[House Report 108-107]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-107
======================================================================
SELECTED RESERVE HOME LOAN EQUITY ACT
_______
May 19, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of New Jersey, from the Committee on Veterans' Affairs,
submitted the following
R E P O R T
[To accompany H.R. 1257]
[Including cost estimate of the Congressional Budget Office]
The Committee on Veterans' Affairs, to whom was referred
the bill (H.R. 1257) to amend title 38, United States Code, to
make permanent the authority for qualifying members of the
Selected Reserve to have access to home loans guaranteed by the
Secretary of Veterans Affairs and to provide for uniformity in
fees charged qualifying members of the Selected Reserve and
active duty veterans for such home loans, having considered the
same, reports favorably thereon without amendment and
recommends that the bill do pass.
Introduction
The reported bill reflects the Committee's consideration of
H.R. 1257, the Selected Reserve Home Loan Equity Act.
On March 13, 2003, Honorable Lane Evans, Ranking Member of
the Committee, introduced H.R. 1257, along with Honorable
Michael H. Michaud, Ranking Member of the Subcommittee on
Benefits, Honorable Bob Filner, Honorable Luis V. Gutierrez,
Honorable Corrine Brown, Honorable Ciro D. Rodriguez, Honorable
Silvestre Reyes, Honorable Ted Strickland, Honorable Tom Udall,
Honorable Timothy J. Ryan, Honorable Bernard Sanders, Honorable
Tim Holden, Honorable Susan A. Davis, and Honorable Maxine
Waters.
On May 7, 2003, the Subcommittee on Benefits met and
unanimously ordered H.R. 1257 reported favorably to the full
Committee.
On May 15, 2003, the full Committee met and ordered H.R.
1257 reported favorably to the House by unanimous voice vote.
Summary of the Reported Bill
H.R. 1257 would:
1. LMake the VA home loan program for members of the
Selected Reserve permanent, and reduce the funding fee charged
to Select Reserve home loan applicants to the same amount as
the amount paid by active duty servicemembers.
2. LIncrease the amount of fees paid by a veteran who is
purchasing a home with no down payment for a second or
subsequent time.
Background and Discussion
On April 11, 2002 (107th Congress), the Subcommittee on
Benefits held a hearing on a number of bills, among them H.R.
2095, introduced by Ranking Member Evans. This bill proposed to
equalize fees between members of the Selected Reserve and other
veterans. Veterans service organizations and the Department of
Veterans Affairs testified in support of the bill. Although
legislation passed the House of Representatives in 2002 to
equalize fees on a temporary basis, the provision was not
included in the final legislation approved in conference. H.R.
1257 is similar to H.R. 2095, but makes the home loan program
for members of the Selected Reserve permanent, and provides for
equalization of funding fees.
Permanent authority for housing loans for members of the
Selected Reserve.--Section 2 of the bill would make the home
loan program for members of the Selected Reserve permanent. In
1992, Congress granted eligibility for VA home loans to persons
who served in the Selected Reserve (which includes the National
Guard). This benefit is a useful recruiting and retention tool
for members of the Selected Reserve. Under current law, the
program is scheduled to expire on September 30, 2009.
In order to qualify for this benefit, a member of the
Selected Reserve must have honorably served for at least six
years and meet other requirements. In recent years, reservists
have been increasingly called upon to participate on active
duty for extended periods to support the national defense. As
the recent actions in Afghanistan and Iraq clearly demonstrate,
reservists are an integral part of America's ``total force.''
They have earned the right to participate in VA's home loan
program on a permanent and equal basis.
Uniform home loan guaranty fees for qualifying members of
the Selected Reserve and active duty veterans.--Section 3 of
the bill would amend the Loan Fee Table to provide uniformity
in the funding fees charged to members of the Selected Reserve
and active duty veterans for VA home loans. Under current law,
in most cases a reservist pays a funding fee that is 0.75
percent higher than the fee charged to veterans who have served
on active duty. For example, the current fee for a veteran to
obtain an initial VA home loan with no down payment is 2
percent; a reservist is charged a fee of 2.75 percent for the
same loan. Reservists who have a service-connected disability
are exempt from the fee.
According to VA, members of the Selected Reserve have a
lower foreclosure rate than other loan guaranty beneficiaries.
Since its inception, the foreclosure rates for members of the
Selected Reserve have been almost one-third lower than that of
other veterans; therefore, a higher rate is not justified on
the basis of foreclosure risk. Reservists have earned equality
in fees with other veterans.
In order to pay the cost of equalizing benefits between
reservists and other veterans, section 3 of the bill would also
increase the home loan guaranty fees for veterans qualifying
for a second or subsequent home loan with no down payment. The
bill would amend the Loan Fee Table to increase the fees for
veterans who obtain a subsequent VA home loan from 3 percent to
3.3 percent for loans closed before October 1, 2011. This fee
would be reduced to 2.15 percent for loans closed between
October 1, 2011 and September 30, 2013.
Section-By-Section Analysis
Section 1 would provide that this Act may be cited as the
``Selected Reserve Home Loan Equity Act''.
Section 2 would amend section 3702(a)(2)(E) of title 38,
United States Code, to provide permanent authority for housing
loans for members of the Selected Reserve.
Section 3 would amend paragraph (2) of section 3729(b) of
title 38, United States Code, to provide uniform home loans
fees for qualifying members of the Selected Reserve and active
duty veterans and would increase the fee for second or
subsequent use of the VA home loan program with no down
payment.
Performance Goals and Objectives
The reported bill would authorize veterans benefits
enhancements and program improvements under laws administered
by the Secretary of Veterans Affairs. The veterans programs and
activities affected by the reported bill are currently
authorized. Their performance goals and objectives are
established in annual performance plans and are subject to the
Committee's regular oversight.
Congressional Budget Office Cost Estimate
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 4, 2003
Hon. Lane Evans
Ranking Democratic Member, Committee on Veterans' Affairs,
House of Representatives, Washington, DC
Dear Congressman: As you requested, the Congressional
Budget Office has prepared the enclosed cost estimate for H.R.
1257, the Selected Reserve Home Loan Equity Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Sunita
D'Monte, who can be reached at 226-2840.
Sincerely,
Douglas Holtz-Eakin,
Director
Enclosure.
Congressional Budget Office Cost Estimate
H.R. 1257, Selected Reserve Home Loan Equity Act
As introduced on March 13, 2003
H.R. 1257 would permanently extend the home loan benefits
guaranteed by the Department of Veterans Affairs (VA) to
members of the selected reserve and amend certain fees charged
for the program. CBO estimates that enacting the bill would
reduce direct spending by $51 million over the 2004-2013
period, but would not affect administrative expenses for the
program, which are provided for in annual appropriations acts.
The changes in direct spending are shown in the following
table. The budgetary impact of this bill falls within budget
function 700 (veterans benefits and services).
----------------------------------------------------------------------------------------------------------------
By Fiscal Year, Outlays in Millions of Dollars
-------------------------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Estimated Budget Authority........................ -4 * * * * * -2 -2 -21 -21
Estimated Outlays................................. -4 * * * * * -2 -2 -21 -21
----------------------------------------------------------------------------------------------------------------
* = Between -$500,000 and zero.
Under current law, reservists are eligible for home loans
guaranteed by VA through 2009. CBO estimates that under the
bill, VA would guarantee 9,000 additional loans a year over the
2010-2013 period, with an average loan amount of $153,000. The
bill also would alter the fee structure for the VA home loan
program in two ways. First, it would require VA to charge the
same fees for active-duty veterans and reservists by reducing
the fees paid by reservists by 75 basis points. And second, it
would increase the fee charged for repeated use (when a veteran
uses the benefit more than once) of the home loan benefit by 30
basis points over the 2004-2011 period and by 90 basis points
in 2012 and 2013.
CBO estimates that revising fees in the manner specified
above would reduce direct spending by $4 million in 2004, but
have no significant effect on direct spending over the 2005-
2009 period as the fee changes would approximately offset each
other over that period. Savings in 2004 result from lower
interest rate assumptions for that year compared to those
projected for the 2005-2009 period.
Starting in 2010, when VA would guarantee additional loans
for reservists under the bill, CBO estimates direct spending
would fall by $2 million a year in 2010 and 2011, and by $21
million a year in 2012 and 2013. Savings result because
reservists have fewer home loan defaults than do other
veterans, according to VA, and this lower default rate would
reduce the subsidy rate for the program as a whole over the
2010-2013 period. Annual savings would increase significantly
from 2011 to 2012 because the fees would rise substantially in
2012 under the bill.
H.R. 1257 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, and tribal
governments.
The CBO staff contact is Sunita D'Monte, who can be reached
at 226-2840. This estimate was approved by Peter H. Fontaine,
Deputy Assistant Director for Budget Analysis.
Statement of Federal Mandates
The preceding Congressional Budget Office cost estimate
states that the bill contains no intergovernmental or private
sector mandates as defined in the Unfunded Mandates Reform Act.
Statement of Constitutional Authority
Pursuant to Article I, section 8 of the United States
Constitution, the reported bill is authorized by Congress'
power to ``provide for the common Defense and general Welfare
of the United States.''
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 italics, existing law in which no change
is proposed is shown in roman):
CHAPTER 37 OF TITLE 38, UNITED STATES CODE
CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
* * * * * * *
SUBCHAPTER I--GENERAL
* * * * * * *
Sec. 3702. Basic entitlement
(a)(1) * * *
(2) The veterans referred to in the first sentence of
paragraph (1) of this subsection are the following:
(A) * * *
* * * * * * *
(E) For the period beginning on October 28, 1992,
[and ending on September 30, 2009,] each veteran
described in section 3701(b)(5) of this title.
* * * * * * *
SUBCHAPTER III--ADMINISTRATIVE PROVISIONS
* * * * * * *
Sec. 3729. Loan fee
(a) * * *
(b) Determination of Fee.--(1) * * *
[(2) The loan fee table referred to in paragraph (1) is as
follows:
[LOAN FEE TABLE
------------------------------------------------------------------------
Active duty Other
Type of loan veteran Reservist obligor
------------------------------------------------------------------------
(A)(i) Initial loan described 2.00 2.75 NA
in section 3710(a) to
purchase or construct a
dwelling with 0-down, or any
other initial loan described
in section 3710(a) other than
with 5-down or 10-down
(closed before October 1,
2011)........................
------------------------------------------------------------------------
(A)(ii) Initial loan described 1.25 2.00 NA
in section 3710(a) to
purchase or construct a
dwelling with 0-down, or any
other initial loan described
in section 3710(a) other than
with 5-down or 10-down
(closed on or after October
1, 2011).....................
------------------------------------------------------------------------
(B)(i) Subsequent loan 3.00 3.00 NA
described in section 3710(a)
to purchase or construct a
dwelling with 0-down, or any
other subsequent loan
described in section 3710(a)
(closed before October 1,
2011)........................
------------------------------------------------------------------------
(B)(ii) Subsequent loan 1.25 2.00 NA
described in section 3710(a)
to purchase or construct a
dwelling with 0-down, or any
other subsequent loan
described in section 3710(a)
(closed on or after October
1, 2011).....................
------------------------------------------------------------------------
(C)(i) Loan described in 1.50 2.25 NA
section 3710(a) to purchase
or construct a dwelling with
5-down (closed before October
1, 2011).....................
------------------------------------------------------------------------
(C)(ii) Loan described in 0.75 1.50 NA
section 3710(a) to purchase
or construct a dwelling with
5-down (closed on or after
October 1, 2011).............
------------------------------------------------------------------------
(D)(i) Initial loan described 1.25 2.00 NA
in section 3710(a) to
purchase or construct a
dwelling with 10-down (closed
before October 1, 2011)......
------------------------------------------------------------------------
(D)(ii) Initial loan described 0.50 1.25 NA
in section 3710(a) to
purchase or construct a
dwelling with 10-down (closed
on or after October 1, 2011).
------------------------------------------------------------------------
(E) Interest rate reduction 0.50 0.50 NA
refinancing loan.............
------------------------------------------------------------------------
(F) Direct loan under section 1.00 1.00 NA
3711.........................
------------------------------------------------------------------------
(G) Manufactured home loan 1.00 1.00 NA
under section 3712 (other
than an interest rate
reduction refinancing loan)..
------------------------------------------------------------------------
(H) Loan to Native American 1.25 1.25 NA
veteran under section 3762
(other than an interest rate
reduction refinancing loan)..
------------------------------------------------------------------------
(I) Loan assumption under 0.50 0.50 0.50
section 3714.................
------------------------------------------------------------------------
(J) Loan under section 3733(a) 2.25 2.25 2.25]
------------------------------------------------------------------------
(2) The loan fee table referred to in paragraph (1) is as
follows:
LOAN FEE TABLE
------------------------------------------------------------------------
Type of loan Veteran Other obligor
------------------------------------------------------------------------
(A)(i) Initial loan described in 2.00 NA
section 3710(a) to purchase or
construct a dwelling with 0-
down, or any other initial loan
described in section 3710(a)
other than with 5-down or 10-
down (closed before October 1,
2011)..........................
------------------------------------------------------------------------
(A)(ii) Initial loan described 1.25 NA
in section 3710(a) to purchase
or construct a dwelling with 0-
down, or any other initial loan
described in section 3710(a)
other than with 5-down or 10-
down (closed on or after
October 1, 2011)...............
------------------------------------------------------------------------
(B)(i) Subsequent loan described 3.30 NA
in section 3710(a) to purchase
or construct a dwelling with 0-
down, or any other subsequent
loan described in section
3710(a) (closed before October
1, 2011).......................
------------------------------------------------------------------------
(B)(ii) Subsequent loan 2.15 NA
described in section 3710(a) to
purchase or construct a
dwelling with 0-down, or any
other subsequent loan described
in section 3710(a) (closed on
or after October 1, 2011 and
before October 1, 2013)........
------------------------------------------------------------------------
(B)(iii) Subsequent loan 1.25 NA
described in section 3710(a) to
purchase or construct a
dwelling with 0-down, or any
other subsequent loan described
in section 3710(a) (closed on
or after October 1, 2013)......
------------------------------------------------------------------------
(C)(i) Loan described in section 1.50 NA
3710(a) to purchase or
construct a dwelling with 5-
down (closed before October 1,
2011)..........................
------------------------------------------------------------------------
(C)(ii) Loan described in 0.75 NA
section 3710(a) to purchase or
construct a dwelling with 5-
down (closed on or after
October 1, 2011)...............
------------------------------------------------------------------------
(D)(i) Initial loan described in 1.25 NA
section 3710(a) to purchase or
construct a dwelling with 10-
down (closed before October 1,
2011)..........................
------------------------------------------------------------------------
(D)(ii) Initial loan described 0.50 NA
in section 3710(a) to purchase
or construct a dwelling with 10-
down (closed on or after
October 1, 2011)...............
------------------------------------------------------------------------
(E) Interest rate reduction 0.50 NA
refinancing loan...............
------------------------------------------------------------------------
(F) Direct loan under section 1.00 NA
3711...........................
------------------------------------------------------------------------
(G) Manufactured home loan under 1.00 NA
section 3712 (other than an
interest rate reduction
refinancing loan)..............
------------------------------------------------------------------------
(H) Loan to Native American 1.25 NA
veteran under section 3762
(other than an interest rate
reduction refinancing loan)....
------------------------------------------------------------------------
(I) Loan assumption under 0.50 0.50
section 3714...................
------------------------------------------------------------------------
(J) Loan under section 3733(a).. 2.25 2.25
------------------------------------------------------------------------
* * * * * * *
(4) For the purposes of paragraph (2):
[(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) of this title who is eligible
under section 3702(a)(2)(E) of this title.]
(A) The term ``veteran'' means any veteran eligible
for the benefits of this chapter.
[(C)] (B) The term ``other obligor'' means a person
who is not a veteran, as defined in section 101 of this
title or other provision of this chapter.
[(D)] (C) The term ``initial loan'' means a loan to a
veteran guaranteed under section 3710 or made under
section 3711 of this title if the veteran has never
obtained a loan guaranteed under section 3710 or made
under section 3711 of this title.
[(E)] (D) The term ``subsequent loan'' means a loan
to a veteran, other than an interest rate reduction
refinancing loan, guaranteed under section 3710 or made
under section 3711 of this title if the veteran has
previously obtained a loan guaranteed under section
3710 or made under section 3711 of this title.
[(F)] (E) The term ``interest rate reduction
refinancing loan'' means a loan described in section
3710(a)(8), 3710(a)(9)(B)(i), 3710(a)(11),
3712(a)(1)(F), or 3762(h) of this title.
[(G)] (F) 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)] (G) The term ``5-down'' means a downpayment of
at least 5 percent or more, but less than 10 percent,
of the total purchase price or construction cost of the
dwelling.
[(I)] (H) The term ``10-down'' means a downpayment of
10 percent or more of the total purchase price or
construction cost of the dwelling.
* * * * * * *