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103D CONGRESS
1ST SESSION
H. R. 2331
To amend title 38, United States Code, to clarify the rights of veterans
with regard to procedures for housing loans upon default, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JUNE 8, 1993
Mr. EVANS introduced the following bill; which was referred to the Committee
on Veterans’ Affairs
A BILL
To amend title 38, United States Code, to clarify the rights
of veterans with regard to procedures for housing loans
upon default, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. PROCEDURES ON DEFAULT OF HOUSING
LOANS.
(a) IN GENERAL.—Paragraph (2) of section 3732(a)
of title 38, United States Code, is amended to read as
follows:
‘‘(2)(A) Before suit or foreclosure the holder of the
obligation shall notify the Secretary of the default. Before
the holder carries out a liquidation sale of real property
securing a defaulted loan, the Secretary within 60 days
after notification of default may, at the Secretary’s option,
pay the holder of the obligation the unpaid balance of the
obligation plus accrued interest and reimburse the holder
for such advances, costs, and attorney fees as the Sec-
retary finds were properly and reasonably incurred in con-
nection with the default and receive an assignment of the
loan and security. Nothing in this section shall preclude
any forebearance for the benefit of the mortgagor as may
be agreed upon by the parties to the loan and approved
by the Secretary.
‘‘(B) Within 10 days after receiving a notice of de-
fault pursuant to paragraph (1) of this subsection, the
Secretary shall notify the mortgagor that the Secretary
may purchase the loan from the holder. The notification
shall specify—
‘‘(i) that if the Secretary purchases the loan,
the Secretary—
‘‘(I) has the authority to modify the loan
instruments by temporarily or permanently low-
ering the interest rate or by extending or
reamortizing the loan; and
‘‘(II) may grant forbearance of interest or
principal or both for a period of not more than
12 months;
‘‘(ii) that if the mortgagor wants the Secretary
to purchase the loan, the mortgagor must submit a
written request to the Secretary within 20 days of
receipt of the Secretary’s notification; and
‘‘(iii) the consequences to the mortgagor if the
Secretary purchases the loan.
‘‘(C) Upon receiving a request from the mortgagor
to purchase the loan pursuant to subparagraph (B) of this
paragraph, the Secretary, for the purpose of avoiding fore-
closure, may purchase the loan in accordance with sub-
paragraph (A). The Secretary shall purchase the loan
from the holder of the obligation if—
‘‘(i) the default was caused by circumstances
beyond the control of the mortgagor and rendered
the mortgagor temporarily unable to correct a mort-
gage delinquency and to resume full mortgage pay-
ments; and
‘‘(ii) it is determined that—
‘‘(I) the holder is unwilling to grant fur-
ther forbearance;
‘‘(II) the mortgagor desires to retain and
occupy the property;
‘‘(III) the mortgagor has maintained the
property in good condition or, if major repairs
are required, such repairs are due to cir-
cumstances which were beyond the mortgagor’s
control;
‘‘(IV) the estimated net value of the prop-
erty exceeds the unguaranteed portion of the
loan; and
‘‘(V) there is a reasonable prospect that
the mortgagor will be able to resume mortgage
payments within 12 months after the Secretary
purchases the loan.
‘‘(D) The Secretary may provide assistance, under
such terms and conditions as the Secretary may provide,
to a mortgagor whose loan has been purchased under the
provisions of subparagraph (C) of this paragraph by—
‘‘(i) modifying the loan instruments to lower the
interest rate or to extend or to reamortize the loan;
and
‘‘(ii) granting forbearance of interest or prin-
cipal or both for a period of not more than 12
months.
‘‘(E) If the Secretary decides not to purchase the
loan—
‘‘(i) the Secretary shall notify the mortgagor of
the decision and its basis within 30 days after re-
ceiving a written request from the mortgagor asking
the Secretary to purchase the loan pursuant to sub-
paragraph (C) of this paragraph; and
‘‘(ii) if the mortgagor is a veteran and used the
veteran’s entitlement under section 3702 to obtain
the loan or substituted entitlement as described in
section 3702(b)(2) to purchase real property secur-
ing a loan guaranteed under this chapter, notice
under clause (i) shall include notice of the right of
appeal.
‘‘(F) The Secretary shall obtain and hold in safekeep-
ing a quit claim deed from the mortgagor to the Secretary
for the real property securing the loan after the loan is
purchased from the loan holder and before the Secretary
makes any modification to the loan instruments or grants
any forbearance. If the mortgagor brings the loan current
and keeps the loan current for 12 consecutive months, the
unrecorded quit claim deed shall be returned to the mort-
gagor. If, exclusive of any period of forbearance, the loan
becomes 6 months delinquent, the Secretary may record
the quit claim deed and acquire the property securing the
loan without incurring substantial delays and foreclosure
expenses. Nothing in this section shall preclude the Sec-
retary from initiating foreclosure before the loan becomes
6 months delinquent if the Secretary believes it is in the
best interest of the United States to do so.
‘‘(G) For the purposes of sections 3720(e) and (h),
loans purchased pursuant to subparagraph (C) that are
not in default and that have not been in default for at
least 12 consecutive months shall be included in pools of
mortgage loans with respect to which certificates or other
securities are issued or guaranteed.’’.
(b) PERSONNEL.—Section 3732(a)(4) of title 38,
United States Code, is amended—
(1) by striking out subparagraph (B); and
(2) in paragraph (4) (as amended by paragraph
(1) of this subsection), by striking out ‘‘(A)’’;
(3) in paragraph (4) (as amended by paragraph
(2) of this subsection)—
(A) by redesignating clauses (i) and (ii) as
subparagraphs (A) and (B), respectively; and
(B) by redesignating subclauses (I) and
(II) as clauses (i) and (ii), respectively.
(c) EXTENSION OF PROCEDURE FOR LIQUIDATION
SALES.—Subsection (c) section 3732(c) of title 38, United
States Code, is amended by striking out paragraph (11).
(d) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to any housing loan guaranteed
under chapter 37 of title 38, United States Code, with
respect to which the Secretary of Veterans Affairs receives
notice of default after the date of enactment of this Act.
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