[Federal Register Volume 59, Number 186 (Tuesday, September 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23753]
[[Page Unknown]]
[Federal Register: September 27, 1994]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 36
RIN 2900-AF39
Loan Guaranty: Credit Underwriting Standards and Procedures for
Processing VA Guaranteed Loans
agency: Department of Veterans Affairs.
action: Final regulatory amendments.
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summary: The Department of Veterans Affairs (VA) is amending its loan
guaranty regulations by updating the credit underwriting standards and
procedures for processing VA guaranteed home loans. Updating the
standards and procedures to keep pace with current economic conditions
will increase the likelihood that a veteran obtaining a VA guaranteed
loan will be able to repay the loan.
effective date: These regulatory amendments are effective October 27,
1994.
for further information contact: Ms. Judith Caden, Assistant Director
for Loan Policy (264), Loan Guaranty Service, Veterans Benefits
Administration, Department of Veterans Affairs, 810 Vermont Avenue NW.,
Washington, DC 20420, (202) 273-7366.
supplementary information: On September 29, 1993, VA published in the
Federal Register (58 FR 50875) proposed regulatory amendments to 38 CFR
36.4337. VA proposed to amend the credit underwriting standards and
procedures for processing VA guaranteed home loans (1) by updating the
figures in the residual income guidelines; (2) by requiring that income
tax returns be submitted with applications for borrowers who are self-
employed, paid on a commission basis, employed in the building trades,
or have seasonal jobs; (3) by providing more specific time frames for
considering whether income from part-time employment, second jobs
overtime, self-employment, and commissions may be considered stable and
reliable; (4) by adding guidelines for underwriting cases involving
foreclosures and Federally-related debts; and (5) by deleting the
requirement that lenders check with VA regional offices on prior VA
loans. VA also proposed to delete union dues from items considered job-
related expenses because these dues are part of the residual income
figure. Please refer to the September 29, 1993 Federal Register for a
complete discussion of the proposed amendments. VA is adopting the
regulatory amendments as originally proposed except for the minor
editorial and terminology changes discussed below.
VA received three comments on the proposed amendments. One
commenter favored all the amendments. The second, a national
association representing certified public accountants, suggested that
more accurate accounting terms be used to describe VA's financial
requirements for self-employed borrowers. Specifically, the commenter
noted that ``compile'' is the correct term to use to describe the case
where an external accountant will ``prepare'' the financial statements,
as required by section 36.4337(f)(7)(i). The commenter also pointed out
that independent accountants do not ``certify the accuracy'' of
financial statements, rather, the technically correct usage is to say
that the accountant conducts an ``audit''. VA agrees that the
commenter's suggested terminology is more precise. Accordingly, we are
revising paragraph (f)(7)(i) of Sec. 36.4337 of the regulations to read
that the profit and loss statement and balance sheet required for self
employed applicants be ``compiled'', rather than ``prepared'', by an
accountant. The words ``certified as accurate'' are also being deleted
from the sentence which was proposed to read, ``In some cases the
nature of the business or the content of the financial statement may
necessitate an independent audit certified as accurate by the
accountant.''
The third commenter requested clarification of how a loan
underwriter determines the stability and reliability of a self-employed
applicant's income.
The proposed new paragraph (f)(7) of Sec. 36.4337 states that
``income from self-employment is generally considered stable when the
applicant has been in business for at least 2 years and that income
from less than 2 years of self-employment usually cannot be considered
stable unless the applicant has had previous related employment and/or
extensive specialized training.'' It also states that ``When an
applicant has been self-employed less than 1 year, it will rarely be
possible to demonstrate that the income is stable for qualifying
purposes * * * .''
As the regulations provide, VA does not require that in every case
the self-employed applicant have a two-year period of continuous
employment with no gaps. If the applicant has been self-employed for
less than two years, it is appropriate in underwriting the loan to also
consider the applicant's related employment or specialized training.
For example, sufficient weight might be given to the fact that the
applicant has had specialized training in his or her field of endeavor,
and that therefore, the income from self-employment should be viewed as
stable, even though it has been for less than 2 years. However, when
the self-employment has been for less than one year, it would be very
difficult to consider the income stable and reliable. In other words,
in cases where the loan applicant has been self-employed for less than
one year, it would not be possible to view his or her income as stable
unless the applicant's training and/or related experience is such as to
clearly show a very strong likelihood of success.
This commenter also asked ``If the two-year history of employment
applies, must it be continuous or should factors such as schooling or
training be considered during that time even if no income resulted?''
As noted above, the proposed regulations provide for the
consideration of training and schooling when determining the adequacy
of income from self-employment. Thus it is possible to consider income
as stable and reliable with less than 2 years of continuous employment,
provided gaps in employment are sufficiently explained by adequate
documentation of schooling or training. It is clear that the language
in paragraph (f)(7)(i) is adequate to prescribe the intended standard
and, therefore, the paragraph will be published as originally proposed.
VA is making an editorial change to paragraph (g) of the
regulations. Language now contained in paragraph (f)(1) of the
regulations explaining the requirements of the Equal Credit Opportunity
Act, is being repeated in paragraph (g) for the purposes of clarity.
Accordingly, except for the terminology and editorial changes
already discussed, VA is publishing these regulations as originally
proposed.
The information collection requirement contained in paragraphs
(f)(6), (f)(7) and (f)(9) of Sec. 36.4337 of these regulations has been
approved by the Office of Management and Budget (OMB) under OMB control
number 2900-0521.
The Secretary hereby certifies that the proposed regulatory
amendments will not have a significant economic impact on a substantial
number of small entities as they are defined in the Regulatory
Flexibility Act, 5 U.S.C. 601-612. These changes will not result in any
major new administrative or procedural burdens on lenders or other
program participants. They simply revise the criteria established by VA
in determining whether home loans for veterans will be guaranteed by VA
based on the veteran's income and credit history.
The Catalog of Federal Domestic Assistance Program numbers are
64.114 and 64.119.
List of Subjects in 38 CFR Part 36
Condominiums, Handicapped, Housing Loan program--housing and
community development, Manufactured homes, Veterans.
These amendments are made final under the authority granted the
Secretary by section 501(a) of title 38, United States Code.
Approved: August 15, 1994.
Jesse Brown,
Secretary for Veterans Affairs.
For the reasons set out in the preamble, 38 CFR part 36, is amended
as set forth below.
PART 36--LOAN GUARANTY
1. The authority citation for part 36 Secs. 36.4300 through 36.4375
is revised to read as follows:
Authority: Sections 36.4300 through 36.4375 issued under 38
U.S.C. 501(a).
2. Section 36.4337 is revised to read as follows:
Sec. 36.4337 Underwriting standards, processing procedures, lender
responsibility and lender certification
(a) Use of standards. Except for refinancing loans guaranteed
pursuant to 38 U.S.C. 3710(a)(8), the standards contained in paragraphs
(c) through (j) of this section will be used to determine that the
veteran's present and anticipated income and expenses, and credit
history are satisfactory.
(b) Waiver of standards. Use of the standards in paragraphs (c)
through (j) of this section for underwriting home loans will be waived
only in extraordinary circumstances when the Secretary determines,
considering the totality of circumstances, that the veteran is a
satisfactory credit risk.
(c) Methods. The two primary underwriting tools that will be used
in determining the adequacy of the veteran's present and anticipated
income are debt-to-income ratio and residual income analysis. They are
described in paragraphs (d) through (f) of this section. Ordinarily, to
qualify for a loan, the veteran must meet both standards. Failure to
meet one standard, however, will not automatically disqualify a
veteran. The following shall apply to cases where a veteran does not
meet both standards:
(1) If the debt-to-income ratio is 41 percent or less, and the
veteran does not meet the residual income standard, the loan may be
approved with justification, by the underwriter's supervisor, as set
out in paragraph (c)(4) of this section.
(2) If the debt-to-income ratio is greater than 41 percent, (unless
it is larger due solely to the existence of tax-free income which
should be noted in the loan file) the loan may be approved with
justification, by the underwriter's supervisor, as set out in paragraph
(c)(4) of this section.
(3) If the ratio is greater than 41 percent and the residual income
exceeds the guidelines by at least 20 percent the second level review
and statement of justification is not required.
(4) In any case described by paragraphs (c)(1) and (c)(2) of this
section, the lender must fully justify the decision to approve the loan
or submit the loan to the Secretary for prior approval in writing. The
lender's statement must not be perfunctory, but should address the
specific compensating factors, as set forth in paragraph (c)(5),
justifying the approval or submission of the loan. The statement must
be signed by the underwriter's supervisor. It must be stressed that the
statute requires not only consideration of a veteran's present and
anticipated income and expenses, but also that the veteran be a
satisfactory credit risk.
Therefore, meeting both the debt-to-income ratio and residual
income standards does not mean the loan is automatically approved. It
is the lender's responsibility to base the loan approval or disapproval
on all the factors present for any individual veteran. The veteran's
credit must be evaluated based on criteria set forth in paragraph (g)
of this section as well as a variety of compensating factors that
should be evaluated.
(5) The following are examples of acceptable compensating factors
to be considered in the course of underwriting a loan:
(i) Excellent long-term credit;
(ii) Conservative use of consumer credit;
(iii) Minimal consumer debt;
(iv) Long-term employment;
(v) Significant liquid assets;
(vi) Downpayment or the existence of equity in refinancing loans;
(vii) Little or no increase in shelter expense;
(viii) Military benefits;
(ix) Satisfactory homeownership experience;
(x) High residual income; and
(xi) Low debt-to-income ratio.
(6) The list in paragraph (c)(5) is not exhaustive and the items
are not in any priority order. Valid compensating factors should
represent unusual strengths rather than mere satisfaction of basic
program requirements. Compensating factors must be relevant to the
marginality or weakness.
(d) Debt-to-income-ratio. A debt-to-income ratio that compares the
veteran's anticipated monthly housing expense and total monthly
obligations to his or her stable monthly income will be computed to
assist in the assessment of the potential risk of the loan. The ratio
will be determined by taking the sum of the monthly Principal,
Interest, Taxes and Insurance (PITI) to the loan being applied for,
homeowners and other assessments such as special assessments,
condominium fees, homeowners association fees, etc., and any long-term
obligations divided by the total of gross salary or earnings and other
compensation or income. The ratio should be rounded to the nearest two
digits; e.g., 35.6 percent would be rounded to 36 percent. The standard
is 41 percent or less. If the ratio is greater than 41 percent, (unless
it is larger due solely to the existence of tax free income which
should be noted in the loan file) the steps cited in paragraphs (c)(1)
through (c)(6) of this section apply.
(e) Residual income guidelines. The guidelines provided in this
paragraph for residual income will be used to determine whether the
veteran's monthly residual income will be adequate to meet living
expenses after estimated monthly shelter expenses have been paid and
other monthly obligations have been met. The guidelines for residual
income are based on data supplied in the Consumer Expenditure Survey
(CES) published by the Department of Labor's Bureau of Labor
Statistics. Regional minimum incomes have been developed for loan
amounts up to $69,999 and for loan amounts of $70,000 and above. It is
recognized that the purchase price of the property may affect family
expenditure levels in individual cases. This factor may be given
consideration in the final determination in individual loan analyses.
For example, a family purchasing in a higher-priced neighborhood may
feel a need to incur higher than average expenses to support a
lifestyle comparable to that in their environment, whereas a
substantially lower-priced home purchase may not compel such
expenditures. It should also be clearly understood from this
information that no single factor is a final determinant in any
applicant's qualification for a VA guaranteed loan. Once the residual
income has been established, other important factors must be examined.
One such consideration is the amount being paid currently for rental or
housing expenses. If the proposed shelter expense is materially in
excess of what is currently being paid, the case may require closer
scrutiny. In such cases, consideration should be given to the ability
of the borrower and spouse to accumulate liquid assets; such as cash
and bonds, and to the amount of debts incurred while paying a lesser
amount for shelter. For example, if an application indicates little or
no capital reserves and excessive obligations, it may not be reasonable
to conclude that a substantial increase in shelter expenses can be
absorbed. Another factor of prime importance is the applicant's manner
of meeting obligations. A poor credit history alone is a basis for
disapproving a loan, as is an obviously inadequate income. When one or
the other is marginal, however, the remaining aspect must be closely
examined to assure that the loan applied for will not exceed the
applicant's ability or capacity to repay. Therefore, it is important to
remember that the figures provided below for residual income are to be
used as a guide and should be used in conjunction with the steps
outlined in paragraphs (c) through (j) of this section. The residual
income guidelines are as follows:
(1) Table of residual incomes by region (for loan amounts to
$69,999 and below):
Table of Residual Incomes by Region
[For loan amounts of $69,999 and below]
------------------------------------------------------------------------
Family size* Northeast Midwest South West
------------------------------------------------------------------------
1................................. $375 $367 $367 $409
2................................. 629 616 616 686
3................................. 758 742 742 826
4................................. 854 835 835 930
5................................. 886 867 867 965
------------------------------------------------------------------------
*For families with more than five members, add $75 for each additional
member up to a family of seven.
(2) Table of residual incomes by region (for loan amounts of
$70,000 and above):
Table of Residual Incomes by Region
[For loan amounts of $70,000 and above]
------------------------------------------------------------------------
Family size* Northeast Midwest South West
------------------------------------------------------------------------
1................................. $433 $424 $424 $472
2................................. 726 710 710 791
3................................. 874 855 855 952
4................................. 986 964 964 1074
5................................. 1021 999 999 1113
------------------------------------------------------------------------
*For families with more than five members, add $80 for each additional
member up to a family of seven.
(3) Geographic regions for residual income guidelines: Northeast--
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island and Vermont; Midwest--Illinois, Indiana,
Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota,
Ohio, South Dakota and Wisconsin; South--Alabama, Arkansas, Delaware,
District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland,
Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina,
Tennessee, Texas, Virginia, West Virginia; West--Alaska, Arizona,
California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico,
Oregon, Utah, Washington and Wyoming.
(4) Military adjustments: For loan applications involving an
active-duty serviceperson or military retiree, the residual income
figures will be reduced by a minimum of 5 percent if there is a clear
indication that the borrower or spouse will continue to receive the
benefits resulting from the use of facilities on a nearby military
base. (This reduction applies to tables in paragraph (e).)
(f) Stability and reliability of income. Only stable and reliable
income of the veteran and spouse can be considered in determining
ability to meet mortgage payments. Income can be considered stable and
reliable if it can be concluded that it will continue during the
foreseeable future.
(1) Verification. Income of the borrower and spouse which is
derived from employment and which is considered in determining the
family's ability to meet the mortgage payments, payments on debts and
other obligations, and other expenses, must be verified. If the spouse
is employed and will be contractually obligated on the loan, the
combined income of both the veteran and spouse is considered when the
income of the veteran alone is not sufficient to qualify for the amount
of the loan sought. In other than community property States, if the
spouse will not be contractually obligated on the loan, Regulation B,
promulgated by the Federal Reserve Board pursuant to the Equal Credit
Opportunity Act prohibits any request for, or consideration of
information concerning the spouse (including income, employment,
assets, or liabilities), except that if the applicant is relying on
alimony, child support, or maintenance payments from a spouse or former
spouse as a basis for repayment of the loan, information concerning
such spouse or former spouse may be requested and considered (see
paragraph (f)(4) of this section). In community property States,
information concerning a spouse may be requested and considered in the
same manner as that for the applicant. The standards applied to income
of the veteran are also applicable to that of the spouse. There can be
no discounting of income on account of sex, marital status, or any
other basis prohibited by the Equal Credit Opportunity Act. Income
claimed by an applicant that is not or cannot be verified cannot be
given considered when analyzing the loan. If the veteran or spouse has
been employed by a present employer for less than 2 years, a 2-year
history covering prior employment, schooling or other training must be
secured. Any periods of unemployment must be explained. Employment
verifications and pay stubs must be no more than 90 days old to be
considered valid. For loans closed automatically, this requirement will
be considered satisfied if the date of the employment verification is
within 90 days of the date of the veteran's application to the lender.
(2) Active duty applicants. (i) In the case of an active duty
applicant, a military Leave & Earnings Statement is required and will
be used instead of an employment verification. The statement must be no
more than 90 days old and must be the original or a lender-certified
copy of the original. For loans closed automatically, this requirement
is satisfied if the date of the Leave and Earnings Statement is within
90 days of the date of the borrower's application to the lender.
(ii) For service members within 12 months of release from active
duty one of the following is also required:
(A) Documentation that the service member has in fact already
reenlisted or extended his/her period of active duty to a date beyond
the 12 month period following the projected closing of the loan.
(B) Verification of a valid offer of local civilian employment
following release from active duty. All data pertinent to sound
underwriting procedures (date employment will begin, earnings, etc.)
must be included.
(C) A statement from the service member that he/she intends to
reenlist or extend his/her period of active duty to a date beyond the
12 month period following the projected loan closing date, and a
statement from the service member's commanding officer confirming that
the service member is eligible to reenlist or extend his/her active
duty as indicated and that the commanding officer has no reason to
believe that such reenlistment or extension of active duty will not be
granted.
(D) Other unusually strong positive underwriting factors, such as a
downpayment of at least 10 percent, significant cash reserves, or clear
evidence of strong ties to the community coupled with a nonmilitary
spouse's income so high that only minimal income from the active duty
service member is needed to qualify.
(iii) Each active duty member who applies for a loan must be
counseled through the use of VA Form 26-0592, Counseling Checklist for
Military Homebuyers. Lenders must submit a signed and dated VA Form 26-
0592 with each prior approval loan application or automatic loan report
involving a borrower on active duty.
(3) Income reliability. Income received by the borrower and spouse
is to be used only if it can be concluded that the income will continue
during the foreseeable future and thus be properly considered in
determining ability to meet the mortgage payments. There can be no
discounting of income solely because it is derived from an annuity,
pension or other retirement benefit, or from part-time employment.
However, unless income from overtime work and part-time or second jobs
can be accorded a reasonable likelihood that it is continuous and will
continue in the foreseeable future, such income should not be used.
Generally, the reliability of such income cannot be demonstrated unless
the income has continued for 2 years. The hours of duty and other work
conditions of the applicant's primary job, and the period of time in
which the applicant was employed under such arrangement must be such as
to permit a clear conclusion as to a good probability that overtime or
part-time or secondary employment can and will continue. Income from
overtime work and part-time jobs not eligible for inclusion as primary
income may, if properly verified for at least 12 months, be used to
offset the payments due on debts and obligations of an intermediate
term, i.e., 6 to 24 months. Such income must be described in the loan
file. The amount of any pension or compensation and other income such
as dividends from stocks, interest from bonds, savings accounts, or
other deposits, rents, royalties, etc., will be used as primary income
if it is reasonable to conclude that such income will continue in the
foreseeable future. Otherwise, it may be used only to offset
intermediate-term debts, as above. Also, the likely duration of certain
military allowances cannot be determined, and therefore will be used
only to offset intermediate-term obligations. Such allowances are: Pro-
pay, flight or hazard pay, and overseas or combat pay, all of which are
subject to periodic review and/or testing of the recipient to ascertain
whether eligibility for such pay will continue. Only if it can be shown
that such pay has continued for a prolonged period and can be expected
to continue because of the nature of the recipient's assigned duties,
will such income be considered as primary income. For instance, flight
pay verified for a pilot can be regarded as probably continuous and
thus should be added to the base pay. Income derived from service in
the reserves or National Guard may be used if the applicant has served
in such capacity for a period of time sufficient to evidence good
probability that such income will continue. The total period of active
and reserve service may be helpful in this regard. Otherwise, such
income may be used to offset intermediate-term debts. There are a
number of additional income sources whose contingent nature precludes
their being considered as available for repayment of a long-term
mortgage obligation. Temporary income items such as VA educational
allowances and unemployment compensation do not represent stable and
reliable income and will not be taken into consideration in determining
the ability of the veteran to meet the income requirement of the
governing law. As required by the Equal Opportunity Act Amendments of
1976, Public Law 94-239, income from public assistance programs is used
to qualify a loan if it can be determined that the income will probably
continue for a substantial fraction of the term of the loan; i.e., one-
third or more. For instance, aid to dependent children being received
for a 5-year old child that will continue until the child achieves
majority would be used to qualify for a 30-year loan.
(4) Alimony, child support, maintenance payments. If an applicant
chooses to reveal income from alimony, child support, or maintenance
payments (after first having been informed that any such disclosure is
voluntary pursuant to the Federal Reserve Board's Regulation B), such
payments are considered as income to the extent that the payments are
likely to be consistently made. Factors to be considered in determining
the likelihood of consistent payments include, but are not limited to:
Whether the payments are received pursuant to a written agreement or
court decree; the length of time the payments have been received; the
regularity of receipt; the availability of procedures to compel
payment; and the creditworthiness of the payor, including the credit
history of the payor when available under the Fair Credit Reporting Act
or other applicable laws. However, the Fair Credit Reporting Act (15
U.S.C. 1681(b)) limits the permissible purposes for which credit
reports may be ordered, in the absence of written instructions of the
consumer to whom the report relates, to business transactions involving
the subject of the credit report or extensions of credit to the subject
of the credit report.
(5) Military quarters allowance. With respect to off-base housing
(quarters) allowances for service personnel on active duty, it is the
policy of the Department of Defense (DoD) to utilize available on-base
housing when possible. In order for a quarters allowance to be
considered as continuing income, it is necessary that the applicant
furnish written authorization from his or her commanding officer for
off-base housing. This authorization should verify that quarters will
not be made available and that the individual should make permanent
arrangements for nonmilitary housing. DD Form 1747, Status of Housing
Availability, is used by the Family Housing Office to advise personnel
regarding family housing. The applicant's quarters allowance cannot be
considered unless item b (Permanent) or d is completed on DD Form 1747,
dated October 1990. of course, if the applicant's income less quarters
allowance is sufficient, there is no need for assurance that the
applicant has permission to occupy nonmilitary housing provided that a
determination can be made that the occupancy requirements of the law
will be met. Also, authorization obtain off-base housing will not be
required when certain duty assignments would clearly qualify service
personnel with families for quarters allowance. For instance, off-base
housing authorizations need not be obtained for service personnel
stationed overseas who are not accompanied by their families,
recruiters on detached duty, or military personnel stationed in areas
where no on-base housing exists. In any case in which no off-base
housing authorization is obtained, an explanation of the circumstances
justifying its omission must be included with the loan application
except when it has been established by the VA facility of jurisdiction
that the waiting lists for on-base housing are so long that it is
improbable that individuals desiring to purchase off-base housing would
be precluded from doing so in the foreseeable future. If stations make
such a determination, a release shall be issued to inform lenders.
(6) Commissions. When all or a major portion of the veteran's
income is derived from commissions, it will be necessary to establish
the stability of such income if it is to be considered in the loan
analysis for the repayment of the mortgage debt and/or short-term
obligations. In order to assess the value of such income, lenders
should obtain written verification of the actual amount of commissions
paid to date, the basis for the payment of such commissions and when
commissions are paid; i.e., monthly, quarterly, semiannually, or
annually. Lenders should also obtain signed and dated individual income
tax returns, plus applicable schedules, for the previous 2 years, or
for whatever additional period is deemed necessary to properly
demonstrate a satisfactory earnings record. The length of the veteran's
employment in the type of occupation for which commissions are paid is
also an important factor in the assessment of the stability of the
income. If the veteran has been employed for a relatively short time,
the income should not normally be considered stable unless the product
or service was the same or closely related to the product or service
sold in an immediate prior position. Generally, income from commissions
is considered stable when the applicant has been receiving such income
for at least 2 years. Less than 2 years of income from commissions
cannot usually be considered stable. When an applicant has received
income from commissions for less than 1 year, it will rarely be
possible to demonstrate that the income is stable for qualifying
purposes; such cases would require in-depth development.
(7) Self-employment. Generally, income from self-employment is
considered stable when the applicant has been in business for at least
2 years. Less than 2 years of income from self-employment cannot
usually be considered stable unless the applicant has had previous
related employment and/or extensive specialized training. When an
applicant has been self-employed less than 1 year, it will rarely be
possible to demonstrate that the income is stable for qualifying
purposes; such cases would require in-depth development. The following
documentation is required for all self-employed borrowers:
(i) A profit and loss statement for the prior fiscal year (12-month
accounting cycle), plus the period year to date since the end of the
last fiscal year (or for whatever shorter period records may be
available), and a current balance sheet showing all assets and
liabilities. The profit and loss statement and balance sheet will be
compiled by an accountant based on the financial records. In some cases
the nature of the business or the content of the financial statement
may necessitate an independent audit by the accountant. Depending on
the situation, this data may be on the veteran and/or the business; and
(ii) Copies of signed individual income tax returns, plus all
applicable schedules for the previous 2 years, or for whatever
additional period is deemed necessary to properly demonstrate a
satisfactory earnings record, must be obtained. If the business is a
corporation or partnership, copies of signed federal business income
tax returns for the previous two years plus all applicable schedules
for the corporation or partnership must be obtained; and
(iii) If the business is a corporation or partnership, a list of
all stockholders or partners showing the interest each holds in the
business will be required. Some cases may justify a written credit
report on the business as well as the applicant. When the business is
of an unusual type and it is difficult to determine the probability of
its continued operation, explanation as to the function and purpose of
the business may be needed from the applicant and/or any other
qualified party with the acknowledged expertise to express a valid
opinion.
(8) Recently discharged veterans. Loan applications received from
recently discharged veterans who have little or no employment
experience other than their military occupation and from veterans
seeking VA guaranteed loans who have retired after 20 years of active
military duty require special attention. The retirement income of the
latter veterans in may cases may not be sufficient to meet the
statutory income requirements for the loan amount sought. Many have
obtained full-time employment and have been employed in their new jobs
for a very short time.
(i) It is essential in determining whether veterans in these
categories qualify from the income standpoint for the amount of the
loan sought, that the facts in respect to their present employment and
retirement income be fully developed, and that each case be considered
on its individual merits.
(ii) In most cases the veteran's current income or current income
plus his or her retirement income is sufficient. The problem lies in
determining whether it can be properly concluded that such income level
will continue for the foreseeable future. If the veteran's employment
status is that of a trainee or apprentice, this will, of course, be a
factor. In cases of the self-employed, the question to be resolved is
whether there are reasonable prospects that the business enterprise
will be successful and produce the required income. Unless a favorable
conclusion can be made, the income from such source should not be
considered in the loan analysis.
(iii) If a recently discharged veteran has no prior employment
history and the veteran's verification of employment shows he or she
has not been on the job a sufficient time in which to become
established, consideration should be given to the duties the veteran
performed in the military service. When it can be determined that the
duties a veteran performed in the service are similar or are in direct
relation to the duties of the applicant's present position, such duties
may be construed as adding weight to his or her present employment
experience and the income from the veteran's present employment thus
may be considered available for qualifying the loan, notwithstanding
the fact that the applicant has been on the present job only a short
time. This same principle may be applied to veterans recently retired
from the service. In addition, when the veteran's income from
retirement, in relation to the total of the estimated shelter expense,
long-term debts and amount available for family support, is such that
only minimal income from employment is necessary to qualify from the
income standpoint, it would be proper to resolve the doubt in favor of
the veteran. It would be erroneous, however, to give consideration to a
veteran's income from employment for a short duration in a job
requiring skills for which the applicant has had no training or
experience.
(iv) To illustrate the provisions of paragraph (f), it would be
proper to use short-term employment income in qualifying a veteran who
had experience as an airplane mechanic in the military service and the
individual's employment after discharge or retirement from the service
is in the same or allied field; e.g., auto mechanic or machinist. This
presumes, however, that the verification of employment included a
statement that the veteran was performing the duties of the job
satisfactorily, the possibility of continued employment was favorable
and that the loan application is eligible in all other respects. An
example of nonqualifying experience is that of a veteran who was an Air
Force pilot and has been employed in insurance sales on commission for
a short time. Most cases, of course, fall somewhere between those
extremes. It is for this reason that the facts of each case must be
fully developed prior to closing the loan automatically or submitting
the case to VA for prior approval.
(9) Employment of short duration. The provisions of paragraph
(f)(7) of this section are similarly applicable to applicants whose
employment is of short duration. Such cases will entail careful
consideration of the employer's confirmation of employment, probability
of permanency, past employment record, the applicant's qualifications
for the position, and previous training, including that received in the
military service. In the event that such considerations do not enable a
determination that the income from the veteran's current position has a
reasonable likelihood of continuance, such income should not be
considered in the analysis. Applications received from persons employed
in the building trades, or in other occupations affected by climatic
conditions, should be supported by documentation evidencing the
applicant's total earnings to date and covering a period of not less
than 1 year as well as signed and dated copies of complete income tax
returns, including all schedules for the past 2 years or for whatever
additional period is deemed necessary to properly demonstrate a
satisfactory earnings record. If the applicant works out of a union,
evidence of the previous year's earnings should be obtained together
with a verification of employment from the current employer.
(10) Rental-income. (i) Multi-unit subject property. When the loan
pertains to a structure with more than a one-family dwelling unit, the
prospective rental income will not be considered unless the veteran can
demonstrate a reasonable likelihood of success as a landlord, and
sufficient cash reserves are verified to enable the veteran to carry
the mortgage loan payments (principal, interest, taxes, and insurance)
without assistance from the rental income for a period of at least 6
months. The determination of the veteran's likelihood of success as a
landlord will be based on documentation of any prior experience in
managing rental units, or other collection activities. The amount of
rental income to be used in the loan analysis will be based on the
prior rental history of the units as verified by the seller's financial
records (e.g., prior years' tax returns) for existing structures or,
for proposed construction, the appraiser's opinion of the property's
fair monthly rental. Adjustments will be applied to reduce estimated
gross rental income by proper allowances for operating expenses and
vacancy losses.
(ii) Rental of existing home. Proposed rental of a veteran's
existing property may be used to offset the mortgage payment on that
property, provided there is no indication that the property will be
difficult to rent. If available, a copy of the rental agreement should
be obtained. It is the responsibility of the loan underwriter to be
aware of the condition of the local rental market. For instance, in
areas where the rental market is very strong the absence of a lease
should not automatically prohibit the offset of the mortgage by the
proposed rental income.
(iii) Other rental property. If income from rental property will be
used to qualify for the new loan, the documentation required of a self-
employed applicant should be obtained together with evidence of cash
reserves equaling 3 months PITI of the rental property. As for any
self-employed earnings (see paragraph (f)(7) of this section),
depreciation claimed may be added back in as income. In the case of a
veteran who has no experience as a landlord, it is unlikely that the
income from a rental property may be used to qualify for the new loan.
(ll) Taxes and other deductions. Deductions to be applied for
Federal income taxes ad Social Security may be obtained from the
Employer's Tax Guide (Circular E) issued by the Internal Revenue
Service (IRS). (For veterans receiving a mortgage credit certificate
(MCC), see paragraph (f)(12) of this section.) Any State or local taxes
should be estimated or obtained from charts similar to those provided
by IRS which may be available in those States with withholding taxes. A
determination of the amount paid or withheld for retirement purposes
should be made and used when calculating deductions from gross income.
In determining whether a veteran-applicant meets the income criteria
for a loan, some consideration may be given to the potential tax
benefits the veteran will realize if the loan is approved. This can be
done by using the instructions and worksheet portion of IRS Form W-4,
Employee's Withholding Allowance Certificate, to compute the total
number of permissible withholding allowances. That number can then be
used when referring to IRS Circular E and any appropriate similar State
withholding charts to arrive at the amount of Federal and State income
tax to be deducted from gross income.
(12) Mortgage credit certificates. (i) The Internal Revenue Code,
as amended by the Tax Reform Act of 1984, allows States and other
political subdivisions to trade in all or part of their authority to
issue mortgage revenue bonds for authority to issue MCCs. Veterans who
are recipients of MCCs may realize a significant reduction in their
income tax liability by receiving a Federal tax credit for a percentage
of their mortgage interest payment on debt incurred on or after January
1, 1985.
(ii) Lenders must provide a copy of the MCC to VA with the home
loan application. The MCC will specify the rate of credit allowed and
the amount of certified indebtedness; i.e., the indebtedness incurred
by the veteran to acquire a principal residence or as a qualified home
improvement or rehabilitation loan.
(iii) For credit underwriting purposes, the amount of tax credit
allowed to a veteran under an MCC will be treated as a reduction in the
monthly Federal income tax. For example, a veteran having a $600
monthly interest payment and an MCC providing a 30-percent tax credit
would receive a $180 (30% x $600) tax credit each month. However,
because the annual tax credit, which amounts to $2,160 (12 x $180),
exceeds $2,000 and is based on a 30-percent credit rate, the maximum
tax credit the veteran can receive is limited to $2,000 per year (Pub.
L. 98-369) or $167 per month ($2,00012). As a consequence of
the tax credit, the interest on which a deduction can be taken will be
reduced by the amount of the tax credit to $433 ($600-$167). This
reduction should also be reflected when calculating Federal income tax.
(iv) For underwriting purposes, the amount of the tax credit is
limited to the amount of the veteran's maximum tax liability. If, in
the example in paragraph (f)(12)(iii), the veteran's tax liability for
the year were only $1,500, the monthly tax credit would be limited to
$125 ($1,50012).
(g) Credit. The conclusion reached as to whether or not the
borrower and spouse are satisfactory credit risks must also be based on
a careful analysis of the available credit data. Regulation B (Equal
Credit Opportunity Act) requires that lenders include, in evaluating
creditworthiness on a veteran's request, the credit history, when
available, of any account reported in the name of the veteran's spouse
or former spouse which the veteran can demonstrate reflects accurately
the veteran's willingness or ability to repay. In other that community
property States, if the spouse will not be contractually obligated on
the loan, Regulation B, promulgated by the Federal Reserve Board
pursuant to the Equal Credit Opportunity Act prohibits any request for,
or consideration of information about the spouse concerning income,
employment, assets or liabilities. In community property States,
information concerning a spouse may be requested and considered in the
same manner as that for the applicant.
(1) Adverse data. If the analysis develops any derogatory credit
information and, despite such facts, it is determined that the borrower
and spouse are satisfactory credit risks, the basis for the decision
must be explained. If a borrower and spouse have debts outstanding
which have not been paid timely, or which they have refused to pay, the
fact that the outstanding debts are paid after the acceptability of the
credit is questioned or in anticipation of applying for new credit does
not, of course, alter the fact that the record for paying debts has
been unsatisfactory. With respect to unpaid debts, lenders may take
into consideration a veterans's claim of bona fide or legal defenses.
This is not applicable when the debt has been reduced to judgment.
(2) Bankruptcy. When the credit information shows that the borrower
or spouse has been discharged in bankruptcy under the ``straight''
liquidation and discharge provisions of the bankruptcy law, this would
not in itself disqualify the loan. However, in such cases it is
necessary to develop complete information as to the facts and
circumstances concerning the bankruptcy. Generally speaking, when the
borrower or spouse, as the case may be, has been regularly employed
(not self-employed) and has been discharged in bankruptcy within the
last 2 or 3 years, it probably would not be possible to determine that
the borrower or spouse is a satisfactory credit risk unless both of the
following requirements are satisfied:
(i) The borrower or spouse has obtained credit subsequent to the
bankruptcy and has met the credit payments in a satisfactory manner
over a continued period, and
(ii) The bankruptcy was caused by circumstances beyond control of
the borrower or spouse, e.g., unemployment, prolonged strikes, medical
bills not covered by insurance. The circumstances alleged must be
verified. If a borrower or spouse is self-employed, has been
adjudicated bankrupt, and subsequently obtains a permanent position, a
finding as to satisfactory credit risk may be made provided there is no
derogatory credit information prior to self-employment, there is no
evidence of derogatory credit information subsequent to the bankruptcy,
and the failure of the business was not due to misconduct. A bankruptcy
discharged more than 5 years ago may be disregarded. A bankruptcy
discharged between 3 and 5 years ago may be given some consideration,
depending upon the circumstances of the bankruptcy and submission of
evidence that the veteran has been paying his or her obligations in a
timely manner.
(3) Petition under Chapter 13 of Bankruptcy Law. A wage earner's
petition under chapter 13 of the Bankruptcy Law filed by the borrower
or spouse is indicative of an effort to pay their creditors. Some plans
may provide for full payment of debts while others arrange for payment
of scaled down debts. Regular payments are made to a court-appointed
trustee over a 2- to 3-year period (or up to 5 years in some cases).
When the borrowers have made all payments in a satisfactory manner,
they may be considered as having reestablished satisfactory credit.
When they apply for a home loan before completion of the payout period,
favorable consideration may nevertheless be given if at least three-
fourths of the payments have been made satisfactorily and the Trustee
or Bankruptcy Judge (Referee) approves of the new credit.
(4) Foreclosures. (i) When the credit information shows that the
veteran or spouse has had a foreclosure on a prior mortgage, e.g., a VA
guaranteed, or HUD insured mortgage, this will not in itself disqualify
the borrower from obtaining the loan. Lenders and field station
personnel should refer to the preceding guidelines on bankruptcies for
cases involving foreclosures. As with a borrower who has been
adjudicated bankrupt, it is necessary to develop complete information
as to the facts and circumstances of the foreclosure.
(ii) When VA pays a claim on a VA guaranteed loan as a result of a
foreclosure, the original veteran may be required to repay any loss to
the Government. In some instances VA may waive the veteran's debt, in
part or totally, based on the facts and circumstances of the case.
However, guaranty entitlement cannot be restored unless the
Government's loss has been repaid in full, regardless of whether or not
the debt has been waived, compromised, or discharged in bankruptcy.
Therefore, a veteran who is seeking a new VA loan after having
experienced a foreclosure on a prior VA loan will in most cases have
only remaining entitlement to apply to the new loan. The lender should
assure that the veteran has sufficient entitlement for its secondary
marketing purposes.
(5) Federal debts. An applicant for a Federally-assisted loan will
not be considered a satisfactory credit risk for such loan if the
applicant is presently delinquent or in default on any debt to the
Federal Government, e.g., a Small Business Administration loan, a U.S.
Guaranteed Student loan, a debt to the Public Health Service, or where
there is a judgment lien against the applicant's property for a debt
owed to the Government. The applicant may not be approved for the loan
until the delinquent account has been brought current or satisfactory
arrangements have been made between the borrower and the Federal agency
owed, or the judgment is paid or otherwise satisfied. Of course, the
applicant must also be able to otherwise qualify for the loan from an
income and remaining credit standpoint. Refinancing under VA's interest
rate reduction refinancing provisions, however, is allowed even if the
borrower is delinquent on the VA guaranteed mortgage being refinanced.
Prior approval processing is required in such cases.
(6) Absence of credit history. The fact that recently discharged
veterans may have had no opportunity to develop a credit history will
not preclude a determination of satisfactory credit. Similarly, other
loan applicants may not have established credit histories as a result
of a preference for purchasing consumer items with cash rather than
credit. There are also cases in which individuals may be genuinely wary
of acquiring new obligations following bankruptcy, consumer credit
counseling (debt proration), or other disruptive credit occurrence. The
absence of the credit history in these cases will not generally be
viewed as an adverse factor in credit underwriting. However, before a
favorable decision is made for cases involving bankruptcies or other
derogatory credit factors, efforts should be made to develop evidence
of timely payment of non-installment debts such as rent and utilities.
It is anticipated that this special consideration in the absence of a
credit history following bankruptcy would be the rare case and
generally confined to bankruptcies which occurred over 3 years ago.
(7) Long-term v. Short-term-debts. All known debts and obligations
including any alimony and/or child support payments of the borrower and
spouse must be documented. Significant liabilities to be deducted from
the total income in determining ability to meet the mortgage payments
are accounts that, generally, are of a relatively long-term; i.e., 6
months or over. Other accounts for terms of less than 6 months must, of
course, be considered in determining ability to meet family expenses.
Certainly any account with less than 6 months' duration which requires
payments so large as to cause a severe impact on the family's resources
for any period of time must be considered in the loan analysis. For
example, monthly payments of $300 on an auto loan with a remaining
balance of $1,500 would be included in those obligations to be deducted
from the total income regardless of the fact that the account can be
expected to pay out in 5 months. It is clear that the applicant will,
in this case, continue to carry the burden of those $300 payments for
the first, most critical, months of the home loan. Similarly, when the
credit information shows open accounts of several years' duration which
are clearly of a revolving or open-end type, the regular monthly
payment for such accounts should be considered as a long-term
obligation to be deducted from income.
(8) Requirements for verification. If the credit investigation
reveals debts or obligations of a material nature which were not
divulged by the applicant, lenders must be certain to obtain
clarification as to the status of such debts from the borrower. A
proper analysis is obviously not possible unless there is total
correlation between the obligations claimed by the borrower and those
revealed by a credit report or deposit verification. Conversely,
significant debts and obligations reported by the borrower must be
dated. If the credit report fails to provide necessary information on
such accounts, lenders will be expected to obtain their own
verifications of those debts directly from the creditors. Credit
reports and verifications must be no more than 90 days old to be
considered valid. For loans closed automatically, this requirement will
be considered satisfied if the date of the credit report or
verification is within 90 days of the date of the veteran's application
to the lender. Of major significance are the applicant's rental history
and outstanding, assumed, or recently retired mortgages, if any,
particularly prior VA loans. Lenders should be sure ratings on such
accounts are obtained; a written explanation is reburied when ratings
are not available. A determination is necessary as to whether alimony
and/or child support payments are required. Verification of the amount
of such obligations should be obtained, although documentation
concerning an applicant's divorce should not be obtained automatically
unless it is necessary to verify the amount of any alimony or child
support liability indicated by the applicant. If in the routine course
of processing the loan application, however, direct evidence is
received (e.g., from the credit report) that an obligation to pay
alimony or child support exists (as opposed to mere evidence that the
veteran was previously divorced), the discrepancy between the loan
application and credit report can and should be fully resolved in the
same manner as any other such discrepancy would be handled.
(9) Job-related expenses. Known job-related expenses should be
documented. This will include costs for any dependent care, significant
commuting costs, etc. When a family's circumstances are such that
dependent care arrangements would probably be necessary, it is
important to determine the cost of such services in order to arrive at
an accurate total of deductions.
(10) Credit reports. Credit reports obtained by lenders on VA
guaranteed loan applications must be in conformance with the
Residential Mortgage Credit Report Standards formulated jointly by the
Department of Veterans Affairs, Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation, Federal Housing Administration,
Farmers Home Administration, credit repositories, repository affiliated
consumer reporting agencies and independent consumer reporting
agencies. The Residential Mortgage Credit Report is a detailed account
of the credit, employment, and residence history as well as public
records information concerning an individual. All credit reports
obtained by the lender must be submitted to VA.
(h) Borrower's personal and financial status. The number and ages
of dependents have an important bearing on whether income after
deduction of fixed charges is sufficient to support the family. Type
and duration of employment of both the borrower and spouse are
important as an indication of stability of their employment. The amount
of liquid assets owned by the borrower or spouse, or both, is an
important factor in determining that they have sufficient funds to
close the loan, as well as being significant in analyzing the overall
qualifications for the loan. (It is imperative that adequate cash
assets from the veteran's own resources are verified to allow the
payment of any difference between the sales price of the property and
the loan amount, in addition to that necessary to cover closing costs,
if the sales price exceeds the reasonable value established by VA (38
CFR 36.4336(a)(3)). Verifications must be no more than 90 days old to
be considered valid. For loans closed on the automatic basis, this
requirement will be considered satisfied if the date of the deposit
verification is within 90 days of the date of the veteran's application
to the lender. Current monthly rental or other housing expense is an
important consideration when compared to that to be undertaken in
connection with the contemplated housing purchase.
(i) Estimated monthly shelter expenses. It is important that
monthly expenses such as taxes, insurance, assessments and maintenance
and utilities be estimated accurately based on property location and
type of house; e.g., old or new, large or small, rather than using or
applying a ``rule of thumb'' to all properties alike. Maintenance and
utility amounts for various types of property should be realistically
estimated. Local utility companies should be consulted for current
rates. The age and type of construction of a house may well affect
these expenses. In the case of condominiums or houses in a planned unit
development (PUD), the monthly amount of the maintenance assessment
payable to a homeowners association should be added. If the amount
currently assessed is less than the maximum provided in the covenants
or master deed, and it appears likely that the amount will be
insufficient for operation of the condominium or PUD, the amount used
will be the maximum the veteran could be charged. If it is expected
that real estate taxes will be raised, or if any special assessments
are expected, the increased or additional amounts should be used. In
special flood hazard areas, include the premium for any required flood
insurance.
(j) Lender responsibility. (1) Lenders are fully responsible for
developing all credit information; i.e., for obtaining verifications of
employment and deposit, credit reports, and for the accuracy of the
information contained in the loan application.
(2) Verifications of employment and deposits, and requests for
credit reports and/or credit information must be initiated and received
by the lender.
(3) In cases where the real estate broker/agent or any other party
requests any of this information, the report(s) must be returned
directly to the lender. This fact must be disclosed by appropriately
completing the required certification on the loan application or report
and the parties must be identified as agents of the lender.
(4) Where the lender relies on other parties to secure any of the
credit or employment information or otherwise accepts such information
obtained by any other party, such parties shall be construed for
purposes of the submission of the loan documents to VA to be authorized
agents of the lender, regardless of the actual relationship between
such parties and the lender, even if disclosure is not provided to VA
under paragraph (j)(3) of this section. Any negligent or willful
representation by such parties shall be imputed to the lender as if the
lender had processed those documents and the lender shall remain
responsible for the quality and accuracy of the information provided to
VA.
(5) All credit reports secured by the lender or other parties as
identified in paragraphs (j)(3) and (j)(4) of this section shall be
provided to VA. If updated credit reports reflect materially different
information than that in other reports such discrepancies must be
explained by the lender and the ultimate decision as to the effects of
the discrepancy upon the loan application fully addressed by the
underwriter.
(k) Lender certification. Lenders originating loans are responsible
for determining and certifying to VA on the appropriate application or
closing form that the loan meets all statutory and regulatory
requirements. Lenders will affirmatively certify that loans were made
in full compliance with the law and loan guaranty regulations as
prescribed in this section.
(1) Definitions. The definitions contained in part 42 of this
chapter and the following definitions are applicable in this section.
(i) Another appropriate amount. In determining the appropriate
amount of a lender's civil penalty in cases where the Secretary has not
sustained a loss or where two times the amount of the Secretary's loss
on the loan involved does not exceed $10,000, the Secretary shall
consider:
(A) The materiality and importance of the false certification to
the determination to issue the guaranty, or to approve the assumption;
(B) The frequency and past pattern of such false certifications by
the lender; and,
(C) Any exculpatory or mitigating circumstances.
(ii) Complaint includes the assessment of liability served pursuant
to this subsection.
(iii) Defendant means a lender named in the complaint.
(iv) Lender includes the holder approving loan assumptions pursuant
to 38 U.S.C. 3714.
(2) Procedures for certification.
(i) As a condition to VA issuance of a loan guaranty on all loans
closed on or after October 27, 1994, and as a prerequisite to an
effective loan assumption on all loans assumed pursuant to 38 U.S.C.
3714 on or after October 27, 1994, the following certification shall
accompany each loan closing or assumption package:
``The undersigned lender certifies that the (loan) (assumption)
application, all verifications of employment, deposit, and other income
and credit verification documents have been processed in compliance
with 38 CFR part 36; that all credit reports obtained or generated in
connection with the processing of this borrower's (loan) (assumption)
application have been provided to VA; that, to the best of the
undersigned lender's knowledge and belief the (loan) (assumption) meets
the underwriting standards recited in chapter 37 of title 38 United
States Code and 38 CFR part 36; and that all information provided in
support of this (loan) (assumption) is true, complete and accurate to
the best of the undersigned lender's knowledge and belief.''
(ii) The certification shall be executed by an officer of the
lender authorized to execute documents and act on behalf of the lender.
(3) Any lender who knowingly and willfully makes a false
certification required pursuant to Sec. 36.4337(k)(2) shall be liable
to the United States Government for a civil penalty equal to two times
the amount of the Secretary's loss on the loan involved or to another
appropriate amount, not to exceed $10,000, whichever is greater.
(l) Assessment of liability. (1) Upon an assessment confirmed by
the Under Secretary for Benefits, in consultation with the
Investigating Official, that a certification, as required in this
section, is false, a report of findings of the Under Secretary for
Benefits shall be submitted to the Reviewing Official setting forth:
(i) The evidence that supports the allegations of a false
certification and of liability;
(ii) A description of the claims or statements upon which the
allegations of liability are based;
(iii) The amount of the VA demand to be made; and,
(iv) Any exculpatory or mitigating circumstances that may relate to
the certification.
(2) The Reviewing Official shall review all of the information
provided and will either inform the Under Secretary for Benefits and
the Investigating Official that there is not adequate evidence, that
the lender is liable, or serve a complaint on the lender stating:
(i) The allegations of a false certification and of liability;
(ii) The amount being assessed by the Secretary and the basis for
the amount assessed;
(iii) Instructions on how to satisfy the assessment and how to file
an answer to request a hearing, including a specific statement of the
lender's right to request a hearing by filing an answer and to be
represented by counsel; and
(iv) That failure to file an answer within 30 days of the complaint
will result in the imposition of the assessment without right to appeal
the assessment to the Secretary.
(m) Hearing procedures. A lender hearing on an assessment
established pursuant to this section shall be governed by the
procedures recited at 38 CFR 42.8 through 42.47.
(n) Additional remedies. Any assessment under this section may be
in addition to other remedies available to VA, such as debarment and
suspension pursuant to 38 U.S.C. 3704 and part 44 of this title or loss
of automatic processing authority pursuant to 38 U.S.C. 3702, or other
actions by the Government under any other law including but not limited
to title 18, U.S.C. and 31 U.S.C. 3732. (Authority: (38 U.S.C. 3710).
(Information collection requirements contained in 36.4337 were
approved by the Office of Management and Budget under control number
2900-0521)
[FR Doc. 94-23753 Filed 9-26-94; 8:45 am]
BILLING CODE 8320-01-P-M