By Marchant H.B. No. 3567 Line and page numbers may not match official copy. Bill not drafted by TLC or Senate E&E. A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to permitting land mortgage loans from the Veterans Land 1-3 Fund. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subchapter K is hereby added to Chapter 161, 1-6 Natural Resources Code, to read as follows: 1-7 SUBCHAPTER K. LAND LOANS 1-8 Sec. 161.501. PURPOSE OF SUBCHAPTER. This Subchapter K is 1-9 added to Chapter 161 in order to provide the Board with additional 1-10 powers in connection with the administration and operation of the 1-11 fund found in the previous Subchapters, and it shall be liberally 1-12 construed to effectuate such purpose. 1-13 Sec. 161.502. ADDITIONAL DEFINITIONS. In this chapter, in 1-14 addition to the definitions Section 161.001: 1-15 (a) "Lending institution" means a bank, trust company, 1-16 savings bank, national banking association, savings and loan 1-17 association, building and loan association, mortgage banker, 1-18 mortgage company, credit union, life insurance company, or other 1-19 financial institution that customarily provides service or aids in 1-20 the financing of mortgages on single-family residential housing 1-21 which has been approved for participation in the program by the 1-22 board. The term includes a holding company for any of the 1-23 foregoing. 2-1 (b) "Loan" means a veterans' land loan made or acquired by 2-2 the board under this chapter secured by a mortgage on a veteran's 2-3 land. 2-4 Sec. 161.503. ADDITIONAL MONEY AND INTERESTS INCLUDED IN THE 2-5 VETERANS' LAND FUND. (a) In addition to the items listed in 2-6 Section 161.171, the veterans' land fund shall also include: 2-7 (1) any interest of the board in land loans made from 2-8 money in the fund to veterans pursuant to this subchapter including 2-9 any title insurance thereon or on the land; 2-10 (2) the proceeds derived from the sale or other 2-11 disposition of the board's interest in land mortgage loans; 2-12 (3) the money attributable to any bonds issued and 2-13 sold by the board to provide money for the fund which shall include 2-14 but shall not be limited to the proceeds from the issuance and sale 2-15 of such bonds; 2-16 (4) income, rents, and any other pecuniary benefit 2-17 received by the board as a result of making these loans; 2-18 (5) sums received by way of indemnity or forfeiture 2-19 for the failure of any bidder for the purchase of any such bonds to 2-20 comply with the person's bid and accept and pay for such bonds and 2-21 amounts received by the board under bond enhancement agreements 2-22 with respect to the bonds; 2-23 (6) interest received from investments of any such 2-24 money; and 2-25 (7) any equitable interest in properties encumbered 2-26 under this program and attributable to the fund. 3-1 (b) Except as otherwise provided by law, money in the fund 3-2 shall be deposited in the State Treasury to the credit of the Fund. 3-3 Sec. 161.504. LOANS. (a) The board shall make or acquire 3-4 loans with money from the fund in accordance with this subchapter 3-5 and the rules adopted by the board. 3-6 (b) To qualify for a loan under this subchapter, a person 3-7 must be a veteran at the time the persons applies for the loan. If 3-8 an eligible veteran dies after filing an application, the surviving 3-9 spouse may complete the transaction. 3-10 (c) The final principal payment on any loan under this 3-11 subchapter shall be made not later than 40 years after the date of 3-12 the loan. The board shall determine the maximum principal amount 3-13 of loans to any veteran that may be outstanding at any time. 3-14 (d) The board shall obtain insurance covering at least 50 3-15 percent of all losses anticipated in connection with veteran 3-16 payment defaults on loans secured by first or second mortgages, 3-17 based upon the advice of one or more qualified consultants to the 3-18 board as to potential losses which may be reasonably expected on 3-19 the loans as determined by analysis, including but not limited to 3-20 actual experience in the residential mortgage lending industry on 3-21 similar types of mortgage loans, or, in the alternative, the board 3-22 shall obtain insurance which shall insure repayment of at least 50 3-23 percent of the outstanding principal amount of all loans in the 3-24 event of the nonpayment of the loans by the veterans. 3-25 (e) All fees to be charged to a veteran receiving a loan 3-26 under this subchapter must be approved by the board. The board may 4-1 enter into contracts with lending institutions to assist in 4-2 processing, originating, servicing, or administering loans under 4-3 this chapter. Any fees and expenses incurred in connection with a 4-4 loan, including the cost of insurance, may be charged to the 4-5 veteran and made a part of the veteran's payments. 4-6 (f) The board may by rule determine, from time to time, the 4-7 number of loans that a veteran may receive under this subchapter. 4-8 (g) The board may permit a veteran to combine a loan under 4-9 this subchapter with a home mortgage loan for a home under Chapter 4-10 162, Natural Resources Code, and prescribe the amounts and forms 4-11 thereof, provided that the loan is funded from amounts on deposit 4-12 in the fund and provided that the home mortgage loan may not be 4-13 funded from amounts in the fund. 4-14 Sec. 161.505. INTEREST RATE. A loan under this subchapter 4-15 shall bear a fixed, variable, floating, or other rate or rates of 4-16 interest determined by the board. The board may set the interest 4-17 rate or rates to provide a margin over the rate paid by the board 4-18 on its bonds issued under this subchapter. The difference between 4-19 the cost of the money to the board and the interest rate or rates 4-20 charged to a veteran may be used in whole or in part to defray the 4-21 expense of administering the program. To assure the maximum 4-22 benefit of the program to the veteran, the board shall adopt rules 4-23 relative to the fees, charges, and interest rates charged by the 4-24 lending institutions on the financing of the land with money other 4-25 than from the fund and shall limit to the maximum extent practical 4-26 such fees, charges, and interest rates to those which would be 5-1 collected by the lending institution in the normal course of its 5-2 mortgage lending business. 5-3 Sec. 161.506. SECURITY FOR THE LOAN. No disbursement of 5-4 funds on a loan under this subchapter shall be made unless the loan 5-5 is secured by a mortgage, deed of trust, or other lien on the land. 5-6 A mortgage retained by or a deed of trust to the board or any other 5-7 lien may be a participation in a lien securing any other loan for 5-8 the purchase of the property, including a lien for a home as 5-9 described in Chapter 162, Natural Resources Code. Payments to 5-10 retire the loan shall be made at times determined by the board. 5-11 Sec. 161.507. INITIAL PAYMENT OR EQUITY. The board may 5-12 require an initial payment on a loan or may require an investment 5-13 in the land by the veteran in an amount or amounts set by the 5-14 board's rules under this subchapter. 5-15 Sec. 161.508. TIME LIMIT ON TRANSFER. (a) Land or any 5-16 interest therein, against which there is a mortgage, deed of trust, 5-17 or any other lien securing a loan under this subchapter may not be 5-18 leased, transferred, sold, or conveyed in whole or in part until 5-19 the original veteran purchaser has owned the land for a period of 5-20 three years from the date of the purchase of the land and complied 5-21 with the terms and conditions of this chapter and the rules of the 5-22 board. 5-23 (b) After the three-year period, land may be transferred, 5-24 sold, or conveyed subject to any lien securing a loan under this 5-25 subchapter at any time if all mature interest, principal, and taxes 5-26 have been paid, the terms and conditions of this chapter and rules 6-1 of the board have been met, and the approval of the board has been 6-2 obtained. 6-3 (c) The board may waive the time limitation of Subsection 6-4 (a) of this section upon the death, bankruptcy, financial 6-5 incapacity, or divorce of the veteran or in the event a veteran is 6-6 forced to move due to a change in employment or because his home is 6-7 condemned through no fault of the veteran or at any other time it 6-8 deems a waiver to be in the best interest of the program. 6-9 (d) In the event the requirements of Subsection (a) of this 6-10 section fail to be met and the board does not waive the time 6-11 limitations as provided in Subsection (c) of this section, the 6-12 board may provide in its rules for the escalation of the interest 6-13 rate on the loan to a higher rate of interest or the acceleration 6-14 of all principal and interest on the loan or such other remedy as 6-15 the board may in its discretion deem appropriate. 6-16 Sec. 161.509. FORECLOSURE AND RESALE. The board shall adopt 6-17 rules providing for the procedures and the rules for foreclosure 6-18 and resale of land financed with a loan under this subchapter. 6-19 Sec. 161.510. INTEREST RATE ON DELINQUENT PRINCIPAL AND 6-20 INTEREST. Principal and interest that become delinquent shall bear 6-21 interest at a rate determined by the board. 6-22 SECTION 2. This Act takes effect September 1, 2001.