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108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-197

======================================================================



 
       OPERATION OF NATIVE AMERICAN VETERAN HOUSING LOAN PROGRAM

                                _______
                                

 July 10, 2003.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Smith of New Jersey, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2595]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Veterans' Affairs, to whom was referred the 
bill (H.R. 2595) to restore the operation of the Native 
American Veteran Housing Loan Program during fiscal year 2003 
to the scope of that program as in effect on September 30, 
2002, having considered the same, reports favorably thereon 
without amendment and recommends that the bill do pass.

                              Introduction

    The reported bill reflects the Committee's consideration of 
H.R. 2595, introduced on June 25, 2003, by Honorable 
Christopher H. Smith, Honorable Lane Evans, Honorable Rick 
Renzi, and Honorable Tom Udall.
    On June 26, 2003, the full Committee met and ordered H.R. 
2595 reported favorably to the House by unanimous voice vote.

                      Summary of the Reported Bill

    H.R. 2595 would:

    1. LRestore the pilot program of home loans for Native 
Americans to the scope that was in effect on September 30, 
2002.

    2. LRatify any home loans acted upon by the Secretary of 
Veterans Affairs while the limitation contained in division K 
of Public Law 108-7; 117 Stat. 476 was in effect.

                       Background and Discussion

    Restoration of the Native American Veteran Housing Loan 
Program.--Section 1 of the bill would restore the pilot program 
of home loans for Native Americans to the scope that was in 
effect on September 30, 2002. The Committee notes that the 
program is limited to the amount of funds already appropriated 
for the pilot project and the Committee's action will not make 
any changes in the amounts presently appropriated.
    In 1993, Public Law 102-389 provided appropriations of $4.5 
million for the subsidy cost of Native American home loans. The 
appropriated funds were available without fiscal year 
limitation. Under current law, the pilot program is scheduled 
to expire on December 31, 2005. Department of Veterans Affairs 
(VA) direct home loans are available to eligible Native 
American veterans who wish to purchase, construct or improve a 
home on Native American trust land. These loans may be used to 
simultaneously purchase and improve a home. Direct loans also 
are available to reduce the interest on existing loans obtained 
under this program. VA direct loans may be limited to the cost 
of the home or $80,000, whichever is less. A funding fee is 
paid to VA of 1.25 percent for loans to purchase, construct or 
improve a home. For loans to refinance an existing loan, the 
fee is 0.5 percent of the loan amount. Veterans receiving 
compensation for service-connected disability are not required 
to pay the funding fee. According to VA's Annual Report to 
Congress for fiscal year 2002, VA closed 62 loans during 2002 
for a total of 289 loans made under the pilot program from its 
inception until September 30, 2002.
    On June 11, 2003, the Under Secretary for Benefits, 
Honorable Daniel L. Cooper, sent a letter to Honorable Henry E. 
Brown, Jr., Chairman, and Honorable Michael H. Michaud, Ranking 
Member of the Subcommittee on Benefits. The letter advised the 
Subcommittee Chairman and Ranking Member that pursuant to Title 
1 of Division K, section 3, of the Consolidated Appropriations 
Resolution (Public Law 108-7), VA had ceased making loans under 
the pilot program due to the $5 million statutory limitation on 
the dollar value of new loans placed on the program. In the 
first two quarters of the fiscal year, VA has closed 47 loans, 
many of them to refinance existing loans at lower mortgage 
rates.
    Because VA has exceeded the limit of $5 million for new 
loans imposed by this law, it is unable to make new loans for 
the remainder of the fiscal year. In determining that the cap 
had been exceeded, VA counted refinanced home loans as well as 
new home construction or acquisition. Of particular concern to 
the Committee are construction loans in which loan payments are 
dispersed as construction progresses. With the cessation of the 
program, veterans may be unable to complete construction on 
homes already in progress. The Committee believes Native 
American veterans have earned this benefit and wishes to 
continue it for those who have served the Nation.

                      Section-By-Section Analysis

    Section 1(a) of the bill would authorize the Secretary of 
Veterans Affairs, in carrying out the pilot program provided by 
subchapter V of chapter 37 of title 38, United States Code, to 
carry out that program during fiscal year 2003 without regard 
to the proviso under the heading ``Native American Veteran 
Housing Loan Program Account'' in title I of the Departments of 
Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act, 2003 (division K of 
Public Law 108-7; 117 Stat. 476), and such proviso would be 
treated as being of no force or effect.

    Section 1(b) of the bill would provide that any action 
taken by the Secretary of Veterans Affairs before the enactment 
of this Act that is inconsistent with the proviso referred to 
in subsection (a) of this bill is ratified with respect to such 
inconsistency.

                    Performance Goals and Objectives

    The reported bill would authorize a program restoration 
under laws administered by the Secretary of Veterans Affairs. 
VA's program performance goals and objectives are established 
in its annual performance plans and are subject to the 
Committee's regular oversight.

              Statement of the Views of the Administration

    The Committee received the following views of the 
Department of Veterans Affairs regarding H.R. 2595 as 
introduced:

                               Department of Veterans Affairs      
                        The Under Secretary of Veterans Affairs    
                                                    for Benefits,  
                                      Washington, DC, June 11, 2003
Hon. Christopher H. Smith,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Department of Veterans Affairs (VA) 
has ceased making loans under the Native American Veteran 
Direct Loan Program (NADL). We were compelled to take this 
action, pursuant to the statutory limitation on the dollar 
value of new loans placed on the program by Public Law 108-7.
    Title 1 of Division K of Section 3 of the Consolidated 
Appropriations Resolution (Public Law 108-7) states that ``no 
new loans in excess of $5,000,000 may be made in fiscal year 
2003.'' We have already exceeded this limit. We are therefore 
unable to continue making any new loans for the remainder of FY 
2003.
    The direct loan limitation for this program was not 
violated intentionally. The loan limitation was imposed--for 
the first time in the history of this program--due to technical 
budget requirements, rather than a deliberate effort to 
restrict VA's ability to make loans to Native American 
veterans. Fiscal year 2003 was the first time the program had a 
negative subsidy rate, which required a legislative loan level 
ceiling. Based on an average loan obligation of $3.6 million 
over the past nine years, the ceiling was set at $5 million. 
With mortgage rates at historical lows, however, Native 
American veterans have been obtaining interest rate reduction 
refinancing loans in record numbers. The number of origination 
loans is also up. In the first two quarters of FY 2003, we have 
closed 47 loans, compared with 62 loans for all of FY 2002.
    The Appropriations Committees have been informed of the 
status of the NADL Program and we will continue to work with 
OMB to address this issue. We have also advised our field 
stations that they may continue to accept and process loan 
applications while informing the applicants of the existing 
situation. By doing so, VA will be in position to act on these 
applications as soon as funds are again available.
    I am committed to doing everything possible to limit the 
impact that this situation will have on our Native American 
veterans. Your continued support is appreciated.

            Sincerely yours,
                                           Daniel L. Cooper

               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, July 8, 2003
Hon. Christopher H. Smith
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2595, a bill to 
restore the operation of the Native American Veteran Housing 
Loan Program during fiscal year 2003 to the scope of that 
program as in effect on September 30, 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sunita 
D'Monte, who can be reached at 226-2840.

            Sincerely,
                                       Douglas Holtz-Eakin,
                                                           Director
    Enclosure.

               Congressional Budget Office Cost Estimate

   H.R. 2595, A bill to restore the operation of the Native American 
 Veteran Housing Loan Program during fiscal year 2003 to the scope of 
            that program as in effect on September 30, 2002

As ordered reported by the House Committee on Veterans' Affairs on June 
                                26, 2003

    H.R. 2595 would repeal a provision in current law that sets 
a $5 million limitation on direct loans made by the Department 
of Veterans Affairs (VA) to Native American veterans in 2003. 
CBO estimates that enacting this legislation would lower 
spending for the Native American Veteran Housing Loan Pilot 
Program by about $1 million in 2003. That change would result 
in a change in direct spending.
    Under the program, VA makes direct loans to veterans living 
on trust lands for the purchase, construction, or improvement 
of a home. Public Law 102-389, an act making appropriations for 
the Departments of Veterans Affairs and Housing and Urban 
Development, and for other independent agencies, boards, 
commissions, corporations, and offices for fiscal year 1993, 
provided appropriations of $4.5 million for the subsidy cost of 
these loans. Since the program's inception, VA has made about 
270 loans at an originally estimated subsidy cost of $2.3 
million. The program is scheduled to end on December 31, 2005. 
Public Law 108-7, the Consolidated Appropriations Resolution, 
2003, limited loans under this program to $5 million in 2003. 
(Section 504 (b)(2) of the Federal Credit Reform Act of 1990 
requires a limitation on new direct loan obligations be 
provided in advance in an appropriations act.)
    In February 2003, VA exceeded the current loan limitation 
of $5 million, and has been unable to make any new direct loans 
since then. The bill would lift the loan limitation for 2003, 
allowing VA to resume making direct loans under this program. 
Based on information from VA, CBO estimates that there is a 
backlog of roughly $30 million in new loan applications (mainly 
refinancings) and that VA could issue about half of those new 
loans in 2003. According to VA, the department would not need 
additional funding for administrative expenses. In contrast to 
earlier subsidy estimates, the program now has a negative 
subsidy rate of almost -\9 percent. Thus, making these loans 
would reduce spending by about $1 million, CBO estimates.
    H.R. 2595 contains no intergovernmental or private-sector 
mandates as defined by the Unfunded Mandates Reform Act and 
would have no effect on the budgets of state, local, or tribal 
governments.
    The CBO staff contact is Sunita D'Monte, who can be reached 
at 226-2840. This estimate was approved by Peter H. Fontaine, 
Deputy Assistant Director for Budget Analysis.

                     Statement of Federal Mandates

    The preceding Congressional Budget Office cost estimate 
states that the bill contains no intergovernmental or private 
sector mandates as defined in the Unfunded Mandates Reform Act.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defense and general Welfare 
of the United States.''