1-1 By: Truan, Lucio S.B. No. 1804
1-2 (In the Senate - Filed April 10, 2001; April 11, 2001, read
1-3 first time and referred to Committee on Finance; April 30, 2001,
1-4 reported favorably by the following vote: Yeas 11, Nays 0;
1-5 April 30, 2001, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to provision by the Veterans' Land Board of loans to
1-9 veterans for the purchase of land.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Subsection (a), Section 161.171, Natural
1-12 Resources Code, is amended to read as follows:
1-13 (a) The veterans' land fund shall include:
1-14 (1) land purchased by the board from money in the
1-15 fund;
1-16 (2) money attributable to general obligation bonds
1-17 issued and sold by the board, including proceeds from the issuance
1-18 and sale of the bonds;
1-19 (3) money received from the sale or resale of land or
1-20 rights in land purchased with the proceeds from the general
1-21 obligation bonds;
1-22 (4) money received from the sale or resale of land or
1-23 rights in land purchased with other money attributable to the
1-24 general obligation bonds;
1-25 (5) proceeds derived from the sale or other
1-26 disposition of the board's interest in:
1-27 (A) contracts for the sale of land or rights in
1-28 land; or
1-29 (B) a loan made under Subchapter K;
1-30 (6) interest and penalties received from the sale or
1-31 resale of [the] land purchased under this chapter or from rights in
1-32 the land;
1-33 (7) bonuses, income, rents, royalties, and any other
1-34 pecuniary benefit received by the board from:
1-35 (A) [the] land purchased under this chapter; or
1-36 (B) loans made under Subchapter K;
1-37 (8) money received as indemnity or forfeiture for the
1-38 failure of any bidder for purchase of general obligation bonds to
1-39 comply with the person's bid and accept and pay for the bonds or
1-40 for the failure of a bidder for purchase of land comprising a part
1-41 of the fund to comply with the person's bid and accept and pay for
1-42 the land and amounts received by the board under bond enhancement
1-43 agreements with respect to the bonds; [and]
1-44 (9) interest received from investments of this money;
1-45 (10) any interest of the board in a loan made under
1-46 Subchapter K using money in the fund, including any title insurance
1-47 related to the loan or land purchased with the loan; and
1-48 (11) any equitable interest in property encumbered
1-49 under Subchapter K and attributable to the fund.
1-50 SECTION 2. Chapter 161, Natural Resources Code, is amended
1-51 by adding Subchapter K to read as follows:
1-52 SUBCHAPTER K. LAND LOANS
1-53 Sec. 161.501. PURPOSE OF SUBCHAPTER; CONSTRUCTION. The
1-54 purpose of this subchapter is to authorize the board to provide
1-55 loans to veterans for the purchase of land that are secured by a
1-56 mortgage, deed of trust, or other lien on the land. This
1-57 subchapter shall be liberally construed to effect that purpose.
1-58 Sec. 161.502. DEFINITIONS. In this subchapter:
1-59 (1) "Lending institution" means a bank, savings bank,
1-60 savings and loan association, credit union, trust company, mortgage
1-61 banker, mortgage company, life insurance company, or other
1-62 financial institution that customarily provides service or aids in
1-63 the financing of mortgages on single-family residential housing, or
1-64 a holding company for one of those institutions.
2-1 (2) "Loan" means a veterans' land loan made or
2-2 acquired by the board under this subchapter secured by a mortgage,
2-3 deed of trust, or other lien on the land purchased with the
2-4 proceeds of the loan.
2-5 Sec. 161.503. LOANS. (a) In addition to purchasing land
2-6 under Subchapters F and G, the board shall make or acquire loans
2-7 with money from the fund to finance land purchases by eligible
2-8 persons in accordance with this subchapter and rules adopted by the
2-9 board.
2-10 (b) The board may enter into contracts with lending
2-11 institutions to assist in processing, originating, servicing, or
2-12 administering loans under this subchapter.
2-13 (c) The board shall obtain insurance:
2-14 (1) covering at least 50 percent of all losses
2-15 anticipated in connection with payment defaults on loans secured by
2-16 first or second mortgages, based on the advice of one or more
2-17 qualified consultants to the board as to potential losses that may
2-18 be reasonably expected on the loans as determined by analysis that
2-19 includes actual experience in the residential mortgage lending
2-20 industry on similar types of mortgage loans; or
2-21 (2) that insures repayment of at least 50 percent of
2-22 the outstanding principal amount of all loans made under this
2-23 subchapter if the loans are not repaid by the recipients.
2-24 (d) The board shall adopt rules as necessary to implement
2-25 this subchapter.
2-26 Sec. 161.504. ELIGIBILITY FOR LOAN. (a) To qualify for a
2-27 loan under this subchapter, a person must be a veteran at the time
2-28 the person applies for the loan. If an eligible veteran dies after
2-29 filing an application for a loan, the veteran's surviving spouse
2-30 may complete the transaction.
2-31 (b) The board by rule may determine the number of loans that
2-32 a person may receive under this subchapter.
2-33 Sec. 161.505. SECURITY FOR LOAN. A disbursement of money on
2-34 a loan may not be made unless the loan is secured by a mortgage,
2-35 deed of trust, or other lien on the land purchased with the
2-36 proceeds of the loan. A mortgage, deed of trust, or other lien may
2-37 be a participation in a lien securing any other loan for the
2-38 purchase of the property, including a lien securing a home loan
2-39 under Chapter 162.
2-40 Sec. 161.506. INITIAL PAYMENT OR EQUITY. The board may
2-41 require an initial payment on a loan or may require an investment
2-42 in the land by the loan recipient in an amount set by the board by
2-43 rule.
2-44 Sec. 161.507. LOAN PAYMENTS. (a) The final principal
2-45 payment on a loan shall be made not later than the 40th anniversary
2-46 of the date of the loan.
2-47 (b) The board shall determine the maximum principal amount
2-48 of loans to the same eligible person that may be outstanding at any
2-49 time.
2-50 (c) Payments on the loan must be made at times determined by
2-51 the board.
2-52 Sec. 161.508. FEES; INTEREST. (a) All fees to be charged
2-53 to a person who receives a loan must be approved by the board.
2-54 (b) Any fees or expenses incurred in connection with a loan,
2-55 including the cost of insurance, may be charged to the loan
2-56 recipient and included in the principal amount of the loan.
2-57 (c) A loan must bear a fixed, variable, floating, or other
2-58 rate or rates of interest determined by the board. The board may
2-59 set the interest rate or rates to provide a margin over the rate
2-60 paid by the board on bonds issued by the board under this chapter.
2-61 (d) The difference between the cost of the money to the
2-62 board and the interest rate or rates charged to a loan recipient
2-63 may be used in whole or in part to defray the expense of
2-64 administering the program.
2-65 (e) To ensure the maximum benefit of the program to the loan
2-66 recipient, the board shall adopt rules:
2-67 (1) relating to the fees, charges, and interest rates
2-68 that may be charged by a lending institution in connection with
2-69 financing the purchase of land with money that does not come from
3-1 the fund; and
3-2 (2) limiting to the maximum extent practical the fees,
3-3 charges, and interest rates to the fees, charges, and interest
3-4 rates that would be collected by the lending institution in the
3-5 normal course of the institution's mortgage lending business.
3-6 Sec. 161.509. INTEREST RATE ON DELINQUENT PRINCIPAL AND
3-7 INTEREST. Principal and interest that become delinquent bear
3-8 interest at a rate determined by the board.
3-9 Sec. 161.510. COMBINATION WITH HOME LOAN. The board may:
3-10 (1) permit a person to combine a loan made under this
3-11 subchapter with a home loan made under Chapter 162 if the portion
3-12 of the loan made under this subchapter is funded from amounts on
3-13 deposit in the fund and the portion of the loan made under Chapter
3-14 162 is not funded from amounts in the fund; and
3-15 (2) prescribe the amounts of and forms for a combined
3-16 loan under this section.
3-17 Sec. 161.511. TIME LIMIT ON TRANSFER OF LAND. (a) Except
3-18 as provided by Subsection (c), a recipient of a loan may not lease,
3-19 sell, or otherwise transfer in whole or part land or any interest
3-20 in land against which there is a mortgage, deed of trust, or any
3-21 other lien securing the loan:
3-22 (1) before the third anniversary of the date the
3-23 recipient purchases the land; and
3-24 (2) unless the recipient has complied with any other
3-25 terms and conditions provided by this subchapter and the rules of
3-26 the board.
3-27 (b) After the three-year period prescribed by Subsection
3-28 (a), land may be sold or otherwise transferred, subject to any lien
3-29 securing a loan, if:
3-30 (1) all interest, principal, and taxes that are due
3-31 have been paid;
3-32 (2) the terms and conditions of this subchapter and
3-33 rules of the board have been met; and
3-34 (3) the board approves the sale or other transfer.
3-35 (c) The board may waive the three-year period prescribed by
3-36 Subsection (a):
3-37 (1) in a case of death, bankruptcy, financial
3-38 incapacity, or divorce of the loan recipient;
3-39 (2) if a loan recipient is forced to move because of a
3-40 change in employment or because the recipient's home is condemned
3-41 through no fault of the recipient; or
3-42 (3) at any other time the board considers a waiver to
3-43 be in the best interest of the program.
3-44 Sec. 161.512. INCREASE IN INTEREST RATE; ACCELERATED
3-45 REPAYMENT. If a recipient of a loan does not comply with the
3-46 requirements of Section 161.511(a) and the board does not waive the
3-47 three-year period prescribed by that section, the board by rule may
3-48 provide for:
3-49 (1) an increase in the interest rate on the loan;
3-50 (2) the acceleration of repayment of the principal of
3-51 and interest on the loan; or
3-52 (3) any other remedy the board considers appropriate.
3-53 Sec. 161.513. FORECLOSURE AND RESALE. The board shall adopt
3-54 rules providing procedures governing foreclosure of a lien securing
3-55 a loan.
3-56 SECTION 3. This Act takes effect immediately if it receives
3-57 a vote of two-thirds of all the members elected to each house, as
3-58 provided by Section 39, Article III, Texas Constitution. If this
3-59 Act does not receive the vote necessary for immediate effect, this
3-60 Act takes effect September 1, 2001.
3-61 * * * * *