article: SECTION 1. PROCEDURES ON DEFAULT OF HOUSING LOANS. (a) In General.--Paragraph (2) of section 3732(a) of title 38, United States Code, is amended to read as follows: ``(2)(A) Before suit or foreclosure the holder of the obligation shall notify the Secretary of the default. Before the holder carries out a liquidation sale of real property securing a defaulted loan, the Secretary within 60 days after notification of default may, at the Secretary's option, pay the holder of the obligation the unpaid balance of the obligation plus accrued interest and reimburse the holder for such advances, costs, and attorney fees as the Secretary finds were properly and reasonably incurred in connection with the default and receive an assignment of the loan and security. Nothing in this section shall preclude any forebearance for the benefit of the mortgagor as may be agreed upon by the parties to the loan and approved by the Secretary. ``(B) Within 10 days after receiving a notice of default pursuant to paragraph (1) of this subsection, the Secretary shall notify the mortgagor that the Secretary may purchase the loan from the holder. The notification shall specify-- ``(i) that if the Secretary purchases the loan, the Secretary-- ``(I) has the authority to modify the loan instruments by temporarily or permanently lowering the interest rate or by extending or reamortizing the loan; and ``(II) may grant forbearance of interest or principal or both for a period of not more than 12 months; ``(ii) that if the mortgagor wants the Secretary to purchase the loan, the mortgagor must submit a written request to the Secretary within 20 days of receipt of the Secretary's notification; and ``(iii) the consequences to the mortgagor if the Secretary purchases the loan. ``(C) Upon receiving a request from the mortgagor to purchase the loan pursuant to subparagraph (B) of this paragraph, the Secretary, for the purpose of avoiding foreclosure, may purchase the loan in accordance with subparagraph (A). The Secretary shall purchase the loan from the holder of the obligation if-- ``(i) the default was caused by circumstances beyond the control of the mortgagor and rendered the mortgagor temporarily unable to correct a mortgage delinquency and to resume full mortgage payments; and ``(ii) it is determined that-- ``(I) the holder is unwilling to grant further forbearance; ``(II) the mortgagor desires to retain and occupy the property; ``(III) the mortgagor has maintained the property in good condition or, if major repairs are required, such repairs are due to circumstances which were beyond the mortgagor's control; ``(IV) the estimated net value of the property exceeds the unguaranteed portion of the loan; and ``(V) there is a reasonable prospect that the mortgagor will be able to resume mortgage payments within 12 months after the Secretary purchases the loan. ``(D) The Secretary may provide assistance, under such terms and conditions as the Secretary may provide, to a mortgagor whose loan has been purchased under the provisions of subparagraph (C) of this paragraph by-- ``(i) modifying the loan instruments to lower the interest rate or to extend or to reamortize the loan; and ``(ii) granting forbearance of interest or principal or both for a period of not more than 12 months. ``(E) If the Secretary decides not to purchase the loan-- ``(i) the Secretary shall notify the mortgagor of the decision and its basis within 30 days after receiving a written request from the mortgagor asking the Secretary to purchase the loan pursuant to subparagraph (C) of this paragraph; and ``(ii) if the mortgagor is a veteran and used the veteran's entitlement under section 3702 to obtain the loan or substituted entitlement as described in section 3702(b)(2) to purchase real property securing a loan guaranteed under this chapter, notice under clause (i) shall include notice of the right of appeal. ``(F) The Secretary shall obtain and hold in safekeeping a quit claim deed from the mortgagor to the Secretary for the real property securing the loan after the loan is purchased from the loan holder and before the Secretary makes any modification to the loan instruments or grants any forbearance. If the mortgagor brings the loan current and keeps the loan current for 12 consecutive months, the unrecorded quit claim deed shall be returned to the mortgagor. If, exclusive of any period of forbearance, the loan becomes 6 months delinquent, the Secretary may record the quit claim deed and acquire the property securing the loan without incurring substantial delays and foreclosure expenses. Nothing in this section shall preclude the Secretary from initiating foreclosure before the loan becomes 6 months delinquent if the Secretary believes it is in the best interest of the United States to do so. ``(G) For the purposes of sections 3720(e) and (h), loans purchased pursuant to subparagraph (C) that are not in default and that have not been in default for at least 12 consecutive months shall be included in pools of mortgage loans with respect to which certificates or other securities are issued or guaranteed.''. (b) Personnel.--Section 3732(a)(4) of title 38, United States Code, is amended-- (1) by striking out subparagraph (B); and (2) in paragraph (4) (as amended by paragraph (1) of this subsection), by striking out ``(A)''; (3) in paragraph (4) (as amended by paragraph (2) of this subsection)-- (A) by redesignating clauses (i) and (ii) as subparagraphs (A) and (B), respectively; and (B) by redesignating subclauses (I) and (II) as clauses (i) and (ii), respectively. (c) Extension of Procedure for Liquidation Sales.--Subsection (c) section 3732(c) of title 38, United States Code, is amended by striking out paragraph (11). (d) Effective Date.--The amendments made by subsection (a) shall apply to any housing loan guaranteed under chapter 37 of title 38, United States Code, with respect to which the Secretary of Veterans Affairs receives notice of default after the date of enactment of this Act.
summary: Revises provisions with respect to the loan default procedure for veterans' housing loans guaranteed by the Department of Veterans Affairs. Authorizes the Secretary of Veterans Affairs to reimburse the holder of the loan obligation for such advances, costs, and attorney's fees properly and reasonably incurrred in connection with the default and to receive an assignment of the loan and security. Directs the Secretary to notify the mortgagor, within ten days after receiving a notice of default from the veteran, that the Secretary may purchase the loan from the holder. Outlines notification and loan purchase requirements. Directs the Secretary to obtain and hold a quitclaim deed from the mortgagor to the Secretary for the real property securing the loan after the loan is purchased from the loan holder and before the Secretary makes any modifications to the loan instruments or grants any forbearance. Allows such unrecorded quitclaim deed to be returned to the mortgagor if the mortgagor brings the loan current and keeps it current for 12 consecutive months. Makes permanent all such loan default procedures (currently terminated as of December 31, 1992).