1-1 By: Marchant (Senate Sponsor - Truan) H.B. No. 3567
1-2 (In the Senate - Received from the House April 30, 2001;
1-3 May 1, 2001, read first time and referred to Committee on Veteran
1-4 Affairs and Military Installations; May 3, 2001, reported
1-5 adversely, with favorable Committee Substitute by the following
1-6 vote: Yeas 4, Nays 0; May 3, 2001, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 3567 By: Truan
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to provision by the Veterans Land Board of loans to
1-11 veterans for the purchase of land.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 161.171(a), Natural Resources Code, is
1-14 amended to read as follows:
1-15 (a) The veterans' land fund shall include:
1-16 (1) land purchased by the board from money in the
1-17 fund;
1-18 (2) money attributable to general obligation bonds
1-19 issued and sold by the board, including proceeds from the issuance
1-20 and sale of the bonds;
1-21 (3) money received from the sale or resale of land or
1-22 rights in land purchased with the proceeds from the general
1-23 obligation bonds;
1-24 (4) money received from the sale or resale of land or
1-25 rights in land purchased with other money attributable to the
1-26 general obligation bonds;
1-27 (5) proceeds derived from the sale or other
1-28 disposition of the board's interest in:
1-29 (A) contracts for the sale of land or rights in
1-30 land; or
1-31 (B) a loan made under Subchapter K;
1-32 (6) interest and penalties received from the sale or
1-33 resale of [the] land purchased under this chapter or from rights in
1-34 the land;
1-35 (7) bonuses, income, rents, royalties, and any other
1-36 pecuniary benefit received by the board from:
1-37 (A) [the] land purchased under this chapter; or
1-38 (B) loans made under Subchapter K;
1-39 (8) money received as indemnity or forfeiture for the
1-40 failure of any bidder for purchase of general obligation bonds to
1-41 comply with the person's bid and accept and pay for the bonds or
1-42 for the failure of a bidder for purchase of land comprising a part
1-43 of the fund to comply with the person's bid and accept and pay for
1-44 the land and amounts received by the board under bond enhancement
1-45 agreements with respect to the bonds; [and]
1-46 (9) interest received from investments of this money;
1-47 (10) any interest of the board in a loan made under
1-48 Subchapter K using money in the fund, including any title insurance
1-49 related to the loan or land purchased with the loan; and
1-50 (11) any equitable interest in property encumbered
1-51 under Subchapter K and attributable to the fund.
1-52 SECTION 2. Chapter 161, Natural Resources Code, is amended by
1-53 adding Subchapter K to read as follows:
1-54 SUBCHAPTER K. LAND LOANS
1-55 Sec. 161.501. PURPOSE OF SUBCHAPTER; CONSTRUCTION. The
1-56 purpose of this subchapter is to authorize the board to provide
1-57 loans to veterans for the purchase of land that are secured by a
1-58 mortgage, deed of trust, or other lien on the land. This subchapter
1-59 shall be liberally construed to effect that purpose.
1-60 Sec. 161.502. DEFINITIONS. In this subchapter:
1-61 (1) "Lending institution" means a bank, savings bank,
1-62 savings and loan association, credit union, trust company, mortgage
1-63 banker, mortgage company, life insurance company, or other
1-64 financial institution that customarily provides service or aids in
2-1 the financing of mortgages on single-family residential housing, or
2-2 a holding company for one of those institutions.
2-3 (2) "Loan" means a veterans' land loan made or
2-4 acquired by the board under this subchapter secured by a mortgage,
2-5 deed of trust, or other lien on the land purchased with the
2-6 proceeds of the loan.
2-7 Sec. 161.503. LOANS. (a) In addition to purchasing land
2-8 under Subchapters F and G, the board shall make or acquire loans
2-9 with money from the fund to finance land purchases by eligible
2-10 persons in accordance with this subchapter and rules adopted by the
2-11 board.
2-12 (b) The board may enter into contracts with lending
2-13 institutions to assist in processing, originating, servicing, or
2-14 administering loans under this subchapter.
2-15 (c) The board shall obtain insurance:
2-16 (1) covering at least 50 percent of all losses
2-17 anticipated in connection with payment defaults on loans secured by
2-18 first or second mortgages, based on the advice of one or more
2-19 qualified consultants to the board as to potential losses that may
2-20 be reasonably expected on the loans as determined by analysis that
2-21 includes actual experience in the residential mortgage lending
2-22 industry on similar types of mortgage loans; or
2-23 (2) that insures repayment of at least 50 percent of
2-24 the outstanding principal amount of all loans made under this
2-25 subchapter if the loans are not repaid by the recipients.
2-26 (d) The board shall adopt rules as necessary to implement
2-27 this subchapter.
2-28 Sec. 161.504. ELIGIBILITY FOR LOAN. (a) To qualify for a
2-29 loan under this subchapter, a person must be a veteran at the time
2-30 the person applies for the loan. If an eligible veteran dies after
2-31 filing an application for a loan, the veteran's surviving spouse
2-32 may complete the transaction.
2-33 (b) The board by rule may determine the number of loans that
2-34 a person may receive under this subchapter.
2-35 Sec. 161.505. SECURITY FOR LOAN. A disbursement of money on
2-36 a loan may not be made unless the loan is secured by a mortgage,
2-37 deed of trust, or other lien on the land purchased with the
2-38 proceeds of the loan. A mortgage, deed of trust, or other lien may
2-39 be a participation in a lien securing any other loan for the
2-40 purchase of the property, including a lien securing a home loan
2-41 under Chapter 162.
2-42 Sec. 161.506. INITIAL PAYMENT OR EQUITY. The board may
2-43 require an initial payment on a loan or may require an investment
2-44 in the land by the loan recipient in an amount set by the board by
2-45 rule.
2-46 Sec. 161.507. LOAN PAYMENTS. (a) The final principal payment
2-47 on a loan shall be made not later than the 40th anniversary of the
2-48 date of the loan.
2-49 (b) The board shall determine the maximum principal amount
2-50 of loans to the same eligible person that may be outstanding at any
2-51 time.
2-52 (c) Payments on the loan must be made at times determined by
2-53 the board.
2-54 Sec. 161.508. FEES; INTEREST. (a) All fees to be charged
2-55 to a person who receives a loan must be approved by the board.
2-56 (b) Any fees or expenses incurred in connection with a loan,
2-57 including the cost of insurance, may be charged to the loan
2-58 recipient and included in the principal amount of the loan.
2-59 (c) A loan must bear a fixed, variable, floating, or other
2-60 rate or rates of interest determined by the board. The board may
2-61 set the interest rate or rates to provide a margin over the rate
2-62 paid by the board on bonds issued by the board under this chapter.
2-63 (d) The difference between the cost of the money to the
2-64 board and the interest rate or rates charged to a loan recipient
2-65 may be used in whole or in part to defray the expense of
2-66 administering the program.
2-67 (e) To ensure the maximum benefit of the program to the loan
2-68 recipient, the board shall adopt rules:
2-69 (1) relating to the fees, charges, and interest rates
3-1 that may be charged by a lending institution in connection with
3-2 financing the purchase of land with money that does not come from
3-3 the fund; and
3-4 (2) limiting to the maximum extent practical the fees,
3-5 charges, and interest rates to the fees, charges, and interest
3-6 rates that would be collected by the lending institution in the
3-7 normal course of the institution's mortgage lending business.
3-8 Sec. 161.509. INTEREST RATE ON DELINQUENT PRINCIPAL AND
3-9 INTEREST. Principal and interest that become delinquent bear
3-10 interest at a rate determined by the board.
3-11 Sec. 161.510. COMBINATION WITH HOME LOAN. The board may:
3-12 (1) permit a person to combine a loan made under this
3-13 subchapter with a home loan made under Chapter 162 if the portion
3-14 of the loan made under this subchapter is funded from amounts on
3-15 deposit in the fund and the portion of the loan made under Chapter
3-16 162 is not funded from amounts in the fund; and
3-17 (2) prescribe the amounts of and forms for a combined
3-18 loan under this section.
3-19 Sec. 161.511. TIME LIMIT ON TRANSFER OF LAND. (a) Except as
3-20 provided by Subsection (c), a recipient of a loan may not lease,
3-21 sell, or otherwise transfer in whole or part land or any interest
3-22 in land against which there is a mortgage, deed of trust, or any
3-23 other lien securing the loan:
3-24 (1) before the third anniversary of the date the
3-25 recipient purchases the land; and
3-26 (2) unless the recipient has complied with any other
3-27 terms and conditions provided by this subchapter and the rules of
3-28 the board.
3-29 (b) After the three-year period prescribed by Subsection
3-30 (a), land may be sold or otherwise transferred, subject to any lien
3-31 securing a loan, if:
3-32 (1) all interest, principal, and taxes that are due
3-33 have been paid;
3-34 (2) the terms and conditions of this subchapter and
3-35 rules of the board have been met; and
3-36 (3) the board approves the sale or other transfer.
3-37 (c) The board may waive the three-year period prescribed by
3-38 Subsection (a):
3-39 (1) in a case of death, bankruptcy, financial
3-40 incapacity, or divorce of the loan recipient;
3-41 (2) if a loan recipient is forced to move because of a
3-42 change in employment or because the recipient's home is condemned
3-43 through no fault of the recipient; or
3-44 (3) at any other time the board considers a waiver to
3-45 be in the best interest of the program.
3-46 Sec. 161.512. INCREASE IN INTEREST RATE; ACCELERATED
3-47 REPAYMENT. If a recipient of a loan does not comply with the
3-48 requirements of Section 161.511(a) and the board does not waive the
3-49 three-year period prescribed by that section, the board by rule may
3-50 provide for:
3-51 (1) an increase in the interest rate on the loan;
3-52 (2) the acceleration of repayment of the principal of
3-53 and interest on the loan; or
3-54 (3) any other remedy the board considers appropriate.
3-55 Sec. 161.513. FORECLOSURE AND RESALE. The board shall adopt
3-56 rules providing procedures governing foreclosure of a lien securing
3-57 a loan.
3-58 SECTION 3. This Act takes effect immediately if it receives
3-59 a vote of two-thirds of all the members elected to each house, as
3-60 provided by Section 39, Article III, Texas Constitution. If this
3-61 Act does not receive the vote necessary for immediate effect, this
3-62 Act takes effect September 1, 2001.
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