BILL ANALYSIS                                                                                                                                                                                                    




                    Appropriations Committee Fiscal Summary
          
                                           1036 (Mullin)
          
          Hearing Date:  8/18/03          Amended: 8/18/03       
          Consultant:  Maureen Brooks         Policy Vote: V. A.  6-0
          ____________________________________________________________ 
          ___
          BILL SUMMARY:.   AB 1036 makes numerous changes to the  
          Veterans' Farm and Home Purchase Act of 1974.

                              Fiscal Impact (in thousands)
           
          Major Provisions            2003-04             2004-05              
           2005-06            Fund  
          
          Home/farm purchase      
          -------------------unknown-----------------------   Special
          STAFF COMMENTS:  This bill meets the criteria to be placed  
          on the Suspense file.  

          This bill could result in future cost pressure since  
          increasing the loan limit will result in fewer funds being  
          available for new loans.  Also, allowing the Department's  
          security interest on loans to be subordinate to others may  
          increase the Department's risk for defaults.  AB 1036 will  
          expand the use of funds in a specified segregated account  
          to provide assistance to lower income first-time purchasers  
          in the form of a deferred-payment second loan. 

          AB 1036 increases the expenditure limits on the purchases  
          of mobilehomes and farms under the Veterans' Farm and Home  
          Purchase Act, allows second loans in which the Department  
          of Veterans Affairs' security interest is subordinate to an  
          existing loan, authorizes the DVA to waive the down payment  
          in specified instances, and authorizes the use of specified  
          funds for deferred payments on second mortgage loans.

          AB 1036 increases the expenditure limit on the purchase of  
          mobilehomes from $70,000 to $125,000, and increases the  
          limit on farms from $300,000 to an equivalent of 150% of  
          the maximum Fannie Mae loan limit (approximately $484,050).  
            With rising land and home prices in California, the  
          existing limits are not reflective of current costs.
          
          The Veterans' Farm and Home Purchase Act of 1974 authorizes  










          the Department of Veterans Affairs (DVA) to assist veterans  
          in acquiring homes and farms by providing that the  
          Department may purchase the home or farm and then sell it  
          to a purchaser.  The Act additionally allows purchasers to  
          borrow against their home equity for loans used to make  
          repairs, alterations or improvements only if the  
          Department's interest remains senior to any other financing  
          on that farm or home.

          The Cal-Vet program's Farm and Home Building Fund of 1943  
          is funded through revenue bonds and self liquidating  
          general obligation bonds.