To amend title 38, United States Code, to authorize the Secretary of Veterans Affairs to provide mortgage protection life insurance to certain veterans unable to acquire commercial mortgage protection life insurance because of service-connected disabilities.

Summary: Authorizes the Secretary of Veterans Affairs to provide mortgage protection life insurance to certain veterans unable to obtain commercial life insurance at a standard rate because of service-connected disabilities.  Establishes guidelines for such insurance regarding:  (1) amount of insurance; (2) premium rates; (3) payment of insurance; and (4) policy provisions.

SECTION 1. MORTGAGE PROTECTION LIFE INSURANCE.

    (a) In General.--Chapter 19 of title 38, United States Code, is 
amended by adding at the end the following new subchapter:

  ``SUBCHAPTER V--SUPPLEMENTAL MORTGAGE PROTECTION LIFE INSURANCE FOR 
                            CERTAIN VETERANS

``Sec. 1991. Purchase of insurance
    ``(a) The Secretary may, without regard to section 3709 of the 
Revised Statutes (41 U.S.C. 5), purchase from one or more life 
insurance companies a policy or policies of mortgage protection life 
insurance on a group basis to provide the benefits specified in this 
subchapter.
    ``(b) A veteran (other than a veteran eligible for insurance under 
section 2106 of this title) who establishes to the satisfaction of the 
Secretary that the veteran is unable to obtain commercial life 
insurance because of a service-connected disability shall, upon 
application made in such form as the Secretary shall prescribe, be 
granted insurance under this subchapter.
``Sec. 1992. Amount of insurance
    ``(a) The initial amount of insurance provided to a veteran under 
this subchapter may not exceed the lowest of the following amounts:
            ``(1) $40,000.
            ``(2) The amount of the loan outstanding on a dwelling (and 
        necessary land therefor) owned or occupied by the veteran as a 
        home on the date insurance under this subchapter is placed in 
        effect.
            ``(3) In the case of a veteran who purchases or constructs 
        a dwelling (including necessary land therefor) to be occupied 
        by the veteran as a home on or after the effective date of this 
        section, the amount of the original loan on that dwelling (and 
        land).
    ``(b) The amount of such insurance shall be reduced according to 
the amortization schedule of the loan and at no time shall exceed the 
amount of the outstanding loan with interest.
``Sec. 1993. Premiums
    ``(a) The premiums charged a veteran for insurance under this 
subchapter shall be paid at such times and in such manner as the 
Secretary shall prescribe. Those premiums shall be based on such 
mortality data as the Secretary considers appropriate to cover only the 
mortality cost of insuring veterans with service-connected disabilities 
who are unable to obtain commercial mortgage protection life insurance.
    ``(b) The Secretary shall deduct the premiums charged a veteran for 
insurance under this subchapter from any compensation or other cash 
benefits payable to the veteran by the Secretary and shall pay such 
premiums to the insurer or insurers for such insurance. A veteran 
insured under this subchapter who is not eligible for cash benefits 
from the Secretary may pay the amount of such premiums directly to the 
insurer or insurers.
``Sec. 1994. Payment of insurance
    ``An amount of insurance in force under this subchapter on the date 
of death of a veteran insured under this subchapter shall be paid only 
to the holder of the mortgage loan, the payment of which such insurance 
was granted, for credit on the loan indebtedness, and the liability of 
the insurer under such insurance shall be satisfied when such payment 
is made. If the Secretary is the holder of the mortgage loan, the 
insurance proceeds shall be credited to the loan indebtedness and, as 
appropriate, deposited in the direct loan or loan guaranty revolving 
fund established by section 3723 or 3724 of this title, respectively.
``Sec. 1995. Insurance policy provisions
    ``(a) Each policy purchased under section 1991 of this title shall 
provide, in terms approved by the Secretary, for the following:
            ``(1) Reinsurance, to the extent and in a manner to be 
        determined by the Secretary to be in the best interest of the 
        veterans or the Government, with such other insurers which meet 
        qualifying criteria established by the Secretary as may elect 
        to participate in such reinsurance.
            ``(2) That at any time the Secretary determines such action 
        to be in the best interest of veterans or the Government, the 
        Secretary may (A) discontinue the entire policy, or (B) at the 
        Secretary's option, exclude from coverage under the policy 
        loans made after a date fixed by the Secretary for that 
        purpose. Any insurance previously issued to a veteran under 
        such policy may not be canceled by the insurer solely because 
        of termination of the policy by the Secretary with respect to 
        new loans. If the entire policy is discontinued, the Secretary 
        shall have the right to require the transfer, to the extent and 
        in a manner to be determined by the Secretary, to any new 
        company or companies with which the Secretary has negotiated a 
        new policy or policies, the amounts, as determined by the 
        existing insurer or insurers with the concurrence of the 
        Secretary, of any policy or contingency reserves with respect 
        to insurance previously in force.
            ``(3) Issuance to each veteran insured under this 
        subchapter of a uniform type of certificate setting forth the 
        benefits to which the veteran is entitled under the insurance.
            ``(4) Any other provisions which are reasonably necessary 
        or appropriate to carry out the provisions of this subchapter.
    ``(b)(1) Any such policy shall also provide that the insurer under 
the policy shall provide to the Secretary an accounting not later than 
90 days after the end of each policy year which shall set forth, in a 
form approved by the Secretary, the following:
            ``(A) The amount of premiums paid by veterans accrued under 
        the contract or agreement from its date of issue to the end of 
        such contract year.
            ``(B) The total of all mortality and other claim charges 
        incurred for that period.
            ``(C) The amount of the insurer's expense and risk charges, 
        if any, for that period.
    ``(2) If the amount under paragraph (1)(A) is greater than the sum 
of the amounts under paragraph (1)(B) and (1)(C), the amount of the 
difference shall be held by the insurer as a contingency reserve to be 
used by that insurer for charges under the contract or agreement only. 
The contingency reserve shall bear interest at a rate to be determined 
in advance of each contract year by the insurer, which rate shall be 
approved by the Secretary if consistent with the rates generally used 
by the insurer for similar funds held under other plans of group life 
insurance.
    ``(3) If the Secretary determines that such contingency reserve has 
attained an amount estimated by the Secretary to make satisfactory 
provision for adverse fluctuations in future charges under the 
contract, the Secretary shall require the insurer to adjust the premium 
rates and contributions so as to prevent any further substantial 
accretions to the contingency reserve.
    ``(4) If the contract or agreement is discontinued and if after all 
charges have been made there is any positive balance remaining in the 
contingency reserve, the insurer shall pay such balance to the 
Secretary. Any such payment shall be credited to the appropriation 
`Compensation and Pensions, Department of Veterans Affairs,'. The 
insurer shall be allowed to make any such payment in equal monthly 
installments over a period of not more than two years.
    ``(c) With respect to insurance contracted for under this 
subchapter, the Secretary may adopt such regulations relating to 
eligibility of the veteran for insurance, the maximum amount of 
insurance, the maximum duration of insurance, and other pertinent 
factors not specifically provided for in this subchapter, as in the 
Secretary's judgment are in the best interest of veterans or the 
Government.
    ``(d) Insurance contracted for under this subchapter shall take 
effect as to any veteran on a date determined by the Secretary.
    ``(e) The amount of the insurance at any time shall be the amount 
necessary to pay the mortgage indebtedness in full, except as otherwise 
limited by the policy.
``Sec. 1996. Termination of insurance
    ``(a) Insurance contracted for under this subchapter shall 
terminate upon whichever of the following first occurs:
            ``(1) Satisfaction of the veteran's indebtedness under the 
        loan upon which the insurance is based.
            ``(2) The veteran's 70th birthday.
            ``(3) Termination of the veteran's ownership of the 
        property securing the loan.
            ``(4) Discontinuance of payment of premiums by the veteran.
            ``(5) Discontinuance of the entire contract or agreement.
    ``(b) Termination of insurance under this subchapter shall not 
affect the guaranty or insurance of the loan by the Secretary under any 
other provision of this chapter.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by adding at the end thereof the following:

  ``Subchapter V--Supplemental Mortgage Protection Life Insurance for 
                            Certain Veterans

``Sec.
``1991. Purchase of insurance.
``1992. Amount of insurance.
``1993. Premium.
``1994. Payment of insurance.
``1995. Insurance policy provisions.
``1996. Termination of insurance.''.