1-1                                   AN ACT
 1-2     relating to provision by the Veterans Land Board of loans to
 1-3     veterans for the purchase of land.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Section 161.171(a), Natural Resources Code, is
 1-6     amended to read as follows:
 1-7           (a)  The veterans' land fund shall include:
 1-8                 (1)  land purchased by the board from money in the
 1-9     fund;
1-10                 (2)  money attributable to general obligation bonds
1-11     issued and sold by the board, including proceeds from the issuance
1-12     and sale of the bonds;
1-13                 (3)  money received from the sale or resale of land or
1-14     rights in land purchased with the proceeds from the general
1-15     obligation bonds;
1-16                 (4)  money received from the sale or resale of land or
1-17     rights in land purchased with other money attributable to the
1-18     general obligation bonds;
1-19                 (5)  proceeds derived from the sale or other
1-20     disposition of the board's interest in:
1-21                       (A)  contracts for the sale of land or rights in
1-22     land; or
1-23                       (B)  a loan made under Subchapter K;
1-24                 (6)  interest and penalties received from the sale or
 2-1     resale of [the] land purchased under this chapter or from rights in
 2-2     the land;
 2-3                 (7)  bonuses, income, rents, royalties, and any other
 2-4     pecuniary benefit received by the board from:
 2-5                       (A)  [the] land purchased under this chapter; or
 2-6                       (B)  loans made under Subchapter K;
 2-7                 (8)  money received as indemnity or forfeiture for the
 2-8     failure of any bidder for purchase of general obligation bonds to
 2-9     comply with the person's bid and accept and pay for the bonds or
2-10     for the failure of a bidder for purchase of land comprising a part
2-11     of the fund to comply with the person's bid and accept and pay for
2-12     the land and amounts received by the board under bond enhancement
2-13     agreements with respect to the bonds;  [and]
2-14                 (9)  interest received from investments of this money;
2-15                 (10)  any interest of the board in a loan made under
2-16     Subchapter K using money in the fund, including any title insurance
2-17     related to the loan or land purchased with the loan; and
2-18                 (11)  any equitable interest in property encumbered
2-19     under Subchapter K and attributable to the fund.
2-20           SECTION 2. Chapter 161, Natural Resources Code, is amended by
2-21     adding Subchapter K to read as follows:
2-22                          SUBCHAPTER K.  LAND LOANS
2-23           Sec. 161.501.  PURPOSE OF SUBCHAPTER; CONSTRUCTION. The
2-24     purpose of this subchapter is to authorize the board to provide
2-25     loans to veterans for the purchase of land that are secured by a
2-26     mortgage, deed of trust, or other lien on the land. This subchapter
2-27     shall be liberally construed to effect that purpose.
 3-1           Sec. 161.502.  DEFINITIONS. In this subchapter:
 3-2                 (1)  "Lending institution" means a bank, savings bank,
 3-3     savings and loan association, credit union, trust company, mortgage
 3-4     banker, mortgage company, life insurance company, or other
 3-5     financial institution that customarily provides service or aids in
 3-6     the financing of mortgages on single-family residential housing, or
 3-7     a holding company for one of those institutions.
 3-8                 (2)  "Loan" means a veterans' land loan made or
 3-9     acquired by the board under this subchapter secured by a mortgage,
3-10     deed of trust, or other lien on the land purchased with the
3-11     proceeds of the loan.
3-12           Sec. 161.503.  LOANS. (a)  In addition to purchasing land
3-13     under Subchapters F and G, the board shall make or acquire loans
3-14     with money from the fund to finance land purchases by eligible
3-15     persons in accordance with this subchapter and rules adopted by the
3-16     board.
3-17           (b)  The board may enter into contracts with lending
3-18     institutions to assist in processing, originating, servicing, or
3-19     administering loans under this subchapter.
3-20           (c)  The board shall obtain insurance:
3-21                 (1)  covering at least 50 percent of all losses
3-22     anticipated in connection with payment defaults on loans secured by
3-23     first or second mortgages, based on the advice of one or more
3-24     qualified consultants to the board as to potential losses that may
3-25     be reasonably expected on the loans as determined by analysis that
3-26     includes actual experience in the residential mortgage lending
3-27     industry on similar types of mortgage loans; or
 4-1                 (2)  that insures repayment of at least 50 percent of
 4-2     the outstanding principal amount of all loans made under this
 4-3     subchapter if the loans are not repaid by the recipients.
 4-4           (d)  The board shall adopt rules as necessary to implement
 4-5     this subchapter.
 4-6           Sec. 161.504.  ELIGIBILITY FOR LOAN. (a)  To qualify for a
 4-7     loan under this subchapter, a person must be a veteran at the time
 4-8     the person applies for the loan.  If an eligible veteran dies after
 4-9     filing an application for a loan, the veteran's surviving spouse
4-10     may complete the transaction.
4-11           (b)  The board by rule may determine the number of loans that
4-12     a person may receive under this subchapter.
4-13           Sec. 161.505.  SECURITY FOR LOAN. A disbursement of money on
4-14     a loan may not be made unless the loan is secured by a mortgage,
4-15     deed of trust, or other lien on the land purchased with the
4-16     proceeds of the loan.  A mortgage, deed of trust, or other lien may
4-17     be a participation in a lien securing any other loan for the
4-18     purchase of the property, including a lien securing a home loan
4-19     under Chapter 162.
4-20           Sec. 161.506.  INITIAL PAYMENT OR EQUITY. The board may
4-21     require an initial payment on a loan or may require an investment
4-22     in the land by the loan recipient in an amount set by the board by
4-23     rule.
4-24           Sec. 161.507.  LOAN PAYMENTS. (a) The final principal payment
4-25     on a loan shall be made not later than the 40th anniversary of the
4-26     date of the loan.
4-27           (b)  The board shall determine the maximum principal amount
 5-1     of loans to the same eligible person that may be outstanding at any
 5-2     time.
 5-3           (c)  Payments on the loan must be made at times determined by
 5-4     the board.
 5-5           Sec. 161.508.  FEES; INTEREST.   (a)  All fees to be charged
 5-6     to a person who receives a loan must be approved by the board.
 5-7           (b)  Any fees or expenses incurred in connection with a loan,
 5-8     including the cost of insurance, may be charged to the loan
 5-9     recipient and included in the principal amount of the loan.
5-10           (c)  A loan must bear a fixed, variable, floating, or other
5-11     rate or rates of interest determined by the board.  The board may
5-12     set the interest rate or rates to provide a margin over the rate
5-13     paid by the board on bonds issued by the board under this chapter.
5-14           (d)  The difference between the cost of the money to the
5-15     board and the interest rate or rates charged to a loan recipient
5-16     may be used in whole or in part to defray the expense of
5-17     administering the program.
5-18           (e)  To ensure the maximum benefit of the program to the loan
5-19     recipient, the board shall adopt rules:
5-20                 (1)  relating to the fees, charges, and interest rates
5-21     that may be charged by a lending institution in connection with
5-22     financing the purchase of land with money that does not come from
5-23     the fund; and
5-24                 (2)  limiting to the maximum extent practical the fees,
5-25     charges, and interest rates to the fees, charges, and interest
5-26     rates that would be collected by the lending institution in the
5-27     normal course of the institution's mortgage lending business.
 6-1           Sec. 161.509.  INTEREST RATE ON DELINQUENT PRINCIPAL AND
 6-2     INTEREST. Principal and interest that become delinquent bear
 6-3     interest at a rate determined by the board.
 6-4           Sec. 161.510.  COMBINATION WITH HOME LOAN. The board may:
 6-5                 (1)  permit a person to combine a loan made under this
 6-6     subchapter with a home loan made under Chapter 162 if the portion
 6-7     of the loan made under this subchapter is funded from amounts on
 6-8     deposit in the fund and the portion of the loan made under Chapter
 6-9     162 is not funded from amounts in the fund; and
6-10                 (2)  prescribe the amounts of and forms for a combined
6-11     loan under this section.
6-12           Sec. 161.511.  TIME LIMIT ON TRANSFER OF LAND. (a)  Except as
6-13     provided by Subsection (c), a recipient of a loan may not lease,
6-14     sell, or otherwise transfer in whole or part land or any interest
6-15     in land against which there is a mortgage, deed of trust, or any
6-16     other lien securing the loan:
6-17                 (1)  before the third anniversary of the date the
6-18     recipient purchases the land; and
6-19                 (2)  unless the recipient has complied with any other
6-20     terms and conditions provided by this subchapter and the rules of
6-21     the board.
6-22           (b)  After the three-year period prescribed by Subsection
6-23     (a), land may be sold or otherwise transferred, subject to any lien
6-24     securing a loan, if:
6-25                 (1)  all interest, principal, and taxes that are due
6-26     have been paid;
6-27                 (2)  the terms and conditions of this subchapter and
 7-1     rules of the board have been met; and
 7-2                 (3)  the board approves the sale or other transfer.
 7-3           (c)  The board may waive the three-year period prescribed by
 7-4     Subsection (a):
 7-5                 (1)  in a case of death, bankruptcy, financial
 7-6     incapacity, or divorce of the loan recipient;
 7-7                 (2)  if a loan recipient is forced to move because of a
 7-8     change in employment or because the recipient's home is condemned
 7-9     through no fault of the recipient; or
7-10                 (3)  at any other time the board considers a waiver to
7-11     be in the best interest of the program.
7-12           Sec. 161.512.  INCREASE IN INTEREST RATE; ACCELERATED
7-13     REPAYMENT. If a recipient of a loan does not comply with the
7-14     requirements of Section 161.511(a) and the board does not waive the
7-15     three-year period prescribed by that section, the board by rule may
7-16     provide for:
7-17                 (1)  an increase in the interest rate on the loan;
7-18                 (2)  the acceleration of repayment of the principal of
7-19     and interest on the loan; or
7-20                 (3)  any other remedy the board considers appropriate.
7-21           Sec. 161.513.  FORECLOSURE AND RESALE. The board shall adopt
7-22     rules providing procedures governing foreclosure of a lien securing
7-23     a loan.
7-24           SECTION 3.  This Act takes effect immediately if it receives
7-25     a vote of two-thirds of all the members elected to each house, as
7-26     provided by Section 39, Article III, Texas Constitution.  If this
7-27     Act does not receive the vote necessary for immediate effect, this
 8-1     Act takes effect September 1, 2001.
         _______________________________     _______________________________
             President of the Senate              Speaker of the House
               I certify that H.B. No. 3567 was passed by the House on April
         27, 2001, by a non-record vote; and that the House concurred in
         Senate amendments to H.B. No. 3567 on May 10, 2001, by the
         following vote:  Yeas 147, Nays 0, 1 present, not voting.
                                             _______________________________
                                                 Chief Clerk of the House
               I certify that H.B. No. 3567 was passed by the Senate, with
         amendments, on May 7, 2001, by the following vote:  Yeas 29, Nays
         0, 1 present, not voting.
                                             _______________________________
                                                 Secretary of the Senate
         APPROVED:  __________________________
                              Date
                    __________________________
                            Governor