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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.
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,
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
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 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
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
Department of Veterans Affairs
The Under Secretary of Veterans Affairs
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
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.
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:
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.
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
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
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.''