SAN FRANCISCO - California lawmakers sent the state's voters another bond measure this week, giving unanimous approval to a ballot measure to authorize $900 million of veterans' mortgage bonds.
The bill was approved to capitalize on federal legislation President Bush signed in June. The HEART Act, or Heroes Earnings Assistance and Relief Tax Act of 2008, makes Texas and California veterans who entered active military duty after 1976 eligible for veterans' home loan programs backed by tax-exempt qualified veterans mortgage bonds, or QVMBs.
Veterans in all five states permitted to issue QVMBs are now able to avail themselves of mortgage loans that carry lower interest rates because they are backed by tax-exempt bonds.
California's Cal-Vet program, administered by the state's Department of Veterans Affairs, has $102 million of state QVMB authorization remaining, according to staff reports prepared for state lawmakers.
More authorization is needed because so many more veterans will qualify for the mortgages under the HEART Act, according to a staff report prepared for the State Assembly.
"With increased demand, CDVA believes it will run out of authorization and be unable to fill loan requests for veterans through 2010," the report said.
The bonds require state voter approval because they are backed by California's general obligation pledge, though the mortgage program has always been self-supporting.
"The default rate on the Cal-Vet home loans is very little as compared to conventional home loans (there were only five in total last year)," said the Senate's staff report, which noted that Cal-Vet loans are not sold on the secondary market, allowing the Veterans' Affairs department to sell the property in the event of a foreclosure and recoup loan proceeds.
Cal-Vet mortgage bonds carry higher underlying ratings than other California GOs. State GOs are at the A-plus level across the board, while the veterans' mortgage bonds carry underlying ratings of AA-minus from Fitch Ratings, Aa2 from Moody's Investors Service, and AA-minus from Standard & Poor's.
The Senate approved the veterans' bond bill 39 to 0 Monday, after the Assembly passed the bill last week on a 75-to-0 vote. The measure will join 11 others that have already qualified for the November ballot. A simple majority is needed for passage.