
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, July 29, 1990                   TAG: 9007290041
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A12   EDITION: METRO 
SOURCE: The Washington Post
DATELINE: WASHINGTON                                LENGTH: Medium

HOUSE OKS VA HOME LOAN BILL

The House voted last week to extend government guarantees of home mortgages to more than a million members of the military reserves and the National Guard, including thousands who never served on active duty, but the measure faces a cool reception in the Senate and opposition from the Bush administration.

Mortgage fees paid by reservists would provide a much-needed infusion of cash for the Department of Veterans Affairs' home loan guaranty fund and the change would recognize the larger role reservists now play in U.S. defense, supporters say. Real estate industry groups also are pushing for the change.

The Senate is not considering any similar legislation, however, because of concern "about the impact on the solvency of the revolving fund that supports VA's loan guaranty program," Sen. Alan Cranston, D-Calif., chairman of the Committee on Veterans' Affairs, said in a statement. The fund has had heavy losses in recent years, requiring $2.2 billion in congressional appropriations since 1984 to keep it solvent.

Sen. Frank Murkowski, R-Alaska, opposes a change.

"The situation with the VA home loan program is almost as serious as the S&L problem and it's disguised because it's a government program," Murkowski said. "We have had to go in each year with special appropriations to meet the deficit."

"My interest . . . is to honestly look at a program that needs restructuring," he said, adding that it would be irresponsible for the real estate industry to back expansion of the program without supporting its restructuring.

Bush administration officials said a law passed in November already has produced changes intended to stem losses from the loan fund and should be given a chance to work before the rules are changed again.

The measure, a major restructuring of the VA loan program, requires veterans to pay fees of up to 1.25 percent on loans. The money goes into a mortgage indemnity fund to reimburse the VA for paying off loans when veterans default.

The loan fund, which has helped 13.1 million veterans buy homes since its beginning in 1944, has been losing money for several years. Economic downturns, particularly in the Western and Southwest regions of the country, have been a major factor in thousands of defaults by veterans.

Loan fees paid by reservists would bring in about $36 million during the first four years, according to Congressional Budget Office estimates. But after four years of making money for the VA, the new program would then begin to cost the government money as some reservists start defaulting on loans, the CBO said. Losses in the fifth year would be about $1 million, according to the estimates.

The CBO said about 7,700 reserve members could be expected to take out VA-guaranteed mortgages each year.

by CNB