Veterans' Home Loan Mortgage Indemnity Act of 1989

Veterans' Home Loan Mortgage Indemnity Act of 1989 - Establishes a Veterans' Mortgage Indemnity Fund. Provides that the Indemnity Fund shall be available to the Secretary of Veterans Affairs for all operations with respect to guaranteed or insured Department of Veterans Affairs housing loans for which fees are collected, other than loans for property which has been disposed of by veterans to purchasers who will assume liability for such loan. Provides that the following sums shall be credited to the Indemnity Fund: (1) all fees collected from such housing loans, other than loans for property which has been disposed of by the veteran to a purchaser who will assume liability for such loan; (2) .25 percent of the original amount of all loans for which a fee is collected for the first three fiscal years beginning with the fiscal year in which such loan is guaranteed or insured; (3) all collections of principal and interest and the proceeds from property held or disposed of with respect to such loans; and (4) all income from investments of the Indemnity Fund that are required to be made by the Secretary of the Treasury in obligations of the United States.

Increases the fee for a Department housing loan to 1.25 percent of the total loan amount. Provides that the following fees shall be collected: (1) one percent of the total loan amount with respect to housing loans obtained which are in default; and (2) .75 percent of the total loan amount with respect to loans for purchase or construction for which a down payment of at least five percent of the total purchase price or construction costs has been made. Provides for the waiver of such fees for veterans who are receiving compensation or for a surviving spouse of a veteran who died from a service-connected disability. Provides that the provision prohibiting fee collection with respect to all loans closed after September 30, 1989, shall apply after such date only to loans which are in default or loans for property which has been disposed of to another purchaser, except in the case of fraud, misrepresentation, or bad faith by the veteran. Provides that any veteran who pays a fee for such loans, other than loans which are in default or loans for property which has been disposed, or who is exempt from paying such fee, shall have no liability to the Secretary with respect to such loan for any loss resulting from a default of the veteran.

Revises provisions regarding the Loan Guaranty Revolving Fund to: (1) provide that it shall be available to the Secretary for all housing operations except those carried out by the Indemnity Fund; (2) limit the deposit of housing loan fees in such Fund, other than fees for loans for property which has been disposed of, to fees collected before the effective date of this Act; and (3) limit the deposit of principal and interest and the proceeds from property held or disposed of with respect to housing loans to loans guaranteed before the effective date of this Act.

Revises a provision authorizing the Secretary to sell notes evidencing loans which are in default to permit such sale only if the cash proceeds received at the time of the sale are at least 90 percent of the unpaid balance of such loan. Requires funds received from the sale of such loans to be credited to the Veterans' Mortgage Indemnity Fund as offsetting collections.

Revises a provision regarding basic entitlement to housing loans to authorize the Secretary, in computing the amount of guaranty entitlement available to a veteran, to exclude the amount of entitlement used for any loan which has been repaid in full.

Allows only the presence of fraud (currently, fraud, misrepresentation, material fault, or lack of good faith) as a bar to the waiver of recovery of payments, overpayments, or benefits made by the Department when the Secretary determines that recovery would be against equity and good conscience.

Prohibits the Secretary, in waiving indebtedness following the default of a veteran on a housing loan, to base such waiver on the balancing of fault or on whether such veteran may be able to repay the indebtedness.

Extends through FY 1991 the procedure to be followed by the Department of Veterans Affairs for defaults by veterans of loans made, guaranteed, or insured by the Department. Provides that, in the case of a partial payment on a defaulted loan tendered by the veteran and refused by the holder, the holder shall notify the Secretary as soon as such payment has been refused of the circumstances of the default and the reasons for the holder's refusal of partial payment.