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105th Congress                                                   Report
 2d Session             HOUSE OF REPRESENTATIVES                105-447
_______________________________________________________________________


 
        VETERANS TRANSITIONAL HOUSING OPPORTUNITIES ACT OF 1998

                                _______
                                

 March 17, 1998.--Committed to the Committee of the Whole House on the 
             State of the Union and ordered to be printed.

                                _______
                                

   Mr. Stump, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3039]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Veterans' Affairs, to whom was referred the 
bill (H.R. 3039) to amend title 38, United States Code, to 
authorize the Secretary of Veterans Affairs to guarantee loans 
to provide multifamily transitional housing for homeless 
veterans, and for other purposes, having considered the same, 
reports favorably thereon with amendments and recommends that 
the bill as amended do pass.

  The amendments (stated in terms of the page and line numbers 
of the introduced bill) are as follows:

  Page 1, line 5, strike out ``1997'' and insert in lieu 
thereof ``1998''.

  Page 4, after line 2, inserting the following new subsection:
  ``(f) The Secretary may guarantee loans under this subchapter 
notwithstanding any requirement for prior appropriations for 
such purpose under any provision of law.

  Page 8, line 1, strike out ``Multifamily'' and all that 
follows through ``3776.''

  Page 9, in the matter before line 1, strike out 
``Multifamily'' and all that follows through ``3776.''

  Page 9, line 1, strike out ``SEC. 3.'' and all that follows 
through page 11, line 6.

                              Introduction

    On November 13, 1997, the Chairman and Ranking Member of 
the Veterans' Affairs Committee, the Honorable Bob Stump and 
the Honorable Lane Evans, along with the Chairman and Ranking 
Member of the Subcommittee on Benefits, the Honorable Jack 
Quinn and the Honorable Bob Filner, introduced H.R. 3039 to 
amend chapter 37 (housing and small business loans) by adding a 
new subchapter VI--Loan Guarantee for Multifamily Transitional 
Housing for Homeless Veterans. The bill would expand the supply 
of transitional housing for homeless veterans by authorizing 
the Secretary of Veterans Affairs to guarantee loans for self-
sustaining housing projects specifically designed to create 
transition housing for homeless veterans.
    On December 18, 1997, the Subcommittee on Benefits met in 
Buffalo, NY, to receive testimony on the legislation. The 
Chairman of the Subcommittee on Benefits, the Honorable Jack 
Quinn, the full Committee Ranking Member, the Honorable Lane 
Evans, and the Honorable John J. LaFalce of New York were 
present for the hearing. The final subcommittee hearing on this 
legislation was held on February 24, 1998.
    On March 5, 1998, the Subcommittee on Benefits met and 
ordered H.R. 3039 reported favorably to the full Committee by 
unanimous voice vote. On March 11, the full Committee met and 
ordered H.R. 3039 reported favorably, as amended, to the House 
by unanimous voice vote.

                      Summary of the Reported Bill

    H.R. 3039, as amended, would:

    1. LExpand the supply of transitional housing for homeless 
veterans by authorizing the Secretary to guarantee loans for 
self-sustaining housing projects specifically designed to 
create long-term transitional housing for homeless veterans.

    2. LAuthorize VA to guarantee up to 15 loans with a maximum 
aggregate value of $100 million. VA could not guarantee more 
than five loans in the first three years of the program. VA 
must contract with a nonprofit corporation experienced in 
transitional housing to obtain advice in administering the 
program.

    3. LRequire borrowers to work with, and obtain assistance 
from, VA health care facilities and state and local 
authorities.

    4. LRequire residents to seek employment and maintain 
sobriety. The project must enforce sobriety standards and 
provide a wide range of supportive services such as counseling 
for substance abuse and job readiness skills. Residents would 
be required to pay a reasonable fee for their residence.

                               Background

    According to Department of Veterans Affairs statistics, 
approximately one in three homeless Americans are military 
veterans. This means that some 250,000 men and women who have 
served their country do not have permanent housing. Federal 
programs targeted specifically at homeless veterans currently 
serve only a fraction of those in need. Transitional housing, 
identified as a major need for homeless veterans, is in short 
supply because of the difficulty in obtaining financing. H.R. 
3039 seeks to provide a VA-guaranteed loan for programs 
offering a supportive and structured environment to homeless 
veterans needing assistance in returning to society.
    There is an obvious shortage of transitional housing for 
homeless veterans. To accommodate an estimated 250,000 homeless 
veterans, VA has fewer than 5,000 transitional-type beds either 
under contract or as part of its domiciliary program for 
homeless veterans. Additionally, from its 1994 ``Report to the 
Nation,'' the National Coalition for Homeless Veterans (NCHV) 
reports that its members provide fewer than 3,000 beds for 
transitioning homeless veterans. The last three VA CHALENG 
Reports (assessments of local services needed by homeless 
veterans) have consistently found that meeting the need for 
both long-term and transitional housing is a top priority. The 
Committee believes the most effective method of reducing the 
revolving-door syndrome plaguing the VA health care system is 
to ensure that veterans are being discharged to residences 
offering a highly structured long-term housing program that 
requires sobriety, accountability and assistance in finding 
employment.
    Numerous studies have shown that destructive, addictive 
behavior and homelessness are inexorably linked. Chemical 
dependency, post-traumatic stress disorder (PTSD) and chronic 
physical problems affect a high percentage of homeless 
veterans. Approximately 75 percent of homeless veterans have a 
problem with alcohol and/or drugs, a rate of abuse higher than 
their non-veteran counterparts, according to providers of 
services to homeless veterans. Mental illness also plays a 
significant role in homelessness.
    The federal government has tried to respond to this 
continuing crisis. Over the past four years, VA has doubled its 
spending on programs serving homeless veterans to $83 million. 
VA now contracts with over 100 community-based service 
providers for residential care for homeless veterans, and 
operates more than 100 projects under its Health Care for 
Homeless Veterans (HCHV) and Domiciliary Care for Homeless 
Veterans (DCHV) programs. Through these initiatives, VA has 
provided services to more than 250,000 veterans during the past 
ten years and today reaches more than 40,000 veterans annually. 
Unfortunately, the number of homeless veterans does not seem to 
be decreasing. Since traditional short-term methods of 
treatment for substance abuse, the major cause of homelessness, 
do not seem to be reducing the overall homeless veteran 
population, the Committee concludes there is a real need for a 
new approach, and that approach is transitional housing.
    To provide opportunities for localities to create 
transitional housing, the Committee believes that a loan 
guaranty program is the most efficient way to address the issue 
of homeless veterans, as opposed to increased funding for VA or 
HUD programs. Therefore, a loan guaranty program has the 
advantage of being able to leverage a relatively small federal 
financial commitment into a much larger result. According to 
NCHV, its members are spending under $10 million per year to 
operate 3,000 beds. Assuming that outcomes are not 
significantly different, programs operated by community-based 
organizations are more cost effective because of the sharing of 
resources.
    Public Law 103-446 expressed the sense of Congress that 
programs serving veterans should receive a proportional share 
of funds for homeless programs. Despite Congress' concerns, of 
the more than $1.3 billion awarded by the Department of Housing 
and Urban Development (HUD) for homeless projects in 1994 and 
1995, only $14.5 million (about 1 percent) has been awarded to 
veteran-specific programs. During 1996 and 1997, HUD grants to 
veteran-specific programs totaled only about $44 million (3 
percent) of the nearly $1.65 billion awarded.
    The VA Committee has reviewed several successful 
transitional housing projects to determine if there were common 
approaches that promote success. The Committee found that 
programs in Buffalo, N.Y.; New York City; Baltimore, Md.; 
Milwaukee, Wis.; and Los Angeles appear to be highly successful 
and are based on a model that stresses personal responsibility, 
addiction recovery, and work. In an effort to replicate the 
success of these programs, H.R. 3039 would require projects 
seeking a VA loan guaranty to enforce sobriety, provide 
appropriate counseling and require residents to pay a 
reasonable rental fee.
    Located in Baltimore, Maryland Homeless Veterans, Inc. 
(MHV) is a nonprofit organization whose operation is funded by 
a combination of private benefactors, federal agencies and 
state and local governments. Many of the residents were 
referred to MHV while undergoing substance abuse treatment at 
the local VA medical center (VAMC). While residing at MHV, the 
veterans attend 12-Step groups to assist them in remaining free 
of drugs and alcohol. Residents must work at the facility in 
jobs such as cooking, cleaning, teaching, or administration, to 
reinforce a sense of discipline and ownership. In its 1997 
Annual Report, MHV stated that of the 413 homeless veterans 
residing at MHV, 154 were successfully transitioned back into 
society as productive citizens.
    Another example of a structured, supportive transitional 
housing program is L.A. Vets, an organization that houses 400 
formerly homeless veterans in the West Los Angeles area. 
Beginning with a short-term loan from Century Housing 
Corporation, then a state-owned, affordable-housing lending 
agency, the program has used, and uses, a combination of for-
profit and nonprofit organizations to develop and operate the 
program. L.A. Vets has successfully placed 81 percent of its 
participants in jobs and 61 percent into permanent housing.
    After reviewing many of these programs, the Committee has 
concluded that community-based organizations, in partnership 
with VA and community-based resources, can deliver the 
necessary services to transitioning homeless veterans. However, 
a lack of capital often prevents potential partnerships from 
developing programs. The Committee believes that the supply of 
transitional housing can be increased without significant 
financial involvement by the federal government and that there 
will be sufficient capital available if the risk to lenders is 
reasonable. H.R. 3039 is intended to reduce that risk by 
offering a VA loan guaranty to lenders.
    The need for such funding was noted repeatedly during 
hearings on the bill. For example, during the December 18, 
1997, field hearing in Buffalo, Mr. William C. Lyons, Vice 
President, First National Bank, Buffalo, commented on the 
importance of such funding:

          The [Western New York Veterans] Housing Coalition is 
        looking to provide more units and H.R. 3039 is a 
        perfect solution. H.R. 3039 gives my bank an excellent 
        opportunity to work with community based nonprofit 
        agencies. It meets both my fiduciary responsibilities 
        and my CRA [Community Reinvestment Act] 
        responsibilities . . . . I can tell you that with H.R. 
        3039 I can provide them [community-based groups] with 
        the loans that will allow these non profits to develop 
        the housing we would need.

    Mr. Thomas R. (Tim) Cantwell, President, Westside Residence 
Hall, Inc., echoed those remarks when he noted in his testimony 
to the Subcommittee on February 24, 1998, that adequate funding 
is critical to the success of these partnerships. He also noted 
that it was important that funding be stable and not rely on 
yearly appropriations. Cantwell further stated regarding 
funding, ``H.R. 3039 provides the mechanisms to fill the gap.''
    At the same hearing, Mr. Raymond G. Boland, Secretary of 
the Wisconsin Department of Veterans Affairs, noted that 
Wisconsin's program to assist homeless veterans mirrors the 
principles embodied in H.R. 3039. Mr. Boland was encouraged by 
the bill's provisions requiring significant integration with 
state and local government and community resources:

          That is why I believe that H.R. 3039 is an excellent 
        concept. It incorporates the diverse strengths of 
        government, non-profits, and the private sector. The 
        proposal also makes sound economic and business sense. 
        This proposed legislation addresses a key segment in 
        the process needed to transition homeless veterans back 
        into the mainstream of society. That key element is 
        housing affordability.
          This proposed legislation will give the USDVA [U.S. 
        Department of Veterans Affairs] the ability to expand 
        its key role within the collaboration. It will give 
        them the authority to provide the financial guarantees 
        necessary to assure the lending sector . . . . The 
        proposed legislation would enable a demonstration that 
        will serve as a prototype for the national effort we 
        require.

    Transitional housing programs lessen the inpatient workload 
of VA medical care facilities by decreasing the episodes of 
treatment for homeless veterans. As a result, VA should 
experience significant cost reductions in its medical care 
program because of a reduction in otherwise preventable 
readmissions.
    In 1995, VA conducted its first one day inpatient census to 
determine the number of homeless veterans treated at VA medical 
care facilities. VA collected data from 160 facilities and 
found that 30 percent of all veterans treated at VA medical 
facilities were homeless at the time of admission or upon 
discharge. Subsequent surveys confirm those findings. The 
Medical Director of the Comprehensive Homeless Center at West 
Los Angeles conducted a study of veterans living at the LA 
Vets' Westside Residence Hall. The study showed that 263 (85 
percent) of the first 308 residents of Westside had been 
admitted to the VAMC for an average of 111 days during the year 
prior to their residence at Westside. This group of 263 
homeless veterans required 29,000 patient days of care. In the 
year after moving into Westside, only 125 of those veterans 
were admitted to the hospital for an average length of 29 days 
during the year. This represents a reduction of 25,000 patient 
days of care. Cost savings from the reduction of in-patient 
days of care at the West Los Angeles VAMC were estimated to be 
$12 million.
    If transitional housing can help break the cycle of 
discharge and readmission that is often seen among homeless 
veterans, the significant resources that would otherwise be 
used to treat these no-longer-homeless veterans will be 
available for other patients. By reducing this strain on 
resources, the Committee believes medical care services to all 
veterans will improve by increasing the availability of 
transitional housing through enactment of H.R. 3039.
    As originally introduced, the bill contained authorization 
to use revenue from National Service Life Insurance trust funds 
to meet the offset requirements of the Congressional Budget Act 
to offset losses due to defaults on VA-guaranteed transitional 
housing loans. VA stated that using money from the Trust Fund 
in that manner did not meet its fiduciary responsibilities to 
NSLI policy holders. VA noted that its fiduciary 
responsibilities required them to provide the best return 
possible under the law, and that any income from NSLI Trust 
Funds should be returned to policy holders in the form of 
dividends or additional paid-up insurance. VA also testified it 
was not restricted to investing NSLI funds in U.S. Treasury 
securities.
    Therefore, the Committee questions whether VA is meeting 
its fiduciary responsibility and directs that trust funds be 
managed in a way that provides the maximum return to NSLI 
policy holders.
    Despite amending the bill to meet the Administration's 
concerns about the use of insurance trust funds, the Committee 
continues to believe that, when properly protected against 
loss, use of trust fund revenue for other veteran-related 
purposes is appropriate.

                         Discussion of the Bill

    H.R. 3039 is intended to expand the supply of transitional 
housing for homeless veterans by authorizing VA to guarantee 
loans for self-sustaining housing projects specifically 
targeted at homeless veterans. Residents would be required to 
seek employment, maintain sobriety and pay a reasonable fee for 
their residence.

                      Section-by-Section Analysis

    Section 1 of the reported bill states the short title of 
the bill as the ``Veterans' Transitional Housing Opportunities 
Act of 1998''.

    Section 2(a) amends chapter 37 of title 38 by establishing 
a new subchapter VI, Section 3771, ``Loan Guarantee for 
Multifamily Transitional Housing for Homeless Veterans''. 
Section 3771 defines the terms ``veteran,'' ``homeless 
veteran,'' and ``homeless individual,'' and creates the 
following new sections:

    Section 3772(a) authorizes the Secretary to make loan 
guaranties.

    Section 3772(b)(1) would authorize the Secretary to 
guarantee up to 15 loans. Only five loans could be guaranteed 
in the first three years of the program. The Committee believes 
that limiting the number of loans initially and in the longer 
term reduces the risk that VA will make unsound guarantee 
decisions. Loans guaranteed by VA must be based on accurate and 
complete financial data which show the borrowers will be able 
to meet their financial obligation.

    Section 3772(b)(2) provides the Secretary flexible 
authority to set the loan guaranty amount at a level necessary 
to be able to sell the mortgage on the secondary market.

    Section 3772(b)(3) sets the maximum aggregate value of the 
15 loans at $100,000,000.

    Section 3772(c) requires the Secretary to approve the loan 
prior to closing. Most VA-guaranteed loans for single family 
homes are closed prior to VA approval under the Lender 
Automatic Approval Program.

    Section 3772(d)(1) directs VA to contract with a nonprofit 
organization with experience in developing transitional housing 
for advice in carrying out the loan guaranty program under this 
subchapter.

    Section 3772(d)(2) establishes qualifications for the 
contract consultant.

    Section 3772(e) authorizes the Secretary to carry out the 
program in advance of publishing regulations.

    Subsection 3772(f) provides that the Secretary may 
guarantee loans under this subchapter in advance of 
appropriation acts and notwithstanding that there is no 
specific appropriation for the subsidy costs of such loan 
guaranties. As introduced, H.R. 3039 would have provided 
funding for the costs of defaulted loans through a unique 
vehicle that involved reinvestment of National Service Life 
Insurance trust funds in securities with yields that are 
historically higher than the yield on U.S. Treasury securities. 
As amended, the bill does not specify the funding source to pay 
costs associated with the loan guaranty. Under section 505(a) 
of the Congressional Budget Act, there is permanent 
authorization of such sums as may be necessary to pay the cost 
associated with loan guaranty commitments which the agency is 
authorized to make. The Congressional Budget Office has 
estimated these costs as being $1 million in the first three 
years of the program and $2 million annually thereafter. 
Because the bill does not make these costs subject to 
appropriations, CBO classifies these amounts as direct 
spending.

    Section 3773 establishes requirements and purposes for 
which VA may guarantee a transitional housing loan.

    Section 3773(a)(1) authorizes guaranties for loans for 
construction, rehabilitation, land acquisition, refinancing, 
furniture, equipment, supplies, material, and working capital.

    Section 3773(a)(2) requires financial, property, or in kind 
participation by state or local governments, or nongovernmental 
entities. The Committee believes that participation by a State 
or local government or nongovernmental entities will increase 
the likelihood of success.

    Section 3773(a)(3)(A) and (B) limit the maximum loan amount 
which VA may guarantee to the lesser of an amount that would be 
approved using generally accepted underwriting principles or 90 
percent of the total cost of the project. This requires 
borrowers to establish equity in the project through other 
sources such as donated facilities, equipment or labor. Such 
increased equity will lessen the debt service and the 
likelihood of default.

    Section 3773(a)(4) through (6) would require the VA to 
determine that the loan is secured and of sound value, and 
would allow the Secretary to consider a wide range of financial 
and local factors in determining whether to provide a guaranty.

    Section 3773(b) defines a multifamily transitional housing 
project and the types of supportive services a project must 
offer to qualify for a loan guaranty. This subsection also 
describes the conditions under which a veteran may occupy 
transitional housing. It requires that a veteran seek to obtain 
and keep employment, to pay a reasonable rent, and to remain 
free of drugs and alcohol. While the Committee understands the 
need for some management flexibility in these matters, the 
Committee notes that truly successful programs adopt a policy 
of zero tolerance for substance abuse. The Committee believes 
that the profound effect of one substance abuser on the lives 
of other residents clearly justifies zero tolerance.

    Section 3773(2)(b) would authorize non-veterans to be 
housed in transitional housing if the needs of homeless 
veterans have been met and would require that such individuals 
meet the same conditions of occupancy. The Committee notes that 
when appropriate, families of homeless veterans may be housed 
to prevent breakup of the family when space is available under 
these provisions.

    Section 3773(c) would direct the Secretary to take into 
account the availability of supportive services from VA and 
other community-based providers when deciding whether or not to 
provide a guarantee under this subchapter.

    Section 3774(a) directs the Secretary to take action to 
obtain repayment on defaulted guaranteed loans.

    Section 3774(b)(1) and (2) describe what recourse is 
available to lenders through the guaranty program. VA may pay 
the lender the lesser of the maximum guarantee or the 
difference between the outstanding balance on the loan and the 
amount realized at public sale of the facilities.

                           Oversight Findings

    No oversight findings have been submitted to the Committee 
by the Committee on Governmental Reform and Oversight.

                  Statement of Administration's Views

    The Department of Veterans Affairs failed to respond in 
writing to the Committee's request for comments prior to the 
February 24, 1998, hearing. The Department also declined to 
present official views during the December 17, 1997, field 
hearing in Buffalo. In testimony on February 24, 1998, VA 
expressed general agreement with the objectives of the bill's 
transitional housing provisions, yet declined to support the 
bill citing a lack of experience in multifamily housing. VA 
also objected to the use of insurance trust funds to finance 
obligations arising from the program.

               Congressional Budget Office Cost Estimate

    The following letter was received from the Congressional 
Budget Office concerning the cost of the reported bill:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 13, 1998.
Hon. Bob Stump,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3039, the Veterans 
Transitional Housing Opportunities Act of 1998.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sunita 
D'Monte, who can be reached at 226-2840.
            Sincerely,
                                           June E. O'Neill,
                                                           Director

    Enclosure

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

   H.R. 3039--Veterans Transitional Housing Opportunities Act of 1998

  As ordered reported by the House Committee on Veterans' Affairs on 
                             March 11, 1998

    Summary. --H.R. 3039 would establish a pilot program in the 
Department of Veterans Affairs (VA) to guarantee loans to 
organizations that serve homeless veterans. CBO estimates that 
enacting the bill would raise direct spending by $1 million to 
$2 million a year from 1999 through 2005, for a total cost of 
$10 million over the span of the program. The bill would not 
significantly affect spending subject to appropriations. The 
legislation contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA), 
and would not significantly affect the budgets of state, local, 
or tribal governments.

    Estimated cost to the Federal Government. --The estimated 
budgetary impact of H.R. 3039 is shown in the following table, 
assuming enactment during fiscal year 1998. The costs of this 
legislation fall within budget function 700 (veterans' 
affairs).
    The bill would establish a pilot program to guarantee loans 
to organizations that would provide transitional housing to 
homeless veterans. The pilot program would be limited to 15 
loans and the total guarantee could not exceed $100 million. 
The loans could be used for a wide variety of activities, 
including construction or rehabilitation of housing, 
refinancing of existing loans, and acquisition of land, 
furniture, and equipment. Based on experience with similar 
programs of the VA and the Small Business Administration and 
assuming that the VA will establish terms and conditions 
similar to its current programs, CBO estimates that the subsidy 
rate for this program would be about 10 percent. Therefore, we 
estimate that the bill would provide subsidy appropriations of 
$10 million, and that the program would cost approximately $1 
million a year over the 1999-2002 period and approximately $2 
million a year thereafter.

                                                                                                                
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                        1998         1999         2000         2001         2002         2003   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                     CHANGES IN DIRECT SPENDING                                                 
Loan Subsidy                                                                                                    
  Estimated budget authority......            0            1            1            1            1            2
  Estimated outlays...............            0            1            1            1            1            2
----------------------------------------------------------------------------------------------------------------


    Pay-as-you-go considerations. --Section 252 of the Balanced 
Budget and Emergency Deficit Control Act of 1985 sets up pay-
as-you-go procedures for legislation affecting direct spending 
or receipts. The net changes in outlays and governmental 
receipts that are subject to pay-as-you-go procedures are shown 
in the following table. For the purposes of enforcing pay-as-
you-go procedures, only the effects in the current year, the 
budget year, and the succeeding four years are counted.

                                                                                                                
                                    [By fiscal years, in millions of dollars]                                   
----------------------------------------------------------------------------------------------------------------
                                      1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008
----------------------------------------------------------------------------------------------------------------
Change in outlays..................      0      1      1      1      1      2      2      2      0      0      0
Change in receipts.................                                 Not applicable                              


    Intergovernmental and private-sector impact. --The 
legislation contains no intergovernmental or private-sector 
mandates as defined in UMRA, and would not significantly affect 
the budgets of state, local, or tribal governments.

    Previous CBO estimate. --On January 23, 1998, CBO prepared 
an estimate for H.R. 3039 as introduced. The total estimated 
costs are the same for both versions except that CBO now 
assumes a later enactment date that would cause spending to 
begin in 1999 instead of 1998. The bill as introduced included 
a financing mechanism that raised several unresolved issues and 
had the potential of increasing the pay-as-you-go costs over 
the amount estimated by CBO; thus, CBO could not estimate its 
full impact.

    Estimate prepared by:
          Federal Costs: Sunita D'Monte
          Impact on State, Local, and Tribal Governments: Marc 
        Nicole
          Impact on the Private Sector: Rachel Schmidt

    Estimate approved by:
          Robert A. Sunshine, Deputy Assistant Director for 
        Budget Analysis

                     Inflationary Impact Statement

    The enactment of the reported bill would have no 
inflationary impact.

                  Applicability to Legislative Branch

    The reported bill would not be applicable to the 
legislative branch under the Congressional Accountability Act, 
Public Law 104-1, because the bill would only affect certain 
Department of Veterans Affairs programs and benefits 
recipients.

                     Statement of Federal Mandates

    The reported bill would not establish a federal mandate 
under the Unfunded Mandates Reform Act, Public Law 104-4.

                 Statement of Constitutional Authority

    Pursuant to Article I, section 8 of the United States 
Constitution, the reported bill is authorized by Congress' 
power to ``provide for the common Defence and general Welfare 
of the United States.''

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (new matter is printed 
in italics and existing law in which no change is proposed is 
shown in roman):

               CHAPTER 37 OF TITLE 38, UNITED STATES CODE

              CHAPTER 37--HOUSING AND SMALL BUSINESS LOANS

                          subchapter i--general

Sec.
3701.    Definitions.
     * * * * * * *

 subchapter vi--loan guarantee for multifamily transitional housing for 
                            homeless veterans

3771.    Definitions.
3772.    General authority.
3773.    Requirements.
3774.    Default.
3775.    Audit.
     * * * * * * *

SUBCHAPTER VI--LOAN GUARANTEE FOR MULTIFAMILY TRANSITIONAL HOUSING FOR 
                           HOMELESS VETERANS

Sec. 3771. Definitions

  For purposes of this subchapter--
          (1) the term ``veteran'' has the meaning given such 
        term by paragraph (2) of section 101;
          (2) the term ``homeless veteran'' means a veteran who 
        is a homeless individual; and
          (3) the term ``homeless individual'' has the same 
        meaning as such term has within the meaning of section 
        103 of the Stewart B. McKinney Homeless Assistance Act 
        (42 U.S.C. 11302).

Sec. 3772. General authority

  (a) The Secretary may guarantee the full or partial repayment 
of a loan that meets the requirements of this subchapter.
  (b)(1) Not more than 15 loans may be guaranteed under 
subsection (a), of which not more than 5 such loans may be 
guaranteed during the 3-year period beginning on the date of 
enactment of the Veterans Transitional Housing Opportunities 
Act of 1998.
  (2) A guarantee of a loan under subsection (a) shall be in an 
amount that is not less than the amount necessary to sell the 
loan in a commercial market.
  (3) Not more than an aggregate amount of $100,000,000 in 
loans may be guaranteed under subsection (a).
  (c) A loan may not be guaranteed under this subchapter 
unless, prior to closing such loan, the Secretary has approved 
such loan.
  (d)(1) The Secretary shall enter into contracts with a 
qualified nonprofit organization to obtain advice in carrying 
out this subchapter, including advice on the terms and 
conditions necessary for a loan that meets the requirements of 
section 3773.
  (2) For purposes of paragraph (1), a qualified nonprofit 
organization is a nonprofit organization--
          (A) described in paragraph (3) or (4) of subsection 
        (c) of section 501 of the Internal Revenue Code of 1986 
        and exempt from tax under subsection (a) of such 
        section, and
          (B) that has experience in underwriting transitional 
        housing projects.
  (e) The Secretary may carry out this subchapter in advance of 
the issuance of regulations for such purpose.
  (f) The Secretary may guarantee loans under this subchapter 
notwithstanding any requirement for prior appropriations for 
such purpose under any provision of law.

Sec. 3773. Requirements

  (a) A loan referred to in section 3772 meets the requirements 
of this subchapter if--
          (1) the loan is for--
                  (A) construction of, rehabilitation of, or 
                acquisition of land for a multifamily 
                transitional housing project described in 
                subsection (b), or more than one of such 
                purposes;
                  (B) refinancing of an existing loan for such 
                a project;
                  (C) financing acquisition of furniture, 
                equipment, supplies, or materials for such a 
                project; or
                  (D) in the case of a loan made for purposes 
                of subparagraph (A), supplying such 
                organization with working capital relative to 
                such a project;
          (2) the loan is made in connection with funding or 
        the provision of substantial property or services for 
        such project by either a State or local government or a 
        nongovernmental entity, or both;
          (3) the maximum loan amount does not exceed the 
        lesser of--
                  (A) that amount generally approved (utilizing 
                prudent underwriting principles) in the 
                consideration and approval of projects of 
                similar nature and risk so as to assure 
                repayment of the loan obligation; and
                  (B) 90 percent of the total cost of the 
                project;
          (4) the loan is of sound value, taking into account 
        the creditworthiness of the entity (and the individual 
        members of the entity) applying for such loan;
          (5) the loan is secured; and
          (6) the loan is subject to such terms and conditions 
        as the Secretary determines are reasonable, taking into 
        account other housing projects with similarities in 
        size, location, population, and services provided.
  (b) For purposes of this subchapter, a multifamily 
transitional housing project referred to in subsection (a)(1) 
is a project that--
          (1)(A) provides transitional housing to homeless 
        veterans, which housing may be single room occupancy 
        (as defined in section 8(n) of the United States 
        Housing Act of 1937 (42 U.S.C. 1437f(n)));
          (B) provides supportive services and counselling 
        services (including job counselling) at the project 
        site with the goal of making such veterans self-
        sufficient;
          (C) requires that the veteran seek to obtain and keep 
        employment;
          (D) charges a reasonable fee for occupying a unit in 
        such housing;
          (E) maintains strict guidelines regarding sobriety as 
        a condition of occupying such unit; and
          (F) may include space for neighborhood retail 
        services or job training programs; and
          (2) may provide transitional housing to veterans who 
        are not homeless and to homeless individuals who are 
        not veterans if--
                  (A) at the time of taking occupancy by any 
                such veteran or homeless individual, the 
                transitional housing needs of homeless veterans 
                in the project area have been met;
                  (B) the housing needs of any such veteran or 
                homeless individual can be met in a manner that 
                is compatible with the manner in which the 
                needs of homeless veterans are met under 
                paragraph (1); and
                  (C) the provisions of subparagraphs (D) and 
                (E) of paragraph (1) are met.
  (c) In determining whether to guarantee a loan under this 
subchapter, the Secretary shall consider--
          (1) the availability of Department of Veterans 
        Affairs medical services to residents of the 
        multifamily transitional housing project; and
          (2) the extent to which needs of homeless veterans 
        are met in a community, as assessed under section 107 
        of Public Law 102-405.

Sec. 3774. Default

  (a) The Secretary shall take such steps as may be necessary 
to obtain repayment on any loan that is in default and that is 
guaranteed under this subchapter.
  (b) Upon default of a loan guaranteed under this subchapter 
and terminated pursuant to State law, a lender may file a claim 
under the guarantee for an amount not to exceed the lesser of--
          (1) the maximum guarantee; or
          (2) the difference between--
                  (A) the total outstanding obligation on the 
                loan, including principal, interest, and 
                expenses authorized by the loan documents, 
                through the date of the public sale (as 
                authorized under such documents and State law); 
                and
                  (B) the amount realized at such sale.

Sec. 3775. Audit

  During each of the first 3 years of operation of a 
multifamily transitional housing project with respect to which 
a loan is guaranteed under this subchapter, there shall be an 
annual, independent audit of such operation. Such audit shall 
include a detailed statement of the operations, activities, and 
accomplishments of such project during the year covered by such 
audit. The party responsible for obtaining such audit (and 
paying the costs therefor) shall be determined before the 
Secretary issues a guarantee under this subchapter.

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