
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 23, 2000]
[Document affected by Public Law 107-103 Section 403]
[CITE: 38USC3714]

 
                      TITLE 38--VETERANS' BENEFITS
 
               PART III--READJUSTMENT AND RELATED BENEFITS
 
              CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS
 
                          SUBCHAPTER II--LOANS
 
Sec. 3714. Assumptions; release from liability

    (a)(1) Except as provided in subsection (f) of this section, if a 
veteran or any other person disposes of residential property securing a 
loan guaranteed, insured, or made under this chapter and the veteran or 
other person notifies the holder of the loan in writing before the 
property is disposed of, the veteran or other person, as the case may 
be, shall be relieved of all further liability to the Secretary with 
respect to the loan (including liability for any loss resulting from any 
default of the purchaser or any subsequent owner of the property) and 
the application for assumption shall be approved if the holder 
determines that--
        (A) the loan is current; and
        (B) the purchaser of the property from such veteran or other 
    person--
            (i) is obligated by contract to purchase such property and 
        to assume full liability for the repayment of the balance of the 
        loan remaining unpaid and has assumed by contract all of the 
        obligations of the veteran under the terms of the instruments 
        creating and securing the loan; and
            (ii) qualifies from a credit standpoint, to the same extent 
        as if the purchaser were a veteran eligible under section 3710 
        of this title, for a guaranteed or insured or direct loan in an 
        amount equal to the unpaid balance of the obligation for which 
        the purchaser is to assume liability.

    (2) For the purposes of paragraph (1), paragraph (3), and paragraph 
(4)(C)(ii) of this subsection, the Secretary shall be considered to be 
the holder of the loan if the actual holder is not an approved lender 
described in section 3702.
    (3) If the holder of the loan determines that the loan is not 
current or that the purchaser of the property does not meet the 
requirements of paragraph (1)(B) of this subsection, the holder shall--
        (A) notify the transferor and the Secretary of such 
    determination; and
        (B) notify the transferor that the transferor may appeal the 
    determination to the Secretary.

    (4)(A) Upon the appeal of the transferor after a determination 
described in paragraph (3) is made, the Secretary shall, in a timely 
manner, review and make a determination (or a redetermination in any 
case in which the Secretary made the determination described in such 
paragraph) with respect to whether the loan is current and whether the 
purchaser of the property meets the requirements of paragraph (1)(B) of 
this subsection. The Secretary shall transmit, in writing, a notice of 
the nature of such determination to the transferor and the holder and 
shall inform them of the action that shall or may be taken under 
subparagraph (B) of this paragraph as a result of the determination of 
the Secretary.
    (B)(i) If the Secretary determines under subparagraph (A) of this 
paragraph that the loan is current and that the purchaser meets the 
requirements of paragraph (1)(B) of this subsection, the holder shall 
approve the assumption of the loan, and the transferor shall be relieved 
of all liability to the Secretary with respect to such loan.
    (ii) If the Secretary determines under subparagraph (A) of this 
paragraph that the purchaser does not meet the requirements of paragraph 
(1)(B) of this subsection, the Secretary may direct the holder to 
approve the assumption of the loan if--
        (I) the Secretary determines that the transferor of the property 
    is unable to make payments on the loan and has made reasonable 
    efforts to find a buyer who meets the requirements of paragraph 
    (1)(B) of this subsection and that, as a result, the proposed 
    transfer is in the best interests of the Department and the 
    transferor;
        (II) the transferor has requested, within 15 days after 
    receiving the notice referred to in subparagraph (A) of this 
    paragraph, that the Secretary approve the assumption; and
        (III) the transferor will, upon assumption of the loan by the 
    purchaser, be secondarily liable on the loan.

    (C) If--
        (i) the loan is not approved for assumption under subparagraph 
    (B) of this paragraph or paragraph (1) of this subsection; or
        (ii) no appeal is made by the transferor under subparagraph (A) 
    of this paragraph within 30 days after the holder informs the 
    transferor of its determination under paragraph (3) of this 
    subsection,

the holder may demand immediate, full payment of the principal, and all 
interest earned thereon, of such loan if the transferor disposes of the 
property.
    (b) If a person disposes of residential property described in 
subsection (a)(1) of this section and the person fails to notify the 
holder of the loan before the property is disposed of, the holder, upon 
learning of such action by the person, may demand immediate and full 
payment of the principal, interest, and all other amounts owing under 
the terms of the loan.
    (c)(1) In any case in which the holder of a loan described in 
subsection (a)(1) of this section has knowledge of a person's disposing 
of residential property securing the loan, the holder shall notify the 
Secretary of such action.
    (2) If the holder fails to notify the Secretary in such a case, the 
holder shall be liable to the Secretary for any damage sustained by the 
Secretary as a result of the holder's failure, as determined at the time 
the Secretary is required to make payments in accordance with any 
insurance or guaranty provided by the Secretary with respect to the loan 
concerned.
    (d) The Secretary shall provide that the mortgage or deed of trust 
and any other instrument evidencing the loan entered into by a person 
with respect to a loan guaranteed, insured, or made under this chapter 
shall contain provisions, in such form as the Secretary shall specify, 
implementing the requirements of this section, and shall bear in 
conspicuous position in capital letters on the first page of the 
document in type at least 2 and \1/2\ times larger than the regular type 
on such page the following: ``This loan is not assumable without the 
approval of the Department of Veterans Affairs or its authorized 
agent.''.
    (e) The Secretary shall establish in regulations a reasonable amount 
as the maximum amount that a lender may charge for processing an 
application for a creditworthiness determination and assumption of a 
loan pursuant to this section. Such regulations shall establish 
requirements for the timely processing of applications for acceptance of 
assumptions.
    (f)(1) This section shall apply--
        (A) in the case of loans other than loans to finance the 
    purchase of real property described in section 3733(a)(1) of this 
    title, only to loans for which commitments are made on or after 
    March 1, 1988; and
        (B) in the case of loans to finance the purchase of such 
    property, only to loans which are closed after January 1, 1989.

    (2) This section shall not apply to a loan which the Secretary has 
sold without recourse.

(Added Pub. L. 100-198, Sec. 10(a)(1), Dec. 21, 1987, 101 Stat. 1321, 
Sec. 1817A; renumbered Sec. 1814, Pub. L. 100-322, title IV, 
Sec. 415(b)(2)(B), May 20, 1988, 102 Stat. 551; amended Pub. L. 100-689, 
title III, Sec. 302, Nov. 18, 1988, 102 Stat. 4176; Pub. L. 101-237, 
title III, Sec. 313(b)(1), Dec. 18, 1989, 103 Stat. 2077; renumbered 
Sec. 3714 and amended Pub. L. 102-83, Secs. 4(a)(2)(B)(iv), (3), (4), 
5(a), (c)(1), Aug. 6, 1991, 105 Stat. 403, 404, 406; Pub. L. 105-368, 
title X, Sec. 1005(b)(10), Nov. 11, 1998, 112 Stat. 3365.)


                               Amendments

    1998--Subsec. (f)(1)(B). Pub. L. 105-368 substituted ``after January 
1, 1989'' for ``more than 45 days after the date of the enactment of the 
Veterans' Benefits and Programs Improvement Act of 1988''.
    1991--Pub. L. 102-83, Sec. 5(a), renumbered section 1814 of this 
title as this section.
    Subsec. (a)(1)(B)(ii). Pub. L. 102-83, Sec. 5(c)(1), substituted 
``3710'' for ``1810''.
    Subsec. (a)(2). Pub. L. 102-83, Sec. 5(c)(1), substituted ``3702'' 
for ``1802''.
    Subsec. (a)(4)(B)(ii)(I). Pub. L. 102-83, Sec. 4(a)(3), (4), 
substituted ``Department'' for ``Veterans' Administration''.
    Subsec. (d). Pub. L. 102-83, Sec. 4(a)(2)(B)(iv), substituted 
``Department of Veterans Affairs'' for ``Veterans' Administration''.
    Subsec. (f)(1)(A). Pub. L. 102-83, Sec. 5(c)(1), substituted 
``3733(a)(1)'' for ``1833(a)(1)''.
    1989--Subsecs. (a), (c) to (f). Pub. L. 101-237, Sec. 313(b)(1), 
substituted ``Secretary'' for ``Administrator'' wherever appearing.
    1988--Pub. L. 100-322, Sec. 415(b)(2)(B), renumbered section 1817A 
of this title as this section.
    Subsec. (a)(1). Pub. L. 100-689, Sec. 302(1), substituted ``Except 
as provided in subsection (f) of this section, if'' for ``If'' and 
``loan guaranteed, insured, or made'' for ``guaranteed, insured, or 
direct housing loan obtained by a veteran''.
    Subsec. (f). Pub. L. 100-689, Sec. 302(2), amended subsec. (f) 
generally. Prior to amendment, subsec. (f) read as follows: ``This 
section shall apply only to loans for which commitments are made on or 
after March 1, 1988.''

                  Section Referred to in Other Sections

    This section is referred to in sections 3704, 3729 of this title.
