
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: 38USC3707]

 
                      TITLE 38--VETERANS' BENEFITS
 
               PART III--READJUSTMENT AND RELATED BENEFITS
 
              CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
 
                          SUBCHAPTER I--GENERAL
 
Sec. 3707. Adjustable rate mortgages

    (a) The Secretary shall carry out a demonstration project under this 
section during fiscal years 1993, 1994, and 1995 for the purpose of 
guaranteeing loans in a manner similar to the manner in which the 
Secretary of Housing and Urban Development insures adjustable rate 
mortgages under section 251 of the National Housing Act.
    (b) Interest rate adjustment provisions of a mortgage guaranteed 
under this section shall--
        (1) correspond to a specified national interest rate index 
    approved by the Secretary, information on which is readily 
    accessible to mortgagors from generally available published sources;
        (2) be made by adjusting the monthly payment on an annual basis;
        (3) be limited, with respect to any single annual interest rate 
    adjustment, to a maximum increase or decrease of 1 percentage point; 
    and
        (4) be limited, over the term of the mortgage, to a maximum 
    increase of 5 percentage points above the initial contract interest 
    rate.

    (c) The Secretary shall promulgate underwriting standards for loans 
guaranteed under this section, taking into account--
        (1) the status of the interest rate index referred to in 
    subsection (b)(1) and available at the time an underwriting decision 
    is made, regardless of the actual initial rate offered by the 
    lender;
        (2) the maximum and likely amounts of increases in mortgage 
    payments that the loans would require;
        (3) the underwriting standards applicable to adjustable rate 
    mortgages insured under title II of the National Housing Act; and
        (4) such other factors as the Secretary finds appropriate.

    (d) The Secretary shall require that the mortgagee make available to 
the mortgagor, at the time of loan application, a written explanation of 
the features of the adjustable rate mortgage, including a hypothetical 
payment schedule that displays the maximum potential increases in 
monthly payments to the mortgagor over the first five years of the 
mortgage term.

(Added Pub. L. 102-547, Sec. 3(a)(1), Oct. 28, 1992, 106 Stat. 3634; 
amended Pub. L. 103-78, Sec. 7, Aug. 13, 1993, 107 Stat. 769.)

                       References in Text

    The National Housing Act, referred to in subsecs. (a) and (c)(3), is 
act June 27, 1934, ch. 847, 48 Stat. 1246, as amended. Title II of the 
Act is classified generally to subchapter II (Sec. 1707 et seq.) of 
chapter 13 of Title 12, Banks and Banking. Section 251 of the Act is 
classified to section 1715z-16 of Title 12. For complete classification 
of this Act to the Code, see section 1701 of Title 12 and Tables.


                               Amendments

    1993--Subsec. (b)(2). Pub. L. 103-78 struck out before semicolon at 
end ``on the anniversary of the date on which the loan was closed''.


   Annual Reports on Adjustable Rate Mortgages Guaranteed Under This 
                                 Section

    Section 3(b) of Pub. L. 102-547 directed Secretary of Veterans 
Affairs to transmit adjustable rate mortgage report to Committees on 
Veterans' Affairs of Senate and House of Representatives no later than 
Dec. 31, 1993, containing description of project carried out under this 
section and thereafter to transmit annual reports to such committees 
with respect to default rates and other information concerning loans 
guaranteed under this section prior to repeal by Pub. L. 104-110, title 
II, Sec. 201(b), Feb. 13, 1996, 110 Stat. 770.
