text: SECTION 1. PROCEDURES ON DEFAULT OF HOUSING LOANS.
  
      (a) In General.--Paragraph (2) of section 3732(a) of title 38, 
  United States Code, is amended to read as follows:
      ``(2)(A) Before suit or foreclosure the holder of the obligation 
  shall notify the Secretary of the default. Before the holder carries 
  out a liquidation sale of real property securing a defaulted loan, the 
  Secretary within 60 days after notification of default may, at the 
  Secretary's option, pay the holder of the obligation the unpaid balance 
  of the obligation plus accrued interest and reimburse the holder for 
  such advances, costs, and attorney fees as the Secretary finds were 
  properly and reasonably incurred in connection with the default and 
  receive an assignment of the loan and security. Nothing in this section 
  shall preclude any forebearance for the benefit of the mortgagor as may 
  be agreed upon by the parties to the loan and approved by the 
  Secretary.
      ``(B) Within 10 days after receiving a notice of default pursuant 
  to paragraph (1) of this subsection, the Secretary shall notify the 
  mortgagor that the Secretary may purchase the loan from the holder. The 
  notification shall specify--
              ``(i) that if the Secretary purchases the loan, the 
          Secretary--
                      ``(I) has the authority to modify the loan 
                  instruments by temporarily or permanently lowering the 
                  interest rate or by extending or reamortizing the loan; 
                  and
                      ``(II) may grant forbearance of interest or 
                  principal or both for a period of not more than 12 
                  months;
              ``(ii) that if the mortgagor wants the Secretary to 
          purchase the loan, the mortgagor must submit a written request 
          to the Secretary within 20 days of receipt of the Secretary's 
          notification; and
              ``(iii) the consequences to the mortgagor if the Secretary 
          purchases the loan.
      ``(C) Upon receiving a request from the mortgagor to purchase the 
  loan pursuant to subparagraph (B) of this paragraph, the Secretary, for 
  the purpose of avoiding foreclosure, may purchase the loan in 
  accordance with subparagraph (A). The Secretary shall purchase the loan 
  from the holder of the obligation if--
              ``(i) the default was caused by circumstances beyond the 
          control of the mortgagor and rendered the mortgagor temporarily 
          unable to correct a mortgage delinquency and to resume full 
          mortgage payments; and
              ``(ii) it is determined that--
                      ``(I) the holder is unwilling to grant further 
                  forbearance;
                      ``(II) the mortgagor desires to retain and occupy 
                  the property;
                      ``(III) the mortgagor has maintained the property 
                  in good condition or, if major repairs are required, 
                  such repairs are due to circumstances which were beyond 
                  the mortgagor's control;
                      ``(IV) the estimated net value of the property 
                  exceeds the unguaranteed portion of the loan; and
                      ``(V) there is a reasonable prospect that the 
                  mortgagor will be able to resume mortgage payments 
                  within 12 months after the Secretary purchases the 
                  loan.
      ``(D) The Secretary may provide assistance, under such terms and 
  conditions as the Secretary may provide, to a mortgagor whose loan has 
  been purchased under the provisions of subparagraph (C) of this 
  paragraph by--
              ``(i) modifying the loan instruments to lower the interest 
          rate or to extend or to reamortize the loan; and
              ``(ii) granting forbearance of interest or principal or 
          both for a period of not more than 12 months.
      ``(E) If the Secretary decides not to purchase the loan--
              ``(i) the Secretary shall notify the mortgagor of the 
          decision and its basis within 30 days after receiving a written 
          request from the mortgagor asking the Secretary to purchase the 
          loan pursuant to subparagraph (C) of this paragraph; and
              ``(ii) if the mortgagor is a veteran and used the veteran's 
          entitlement under section 3702 to obtain the loan or 
          substituted entitlement as described in section 3702(b)(2) to 
          purchase real property securing a loan guaranteed under this 
          chapter, notice under clause (i) shall include notice of the 
          right of appeal.
      ``(F) The Secretary shall obtain and hold in safekeeping a quit 
  claim deed from the mortgagor to the Secretary for the real property 
  securing the loan after the loan is purchased from the loan holder and 
  before the Secretary makes any modification to the loan instruments or 
  grants any forbearance. If the mortgagor brings the loan current and 
  keeps the loan current for 12 consecutive months, the unrecorded quit 
  claim deed shall be returned to the mortgagor. If, exclusive of any 
  period of forbearance, the loan becomes 6 months delinquent, the 
  Secretary may record the quit claim deed and acquire the property 
  securing the loan without incurring substantial delays and foreclosure 
  expenses. Nothing in this section shall preclude the Secretary from 
  initiating foreclosure before the loan becomes 6 months delinquent if 
  the Secretary believes it is in the best interest of the United States 
  to do so.
      ``(G) For the purposes of sections 3720(e) and (h), loans purchased 
  pursuant to subparagraph (C) that are not in default and that have not 
  been in default for at least 12 consecutive months shall be included in 
  pools of mortgage loans with respect to which certificates or other 
  securities are issued or guaranteed.''.
      (b) Personnel.--Section 3732(a)(4) of title 38, United States Code, 
  is amended--
              (1) by striking out subparagraph (B); and
              (2) in paragraph (4) (as amended by paragraph (1) of this 
          subsection), by striking out ``(A)'';
              (3) in paragraph (4) (as amended by paragraph (2) of this 
          subsection)--
                      (A) by redesignating clauses (i) and (ii) as 
                  subparagraphs (A) and (B), respectively; and
                      (B) by redesignating subclauses (I) and (II) as 
                  clauses (i) and (ii), respectively.
      (c) Extension of Procedure for Liquidation Sales.--Subsection (c) 
  section 3732(c) of title 38, United States Code, is amended by striking 
  out paragraph (11).
      (d) Effective Date.--The amendments made by subsection (a) shall 
  apply to any housing loan guaranteed under chapter 37 of title 38, 
  United States Code, with respect to which the Secretary of Veterans 
  Affairs receives notice of default after the date of enactment of this 
  Act.
target: Revises provisions with respect to the loan default procedure for veterans' housing loans guaranteed by the Department of Veterans Affairs.  Authorizes the Secretary of Veterans Affairs to reimburse the holder of the loan obligation for such advances, costs, and attorney's fees properly and reasonably incurrred in connection with the default and to receive an assignment of the loan and security.  Directs the Secretary to notify the mortgagor, within ten days after receiving a notice of default from the veteran, that the Secretary may purchase the loan from the holder.  Outlines notification and loan purchase requirements. Directs the Secretary to obtain and hold a quitclaim deed from the mortgagor to the Secretary for the real property securing the loan after the loan is purchased from the loan holder and before the Secretary makes any modifications to the loan instruments or grants any forbearance.  Allows such unrecorded quitclaim deed to be returned to the mortgagor if the mortgagor brings the loan current and keeps it current for 12 consecutive months. 
  Makes permanent all such loan default procedures (currently terminated as of December 31, 1992).
feat_title: To amend title 38, United States Code, to clarify the rights of veterans with regard to procedures for housing loans upon default, and for other purposes.