Veterans Home Loan Program Amendments

The law established a new category of veteran eligible for VA home loan benefits.  Individuals who are not otherwise eligible and who have completed a total of at least 6 years of honorable service in the Selected Reserves (including National Guard) are eligible for VA home loans.  Reserves must pay a 3/4% higher funding fee than other veterans and their eligibility expires October 28, 1999.

The law also required VA to carry out a program to demonstrate the feasibility of guaranteeing mortgages for the acquisition of an existing dwelling and the cost of making energy efficient improvements to the dwelling or for refinancing and adding energy efficient improvements to a dwelling owned and occupied by a veteran.  It authorized an addition to the loan for the cost of the energy efficient improvements up to $3,000; or $6,000 if the increase in the monthly payment for principal and interest does not exceed the likely reduction in monthly utility costs resulting from the energy efficiency improvements.

The funding fee on IRRRLs (Interest Rate Reduction Refinancing Loans) was reduced to .5% for all such loans, including those made to Reservists.  The law also provided for a minimum guaranty of 25% on all IRRRLs, regardless of the amount of guaranty on the original loan.

Public Law 102-547 also established a new Subchapter V to Chapter 37 of Title 38 which authorized a pilot program to provide direct loans to Native Americans on Trust Land.  Such loan are limited to $80,000, unless the Secretary determines that a higher amount is necessary to carry out the pilot program in an area where the cost of housing is significantly higher than the average cost nationwide.

Public Law 102-547 also extended the Lender Appraisal Processing Program (LAPP) until December 31, 1995.

Public Law 102-547 also extended the Lender Appraisal Processing Program (LAPP) and the Enhanced Loan Asset Sale Authority provided by Public Law 102-291 until December 31, 1995.

Public Law 103-66, the Omnibus Budget Reconciliation Act of 1993, increased the funding fees charged on VA loans by 0.75 percent of the loan amount.  A new fee of 3 percent of the loan amount was established for multiple users of the program except those who make a downpayment of at least 5 percent.  The new fees are effective through September 30, 1998.  The fee increases do not apply to interest rate reduction refinancing loans, for which the fee is 0.50 percent of the loan amount.  This law also amended the net value formula to include losses sustained on the resale of VA acquired properties.

Public Law 103-353, approved October 13, 1994, increased the maximum home loan guaranty entitlement amount from $46,000 to $50,750.  The new maximum affects only those loans above $144,000 to purchase or construct a home, or refinance an existing VA guaranteed loan to a lower interest rate.  The basic entitlement amount remains at $36,000 for all other loans. 

Public Law 103-446, approved November 2, 1994, made a number of changes.  It allows VA to restore entitlement, on a one-time basis, for a veteran who has paid off the prior loan but has not disposed of the property.  It extends loan guaranty eligibility to Reservists discharged because of a service-connected disability, and to surviving spouses of Reservists who died in service or as a result of a service-connected disability.  It also amended the 24 month minimum active duty service requirement for loan guaranty benefits, by creating a limited exception for persons who failed to meet the 24 month requirement because of a reduction in force. 

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