BILL ANALYSIS
AB 776
Page 1
Date of Hearing: April 28, 2009
ASSEMBLY COMMITTEE ON VETERANS AFFAIRS
Mary Salas, Chair
AB 776 (Salas) - As Introduced: February 26, 2009
SUBJECT : Veterans.
SUMMARY : Requires the California Department of Veterans
Affairs to urge the Congress of the United States to act
immediately to remove this requirement from federal law, which
limits the proceeds of the qualified veterans mortgage bond to
use by veterans seeking single family home loans, so that the
proceeds from the bonds can be used for other types of housing.
EXISTING LAW: states that the California Department of Veterans
Affairs has specified powers and duties relating to veterans,
including the administration of the CalVet Home Loan program,
which helps fund the purchase of homes and farms for eligible
veterans with the proceeds from tax-exempt bonds.
Existing federal law requires the proceeds from certain
tax-exempt bonds to be used for the acquisition of a
single-family residence, as provided.
FISCAL EFFECT : Unknown
COMMENTS : The CalVet Farm and Home Loan program is entirely
funded by General Obligation Bonds approved by voters. Since
1921, the voters in California have approved approximately $8.8
billion of general obligation bond sales to finance the
veterans' farm and home purchase (Cal-Vet) program. The last
bond measure approved for the Cal-Vet Program was in November
2008 in the amount of $900 million.
Veterans' bonds have always been structured as to not endanger
the General Fund. Veterans bonds differ from other bonds because
the debt is not serviced from the General Fund. Money is raised
for the loan program by selling the bonds. Then both the
principal and the debt service are paid by the veterans' monthly
mortgage payments.
Until last year CalVet Farm and Home Loan program was limited to
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Vietnam era vets who separated from the service prior to 1977.
Federal law now allows all veterans access to this loan program.
On June 17th the Heroes Earnings Assistance and Relief Tax
(HEART) Act of 2008 was signed into law. As for qualified
veterans' mortgage bonds issued in California or Texas, the
HEART Act repeals the requirement in those states that veterans
must have served before 1977 and reduces the eligibility period
to 25 years (rather than 30 years) following release from
military service. This change opens up this home loan program
to a larger number of veterans. In prior years CalVet Farm and
Home Loan program used "unrestricted dollars" (generated by the
early pay off of bonds and by unused default reserves) to fund
loans for post 1977 veterans.
The program operates under federal tax laws that limit state tax
exempt bond programs. CalVet Farm and Home Loan program can be
used for construction and acquisition of single family homes and
farms, including condos and coops. Title 26 section 143 (c) of
the Internal Revnue Service code governs the tax exempt status
of the state bonds issued under the authority of the qualified
veterans mortgage bond programs which is operated by only five
states. These funds are to be used to provide low interest
single-family mortgage loans for the permanent financing of
owner-occupied single-family residences. The Internal Revenue
Code and its regulations impose a number of requirements upon
recipients of loans which are fund from QVMB funds.
The author believes that a small tweak in federal law could
result in more housing dollars for California without
jeopardizing the solvency of the existing CalVet Farm and Home
Loan program. This committee has heard from the California
Department of Veterans Affairs that it would take a change in
federal for them to access bond funds for the purpose of
providing any housing other than single family ownership.
This prompted the author to inquire whether a small portion of
the CalVet Farm and Home Loan program could be used to provide
supportive housing projects to veterans without affecting the
solvency of the program. The bonds issued in support of this
program allow for 5% to pay for administrative costs. Currently
CDVA only uses approximately 2% for administrative cost. The
author would like a change in federal law so that the allowance
for administrative costs and the interest earned on the bond may
be used to provide supportive housing services to veterans.
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REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Eric Worthen / V. A. / (916) 319-3550