38 U.S.C. § 3713 — Release from liability under guaranty

Page 911 TITLE 38—VETERANS’ BENEFITS § 3713 for ‘‘financed through the assistance of this section and in the case of necessary site preparation, the loan amount shall not be increased by an amount in excess of the reasonable value of such lot’’. Subsec. (d)(2)(A). Pub. L. 93–569, § 5(6), substituted ‘‘$12,500’’ for ‘‘$10,000,’’ and ‘‘single wide mobile home only’’ for ‘‘mobile home only,’’. Subsec. (d)(2)(B). Pub. L. 93–569, § 5(6), increased from $15,000 to $20,000, and from fifteen years and thirty-two days to twenty years and thirty-two days the amount and period of the loan, struck out the $10,000 maximum allowable amount for the mobile home, and restricted the amount of the loan to the purchase of a double-wide mobile home instead of a mobile home and undeveloped lot. Subsec. (d)(2)(C). Pub. L. 93–569, § 5(6), substituted ‘‘$20,000’’ for ‘‘$17,500,’’ ‘‘$12,500’’ for ‘‘$10,000,’’ ‘‘single- wide mobile home’’ for ‘‘mobile home’’ and ‘‘an unde- veloped lot’’ for ‘‘a suitably developed lot,’’ and in- serted provision including such amount as is appro- priate to cover cost of site preparation. Subsec. (d)(2)(D) to (H). Pub. L. 93–569, § 5(6), added subpars. (D) to (H). Subsec. (e)(3). Pub. L. 93–569, § 5(7), inserted ‘‘pur- chased with the proceeds of the loan and on’’ after ‘‘mobile home’’. Subsec. (f). Pub. L. 93–569, § 5(8), inserted ‘‘and mobile home lot loans’’ after ‘‘loans’’. Subsec. (i). Pub. L. 93–569, § 5(9), inserted provision prohibiting the guarantee of a loan for the purchase of a lot on which to place a mobile home unless the lot meets prescribed standards. Subsec. (n). Pub. L. 93–569, § 5(10), inserted ‘‘and mo- bile home lot loans’’ after ‘‘mobile home loans’’. Subsec. (o). Pub. L. 93–569, § 5(11), struck out subsec. (o) which prohibited the making or guaranteeing of loans on and after July 1, 1975, except upon prior com- mitment. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1990 AMENDMENT Pub. L. 101–508, title VIII, § 8031(b), Nov. 5, 1990, 104 Stat. 1388–348, provided that: ‘‘The amendment made by this section [amending this section] shall apply to claims filed with the Secretary of Veterans Affairs on or after the date of the enactment of this Act [Nov. 5, 1990].’’ EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–253 applicable to loans closed on or after Feb. 1, 1988, except for loans for which guaranty commitment was made on or before Dec. 31, 1987, see section 3(c) of Pub. L. 100–253, set out as a note under section 3703 of this title. EFFECTIVE DATE OF 1987 AMENDMENT Amendment by section 3(b) of Pub. L. 100–198 applica- ble to loans closed on or after Feb. 1, 1988, but not ap- plicable 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. Amendment by section 7(b) of Pub. L. 100–198 applica- ble to loans made more than 30 days after Dec. 21, 1987, see section 7(d) of Pub. L. 100–198, set out as a note under section 3710 of this title. Amendment by section 8(b) of Pub. L. 100–198 applica- ble with respect to loans made more than 30 days after Dec. 21, 1987, see section 8(c) of Pub. L. 100–198, set out as a note under section 3704 of this title. EFFECTIVE DATE OF 1981 AMENDMENTS Amendment by Pub. L. 97–72 effective at end of 180- day period beginning on Nov. 3, 1981, see section 305 of Pub. L. 97–72, set out as an Effective Date note under section 3741 of this title. Amendment by Pub. L. 97–66 effective Oct. 17, 1981, see section 701(b)(1) of Pub. L 97–66, set out as a note under section 1114 of this title. EFFECTIVE DATE OF 1980 AMENDMENT Amendment by sections 401(b) and 402(c) of Pub. L. 96–385 effective Oct. 7, 1980, and Oct. 1, 1980, respec- tively, 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 5 and 7(20)–(23) of Pub. L. 94–324 effective July 1, 1976, and June 30, 1976, respec- tively, 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 Pub. L. 91–506, § 8, Oct. 23, 1970, 84 Stat. 1114, provided that: ‘‘Section 5 of this Act [enacting this section] shall become effective sixty days following the date of enact- ment [Oct. 23, 1970].’’ § 3713. Release from liability under guaranty (a) Whenever any veteran disposes of residen- tial property securing a guaranteed, insured, or direct housing loan obtained by the veteran, the Secretary, upon application made by such vet- eran and by the transferee incident to such dis- posal, shall issue to such veteran in connection with such disposal a release relieving the vet- eran of all further liability to the Secretary on account of such loan (including liability for any loss resulting from any default of the transferee or any subsequent purchaser of such property) if the Secretary has determined, after such inves- tigation as the Secretary may deem appropriate, that (1) the loan is current, and (2) the purchaser of such property from such veteran (A) is obli- gated 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 cre- ating and securing the loan, and (B) qualifies from a credit standpoint, to the same extent as if the transferee were a veteran eligible for pur- poses specified in section 3710 of this title, for a guaranteed or insured or direct loan in an amount equal to the unpaid balance of the obli- gation for which the transferee has assumed li- ability. (b) If any veteran disposes of residential prop- erty securing a guaranteed, insured, or direct housing loan obtained by the veteran under this chapter without receiving a release from liabil- ity with respect to such loan under subsection (a), and a default subsequently occurs which re- sults in liability of the veteran to the Secretary on account of the loan, the Secretary may re- lieve the veteran of such liability if the Sec- retary determines, after such investigation as the Secretary deems appropriate, that the prop- erty was disposed of by the veteran in such a manner, and subject to such conditions, that the Secretary would have issued the veteran a re- lease from liability under subsection (a) with re- Page 912 TITLE 38—VETERANS’ BENEFITS § 3714 spect to the loan if the veteran had made appli- cation therefor incident to such disposal. Fail- ure of a transferee to assume by contract all of the liabilities of the original veteran-borrower shall bar such release of liability only in cases in which no acceptable transferee, either imme- diate or remote, is legally liable to the Sec- retary for the indebtedness of the original vet- eran-borrower arising from termination of the loan. The failure of a veteran to qualify for re- lease from liability under this subsection does not preclude relief from being granted under sec- tion 5302(b) of this title, if the veteran is eligible for relief under that section. (c) This section shall apply only to loans for which commitments are made before March 1, 1988. (Pub. L. 85–857, Sept. 2, 1958, 72 Stat. 1212, § 1817; Pub. L. 92–328, title II, § 204, June 30, 1972, 86 Stat. 397; Pub. L. 94–324, § 7(18), (19), June 30, 1976, 90 Stat. 722; Pub. L. 97–72, title III, § 303(f), Nov. 3, 1981, 95 Stat. 1060; Pub. L. 100–198, § 10(a)(2), Dec. 21, 1987, 101 Stat. 1323; renumbered § 1813 and amended Pub. L. 100–322, title IV, § 415(b)(2), May 20, 1988, 102 Stat. 550; Pub. L. 101–237, title III, § 313(b)(1), Dec. 18, 1989, 103 Stat. 2077; Pub. L. 102–40, title IV, § 402(d)(1), May 7, 1991, 105 Stat. 239; renumbered § 3713 and amend- ed Pub. L. 102–83, § 5(a), (c)(1), Aug. 6, 1991, 105 Stat. 406; Pub. L. 103–446, title XII, § 1201(e)(15), Nov. 2, 1994, 108 Stat. 4686.) Editorial Notes AMENDMENTS 1994—Subsec. (b). Pub. L. 103–446 before period at end substituted ‘‘section 5302(b) of this title, if the veteran is eligible for relief under that section’’ for ‘‘subsection 5302(b) of this title, if eligible thereunder’’. 1991—Pub. L. 102–83, § 5(a), renumbered section 1813 of this title as this section. Subsec. (a). Pub. L. 102–83, § 5(c)(1), substituted ‘‘3710’’ for ‘‘1810’’. Subsec. (b). Pub. L. 102–40 substituted ‘‘5302(b)’’ for ‘‘3102(b)’’. 1989—Subsecs. (a), (b). Pub. L. 101–237 substituted ‘‘Secretary’’ for ‘‘Administrator’’ wherever appearing. 1988—Pub. L. 100–322, § 415(b)(2)(B), renumbered sec- tion 1817 of this title as this section. Subsec. (a). Pub. L. 100–322, § 415(b)(2)(A), substituted ‘‘for purposes specified in section 1810’’ for ‘‘under sec- tion 1810’’. 1987—Subsec. (c). Pub. L. 100–198 added subsec. (c). 1981—Subsec. (a). Pub. L. 97–72, § 303(f)(1), substituted ‘‘direct housing loan’’ for ‘‘direct loan’’. Subsec. (b). Pub. L. 97–72, § 303(f)(2), substituted ‘‘or direct housing loan obtained’’ for ‘‘or direct loan ob- tained’’. 1976—Subsec. (a). Pub. L. 94–324, § 7(18), substituted ‘‘the veteran’’ for ‘‘him’’ in two places, ‘‘the Adminis- trator may deem’’ for ‘‘he may deem’’, ‘‘the transferee were a veteran’’ for ‘‘he were a veteran’’, ‘‘the trans- feree has assumed’’ for ‘‘he has assumed’’, and ‘‘is obli- gated’’ for ‘‘has obligated himself’’. Subsec. (b). Pub. L. 94–324, § 7(19), substituted ‘‘ob- tained by the veteran’’ for ‘‘obtained by him’’, ‘‘the Ad- ministrator determines’’ for ‘‘he determines’’, and ‘‘the Administrator deems’’ for ‘‘he deems’’. 1972—Pub. L. 92–328 designated existing provisions as subsec. (a) and added subsec. (b). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1981 AMENDMENT Amendment by Pub. L. 97–72 effective at end of 180- day period beginning on Nov. 3, 1981, see section 305 of Pub. L. 97–72, set out as an Effective Date note under section 3741 of this title. 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 1972 AMENDMENT Pub. L. 92–328, title III, § 301(c), June 30, 1972, 86 Stat. 398, provided that: ‘‘Sections 201 through 206 of this Act [amending this section and sections 210, 1820 [now 3720], 3102 [now 5302], and 3503 [now 6103] of this title, and en- acting provisions set out as a note under section 5302 of this title] shall take effect upon the date of enactment of this Act [June 30, 1972].’’ § 3714. Assumptions; release from liability (a)(1) Except as provided in subsection (f) of this section, if a veteran or any other person dis- poses 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 subse- quent 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 con- tract 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 bal- ance of the obligation for which the pur- chaser is to assume liability. (2) For the purposes of paragraph (1), para- graph (3), and paragraph (4)(C)(ii) of this sub- section, 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 Sec- retary. (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 redeter- mination in any case in which the Secretary made the determination described in such para- graph) with respect to whether the loan is cur-