for Ginnie Mae
H.R. 1988 would have no significant net effect on the federal
budget.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays (-$3 million in 2019) that
are subject to those pay-as-you-go procedures are shown in
Table 1.
Increase in long-term deficits: None.
Mandates: None.
Previous CBO estimate: On June 5, 2019, CBO transmitted a
cost estimate for H.R. 1988, the Protecting Affordable
Mortgages for Veterans Act of 2019, as ordered reported by the
House Committee on Financial Services on May 8, 2019. The two
versions of the bill are similar and their estimated costs are
the same.
Estimate prepared by: Federal costs: Robert Reese;
Mandates: Rachel Austin.
Estimate reviewed by: Kim P. Cawley, Chief, Natural and
Physical Resources Cost Estimates Unit; H. Samuel Papenfuss,
Deputy Assistant Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates regarding H.R. 1988 prepared by the Director of the
Congressional Budget Office pursuant to Section 423 of the
Unfunded Mandates Reform Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act would be created by H.R.
1988.
Constitutional Authority Statement
Pursuant to Article I, section 8 of the United States
Constitution, H.R. 1988 is authorized by Congress' power to
``provide for the common Defense and general Welfare of the
United States.''
Applicability to Legislative Branch
The Committee finds that H.R. 1988 does not relate to the
terms and conditions of employment or access to public services
or accommodations within the legislative branch.
Statement on Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee finds that no provision
of H.R. 1988 establishes or reauthorizes a program of the
Federal Government known to be duplicative of another Federal
program, a program that was included in any report from the
Government Accountability Office to Congress pursuant to
section 21 of Public Law 111-139, or a program related to a
program identified in the most recent Catalog of Federal
Domestic Assistance.
Disclosure of Directed Rulemaking
Pursuant to clause 3(c)(5) of rule XIII, the Committee
estimates that H.R. 1988 contains no directed rule making that
would require the Secretary to prescribe regulations.
Section-by-Section Analysis of the Legislation
Section 1: Short title
Section 2: Clarifies that the date a VA Home Loan can be refinanced is
the later of:
(1) the date on which the borrower has made at least six
consecutive monthly payments on the loan being refinanced; and
(2) the date that is 210 days after the first payment due
date of the loan being refinanced.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
NATIONAL HOUSING ACT
* * * * * * *
TITLE III--NATIONAL MORTGAGE ASSOCIATIONS
* * * * * * *
management and liquidation functions--government national mortgage
association
Sec. 306. (a) To carry out the purposes set forth in
paragraph (c) of section 301, the Association is authorized and
directed, as of the close of the cutoff date determined by the
Association pursuant to section 303(d) of this title, to
establish separate accountability for all of its assets and
liabilities (exclusive of capital, surplus, surplus reserves,
and undistributed earnings to be evidenced by preferred stock
as provided in section 303(d) hereof, but inclusive of all
rights and obligations under any outstanding contracts), and to
maintain such separate accountability for the management and
orderly liquidation of such assets and liabilities as provided
in this section.
(b) For the purposes of this section and to assure that, to
the maximum extent, and as rapidly as possible, private
financing will be substituted for Treasury borrowings otherwise
required to carry mortgages held under the aforesaid separate
accountability, the Association is authorized to issue, upon
the approval of the Secretary of the Treasury, and have
outstanding at any one time obligations having such maturities
and bearing such rate or rates of interest as may be determined
by the Association with the approval of the Secretary of the
Treasury, to be redeemable at the option, of the Association
before maturity in such manner as may be stipulated in such
obligations; but in no event shall any such obligations be
issued if, at the time of such proposed issuance, and as a
consequence thereof, the resulting aggregate amount of its
outstanding obligations under this subsection would exceed the
amount of the Association's ownership under the aforesaid
separate accountability, free from any liens or encumbrances,
of cash, mortgages, and obligations of the United States or
guaranteed thereby, or obligations, participations, or other
instruments which are lawful investments for fiduciary, trust,
or public funds. The proceeds of any private financing effected
under this subsection shall be paid to the Secretary of the
Treasury in reduction of the indebtedness of the Association to
the Secretary of the Treasury under the aforesaid separate
accountability. The Association shall insert appropriate
language in all of its obligations issued under this subsection
clearly indicating that such obligations, together with the
interest thereon, are not guaranteed by the United States and
do not constitute a debt or obligation of the United States or
of any agency or instrumentality thereof other than the
Association. The Association is authorized to purchase in the
open market any of its obligations outstanding under this
subsection at any time and at any price.
(c) No mortgage shall be purchased by the Association in its
operations under this section except pursuant to and in
accordance with the terms of a contract or commitment to
purchase the same made prior to the cutoff date provided for in
section 303(d), which contract or commitment became a part of
the aforesaid separate accountability, and the total amount of
mortgages and commitments held by the Association under this
section shall not, in any event, exceed $3,350,000,000:
Provided, That such maximum amount shall be progressively
reduced by the amount of cash realizations on account of
principal of mortgages held under the aforesaid separate
accountability and by cancellation of any commitments to
purchase mortgages thereunder, as reflected by the books of the
Association, with the objective that the entire aforesaid
maximum amount shall be eliminated with the orderly liquidation
of all mortgages held under the aforesaid separate
accountability: And provided further, That nothing in this
subsection shall preclude the Association from granting such
usual and customary increases in the amounts of outstanding
commitments (resulting from increased costs or otherwise) as
have theretofore been covered by like increases in commitments
granted by the agencies of the Federal Government insuring or
guaranteeing the mortgages. There shall be excluded from the
total amounts set forth in this subsection the amounts of any
mortgages which, subsequent to May 31, 1954, are transferred by
law to the Association and held under the aforesaid separate
accountability.
(d) The Association may issue to the Secretary of the
Treasury its obligations in an amount outstanding at any one
time sufficient to enable the Association to carry out it
functions under this section, such obligations to mature not
more than five years from their respective dates of issue, to
be redeemable at the option of the Association before maturity
in such manner as may be stipulated in such obligations. Each
such obligation shall bear interest at a rate determined by the
Secretary of the Treasury, taking into consideration the
current average rate on outstanding marketable obligations of
the United States as of the last day of the month preceding the
issuance of the obligation of the Association. The Secretary of
the Treasury is authorized to purchase any obligations of the
Association to be issued under this section, and for such
purpose the Secretary of the Treasury is authorized to use as a
public debt transaction the proceeds from the sale of any
securities issued under chapter 31 of title 31, United States
Code, and the purposes for which securities may be issued under
chapter 31 of title 31, United States Code, are extended to
include any purchases of the Association's obligations
hereunder.
(e) Notwithstanding any other provision of law, the
Association is authorized, under the aforesaid separate
accountability, to make commitments to purchase, and to
purchase, service, or sell any obligations offered to it by the
Secretary of Housing and Urban Development, or any mortgages
covering residential property offered to it by any Federal
instrumentality, or the head thereof. There shall be excluded
from the total amounts set forth in subsetion (c) the amounts
of any obligations or mortgages purchased by the Association
pursuant to this subsection.
(f) Notwithstanding any of the provisions of this Act or of
any other law, an amount equal to the net decrease for the
preceding fiscal year in the aggregate principal amount of all
mortgages owned by the Association under this section shall, as
of July 1 of each of the years 1961 through 1964, be
transferred to and merged with the authority provided under
section 305(a), and the amount of such authority as specified
in section 305(c) shall be increased by an amount so
transferred.
(g)(1) The Association is authorized, upon such terms and
conditions as it may deem appropriate, to guarantee the timely
payment of principal of and interest on such trust certificates
or other securities as shall (i) be issued by the corporation
under section 304(d), or by any other issuer approved for the
purposes of this subsection by the Association, and (ii) be
based on and backed by a trust or pool composed of mortgages
which are insured under the National Housing Act, or which are
insured or guaranteed under the Servicemen's Readjustment Act
of 1944, title V of the Housing Act of 1949, or chapter 37 of
title 38, United States Code; or guaranteed under section 184
of the Housing and Community Development Act of 1992. [The
Association may not guarantee the timely payment of principal
and interest on a security that is backed by a mortgage insured
or guaranteed under chapter 37 of title 38, United States Code,
and that was refinanced until the later of the date that is 210
days after the date on which the first monthly payment is made
on the mortgage being refinanced and the date on which 6 full
monthly payments have been made on the mortgage being
refinanced.] The Association shall collect from the issuer a
reasonable fee for any guaranty under this subsection and shall
make such charges as it may determine to be reasonable for the
analysis of any trust or other security arrangement proposed by
the issuer. In the event the issuer is unable to make any
payment of principal of or interest on any security guaranteed
under this subsection, the Association shall make such payment
as and when due in cash, and thereupon shall be subrogated
fully to the rights satisfied by such payment. In any case in
which (I) Federal law requires the reduction of the interest
rate on any mortgage backing a security guaranteed under this
subsection, (II) the mortgagor under the mortgage is a person
in the military service, and (III) the issuer of such security
fails to receive from the mortgagor the full amount of interest
payment due, the Association may make payments of interest on
the security in amounts not exceeding the difference between
the amount payable under the interest rate on the mortgage and
the amount of interest actually paid by the mortgagor. The
Association is hereby empowered, in connection with any
guaranty under this subsection, whether before or after any
default, to provide by contract with the issuer for the
extinguishment, upon default by the issuer, of any redemption,
equitable, legal, or other right, title, or interest of the
issuer in any mortgage or mortgages constituting the trust or
pool against which the guaranteed securities are issued; and
with respect to any issue of guaranteed securities, in the
event of default and pursuant otherwise to the terms of the
contract, the mortgages that constitute such trust or pool
shall become the absolute property of the Association subject
only to the unsatisfied rights of the holders of the securities
based on and backed by such trust or pool. No State or local
law, and no Federal law (except Federal law enacted expressly
in limitation of this subsection after the effective date of
this sentence), shall preclude or limit the exercise by the
Association of (A) its power to contract with the issuer on the
terms stated in the preceding sentence, (B) its rights to
enforce any such contract with the issuer, or (C) its ownership
rights, as provided in the preceding sentence, in the mortgages
constituting the trust or pool against which the guaranteed
securities are issued. The full faith and credit of the United
States is pledged to the payment of all amounts which may be
required to be paid under any guaranty under this subsection.
There shall be excluded from the total amounts set forth in
subsection (c) the amounts of any mortgages acquired by the
Association as a result of its operations under this
subsection.
(2) Notwithstanding any other provision of law and subject
only to the absence of qualified requests for guarantees, to
the authority provided in this subsection, and to the extent of
or in such amounts as any funding limitation approved in
appropriation Acts, the Association shall enter into
commitments to issue guarantees under this subsection in an
aggregate amount of $110,000,000,000 during fiscal year 1996.
There are authorized to be appropriated to cover the costs (as
such term is defined in section 502 of the Congressional Budget
Act of 1974) of guarantees issued under this Act by the
Association such sums as may be necessary for fiscal year 1996.
(3)(A) No fee or charge in excess of 6 basis points may be
assessed or collected by the United States (including any
executive department, agency, or independent establishment of
the United States) on or with regard to any guaranty of the
timely payment of principal or interest on securities or notes
based on or backed by mortgages that are secured by 1- to 4-
family dwellings and (i) insured by the Federal Housing
Administration under title II of the National Housing Act; or
(ii) insured or guaranteed under the Serviceman's Readjustment
Act of 1944, chapter 37 of title 38, United States Code, or
title V of the Housing Act of 1949.
(B) The fees charged for the guaranty of securities or on
notes based on or backed by mortgages not referred to in
subparagraph (A), as authorized by other provisions of law,
shall be set by the Association at a level not more than
necessary to create reserves sufficient to meet anticipated
claims based upon actuarial analysis, and for no other purpose.
(C) Fees or charges for the issuance of commitments or
miscellaneous administrative fees of the Association shall not
be on a competitive auction basis and shall remain at the level
set for such fees or charges as of September 1, 1985, except
that such fees or charges may be increased if reasonably
related to the cost of administering the program, and for no
other purpose.
(D) Not less than 90 days before increasing any fee or charge
under subparagraph (B) or (C), the Secretary shall submit to
the Congress a certification that such increase is solely for
the purpose specified in such subparagraph.
(E)(i) Notwithstanding subparagraphs (A) through (D), fees
charged for the guarantee of, or commitment to guarantee,
multiclass securities backed by a trust or pool of securities
or notes guaranteed by the Association under this subsection,
and other related fees shall be charged by the Association in
an amount the Association deems appropriate. The Association
shall take such action as may be necessary to reasonably assure
that such portion of the benefit, resulting from the
Association's multiclass securities program, as the Association
determines is appropriate accrues to mortgagors who execute
eligible mortgages after the date of the enactment of this
subparagraph.
(ii) The Association shall provide for the initial
implementation of the program for which fees are charged under
the first sentence of clause (i) by notice published in the
Federal Register. The notice shall be effective upon
publication and shall provide an opportunity for public
comment. Not later than 12 months after publication of the
notice, the Association shall issue regulations for such
program based on the notice, comments received, and the
experience of the Association in carrying out the program
during such period.
(iii) The Association shall consult with persons or entities
in such manner as the Association deems appropriate to ensure
the efficient commencement and operation of the multiclass
securities program.
(iv) No State or local law, and no Federal law (except
Federal law enacted expressly in limitation of this clause
after the effective date of this subparagraph) shall preclude
or limit the exercise by the Association of its power to
contract with persons or entities, and its rights to enforce
such contracts, for the purpose of ensuring the efficient
commencement and continued operation of the multiclass
securities program.
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TITLE 38, UNITED STATES CODE
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PART III--READJUSTMENT AND RELATED BENEFITS
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CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
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SUBCHAPTER I--GENERAL
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Sec. 3709. Refinancing of housing loans
(a) Fee Recoupment.--Except as provided in subsection (d) and
notwithstanding section 3703 of this title or any other
provision of law, a loan to a veteran for a purpose specified
in section 3710 of this title that is being refinanced may not
be guaranteed or insured under this chapter unless--
(1) the issuer of the refinanced loan provides the
Secretary with a certification of the recoupment period
for fees, closing costs, and any expenses (other than
taxes, amounts held in escrow, and fees paid under this
chapter) that would be incurred by the borrower in the
refinancing of the loan;
(2) all of the fees and incurred costs are scheduled
to be recouped on or before the date that is 36 months
after the date of loan issuance; and
(3) the recoupment is calculated through lower
regular monthly payments (other than taxes, amounts
held in escrow, and fees paid under this chapter) as a
result of the refinanced loan.
(b) Net Tangible Benefit Test.--Except as provided in
subsection (d) and notwithstanding section 3703 of this title
or any other provision of law, a loan to a veteran for a
purpose specified in section 3710 of this title that is
refinanced may not be guaranteed or insured under this chapter
unless--
(1) the issuer of the refinanced loan provides the
borrower with a net tangible benefit test;
(2) in a case in which the original loan had a fixed
rate mortgage interest rate and the refinanced loan
will have a fixed rate mortgage interest rate, the
refinanced loan has a mortgage interest rate that is
not less than 50 basis points less than the previous
loan;
(3) in a case in which the original loan had a fixed
rate mortgage interest rate and the refinanced loan
will have an adjustable rate mortgage interest rate,
the refinanced loan has a mortgage interest rate that
is not less than 200 basis points less than the
previous loan; and
(4) the lower interest rate is not produced solely
from discount points, unless--
(A) such points are paid at closing; and
(B) such points are not added to the
principal loan amount, unless--
(i) for discount point amounts that
are less than or equal to one discount
point, the resulting loan balance after
any fees and expenses allows the
property with respect to which the loan
was issued to maintain a loan to value
ratio of 100 percent or less; and
(ii) for discount point amounts that
are greater than one discount point,
the resulting loan balance after any
fees and expenses allows the property
with respect to which the loan was
issued to maintain a loan to value
ratio of 90 percent or less.
[(c) Loan Seasoning.--Except as provided in subsection (d)
and notwithstanding section 3703 of this title or any other
provision of law, a loan to a veteran for a purpose specified
in section 3710 of this title that is refinanced may not be
guaranteed or insured under this chapter until the date that is
the later of--
[(1) the date that is 210 days after the date on
which the first monthly payment is made on the loan;
and
[(2) the date on which the sixth monthly payment is
made on the loan.]
(c) Loan Seasoning.--Except as provided in subsection (d) and
notwithstanding section 3703 of this title or any other
provision of law, a loan to a veteran for a purpose specified
in section 3710 of this title that is a refinance may not be
guaranteed or insured under this chapter until the date that is
the later of--
(1) the date on which the borrower has made at least
six consecutive monthly payments on the loan being
refinanced; and
(2) the date that is 210 days after the first payment
due date of the loan being refinanced.
(d) Cash-out Refinances.--(1) Subsections (a) through (c)
shall not apply in a case of a loan refinancing in which the
amount of the principal for the new loan to be guaranteed or
insured under this chapter is larger than the payoff amount of
the refinanced loan.
(2) Not later than 180 days after the date of the enactment
of this section, the Secretary shall promulgate such rules as
the Secretary considers appropriate with respect to refinancing
described in paragraph (1) to ensure that such refinancing is
in the financial interest of the borrower, including rules
relating to recoupment, seasoning, and net tangible benefits.
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