Court to Rule on Cal-Vet Eligibility

The California Supreme Court has agreed to decide a potentially far-reaching case that could determine whether war veterans who moved to the state after serving in the military are eligible for low-interest “Cal-Vet” loans.

A decision in favor of the group of veterans who brought the suit could open up the Cal-Vet program to an additional 300,000 former GIs who now live in California.

And whether the group wins or loses, the court’s decision could have broad impact on a variety of special loan programs and other benefit plans across the nation.

About 900,000 veterans live in California, according to the state’s Department of Veterans Affairs. But more 300,000 of those vets aren’t eligible for the agency’s low-rate home-loan program because they weren’t California residents when they served.

“Our state government is discriminating against veterans from other states,” said Dan Stormer, an attorney representing a group of veterans who have been denied Cal-Vet loans because they didn’t have legal residence here when they were in the armed forces.

“My feeling is, if you took time out of your life to serve your country--and maybe even got wounded or permanently disabled--you ought to be eligible for the program as long as you’re living here now.”

One of the key plaintiffs in the suit is Michael Gureckas, who was left a parapalegic when the fighter plane he was piloting was shot down in Vietnam in 1968.

Gureckas was a Connecticut resident when he was drafted, but has lived in California ever since he returned to the United States. He was denied a Cal-Vet loan in 1971.

Veterans who meet Cal-Vet’s so-called “residency” requirements and other eligibility guidelines can get low down-payment loans of up to $125,000 to buy a home. The interest rate they pay is typically about two points below those offered by conventional lenders.

State officials have also used the residency rule to deny student loans and a handful of other benefits to some of Stormer’s clients and their families.

The state’s Veterans Affairs Department maintains that its refusal to grant Cal-Vet loans to war veterans who didn’t live here when they were enlisted is justified.

“We’re just trying to uphold state law,” said Porter Moreney, the agency’s chief deputy director.

“Cal-Vet is a program for veterans who lived here while they served. It’s not for veterans who moved here after they got out of the service.”

A Los Angeles superior court judge initially sided with the Veterans Department, rejecting attorney Stormer’s argument that state officials were denying some veterans their constitutional right to equal protection under the law.

But a state appeals court reversed that decision last May, agreeing with Stormer that denying benefits to vets because they lived somewhere else when they served is illegal.

If the state Supreme Court upholds the latest decision, about 300,000 more veterans living in California would be given access to the Cal-Vet loan program.

Although their are no firm estimates, Moreney believes that between 50,000 and 60,000 of those newly eligible vets would actually apply for a loan.

An affirmation by the state Supreme Court could also open up similar programs in other states to a countless number of veterans currently denied benefits.

But if the state Supreme Court reverses the appellate court’s decision and rules against Stormer’s clients, it could validate residency restrictions currently placed on a variety of special programs across the nation and maybe even lead to new curbs.

“If we lose this case, it could give other states the green light to impose new (residency) restrictions on a lot of different programs,” Stormer said.

“You might start seeing stricter residency rules to get public assistance and other types of aid, or you might see more restrictions on who can and who can’t take various licensing exams.”

Ironically, a victory for Stormer’s clients might come at the expense of veterans who’d like to use the program in the future.

A bill currently in the state Legislature would raise the limit on the amount that veterans could borrow under the Cal-Vet program by tens of thousands of dollars.

A higher ceiling would make the program more attractive to thousands of veterans in high-priced housing markets like Southern California, where the current $125,000-loan ceiling limits the program’s viability.

But if the current ceiling is raised and more veterans are allowed to use the program, the Cal-Vet office could run out of money to lend.

“We’d basically have to go to a first-come, first-served basis,” Moreney said. “If a vet came to us in August and we had already run out of mortgage money, we’d have to say, ‘Take a number, and we’ll see you next year.’ ”

Arguments in the case are expected to be heard early next year, and a decision should be announced by the summer.

Average Rates for Residential Mortgages

Average rates for residential mortgages as of Oct. 4, 1991.

Survey Conventional Mortgages Adjustable Mortgages Area 15 Year 30 Year Composite 1 Year Composite National 8.60% 8.94% 8.78% 6.67% 6.95% California 8.79 9.10 8.95 6.78 6.83 Connecticut 8.56 8.94 8.78 6.67 6.91 Wash. D.C. 8.46 8.80 8.64 6.30 6.61 Florida 8.57 8.94 8.77 6.59 6.86 Mass. 8.54 8.90 8.73 6.63 7.11 New Jersey 8.61 8.94 8.79 6.65 7.14 N.Y. Metro 8.65 8.99 8.84 6.74 7.10 New York 8.72 9.06 8.91 6.83 7.12 N.Y. Co-ops 8.80 9.15 9.08 7.37 7.77 Pa. 8.37 8.72 8.55 6.47 6.67 Texas 8.50 8.86 8.69 6.65 6.89

SOURCE: HSH Associates, Butler, N.J.