
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document not affected by Public Laws enacted between
  January 23, 2000 and December 4, 2001]
[CITE: 38USC3704]

 
                      TITLE 38--VETERANS' BENEFITS
 
               PART III--READJUSTMENT AND RELATED BENEFITS
 
              CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
 
                          SUBCHAPTER I--GENERAL
 
Sec. 3704. Restrictions on loans

    (a) No loan for the purchase or construction of residential property 
shall be financed through the assistance of this chapter unless the 
property meets or exceeds minimum requirements for planning, 
construction, and general acceptability prescribed by the Secretary; 
however, this subsection shall not apply to a loan for the purchase of 
residential property on which construction is fully completed more than 
one year before such loan is made.
    (b) Subject to notice and opportunity for a hearing, the Secretary 
may refuse to appraise any dwelling or housing project owned, sponsored, 
or to be constructed by any person identified with housing previously 
sold to veterans under this chapter as to which substantial deficiencies 
have been discovered, or as to which there has been a failure or 
indicated inability to discharge contractual liabilities to veterans, or 
as to which it is ascertained that the type of contract of sale or the 
methods or practices pursued in relation to the marketing of such 
properties were unfair or unduly prejudicial to veteran purchasers. The 
Secretary may also refuse to appraise any dwelling or housing project 
owned, sponsored, or to be constructed by any person refused the 
benefits of participation under the National Housing Act pursuant to a 
determination of the Secretary of Housing and Urban Development.
    (c)(1) Except as provided in paragraph (2) of this subsection, no 
loan for the purchase or construction of residential property shall be 
financed through the assistance of this chapter unless the veteran 
applicant, at the time that the veteran applies for the loan, and also 
at the time that the loan is closed, certifies in such form as the 
Secretary may require, that the veteran intends to occupy the property 
as the veteran's home. Except as provided in paragraph (2) of this 
subsection, no loan for the repair, alteration, or improvement of 
residential property shall be financed through the assistance of the 
provisions of this chapter unless the veteran applicant, at the time 
that the veteran applies to the lender for the loan, and also at the 
time that the loan is closed, certifies, in such form as may be required 
by the Secretary, that the veteran occupies the property as the 
veteran's home. Notwithstanding the foregoing provisions of this 
subsection, in the case of a loan automatically guaranteed under this 
chapter, the veteran shall be required to make the certification only at 
the time the loan is closed. For the purposes of this chapter the 
requirement that the veteran recipient of a guaranteed or direct home 
loan must occupy or intend to occupy the property as the veteran's home 
means that the veteran as of the date of the veteran's certification 
actually lives in the property personally as the veteran's residence or 
actually intends upon completion of the loan and acquisition of the 
dwelling unit to move into the property personally within a reasonable 
time and to utilize such property as the veteran's residence. 
Notwithstanding the foregoing requirements of this subsection, the 
provisions for certification by the veteran at the time the veteran 
applies for the loan and at the time the loan is closed shall be 
considered to be satisfied if the Secretary finds that (1) in the case 
of a loan for repair, alteration, or improvement the veteran in fact did 
occupy the property at such times, or (2) in the case of a loan for 
construction or purchase the veteran intended to occupy the property as 
the veteran's home at such times and the veteran did in fact so occupy 
it when, or within a reasonable time after, the loan was closed.
    (2) In any case in which a veteran is in active duty status as a 
member of the Armed Forces and is unable to occupy a property because of 
such status, the occupancy requirements of--
        (A) paragraph (1) of this subsection;
        (B) paragraphs (1) through (5) and paragraph (7) of section 
    3710(a) of this title;
        (C) section 3712(a)(5)(A)(i) of this title; and
        (D) section 3712(e)(5) of this title;

shall be considered to be satisfied if the spouse of the veteran 
occupies the property as the spouse's home and the spouse makes the 
certification required by paragraph (1) of this subsection.
    (d) Subject to notice and opportunity for a hearing, whenever the 
Secretary finds with respect to guaranteed or insured loans that any 
lender or holder has failed to maintain adequate loan accounting 
records, or to demonstrate proper ability to service loans adequately or 
to exercise proper credit judgment or has willfully or negligently 
engaged in practices otherwise detrimental to the interest of veterans 
or of the Government, the Secretary may refuse either temporarily or 
permanently to guarantee or insure any loans made by such lender or 
holder and may bar such lender or holder from acquiring loans guaranteed 
or insured under this chapter; however, the Secretary shall not refuse 
to pay a guaranty or insurance claim on loans theretofore entered into 
in good faith between a veteran and such lender. The Secretary may also 
refuse either temporarily or permanently to guarantee or insure any 
loans made by a lender or holder refused the benefits of participation 
under the National Housing Act pursuant to a determination of the 
Secretary of Housing and Urban Development.
    (e) Any housing loan which is financed through the assistance of 
this chapter and to which section 3714 of this chapter applies shall 
include a provision that the loan is immediately due and payable upon 
transfer of the property securing such loan to any transferee unless the 
acceptability of the assumption of the loan is established pursuant to 
such section 3714.
    (f) A loan for the purchase or construction of new residential 
property, the construction of which began after the energy efficiency 
standards under section 109 of the Cranston-Gonzalez National Affordable 
Housing Act (42 U.S.C. 12709), as amended by section 101(c) of the 
Energy Policy Act of 1992, take effect, may not be financed through the 
assistance of this chapter unless the new residential property is 
constructed in compliance with such standards.

(Pub. L. 85-857, Sept. 2, 1958, 72 Stat. 1206, Sec. 1804; Pub. L. 86-73, 
Sec. 3, June 30, 1959, 73 Stat. 156; Pub. L. 86-665, Sec. 5, July 14, 
1960, 74 Stat. 532; Pub. L. 89-117, title II, Sec. 217(b), Aug. 10, 
1965, 79 Stat. 473; Pub. L. 90-19, Sec. 25(2), May 25, 1967, 81 Stat. 
28; Pub. L. 91-506, Sec. 2(d), Oct. 23, 1970, 84 Stat. 1108; Pub. L. 93-
569, Sec. 2(d), (e), Dec. 31, 1974, 88 Stat. 1863, 1864; Pub. L. 94-324, 
Sec. 7(7), (8), June 30, 1976, 90 Stat. 721; Pub. L. 97-295, Sec. 4(64), 
Oct. 12, 1982, 96 Stat. 1309; Pub. L. 100-198, Secs. 8(a)(1), 10(b), 
Dec. 21, 1987, 101 Stat. 1319, 1323; Pub. L. 100-322, title IV, 
Sec. 415(c)(3), May 20, 1988, 102 Stat. 551; Pub. L. 101-237, title III, 
Sec. 313(b)(1), Dec. 18, 1989, 103 Stat. 2077; renumbered Sec. 3704 and 
amended Pub. L. 102-83, Sec. 5(a), (c)(1), Aug. 6, 1991, 105 Stat. 406; 
Pub. L. 102-486, title I, Sec. 101(c)(2), Oct. 24, 1992, 106 Stat. 2787; 
Pub. L. 103-446, title IX, Sec. 903, Nov. 2, 1994, 108 Stat. 4676.)

                       References in Text

    The National Housing Act, referred to in subsecs. (b) and (d), is 
act June 27, 1934, ch. 847, 48 Stat. 1246, as amended, which is 
classified principally to chapter 13 (Sec. 1701 et seq.) of Title 12, 
Banks and Banking. For complete classification of this Act to the Code, 
see section 1701 of Title 12 and Tables.


                               Amendments

    1994--Subsecs. (e) to (g). Pub. L. 103-446 redesignated subsecs. (f) 
and (g) as (e) and (f), respectively, and struck out former subsec. (e) 
which read as follows: ``No loan for the purchase or construction of new 
residential property (other than property served by a water and sewerage 
system approved by the Secretary of Housing and Urban Development 
pursuant to title X of the National Housing Act (12 U.S.C. 1749aa et 
seq.)) shall be financed through the assistance of this chapter, except 
pursuant to a commitment made prior to August 10, 1965, if such property 
is not served by a public or adequate community water and sewerage 
system and is located in an area where the appropriate local officials 
certify that the establishment of such systems is economically feasible. 
For purposes of this subsection, the economic feasibility of 
establishing public or adequate community water and sewerage systems 
shall be determined without regard to whether such establishment is 
authorized by law or is subject to approval by one or more local 
governments or public bodies.''
    1992--Subsec. (g). Pub. L. 102-486 added subsec. (g).
    1991--Pub. L. 102-83, Sec. 5(a), renumbered section 1804 of this 
title as this section.
    Subsec. (c)(2). Pub. L. 102-83, Sec. 5(c)(1), substituted 
``3710(a)'' for ``1810(a)'' in subpar. (B), ``3712(a)(5)(A)(i)'' for 
``1812(a)(5)(A)(i)'' in subpar. (C), and ``3712(e)(5)'' for 
``1812(e)(5)'' in subpar. (D).
    Subsec. (f). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3714'' for 
``1814'' in two places.
    1989--Subsecs. (a) to (c)(1), (d). Pub. L. 101-237 substituted 
``Secretary'' for ``Administrator'' wherever appearing.
    1988--Subsec. (c)(2)(C). Pub. L. 100-322, Sec. 415(c)(3)(A), 
substituted ``1812(a)(5)(A)(i)'' for ``1819(a)(5)(A)(i)''.
    Subsec. (c)(2)(D). Pub. L. 100-322, Sec. 415(c)(3)(b), substituted 
``1812(e)(5)'' for ``1819(e)(5)''.
    Subsec. (f). Pub. L. 100-322, Sec. 415(c)(3)(C), substituted 
``section 1814'' for ``section 1817A'' in two places.
    1987--Subsec. (c). Pub. L. 100-198, Sec. 8(a), designated existing 
provision as par. (1), substituted ``Except as provided in paragraph (2) 
of this subsection, no'' for ``No'' in first and second sentences, and 
added par. (2).
    Subsec. (f). Pub. L. 100-198, Sec. 10(b), added subsec. (f).
    1982--Subsec. (e). Pub. L. 97-295 inserted ``(12 U.S.C. 1749aa et 
seq.)'' after ``the National Housing Act'', and substituted ``August 10, 
1965'' for ``the date of the enactment of the Housing and Urban 
Development Act of 1965''.
    1976--Subsec. (c). Pub. L. 94-324, Sec. 7(7), substituted ``the 
veteran'' for ``he'' in six places and ``the veteran's'' for ``his'' 
wherever appearing.
    Subsec. (d). Pub. L. 94-324, Sec. 7(8), substituted ``the 
Administrator may'' for ``he may''.
    1974--Subsec. (b). Pub. L. 93-569, Sec. 2(e), struck out ``under 
section 512 of that Act'' after ``determination of the Secretary of 
Housing and Urban Development''.
    Subsec. (c). Pub. L. 93-569, Sec. 2(d), inserted provision that, the 
foregoing provisions notwithstanding, in the case of an automatically 
guaranteed loan, the veteran is required to make certification only at 
the time of loan closing.
    Subsec. (d). Pub. L. 93-569, Sec. 2(e), struck out ``under section 
512 of that Act'' after ``determination of the Secretary of Housing and 
Urban Development''.
    1970--Subsec. (b). Pub. L. 91-506 substituted ``Subject to notice 
and opportunity for a hearing, the'' for ``The''.
    Subsec. (d). Pub. L. 91-506 substituted ``Subject to notice and 
opportunity for a hearing, whenever'' for ``Whenever''.
    1967--Subsecs. (b), (d), (e). Pub. L. 90-19 substituted ``Secretary 
of Housing and Urban Development'' for ``Federal Housing Commissioner''.
    1965--Subsec. (e). Pub. L. 89-117 added subsec. (e).
    1960--Subsec. (c). Pub. L. 86-665 inserted sentence respecting 
satisfaction of provisions for certification by the veteran at the time 
he applies for the loan and at the time the loan is closed.
    1959--Subsec. (b). Pub. L. 86-73, Sec. 3(a), authorized the 
Administrator to refuse to appraise any property if the builder or 
sponsor of the property had been barred by the Federal Housing 
Commissioner from participation in the FHA insurance program.
    Subsec. (d). Pub. L. 86-73, Sec. 3(b), authorized the Administrator 
to refuse to guarantee or insure loans if the lender or holder of the 
loans has been barred by the Federal Housing Commissioner from 
participation in the FHA insurance program.


                    Effective Date of 1987 Amendment

    Section 8(c) of Pub. L. 100-198 provided that: ``The amendments made 
by this section [amending this section and sections 1810 and 1819 [now 
3710 and 3712] of this title] shall apply with respect to loans made 
more than 30 days after the date of the enactment of this Act [Dec. 21, 
1987].''


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-324 effective June 30, 1976, see section 
9(a) of Pub. L. 94-324, set out as a note under section 3701 of this 
title.


                    Effective Date of 1974 Amendment

    Amendment by Pub. L. 93-569 effective Dec. 31, 1974, see section 10 
of Pub. L. 93-569, set out as a note under section 3702 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 3706, 3710, 3711, 3712, 3762 
of this title.
