Section 45.37. Mortgage loan program.

 

(1)   Loans authorized. An authorized lender or a county veterans service officer may, as agent for and with the approval of the department, make loans to eligible persons for qualified purposes in the manner provided under this section.

(2)   Loan applications.

(a) Applications for loans under this section for a purpose specified in s. 45.34 (1) (a) , (b) , or (d) shall be made to an authorized lender and applications for loans under this section for a purpose specified under s. 45.34 (1) (c) may be made to the department or to a county veterans service officer on forms approved by the department and signed by the applicant. If the applicant is married and not legally separated under s. 767.001 (1) (d) or in the process of obtaining a divorce, the applicant's spouse also shall sign the application.

(b) The applicant may apply directly to the department or through a county veterans service officer for certification of eligibility.

(3)   Loans to be secured.

(a) Each loan made under this section, except a loan of $3,000 or less for a purpose specified under s. 45.34 (1) (c) , shall be evidenced by a promissory installment note and secured by a mortgage on the real estate in respect to which the loan is granted. A loan of $3,000 or less made for a purpose specified under s. 45.34 (1) (c) shall be evidenced by a promissory installment note and shall be secured by a guarantor or by a mortgage on the real estate in respect to which the loan is granted. Any loan having as its source funds provided under sub. (6) (a) and secured by a mortgage shall have the mortgage name the department as mortgagee and payee. Any loan having as its source funds provided under sub. (6) (b) and secured by a mortgage shall have the mortgage name the authorized lender involved as mortgagee and payee, and such mortgage and note shall be assigned by the authorized lender to the authority immediately upon execution. A mortgage securing a loan made for a purpose specified in s. 45.34 (1) (a) , (b) , or (d) shall have priority over all liens against the mortgaged premises and the buildings and improvements to the buildings, except tax and special assessment liens filed after the recording of the mortgage. A mortgage securing a loan made for a purpose specified under s. 45.34 (1) (c) is acceptable if the applicant can establish a minimum equity in the property, as established by the department by rule.

(b) Mortgages given to secure loans under this section shall provide for adequate fire and extended coverage insurance. Policies providing such insurance coverage shall name the authorized lender or the department as an insured.

(4)   Interest rate determined.

(a) The board shall determine the interest rate on loans made under this section. Except as provided in sub. (11) , the interest rate determined may not be increased during the term of the loan. Except as provided in sub. (11) , the interest rate shall be as low as possible but shall be sufficient to fully pay all expenses and to provide reserves that are reasonably expected to be required in the judgment of the board in accordance with par. (b) and sub. (7) (a) 3.

(b)

1. The board shall select and implement the methods of insuring against losses arising from delinquency and default in the repayment of loans funded under sub. (6) (a) and shall select and implement the methods of managing and selling any property securing loans funded under sub. (6) (a) .

2. The board shall charge or cause to be charged to borrowers all costs necessary to insure against losses under subd. 1.

3. Moneys collected under subd. 2. and that are held by the state shall be deposited, reserved, and expended as provided in sub. (7) (a) 3.

(c) Loans made pursuant to this section shall not be subject to s. 138.05 , 138.051 , or 138.052 , except that a loan originated under this section after May 3, 1996, is subject to s. 138.052 (5) .

(5)   Administrative provisions.

(a) The department may do any of the following:

1. Enter into contracts with authorized lenders throughout this state authorizing such lenders to process applications and close and service loans made under this section. The contracts shall include the responsibilities of the authorized lender with respect to credit evaluations, financial eligibility determinations, valuation of the home for which the loan is to be made, collection procedures in the event of delinquent loan repayments, and other functions that the department may require. The contracts shall authorize the lender to retain an amount from the monthly payments for servicing loans made under this section. The rate of the service fee shall not exceed a maximum rate established by the department with the lender in accordance with current practices under similar programs, and shall be stated in the contracts. The department shall specify in the contracts a maximum length of time between receipt of monthly mortgage payments by the lender and transmittal of such payments to the state or the authority.

2. Commit to advance and advance funds in the full amount of any mortgage securing a purchase loan to be made by an authorized lender in accordance with the terms under this section.

3. Commit to advance and advance in installments up to the full amount of any mortgage securing a construction loan made by an authorized lender, to provide for the purchase and improvement of a lot and the completion of the construction for which the loan is to be made, under the terms of this section.

4. Mail checks, share drafts, or other drafts, or otherwise transfer or arrange for transfer of funds to authorized lenders not sooner than 7 days prior to proposed closing or disbursement dates.

5. Designate and maintain a current list of lenders authorized to make or service loans under this section. The department shall promulgate rules establishing standards for and governing the performance of authorized lenders in making and servicing loans under this section and shall periodically monitor such performance. The department shall promulgate rules to provide for the removal from its list of authorized lenders of any lender that makes an excessive number of errors on loan applications processed under subd. 1. The department may summarily remove from its list of authorized lenders any lender that indicates it does not wish to participate in the program and after hearing on notice remove from its list of authorized lenders any lender that fails to conform with the rules of the department governing that performance, and may refuse to permit a lender so removed to make or service any loan under this section until the department is satisfied that the lender will conform with its rules.

6. Require borrowers to make monthly escrow payments to be held by the authorized lender or the department for real estate taxes and casualty insurance premiums. The authorized lender or the department shall pay all of the amounts due for real estate taxes and casualty insurance premiums, even if the amount held in escrow is insufficient to cover the amounts due. If the amount held in escrow is insufficient to cover the amounts due, the authorized lender or the department shall recover from the borrower, after paying the amounts due under this subdivision, an amount equal to the difference between the amounts paid and the amount held in escrow. If the amount held in escrow is more than the amounts due, the authorized lender or the department shall refund to the borrower, after paying the amounts due under this subdivision, an amount equal to the difference between the amount held in escrow and the amounts paid by the authorized lender or the department.

7. Obtain guarantees for loans under 38 USC 1801 to 1827 .

8. Exercise all of the powers vested in it under this subchapter with respect to any applications for loans and loans approved under this section and with respect to any mortgages and mortgage notes executed to authorized lenders and assigned to and purchased by the authority under this section and the properties securing those mortgages. The department may exercise or authorize those powers to be exercised in its own name.

9. With prior approval of the building commission, retire all 1981 veterans home loan revenue bonds and transfer any assets remaining in the bond fund after retirement into the veterans trust fund. The department may sell the assets transferred to the veterans trust fund under this subdivision and deposit the proceeds of any sale into the veterans trust fund.

10. Service loans made under this section and purchase from authorized lenders the servicing rights for loans made by authorized lenders under this section.

11. Enter into contracts with persons other than authorized lenders for the servicing of loans made under this section.

12. Loan money from the veterans trust fund to the veterans mortgage loan repayment fund to fund loans under this section.

(b) At the time of closing, persons receiving loans under this section shall pay an origination fee to the authorized lender participating in the loan, except that the department shall pay, on behalf of a veteran who receives a loan under this section and who has at least a 30 percent service-connected disability rating for purposes of 38 USC 1114 or 1134 , the origination fee to the authorized lender. The origination fee charged under this paragraph shall be negotiated between the department and the authorized lender but may not exceed that which the authorized lender would charge other borrowers in the ordinary course of business under the same or similar circumstances.

(6)   Sources of loan funds. Funding for loans authorized under this section may, at the discretion of the building commission, be provided by one or a combination of the following:

(a) The secretary, with the approval of the governor and subject to the limits of s. 20.866 (2) (zn) , may request that state debt be contracted in accordance with ch. 18 . Debt requested shall meet all of the following additional requirements:

1. State debt may be contracted when it reasonably appears to the building commission that all state obligations so incurred under this paragraph and s. 20.866 (2) (zo) can be fully paid from moneys received from veterans repayments of loans on mortgages and mortgage notes funded under this paragraph and other available revenues of the veterans mortgage loan repayment fund. In making this determination, the building commission may take into account the effect of its planned future actions to refinance existing state debt, to create reserve funds, and to modify the structure of the total debt outstanding so as to ensure that projected repayments of loans on mortgages and mortgage notes, together with other available moneys, will be sufficient as received to fund debt service payments as due. It is the intent of the legislature that the program authorized under this section be fully self-supporting and that it be administered so that all debt service and all related costs of the program under this section will require no supplemental support from the general fund.

2. The chairperson of the board shall certify that the chairperson does not expect proceeds of state debt issued under this paragraph to be used in a manner that would cause the debt to be arbitrage bonds as defined in the Internal Revenue Code, if that debt is a bond that is exempt from federal taxation.

(b) Loans made under this section may be purchased by the authority from the veterans housing loan fund under s. 234.41 . All receipts of interest, except amounts retained as servicing fees by the authorized lenders servicing the loans purchased by the authority, and principal on the loans, payments of losses by insurers not used for restoration of the property securing the loans, and any other collections, shall be deposited by the authority into the veterans housing bond redemption fund under s. 234.43 and shall be disbursed from the fund as provided in s. 234.43 (2) .

(c) The secretary, with the approval of the governor and subject to the limits of sub. (10) , may request that revenue obligations be contracted in accordance with subch. II of ch. 18 . Revenue obligations requested shall meet all of the following additional requirements:

1. Revenue obligations may be contracted when it reasonably appears to the building commission that all obligations incurred under this paragraph can be fully paid from moneys received from veterans repayments of loans on mortgages and mortgage notes funded under this paragraph.

2. The chairperson of the board shall certify that the board and the department do not expect and shall not use proceeds of revenue obligations issued under this paragraph in a manner that would cause the revenue obligations to be arbitrage bonds as defined in the Internal Revenue Code, where that debt is a bond that is exempt from federal taxation.

(7)   Repayment of mortgage loans.

(a) There is created the veterans mortgage loan repayment fund. All moneys received by the department for the repayment of loans funded under sub. (6) (a) except for servicing fees required to be paid to authorized lenders, net proceeds from the sale of mortgaged properties, any repayment to the department of moneys paid to authorized lenders, gifts, grants, other appropriations, and interest earnings accruing, any repayment of moneys borrowed under s. 45.42 (8) (a) , all moneys received under sub. (5) (a) 6. , and any moneys deposited or transferred under s. 18.04 (6) (b) or (d) shall be promptly deposited into the veterans mortgage loan repayment fund. The board shall establish by resolution a system of accounts providing for the maintenance and disbursement of moneys of the veterans mortgage loan repayment fund to fund loans under sub. (6) (a) or to fund, refund, or acquire public debt as provided in s. 18.04 (5) . The system of accounts shall record and provide moneys for all of the following purposes:

1. Transfer to the bond security and redemption fund.

2. Acquisition or redemption of public debt in accordance with resolutions of the building commission.

3. Payment of losses arising from delinquency or default in the repayment of loans funded under sub. (6) (a) , including loss of principal and interest accrued to the point of final disposition of the defaulted loan and the expenses of management and sale of the property taken upon default of loan repayment.

4. Payment of all costs incurred by the department in processing and servicing loans, purchasing servicing rights for loans under this section, and accounting for and administering the program under this section, including a portion of grants made to county veterans service officers under s. 45.82 .

5. Payment of all costs incurred in contracting public debt for the purposes under s. 18.04 (5) and under s. 18.04 (2) for the purpose of funding veterans housing loans.

6. Payment of costs of issuance of obligations to fund loans under sub. (6) (c) if not paid from the proceeds of the obligations.

7. Payment of obligations arising from loans funded under sub. (6) (b) .

8. Payment of any other costs of program operation and management authorized under this section.

9. Loan money to the veterans trust fund, upon prior approval of the building commission for each loan, for the purposes under s. 45.42 .

10. Payment of origination fees, on behalf of veterans who have at least a 30 percent service-connected disability rating for purposes of 38 USC 1114 or 1134 , to authorized lenders under sub. (5) (b) .

11. Payment required of the department under sub. (5) (a) 6.

12. Payment of obligations arising from the acquisition of a headquarters and museum building for the department under s. 45.03 (5) (b) .

(b) The board may amend the system of accounts established under par. (a) only by resolution of the board that is approved by the building commission.

(c) If revenues of the veterans mortgage loan repayment fund are insufficient to meet all current expenses, the secretary of administration shall establish a repayment schedule whereby the general fund will be reimbursed in an orderly manner for moneys advanced. Interest rates to be charged on loans subsequently issued shall be adjusted to provide sufficient revenues to meet all of this repayment schedule.

(d) After meeting all expenses and providing for reserves under par. (a) 3. , assets in the veterans mortgage loan repayment fund, upon prior approval of the building commission, may be transferred to the veterans trust fund and used to fund loans under s. 45.42 .

(8)   Use of surpluses. Surpluses may be used under sub. (11) (c) only if there are no unrestricted fund balances available for that purpose in the funds created under sub. (10) . Section 20.001 (3) (e) shall not be construed to prohibit this action.

(9)   Limitation on remodeling or alteration for a disabled veteran. Not more than 50 percent of the proceeds of a loan granted under this section for a purpose under s. 45.34 (1) (a) may be used for remodeling or alteration of the housing accommodation after purchase to meet the special needs of a permanently and totally disabled veteran. That portion of the proceeds used for this purpose shall be reserved and distributed by the authorized lender.

(10)   Repayment of revenue obligations.

(a) All moneys received from any source for repayment of loans, mortgages, or mortgage loan notes funded with proceeds of revenue obligations issued under sub. (6) (c) shall be deposited into one or more separate nonlapsible trust funds in the state treasury or with a trustee appointed for that purpose by the authorizing resolution for the revenue obligations. The board may pledge revenues received by the funds to secure revenue obligations issued under sub. (6) (c) and shall have all other powers necessary and convenient to distribute the proceeds of the revenue obligations and loan repayments in accordance with subch. II of ch. 18 . Unrestricted balances in the funds may be used to fund additional loans issued under sub. (6) (c) and pay the balances owing on loans after the assumptions of the loans or the closings of the sales of residences under sub. (11) (c) .

(b) Revenue obligations issued under sub. (6) (c) may not exceed $280,000,000 in principal amount, excluding obligations issued to fund or refund outstanding revenue obligation notes or to refund outstanding revenue obligation bonds.

(c) Except as may otherwise be expressly provided in resolutions authorizing the issuance of revenue obligations or in other agreements with the holders of revenue obligations, each issue of revenue obligations shall be on a parity with every other revenue obligation issued under sub. (6) (c) and payable in accordance with subch. II of ch. 18 .

(11)   Guaranteed loans.

(a) Upon any sale of the residence which secures a guaranteed loan made under this section after April 3, 1980, except for the purchase of the residence at the time the loan is initially made, the guaranteed loan may be assumed or continue to be paid in regular monthly installments if the person who assumes the mortgage loan payments or who will make the regular monthly installments agrees to all of the following:

1. To pay interest on the loan from the date of the assumption of the loan, if the loan is assumed, or from the date of the closing of the sale of the residence at the maximum rates of interest being charged on guaranteed loans on the date the loan was initially made.

2. To increase the amortization payments on the loan by an amount sufficient to amortize the loan by the date the balance on the loan is payable in full according to the original terms of the loan.

(b) The department and authorized lenders shall increase the interest rates and amortization payments on loans assumed under par. (a) .

(c) After the assumption of a guaranteed loan funded under sub. (6) (c) , if the loan is assumed, or the closing of the sale of a residence on which a balance is owing on a guaranteed loan funded under sub. (6) (c) , the balance owing on the loan on the date of the assumption of the loan, if the loan is assumed, or the closing of the sale may be paid to the funds created under sub. (10) from available surpluses, if any, in the veterans mortgage loan repayment fund under sub. (7) (d) . The loan and the mortgage and mortgage note pertaining to the loan may be purchased by the veterans mortgage loan repayment fund under sub. (7) .

(12)   Prior program loans. Subject to this section and ss. 45.33 to 45.35 , neither the department nor an authorized lender may deny a person a loan under this section because of the reason the person sold any property previously mortgaged by the person to the department or an authorized lender, if the person completely paid the balance of any previous loan under this subchapter in accordance with the terms and conditions of the promissory note and the mortgage or other agreement executed in connection with the previous loan.

(13)   Repayment of loan. Any money appropriated or transferred by law from the veterans mortgage loan repayment fund for purposes other than those listed in sub. (7) , other than moneys made temporarily available to other funds under s. 20.002 (11) , shall be repaid from the general fund with interest at a rate of 5 percent per year from the date of the appropriation or transfer to the date of repayment.

2005 a. 22 ; 2007 a. 96 .