Direct Loan Program

The Korean conflict posed the same problems for its veterans as World War II in terms of impact upon schooling, jobs or building up an equity for the purchase or construction of a home, starting a business, or buying a farm or farm equipment.  Congress readily recognized that these veterans were also entitled to aid in readjustment to civilian status upon leaving the service, and passed the Korean GI Bill, Public Law 82-550, in 1952.   An increasing number of complaints as to the quality of new houses constructed under the provisions of the loan guaranty program led the Veterans Administration to require minimum planning and general acceptability standards relative to land development, sanitary and drainage systems, water supply, and other development improvements.  The 1950 legislation had permitted only actual construction standards.

In order to give added enforcement powers to both construction and planning standards, the Administrator of Veterans Affairs was given authority to refuse to appraise any dwelling unit or project owned by a person or firm who had previously sold housing to veterans and which had been found to have substantial deficiencies or to those whose transactions had been in other ways unduly prejudicial to veteran purchasers.  The Administrator was also empowered to refuse to guarantee loans made by lenders who had failed to keep accurate records or otherwise willfully engaged in practices detrimental to veteran's interests.

As stated above, in 1952 Public Law 82-550 extended the home loan benefit to Korean veterans.  Therefore, Public Law 84-898, approved August 1, 1956, extended the home loan program for World War II veterans until December 31, 1958.  The home loan program was also extended by the 85th Congress and the 86th Congress.  Public Law 86-665, approved July 14, 1960, established the Loan Guaranty Revolving Fund from which to pay the operating expenses of the program.

In 1960, the veteran's home loan program reached its lowest point in 15 years despite the fact that more than 14 million veterans of World War II and the Korean conflict had not used their entitlement to home loans.  Public Law 87-84, approved July 6, 1961, removed the expiration dates of the home loan program for World War II and Korean veterans, from the then existing law.  In lieu, the law put into effect a new phase-out formula.  In essence, the new Act provided for all World War II veterans to have at least until July 25, 1962, to obtain guaranteed or direct loans; or World War II veterans to have 10 years from the date of discharge from active duty during World War II, plus an additional period equal to one year for each 3 months of active duty during World War II, but in no case beyond July 25, 1967.  All World War II veterans with a service-connected disability discharge had until July 25, 1967 to use their guaranteed or direct loan benefits.

A similar formula was developed for Korean veterans.  These veterans had at least until February 1, 1965, to obtain a guaranteed or direct loan; or 10 years from the date of discharge from active duty during the Korean conflict, plus an additional period equal to one year for each 3 months of active duty during the Korean conflict, but in no case beyond

January 31, 1975.  As in the case of World War II veterans with a service-connected disability, Korean conflict veterans with a service-connected disability had until January 31, 1975 to use their home loan benefits.

In addition to the phase-out formula, the Act also authorized additional funds for the veterans' direct home loan program.  Funds for direct loans had been inadequate and a big waiting list had been accumulated.

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