I

103D CONGRESS

1ST SESSION H. R. 2976

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.

IN THE HOUSE OF REPRESENTATIVES

AUGUST 6, 1993

Mr. MONTGOMERY (by request) introduced the following bill; which was

referred to the Committee on Veterans’ Affairs

A BILL

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. MORTGAGE PROTECTION LIFE INSURANCE.

4 (a) IN GENERAL.—Chapter 19 of title 38, United

5 States Code, is amended by adding at the end the follow6 ing new subchapter:
2

•HR 2976 IH

1 ‘‘SUBCHAPTER V—SUPPLEMENTAL MORTGAGE

2 PROTECTION LIFE INSURANCE FOR CER3 TAIN VETERANS

4 ‘‘§ 1991. Purchase of insurance

5 ‘‘(a) The Secretary may, without regard to section

6 3709 of the Revised Statutes (41 U.S.C. 5), purchase

7 from one or more life insurance companies a policy or poli8 cies of mortgage protection life insurance on a group basis

9 to provide the benefits specified in this subchapter.

10 ‘‘(b) A veteran (other than a veteran eligible for in11 surance under section 2106 of this title) who establishes

12 to the satisfaction of the Secretary that the veteran is un13 able to obtain commercial life insurance because of a serv14 ice-connected disability shall, upon application made in

15 such form as the Secretary shall prescribe, be granted in16 surance under this subchapter.

17 ‘‘§ 1992. Amount of insurance

18 ‘‘(a) The initial amount of insurance provided to a

19 veteran under this subchapter may not exceed the lowest

20 of the following amounts:

21 ‘‘(1) $40,000.

22 ‘‘(2) The amount of the loan outstanding on a

23 dwelling (and necessary land therefor) owned or oc24 cupied by the veteran as a home on the date insur25 ance under this subchapter is placed in effect.
3

•HR 2976 IH

1 ‘‘(3) In the case of a veteran who purchases or

2 constructs a dwelling (including necessary land

3 therefor) to be occupied by the veteran as a home

4 on or after the effective date of this section, the

5 amount of the original loan on that dwelling (and

6 land).

7 ‘‘(b) The amount of such insurance shall be reduced

8 according to the amortization schedule of the loan and at

9 no time shall exceed the amount of the outstanding loan

10 with interest.

11 ‘‘§ 1993. Premiums

12 ‘‘(a) The premiums charged a veteran for insurance

13 under this subchapter shall be paid at such times and in

14 such manner as the Secretary shall prescribe. Those pre15 miums shall be based on such mortality data as the Sec16 retary considers appropriate to cover only the mortality

17 cost of insuring veterans with service-connected disabilities

18 who are unable to obtain commercial mortgage protection

19 life insurance.

20 ‘‘(b) The Secretary shall deduct the premiums

21 charged a veteran for insurance under this subchapter

22 from any compensation or other cash benefits payable to

23 the veteran by the Secretary and shall pay such premiums

24 to the insurer or insurers for such insurance. A veteran

25 insured under this subchapter who is not eligible for cash
4

•HR 2976 IH

1 benefits from the Secretary may pay the amount of such

2 premiums directly to the insurer or insurers.

3 ‘‘§ 1994. Payment of insurance

4 ‘‘An amount of insurance in force under this sub5 chapter on the date of death of a veteran insured under

6 this subchapter shall be paid only to the holder of the

7 mortgage loan, the payment of which such insurance was

8 granted, for credit on the loan indebtedness, and the liabil9 ity of the insurer under such insurance shall be satisfied

10 when such payment is made. If the Secretary is the holder

11 of the mortgage loan, the insurance proceeds shall be cred12 ited to the loan indebtedness and, as appropriate, depos13 ited in the direct loan or loan guaranty revolving fund es14 tablished by section 3723 or 3724 of this title, respec15 tively.

16 ‘‘§ 1995. Insurance policy provisions

17 ‘‘(a) Each policy purchased under section 1991 of

18 this title shall provide, in terms approved by the Secretary,

19 for the following:

20 ‘‘(1) Reinsurance, to the extent and in a man21 ner to be determined by the Secretary to be in the

22 best interest of the veterans or the Government,

23 with such other insurers which meet qualifying cri24 teria established by the Secretary as may elect to

25 participate in such reinsurance.
5

•HR 2976 IH

1 ‘‘(2) That at any time the Secretary determines

2 such action to be in the best interest of veterans or

3 the Government, the Secretary may (A) discontinue

4 the entire policy, or (B) at the Secretary’s option,

5 exclude from coverage under the policy loans made

6 after a date fixed by the Secretary for that purpose.

7 Any insurance previously issued to a veteran under

8 such policy may not be canceled by the insurer solely

9 because of termination of the policy by the Secretary

10 with respect to new loans. If the entire policy is dis11 continued, the Secretary shall have the right to re12 quire the transfer, to the extent and in a manner to

13 be determined by the Secretary, to any new company

14 or companies with which the Secretary has nego15 tiated a new policy or policies, the amounts, as de16 termined by the existing insurer or insurers with the

17 concurrence of the Secretary, of any policy or con18 tingency reserves with respect to insurance pre19 viously in force.

20 ‘‘(3) Issuance to each veteran insured under

21 this subchapter of a uniform type of certificate set22 ting forth the benefits to which the veteran is enti23 tled under the insurance.
6

•HR 2976 IH

1 ‘‘(4) Any other provisions which are reasonably

2 necessary or appropriate to carry out the provisions

3 of this subchapter.

4 ‘‘(b)(1) Any such policy shall also provide that the

5 insurer under the policy shall provide to the Secretary an

6 accounting not later than 90 days after the end of each

7 policy year which shall set forth, in a form approved by

8 the Secretary, the following:

9 ‘‘(A) The amount of premiums paid by veterans

10 accrued under the contract or agreement from its

11 date of issue to the end of such contract year.

12 ‘‘(B) The total of all mortality and other claim

13 charges incurred for that period.

14 ‘‘(C) The amount of the insurer’s expense and

15 risk charges, if any, for that period.

16 ‘‘(2) If the amount under paragraph (1)(A) is greater

17 than the sum of the amounts under paragraph (1)(B) and

18 (1)(C), the amount of the difference shall be held by the

19 insurer as a contingency reserve to be used by that insurer

20 for charges under the contract or agreement only. The

21 contingency reserve shall bear interest at a rate to be de22 termined in advance of each contract year by the insurer,

23 which rate shall be approved by the Secretary if consistent

24 with the rates generally used by the insurer for similar

25 funds held under other plans of group life insurance.
7

•HR 2976 IH

1 ‘‘(3) If the Secretary determines that such contin2 gency reserve has attained an amount estimated by the

3 Secretary to make satisfactory provision for adverse fluc4 tuations in future charges under the contract, the Sec5 retary shall require the insurer to adjust the premium

6 rates and contributions so as to prevent any further sub7 stantial accretions to the contingency reserve.

8 ‘‘(4) If the contract or agreement is discontinued and

9 if after all charges have been made there is any positive

10 balance remaining in the contingency reserve, the insurer

11 shall pay such balance to the Secretary. Any such payment

12 shall be credited to the appropriation ‘Compensation and

13 Pensions, Department of Veterans Affairs,’. The insurer

14 shall be allowed to make any such payment in equal

15 monthly installments over a period of not more than two

16 years.

17 ‘‘(c) With respect to insurance contracted for under

18 this subchapter, the Secretary may adopt such regulations

19 relating to eligibility of the veteran for insurance, the max20 imum amount of insurance, the maximum duration of in21 surance, and other pertinent factors not specifically pro22 vided for in this subchapter, as in the Secretary’s judg23 ment are in the best interest of veterans or the Govern24 ment.
8

•HR 2976 IH

1 ‘‘(d) Insurance contracted for under this subchapter

2 shall take effect as to any veteran on a date determined

3 by the Secretary.

4 ‘‘(e) The amount of the insurance at any time shall

5 be the amount necessary to pay the mortgage indebtedness

6 in full, except as otherwise limited by the policy.

7 ‘‘§ 1996. Termination of insurance

8 ‘‘(a) Insurance contracted for under this subchapter

9 shall terminate upon whichever of the following first oc10 curs:

11 ‘‘(1) Satisfaction of the veteran’s indebtedness

12 under the loan upon which the insurance is based.

13 ‘‘(2) The veteran’s 70th birthday.

14 ‘‘(3) Termination of the veteran’s ownership of

15 the property securing the loan.

16 ‘‘(4) Discontinuance of payment of premiums

17 by the veteran.

18 ‘‘(5) Discontinuance of the entire contract or

19 agreement.

20 ‘‘(b) Termination of insurance under this subchapter

21 shall not affect the guaranty or insurance of the loan by

22 the Secretary under any other provision of this chapter.’’.

23 (b) CLERICAL AMENDMENT.—The table of sections

24 at the beginning of such chapter is amended by adding

25 at the end thereof the following:
9

•HR 2976 IH

‘‘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.’’.

Æ