
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: 38USC3711]

 
                      TITLE 38--VETERANS' BENEFITS
 
               PART III--READJUSTMENT AND RELATED BENEFITS
 
              CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
 
                          SUBCHAPTER II--LOANS
 
Sec. 3711. Direct loans to veterans

    (a) The Congress finds that housing credit for purposes specified in 
section 3710 or 3712 of this title is not and has not been generally 
available to veterans living in rural areas, or in small cities and 
towns not near large metropolitan areas. It is therefore the purpose of 
this section to provide housing credit for veterans living in such rural 
areas and such small cities and towns.
    (b) Whenever the Secretary finds that private capital is not 
generally available in any rural area or small city or town for the 
financing of loans guaranteed for purposes specified in section 3710 or 
3712 of this title, the Secretary shall designate such rural area or 
small city or town as a ``housing credit shortage area''. The Secretary 
shall, with respect to any such area, make, or enter into commitments to 
make, to any veteran eligible under this title, a loan for any or all of 
the purposes described in section 3710(a) or 3712 of this title (other 
than the refinancing of a loan under section 3710(a)(8) or 
3712(a)(1)(F)).
    (c) No loan may be made under this section to a veteran unless the 
veteran shows to the satisfaction of the Secretary that--
        (1) the veteran is unable to obtain from a private lender in 
    such housing credit shortage area, at an interest rate not in excess 
    of the rate authorized for guaranteed home loans or manufactured 
    home loans, as appropriate, a loan for such purpose for which the 
    veteran is qualified under section 3710 or 3712 of this title, as 
    appropriate; and
        (2) the veteran is unable to obtain a loan for such purpose from 
    the Secretary of Agriculture under title III of the Consolidated 
    Farm and Rural Development Act (7 U.S.C. 1921 et seq.) or title V of 
    the Housing Act of 1949 (42 U.S.C. 1471 et seq.).

    (d)(1) Loans made under this section shall bear interest at a rate 
determined by the Secretary, not to exceed the rate authorized for 
guaranteed home loans, or manufactured home loans, as appropriate, and 
shall be subject to such requirements or limitations prescribed for 
loans guaranteed under this title as may be applicable.
    (2)(A) Except for any loan made under this chapter for the purposes 
described in section 3712 of this title, the original principal amount 
of any loan made under this section shall not exceed an amount which 
bears the same ratio to $33,000 as the amount of guaranty to which the 
veteran is entitled under section 3710 of this title at the time the 
loan is made bears to $36,000; and the guaranty entitlement of any 
veteran who heretofore or hereafter has been granted a loan under this 
section shall be charged with an amount which bears the same ratio to 
$36,000 as the amount of the loan bears to $33,000.
    (B) The original principal amount of any loan made under this 
section for the purposes described in section 3712 of this title shall 
not exceed the amount that bears the same ratio to $33,000 as the amount 
of guaranty to which the veteran is entitled under such section at the 
time the loan is made bears to $20,000. The amount of the guaranty 
entitlement for purposes specified in section 3710 of this title of any 
veteran who is granted a loan under this section, or who before October 
18, 1978, was granted a loan under this section, shall be charged with 
the amount that bears the same ratio to $20,000 as the amount of the 
loan bears to $33,000.
    (3) No veteran may obtain loans under this section aggregating more 
than $33,000.
    (e) Loans made under this section shall be repaid in monthly 
installments, except that in the case of any such loan made for any of 
the purposes described in paragraphs (2), (3), or (4) of section 3710(a) 
of this title, the Secretary may provide that such loan shall be repaid 
in quarterly, semiannual, or annual installments.
    (f) In connection with any loan under this section, the Secretary 
may make advances in cash to pay taxes and assessments on the real 
estate, to provide for repairs, alterations, and improvements, and to 
meet the incidental expenses of the transaction. The Secretary shall 
determine the expenses incident to origination of loans made under this 
section, which expenses, or a reasonable flat allowance in lieu thereof, 
shall be paid by the veteran in addition to the loan closing costs.
    (g) The Secretary may sell, and shall offer for sale, to any person 
or entity approved for such purpose by the Secretary, any loan made 
under this section at a price which the Secretary determines to be 
reasonable under the conditions prevailing in the mortgage market when 
the agreement to sell the loan is made; and shall guarantee any loan 
thus sold subject to the same conditions, terms, and limitations which 
would be applicable were the loan guaranteed for purposes specified in 
section 3710 or 3712 of this title, as appropriate.
    (h) The Secretary may exempt dwellings constructed through 
assistance provided by this section from the minimum land planning and 
subdivision requirements prescribed pursuant to subsection (a) of 
section 3704 of this title, and with respect to such dwellings may 
prescribe special minimum land planning and subdivision requirements 
which shall be in keeping with the general housing facilities in the 
locality but shall require that such dwellings meet minimum requirements 
of structural soundness and general acceptability.
    (i) The Secretary is authorized, without regard to the provisions of 
subsections (a), (b), and (c) of this section, to make or enter into a 
commitment to make a loan to any veteran to assist the veteran in 
acquiring a specially adapted housing unit authorized under chapter 21 
of this title, if the veteran is determined to be eligible for the 
benefits of such chapter 21, and is eligible for loan guaranty benefits 
under this chapter.
    (j)(1) If any builder or sponsor proposes to construct one or more 
dwellings in a housing credit shortage area, or in any area for a 
veteran who is determined to be eligible for assistance in acquiring a 
specially adapted housing unit under chapter 21 of this title, the 
Secretary may enter into commitment with such builder or sponsor, under 
which funds available for loans under this section will be reserved for 
a period not in excess of three months, or such longer period as the 
Secretary may authorize to meet the needs in any particular case, for 
the purpose of making loans to veterans to purchase such dwellings. Such 
commitment may not be assigned or transferred except with the written 
approval of the Secretary. The Secretary shall not enter into any such 
commitment unless such builder or sponsor pays a nonrefundable 
commitment fee to the Secretary in an amount determined by the 
Secretary, not to exceed 2 percent of the funds reserved for such 
builder or sponsor.
    (2) Whenever the Secretary finds that a dwelling with respect to 
which funds are being reserved under this subsection has been sold, or 
contracted to be sold, to a veteran eligible for a direct loan under 
this section, the Secretary shall enter into a commitment to make the 
veteran a loan for the purchase of such dwelling. With respect to any 
loan made to an eligible veteran under this subsection, the Secretary 
may make advances during the construction of the dwelling, up to a 
maximum in advances of (A) the cost of the land plus (B) 80 percent of 
the value of the construction in place.
    (k) Without regard to any other provision of this chapter, the 
Secretary may take or cause to be taken such action as in the 
Secretary's judgment may be necessary or appropriate for or in 
connection with the custody, management, protection, and realization or 
sale of investments under this section, may determine the Secretary's 
necessary expenses and expenditures, and the manner in which the same 
shall be incurred, allowed and paid, may make such rules, regulations, 
and orders as the Secretary may deem necessary or appropriate for 
carrying out the Secretary's functions under this section and, except as 
otherwise expressly provided in this chapter, may employ, utilize, 
compensate, and, to the extent not inconsistent with the Secretary's 
basic responsibilities under this chapter, delegate any of the 
Secretary's functions under this section to such persons and such 
corporate or other agencies, including agencies of the United States, as 
the Secretary may designate.

(Pub. L. 85-857, Sept. 2, 1958, 72 Stat. 1208, Sec. 1811; Pub. L. 86-
665, Sec. 2, July 14, 1960, 74 Stat. 531; Pub. L. 87-84, Sec. 2, July 6, 
1961, 75 Stat. 201; Pub. L. 88-402, Aug. 4, 1964, 78 Stat. 380; Pub. L. 
89-358, Sec. 5(e), Mar. 3, 1966, 80 Stat. 26; Pub. L. 90-77, title IV, 
Sec. 404, Aug. 31, 1967, 81 Stat. 190; Pub. L. 90-301, Sec. 1(b), May 7, 
1968, 82 Stat. 113; Pub. L. 91-22, Sec. 3, June 6, 1969, 83 Stat. 32; 
Pub. L. 91-506, Sec. 4, Oct. 23, 1970, 84 Stat. 1109; Pub. L. 92-66, 
Aug. 5, 1971, 85 Stat. 173; Pub. L. 93-569, Sec. 4, Dec. 31, 1974, 88 
Stat. 1864; Pub. L. 94-324, Secs. 3, 7(12)-(15), June 30, 1976, 90 Stat. 
720, 721; Pub. L. 95-476, title I, Sec. 105(b), Oct. 18, 1978, 92 Stat. 
1499; Pub. L. 96-385, title IV, Secs. 401(c)(2), 402(b), Oct. 7, 1980, 
94 Stat. 1533; Pub. L. 97-295, Sec. 4(65), Oct. 12, 1982, 96 Stat. 1309; 
Pub. L. 97-306, title IV, Sec. 406(c)(1), Oct. 14, 1982, 96 Stat. 1445; 
Pub. L. 100-198, Sec. 3(c), Dec. 21, 1987, 101 Stat. 1316; Pub. L. 100-
322, title IV, Sec. 415(c)(5), (d)(2) May 20, 1988, 102 Stat. 551, 552; 
Pub. L. 101-237, title III, Sec. 313(b)(1), Dec. 18, 1989, 103 Stat. 
2077; renumbered Sec. 3711 and amended Pub. L. 102-83, Sec. 5(a), 
(c)(1), Aug. 6, 1991, 105 Stat. 406; Pub. L. 105-368, title VI, 
Sec. 602(e)(1)(B), Nov. 11, 1998, 112 Stat. 3346.)

                       References in Text

    Title III of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1921 et seq.), referred to in subsec. (c)(2), probably means 
title III of Pub. L. 87-128, Aug. 8, 1961, 75 Stat. 307, as amended, 
known as the Consolidated Farm and Rural Development Act, which is 
classified principally to chapter 50 (Sec. 1921 et seq.) of Title 7, 
Agriculture. For complete classification of this Act to the Code, see 
Short Title note set out under section 1921 of Title 7 and Tables.
    The Housing Act of 1949, referred to in subsec. (c)(2), is act July 
15, 1949, ch. 338, 63 Stat. 413, as amended. Title V of the Housing Act 
of 1949 is classified generally to subchapter III (Sec. 1471 et seq.) of 
chapter 8A of Title 42, The Public Health and Welfare. For complete 
classification of this Act to the Code, see Short Title note set out 
under section 1441 of Title 42 and Tables.


                               Amendments

    1998--Subsec. (k). Pub. L. 105-368 struck out ``and section 3723 of 
this title'' after ``functions under this section'' in two places.
    1991--Pub. L. 102-83, Sec. 5(a), renumbered section 1811 of this 
title as this section.
    Subsec. (a). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3710 or 
3712'' for ``1810 or 1812''.
    Subsec. (b). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3710 or 
3712'' for ``1810 or 1812'', ``3710(a) or 3712'' for ``1810(a) or 
1812'', and ``3710(a)(8) or 3712(a)(1)(F))'' for ``1810(a)(8) or 
1812(a)(1)(F))''.
    Subsec. (c)(1). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3710 or 
3712'' for ``1810 or 1812''.
    Subsec. (d)(2). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3712'' 
for ``1812'' and ``3710'' for ``1810'' in subpars. (A) and (B).
    Subsec. (e). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3710(a)'' 
for ``1810(a)''.
    Subsec. (g). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3710 or 
3712'' for ``1810 or 1812''.
    Subsec. (h). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3704'' for 
``1804''.
    Subsec. (k). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3723'' for 
``1823'' in two places.
    1989--Subsecs. (b) to (d)(1), (e) to (k). Pub. L. 101-237 
substituted ``Secretary'' and ``Secretary's'' for ``Administrator'' and 
``Administrator's'', respectively, wherever appearing.
    1988--Subsec. (a). Pub. L. 100-322, Sec. 415(c)(5)(A), (d)(2)(A), 
substituted ``for purposes specified in section 1810 or 1812'' for 
``under section 1810 or 1819''.
    Subsec. (b). Pub. L. 100-322, Sec. 415(c)(5), (d)(2)(A), substituted 
``for purposes specified in section 1810 or 1812'' for ``under section 
1810 or 1819'', ``section 1810(a) or 1812'' for ``section 1810(a) or 
1819'', and ``section 1812(a)(1)(F)'' for ``section 1819(a)(1)(F)''.
    Subsecs. (c)(1), (d)(2)(A). Pub. L. 100-322, Sec. 415(c)(5)(A), 
substituted ``1812'' for ``1819''.
    Subsec. (d)(2)(B). Pub. L. 100-322, Sec. 415(c)(5)(A), (d)(2)(B), 
substituted ``1812'' for ``1819'' and ``for purposes specified in 
section 1810'' for ``under section 1810(c)''.
    Subsec. (g). Pub. L. 100-322, Sec. 415(c)(5)(A), (d)(2)(A), 
substituted ``for purposes specified in section 1810 or 1812'' for 
``under section 1810 or 1819''.
    1987--Subsec. (d)(2)(A). Pub. L. 100-198 substituted ``$36,000'' for 
``$27,500'' in two places.
    1982--Subsec. (c)(1). Pub. L. 97-306, Sec. 406(c)(1), substituted 
``manufactured home'' for ``mobile home''.
    Subsec. (c)(2). Pub. L. 97-295, Sec. 4(65)(A), substituted ``title 
III of the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et 
seq.) or title V of the Housing Act of 1949 (42 U.S.C. 1471 et seq.)'' 
for ``sections 1000-1029 of title 7 or under sections 1471-1483 of title 
42''.
    Subsec. (d)(1). Pub. L. 97-306, Sec. 406(c)(1), substituted 
``manufactured home'' for ``mobile home''.
    Subsec. (d)(2)(B). Pub. L. 97-295, Sec. 4(65)(B), substituted 
``October 18, 1978,'' for ``the date of the enactment of the Veterans' 
Housing Benefits Act of 1978''.
    Subsec. (j). Pub. L. 97-295, Sec. 4(65)(C), substituted ``percent'' 
for ``per centum'' wherever appearing.
    1980--Subsec. (b). Pub. L. 96-385, Sec. 401(c)(2), inserted ``(other 
than the refinancing of a loan under section 1810(a)(8) or 
1819(a)(1)(F))'' after ``section 1810(a) or 1819 of this title''.
    Subsec. (d)(2). Pub. L. 96-385, Sec. 402(b), substituted in two 
places ``$27,500'' for ``$25,000'' in subpar. (A) and ``$20,000'' for 
``$17,500'' in two places in subpar. (B).
    1978--Subsec. (d)(2)(A). Pub. L. 95-476, Sec. 105(b)(1), substituted 
``$25,000'' for ``$17,500'' in two places.
    Subsec. (d)(2)(B). Pub. L. 95-476, Sec. 105(b)(2), substituted 
formula for determining maximum amount of original principal of any loan 
made under this section for purposes of section 1819 of this title for 
provision that such original amount was not to exceed amount specified 
by Administrator pursuant to section 1819(d) of this title and inserted 
provision relating to amount of guaranty entitlement under section 
1810(c) of this title.
    1976--Subsec. (b). Pub. L. 94-324, Sec. 7(12), substituted ``the 
Administrator shall'' for ``he shall'' and ``The Administrator'' for 
``He''.
    Subsec. (c). Pub. L. 94-324, Sec. 7(13), substituted ``the veteran'' 
for ``he'' wherever appearing.
    Subsec. (d)(2)(A). Pub. L. 94-324, Sec. 3(1), substituted 
``$33,000'' for ``$21,000'' wherever appearing and struck out provision 
authorizing Administrator to increase limitations specified upon finding 
that cost levels so required.
    Subsec. (d)(3). Pub. L. 94-324, Sec. 3(2), increased aggregate 
amount of loans that a veteran is eligible to receive under this section 
from $21,000 to $33,000 and struck out provision authorizing 
Administrator to increase specific limitations upon such loans.
    Subsec. (g). Pub. L. 94-324, Sec. 7(14), substituted ``the 
Administrator'' for ``him'' and ``he'' wherever appearing.
    Subsec. (k). Pub. L. 94-324, Sec. 7(15), substituted ``the 
Administrator's'' for ``his'' wherever appearing and ``as the 
Administrator'' for ``as he'' wherever appearing.
    1974--Subsec. (d)(2)(A). Pub. L. 93-569 substituted ``$17,500'' for 
``$12,500'' wherever appearing.
    1971--Subsec. (g). Pub. L. 92-66 substituted provisions authorizing 
Administrator to sell loans at a price which he determines to be 
reasonable under prevailing conditions in the mortgage market when 
agreement to sell loan is made, for provisions authorizing Administrator 
to sell loans at a price which he determines to be reasonable but not 
less than 98 per centum of unpaid principal balance, plus full amount of 
accrued interest, and if loans are offered to an investor in a package 
or block of two or more loans at not less than 98 per centum of 
aggregate unpaid principal balance of loans included in such package or 
block, plus full amount of accrued interest.
    1970--Subsec. (a). Pub. L. 91-506, Sec. 4(1), substituted ``1810 or 
1819'' for ``1810''.
    Subsec. (b). Pub. L. 91-506, Sec. 4(1), (2), substituted ``1810 or 
1819'' for ``1810'' and provided that the Administrator make, or enter 
into commitments to make, to any eligible veteran, a loan for any of the 
purposes described in section 1819 dealing with loans to purchase mobile 
homes and lots as well as section 1810(a) dealing with the purchase or 
construction of homes.
    Subsecs. (c)(1), (d)(1). Pub. L. 91-506, Sec. 4(3), (4), inserted 
reference to mobile home loans.
    Subsec. (d)(2)(A). Pub. L. 91-506, Sec. 4(5), redesignated subsec. 
(d)(2) as subsec. (d)(2)(A) and substituted ``Except for any loan made 
under this chapter for the purposes described in section 1819 of this 
title, the'' for ``The''.
    Subsec. (d)(2)(B). Pub. L. 91-506, Sec. 4(6), inserted provision 
limiting the original principal amount of any loan made under this 
section for the purchase of mobile homes and mobile home lots under 
section 1819 of this title to the amount specified by the Administrator 
pursuant to subsec. (d) of section 1819.
    Subsec. (g). Pub. L. 91-506, Sec. 4(7), substituted ``1810 or 1819 
of this title, as appropriate'' for ``1810 of this title''.
    Subsec. (h). Pub. L. 91-506, Sec. 4(8), substituted provisions 
permitting Administrator to exempt dwellings constructed through 
assistance provided by this section from the minimum land planning and 
subdivision requirements of this title so long as such dwellings meet 
minimum requirements of structural soundness and general acceptability 
for provisions establishing a direct loan expiration date by reference 
to those for guaranteed loans.
    Subsec. (i). Pub. L. 91-506, Sec. 4(8), substituted provisions 
authorizing, Administrator to make or enter into a commitment to make, 
loans to assist disabled veterans in acquiring specially adapted housing 
if they are eligible for provisions authorizing Administrator to reserve 
funds available for loans to enable veterans to purchase dwellings in a 
housing credit shortage area provided the builder pays a nonrefundable 
commitment fee, not to exceed 2 percent of the funds reserved, 
authorizing the Administrator to make advances during construction of 
the dwelling, authorizing the Administrator to permit a private lender 
to purchase such loan, and permitting the Administrator to exempt 
dwellings constructed through assistance provided by this subsec. from 
the minimum land planning and subdivision requirements of this title so 
long as such dwellings meet minimum requirements of structural soundness 
and general acceptability.
    Subsec. (j). Pub. L. 91-506, Sec. 4(8), substituted provisions 
authorizing Administrator to reserve funds available for loans to enable 
veterans to purchase housing in a housing credit shortage area, or in 
any area for a disabled veteran eligible for specially adapted housing, 
provided the builder pays a nonrefundable commitment fee, not to exceed 
2 percent of the funds reserved and authorizing the Administrator to 
make advances during construction of the dwelling for provisions 
authorizing the Administrator to process loan applications 
notwithstanding the assistance of the Voluntary Home Mortgage Credit 
Committee in trying to place such loans with private lenders, 
authorizing the Administrator to complete the processing of such loan 
applications unless he is notified by such Committee that it was able to 
place any such loan with a private lender, and defining ``working 
days''.
    1969--Subsec. (d)(2), (3). Pub. L. 91-22 substituted ``$21,000'' for 
``$17,500'' wherever appearing.
    1968--Subsec. (d)(2). Pub. L. 90-301 substituted ``$12,500'' for 
``$7,500'' in two places.
    1967--Subsec. (d)(2). Pub. L. 90-77, Sec. 404(a), authorized an 
increase in amount of direct loan limits from $17,500 to $25,000 where 
Administrator finds cost levels so require.
    Subsec. (d)(3). Pub. L. 90-77, Sec. 404(b), authorized an increase 
in aggregate amount of direct loans to $25,000 where Administrator finds 
cost levels so require.
    1966--Subsec. (d)(2), (3), Pub. L. 89-358 substituted ``$17,500'' 
for ``$15,000'' wherever appearing.
    1964--Subsec. (g). Pub. L. 88-402 substituted provisions authorizing 
Administrator to sell loans at a price which he determines to be 
reasonable but not less than 98 per centum of unpaid principal balance, 
plus full amount of accrued interest, and if loans are offered to an 
investor in a package or block of two or more loans at not less than 98 
per centum of aggregate unpaid principal balance of loans included in 
such package or block, plus full amount of accrued interest, for 
provisions which permitted Administrator to sell loans only at a price 
not less than par.
    1961--Subsec. (d)(2), (3). Pub. L. 87-84, Sec. 2(a), substituted 
``$15,000'' for ``$13,500'' wherever appearing.
    Subsec. (h). Pub. L. 87-84, Sec. 2(b), substituted ``to any veteran 
after the expiration of his entitlement pursuant to section 1803(a)(3) 
of this title except pursuant to a commitment issued by the 
Administrator before such entitlement expires'' for ``after July 25, 
1962, except pursuant to commitments issued by the Administrator before 
that date.''
    1960--Subsec. (h). Pub. L. 86-665 substituted ``1962'' for ``1960''.


                    Effective Date of 1998 Amendment

    Amendment by Pub. L. 105-368 effective Oct. 1, 1998, see section 
602(f) of Pub. L. 105-368, set out as a note under section 2106 of this 
title.


                    Effective Date of 1987 Amendment

    Amendment by section 3(c) of Pub. L. 100-198 applicable to loans 
closed on or after Feb. 1, 1988, but not applicable to any loan for 
which a guaranty commitment is made on or before Dec. 31, 1987, see 
section 3(d) of Pub. L. 100-198, set out as a note under section 3703 of 
this title.


                    Effective Date of 1980 Amendment

    Amendment by sections 401(c)(2) and 402(b) of Pub. L. 96-385 
effective Oct. 7, 1980, and Oct. 1, 1980, respectively, see section 
601(b), (d) of Pub. L. 96-385, set out as a note under section 1114 of 
this title.


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-476 effective Oct. 1, 1978, see section 
108(a) of Pub. L. 95-476, set out as a note under section 3702 of this 
title.


                    Effective Date of 1976 Amendment

    Amendment by sections 3 and 7(12)-(15) of Pub. L. 94-324 effective 
Oct. 1, 1976, and June 30, 1976, respectively, see section 9(a), (b) 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.


                    Effective Date of 1967 Amendment

    Amendment by Pub. L. 90-77 effective first day of first calendar 
month which begins more than ten days after Aug. 31, 1967, see section 
405 of Pub. L. 90-77, set out as a note under section 101 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 3710, 3712, 3729, 3732 of 
this title.
