BILL NUMBER: AB 1036 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 18, 2003
INTRODUCED BY Assembly Member Mullin
FEBRUARY 20, 2003
An act to amend Sections 987.65 , 987.71, 987.775, and
988.4 of the Military and Veterans Code, relating to veterans ,
and making an appropriation therefor .
LEGISLATIVE COUNSEL'S DIGEST
AB 1036, as amended, Mullin. Veterans: Cal-Vet loans.
The Veterans' Farm and Home Purchase Act of 1974 authorizes the
Department of Veterans Affairs to assist veterans in acquiring homes
and farms by generally providing that the department may purchase a
farm or home which the department then sells to a purchaser, as
defined. Existing law limits the amount that the department may
expend for these purposes in acquiring different types of homes and
farms and provides that the department may not expend more than
$70,000 for a mobilehome that is to be sited in a mobilehome park, as
defined, nor more than $300,000 for a farm, as defined.
This bill would change these expenditure limits to $125,000 in the
case of a mobilehome that is to be sited in a mobilehome park and,
in the case of a farm, to 150% of the maximum Fannie Mae loan limit,
as provided.
Existing law requires a purchaser to make an initial payment, as
defined, to the department of at least 2% of the selling price, as
defined, of the property to be acquired, except that the department
may waive this initial payment when the value of the property, as
determined by the department from an appraisal, equals the amount to
be paid by the department for the property plus at least 5%.
This bill would additionally authorize the department to waive the
initial payment for a purchase that requires a loan guaranty by the
United States Department of Veterans Affairs.
Existing law provides for the Veterans' Farm and Home Building
Fund of 1943 and creates within this fund a segregated account
to receive gains realized when the department declares a forfeiture
of a purchaser's property, as provided. Existing law authorizes the
department to expend moneys from that account for, among other
purposes, providing assistance to lower income first-time purchasers
by postponing loan principal payments or loan payment installments.
This bill would additionally authorize the department to expend
moneys from this segregated account in this fund to provide initial
payment assistance to lower income first-time purchasers in the form
of a deferred-payment 2nd loan, as provided. By authorizing this
additional use of moneys from the Veterans' Farm and Home Building
Fund of 1943, an appropriated special fund, this bill would make an
appropriation.
Existing law also authorizes the department to expend moneys
from that fund for, among other purposes,
for advancing to a purchaser sums for the purpose of making
alterations, repairs, or improvements on or in connection with the
principal place of residence of the purchaser. Existing state
regulations allow a purchaser to borrow against that purchaser's
equity in a farm or home that the department assisted that purchaser
in acquiring only if, among other conditions, the department's
interest in the home is prior and senior to any other financing on
that farm or home.
This bill would authorize the department to secure the advances
described above with a security interest that is subordinate to any
existing financing on that residence.
Vote: majority. Appropriation: no yes
. Fiscal committee: yes. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 987.65 of the Military and Veterans Code is
amended to read:
987.65. (a) The purchase price of a home to the department, or
the sum to be expended by the department pursuant to a contract for
the construction of a dwelling house and other improvements, or the
purchase price of a mobilehome sited on a lot owned by the purchaser
and installed on a foundation system pursuant to Section 18551 of the
Health and Safety Code, or the purchase price of a mobilehome
converted to a fixture and improvement to the underlying real
property in a mobilehome park that has been converted to a
resident-owned subdivision, cooperative, condominium, or nonprofit
corporation as set forth in Section 18555 of the Health and Safety
Code, may not exceed the then current maximum Fannie Mae loan limit
that is annually set by Fannie Mae for a single-family home .
(b) The purchase price of a mobilehome that is to be sited in a
mobilehome park, as defined in Section 18214 of the Health and Safety
Code, in addition to any assistance provided by the department to a
veteran pursuant to subdivision (e) of Section 987.85, may not exceed
one hundred twenty-five thousand dollars ($125,000).
(c) A veteran purchasing the home may advance, subject to Section
987.64, the difference between the total price or cost of the home
and the sum of the purchase price of the home to the department and
any amount the department adds, under Section 987.69, to the purchase
price of the home in fixing the selling price to the veteran. Any
amount of the purchase price to the department may be provided by
funds from participation contracts or revenue bonds.
(d) The purchase price of a farm to the department may not exceed
150 percent of the current maximum Fannie Mae loan limit described in
subdivision (a). A veteran purchasing the farm may advance the
difference between the total price of the farm, or the cost of the
dwelling and improvements to be constructed on a farm under a
contract, and the sum of the purchase price to the department or
contract price to the department and any amount that the department
adds, under Section 987.69, to the purchase or contract price to the
department in fixing the selling price of the farm to the veteran.
SEC. 2. Section 987.71 of the Military and Veterans Code is
amended to read:
987.71. (a) The purchaser shall make an initial payment of at
least 2 percent of the selling price of the property. The department
may waive the initial payment in any case where the value of the
property as determined by the department from an appraisal equals the
amount to be paid by the department plus at least 5 percent. In the
case of a purchase requiring a loan guaranty by the United States
Department of Veterans Affairs, the department may waive the
initial payment and the purchaser shall pay the loan guaranty
fee, which may be added to the loan amount. The department may
require the purchaser to pay a loan origination fee, not to exceed 1
percent of the loan amount, which may be added to the loan amount.
(b) The balance of the loan amount may be amortized over a period
fixed by the department, not exceeding 40 years for farms or homes
and not exceeding 30 years for mobilehomes located in mobilehome
parks, as defined in Section 18214 of the Health and Safety Code,
together with interest thereon at the rate determined by the
department pursuant to Section 987.87 for these amortization
purposes.
(c) The department may, in order to allow the veteran to purchase
the home selected without incurring excessive monthly payments, at
the time of initial purchase, postpone the commencement of payment of
the principal balance for a period not to exceed five
years if the veteran's current income meets the standards for
purchase on these terms and if the department determines, in
accordance with previously established criteria for these
determinations, that the veteran's income can reasonably be expected
to increase sufficiently within the five-year period to make the
transition to fully amortized principal and interest payments, so
long as the total term of the contract of purchase does not exceed 40
years, or 30 years where the contract relates to a mobilehome
located in a mobilehome park, as defined in Section 18214 of the
Health and Safety Code.
(d) The purchaser on any installment date may pay any or all
installments still remaining unpaid.
(e) In any individual case, the department may for good cause
postpone, from time to time, upon terms the department determines to
be proper, the payment of the whole or any part of any installment of
the purchase price or interest thereon.
(f) Each installment shall include an amount sufficient to pay the
principal and interest on the participation contract to which the
interest of the department is subject, and any amount as may be
required by a covenant or provision contained in any resolution of
issuance.
(g) When a purchaser makes an initial payment of less than 20
percent of the selling price of the property, the department shall do
all of the following:
(1) Take prudent measures to minimize losses from loan defaults
and loan delinquencies.
(2) (A) Ensure the continued financial solvency of the loan
program by charging fees to cover the costs, as determined by the
department, of any loan guaranty, primary mortgage insurance, or
other similar arrangement.
(B) Fees charged under this paragraph may be included in the
amount of the loan, collected in advance, or collected as part of the
monthly payment.
(h) (1) Subject to paragraph (2), the department may provide
initial payment assistance to lower income first-time purchasers by
providing a deferred-payment second loan, upon which simple interest
shall be charged at a rate established by the department.
(2) A deferred-payment second loan described in paragraph (1) is
subject to all of the following conditions:
(A) The loan may not exceed 3 percent of the selling price of the
farm or home.
(B) The loan shall be secured by a deed of trust.
(C) The loan shall be due and payable upon the payment in full of
the contract or upon the sale or transfer of the farm or home.
SEC. 3. Section 987.775 of the Military and Veterans Code is
amended to read:
987.775. Whenever the department proceeds under Section 987.77 to
declare a forfeiture and to retain all payments made under the
forfeited contract as rental paid for occupancy, the department may,
in lieu of paying any net gain to the purchaser in accordance with
Section 987.79, deposit that net gain into a segregated account in
the Veterans' Farm and Home Building Fund of 1943 created to receive
funds pursuant to this section. The funds in the account shall be
accumulated until June 30 of each year, and any losses on the sales
of forfeited properties during the fiscal year shall be deducted from
the total of the net gains deposited in the account during the
fiscal year. The department may expend the funds remaining in the
account on June 30 each year, after deduction for losses on sales of
forfeited properties, for purposes of assistance to lower income
purchasers pursuant to subdivision (c) or ,
(e) , or (h) of Section 987.71 who might
otherwise be rejected because of insufficient income or decline
benefits under this article because of inability to afford the
initial payment pursuant to subdivision (a) of Section 987.71. No
financial assistance provided under this section may be used to
reduce the initial payment required of the purchaser below 3 percent,
except as provided by Section 987.71 .
SEC. 4. Section 988.4 of the Military and Veterans Code is
amended to read:
988.4. (a) For purposes of this section, "purchaser" includes any
veteran whose only loan with the department is for the purpose of a
home improvement on property that is the principal place of residence
of the veteran.
(b) (1) Out of any money available in the Veterans' Farm and Home
Building Fund of 1943, the department may advance to a purchaser upon
his or her application, and under the policies as the department
may, from time to time, prescribe, sums for the purpose of making
alterations, repairs, or improvements on or in connection with the
principal place of residence of the purchaser.
(2) Notwithstanding any other provision of law, in making the
advances described in paragraph (1), the department may secure that
advance by issuing a deed of trust, a promissory note, or other
security interest that is subordinate to any existing financing on
the principal place of residence of the purchaser.
(c) The department shall be the sole judge of the need and
desirability of making advances and the method of repayment by the
purchaser under this section.