[Federal Register Volume 74, Number 191 (Monday, October 5, 2009)]
[Proposed Rules]
[Pages 51103-51111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-23842]



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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 36

RIN 2900-AM87


Loan Guaranty: Assistance to Eligible Individuals in Acquiring 
Specially Adapted Housing

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend the Department of Veterans 
Affairs' (VA's) Loan Guaranty regulations concerning assistance to 
eligible individuals in acquiring specially adapted housing. These 
proposed changes would improve the readability of the regulations, 
provide further detail about program policies, and incorporate 
legislation, policy changes, and a VA Office of the General Counsel 
legal opinion.

DATES: Comments must be received on or before December 4, 2009.

ADDRESSES: Written comments may be submitted through http://www.Regulations.gov; by mail or hand-delivery to Director, Regulations 
Management (02REG), Department of Veterans Affairs, 810 Vermont Ave., 
NW., Room 1068, Washington, DC 20420; or by fax to (202) 273-9026. 
Comments should indicate that they are submitted in response to RIN 
2900-AM87 ``Loan Guaranty: Assistance to Eligible Individuals in 
Acquiring Specially Adapted Housing.'' Copies of comments received will 
be available for public inspection in the Office of Regulation Policy 
and Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m., 
Monday through Friday (except holidays). Please call (202) 461-4902 
(this is not a toll-free number) for an appointment. In addition, 
during the comment period, comments may be viewed online through the 
Federal Docket Management System (FDMS) at http://www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Katherine Faliski, Assistant Director 
for Loan Policy and Valuation, Loan Guaranty Service (26), Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Avenue, NW., Washington, DC 20420, (202) 461-9527. (This is not a toll-
free telephone number.)

SUPPLEMENTARY INFORMATION:

I. Introduction

    Veterans and servicemembers with severe disabilities may be 
eligible under 38 U.S.C. chapter 21 for specially adapted housing (SAH) 
grants. In administering the SAH program, VA helps these eligible 
individuals to purchase, construct, or adapt a home that suits the 
individual's living needs. This document proposes to amend VA's 
regulations in 38 CFR Part 36, Subpart C, Assistance to Certain 
Disabled Veterans in Acquiring Specially Adapted Housing, Sec. Sec.  
36.4400 through 36.4410, which implement the SAH grant program. Because 
eligibility for SAH grants includes certain disabled servicemembers, 
the proposed rule would revise the heading of Subpart C to refer to 
``Eligible Individuals'' rather than ``Certain Disabled Veterans.''
    The proposed amendments are necessary for three reasons. First, VA 
believes the regulations should be written in a reader-focused style. 
Second, detailed guidance about program policies and an easy-to-follow 
organizational structure will help applicants and eligible individuals 
(and those acting on their behalf) to navigate the program. Third, 
substantive changes are necessary to incorporate legislation, policy 
decisions, and a legal decision of VA's Office of the General Counsel. 
Pursuant to 38 U.S.C. 2101(d), the Secretary may prescribe regulations 
applicable to the SAH program. In revising these regulations, VA 
intends that applicants, eligible individuals, other program 
participants, and other interested parties will be better informed 
about the legal requirements and Department policies that guide the 
administration of SAH grants.

II. Regulatory Overview

    The following is a section-by-section analysis of VA's proposed 
rule. We outline briefly for each section the current rule and the 
proposed rule, as well as the reasons for the changes, noting the 
objectives and intended effects of the proposed rule. VA welcomes 
comments on every aspect of its proposal, but is particularly 
interested in drawing attention to three sections: (1) Sec.  36.4404, 
in which VA proposes to ease the requirements for satisfying the SAH 
eligibility criteria; (2) Sec.  36.4405, VA's proposed two-staged 
approval process intended to reduce eligible individuals' out-of-pocket 
expenses, thereby increasing the number of eligible individuals who may 
use the SAH program; and (3) Sec.  36.4406, a more structured process 
for reimbursing eligible individuals who have expended personal funds 
toward authorized grant expenses.

Section 36.4400 Authority

    Current Sec.  36.4400, ``Applicability,'' states that any 
references to chapters 21 and 37 of title 38 U.S.C. are deemed where 
applicable to refer also to the prior corresponding provisions of the 
law. At the time the current rule was promulgated, Congress had 
recently consolidated into title 38 all of the laws administered by the 
then Veterans Administration. Almost 50 years have passed since 
Congress moved the statutes governing SAH to 38 U.S.C. chapter 21, and 
VA believes the reference to the former provisions may confuse readers. 
Therefore, the proposed rule would delete the reference to the former 
codification of the SAH authorizing statutes. The section's heading 
would be changed to ``Authority'' to reflect changes in its content. 
The proposed rule would no longer contain the current rule's 
applicability provisions. No substantive change is intended by the 
changes to this section.

Section 36.4401 Definitions

    Currently, definitions of eight terms are found in Sec.  36.4401: 
``Secretary,'' ``chapter 21,'' ``movable facilities,'' ``necessary 
land,'' ``special fixtures and necessary adaptations,'' ``housing 
unit,'' ``remodeling,'' and ``veteran's family.'' The proposed rule 
would add 16 terms and delete six terms. These changes would: (1) 
Replace certain terms with more reader-friendly ones; (2) add new 
terms, providing SAH-specific meanings where everyday usage might 
require additional clarification; (3) define terminology unique to the 
SAH program; (4) provide new definitions as a result of both 
established and proposed VA policies; and (5) delete terms that would 
be rendered unnecessary by the new rule. The terms would also be 
reordered to appear in alphabetical order.
    First, the definition of ``Housing unit'' would be expanded to make 
it easier for the general public to understand the rule. The term 
``Housing unit,'' which would be defined to include ``any residential 
unit, including all necessary land, improvements, and appurtenances, 
together with such movable equipment or special features as are 
authorized by 38 U.S.C. 1717 and 2101,'' would incorporate the current 
definitions of ``movable facilities,'' ``necessary land,'' and 
``special fixtures and necessary adaptations.''
    Second, the proposed rule would expand the list of definitions and 
provide SAH-specific meanings for some commonly-used words. For 
example, the term ``reside,'' which would mean ``to occupy (including 
seasonal occupancy) as one's residence,'' would reflect VA's current 
policy of allowing seasonal occupancy

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under the SAH program. Other new terms include: ``Adapt,'' ``braces,'' 
``disability,'' ``eligible individual,'' and ``eligible individual's 
family.''
    Third, a few of the proposed definitions reflect terminology that 
has developed over time with the SAH program: ``Paraplegic housing 
grant or PH grant,'' ``adapted housing grant or AH grant,'' and 
``temporary residence adaptations grant or TRA grant,'' would mean 
grants authorized under 38 U.S.C. 2101(a), 2101(b), and 2102A, 
respectively. ``Specially adapted housing grant'' would be defined to 
clarify that the term refers collectively to PH, AH, or TRA grants. 
``Aggregate amount of assistance available'' would mean the grant 
amount available to an eligible individual based on the annual 
adjustments required by 38 U.S.C. 2102(e).
    Fourth, the proposed rule would add several definitions that are 
the result of substantive policy decisions. The term ``ownership 
interest'' would: (1) Ensure that an eligible individual will not be 
denied SAH benefits because he or she chooses a less traditional method 
of property ownership, (2) account for the fact that trends in property 
ownership vary based on geographic region, and (3) incorporate 
statutory language expressly permitting the Secretary to provide SAH 
grants outside the United States. A definition of ``beneficial property 
interest'' has also been added to facilitate provision of SAH grants 
outside the United States by accounting for different laws and customs 
related to property ownership in various countries. The preamble 
explanation of Sec.  36.4405 describes more fully the effects of this 
change.

    Note:  Though not required by this proposed rule, VA recommends 
that eligible individuals seek professional estate planning advice 
when determining the type of legal interest that best suits the 
eligible individual's needs.

    Three other new defined terms would be ``construction-related 
cost,'' ``preconstruction cost,'' and ``reimburse.'' VA believes that 
these terms are necessary in explaining VA's policy of reimbursing 
eligible individuals (or, where applicable, their estates) for costs 
related to the preparation for adaptations and for the actual 
adaptations. An in-depth explanation of this policy is provided below, 
in the discussion of Sec.  36.4406.
    Finally, the proposed rule would render certain terms unnecessary. 
Such terms are ``chapter 21,'' ``movable facilities,'' ``necessary 
land,'' and ``special fixtures and necessary adaptations,'' 
``remodeling,'' which would be considered part of the definition of 
``adapt,'' and ``veteran's family,'' which would be replaced with 
``eligible individual's family.'' Therefore, VA proposes to delete 
these terms.

Section 36.4402 Grant Types

    Chapter 21 of title 38, U.S.C., authorizes the Secretary to provide 
three types of SAH grants. The PH grant is available to the most 
severely disabled veterans and servicemembers who meet the criteria set 
forth in section 2101(a). The monetary cap on PH grants, currently 
$60,000, is higher than that for the other grants. The AH grant is for 
severely disabled veterans and servicemembers who satisfy the 
requirements of section 2101(b). Its statutory cap is currently 
$12,000. The TRA grant, authorized by Public Laws 109-233 and 110-289, 
is a grant that allows eligible individuals who temporarily reside in a 
housing unit owned by a member of the eligible individual's family to 
receive assistance to adapt that home.
    Currently, the regulations do not describe in detail the various 
SAH grant types. Instead, they cite only the basic information codified 
at 38 U.S.C. 2101. Moreover, the regulations give few particulars about 
the various grant types available to eligible individuals, but 
specifically reference the maximum grant amounts, which are subject to 
annual adjustments and, thus, easily outdated.
    Therefore, under the proposed rule, Sec.  36.4402, ``Grant types,'' 
would explain the PH grant, AH grant, and TRA grant. More specifically, 
the section would describe the respective plan options under which an 
eligible individual may obtain assistance. The statute provides 
formulas for calculating the amount of grant assistance, based on the 
type of grant and the nature of the property to be adapted. By 
outlining these detailed formulas in the regulation, VA would make it 
easier for the public to understand how VA determines the amount of 
assistance it is to provide. VA also clarifies its interpretation of 38 
U.S.C. 2102(a)(3), which governs the amounts of assistance available 
for the remodeling of a dwelling acquired prior to the application for 
SAH assistance. This provision requires the Secretary to pay the 
greater of (A) the cost to the veteran of such remodeling or (B) 50 
percent of the cost to the veteran of such remodeling, plus other costs 
as prescribed by statute. These other costs may be either 50 percent of 
the costs of the dwelling and land or the full amount of any unpaid 
principal loan balance, whichever is less. Since Congress expressly 
limited 38 U.S.C. 2102(a)(2) and (a)(4) to the smaller of the available 
sums, but did not impose a similar limitation on option (a)(3). VA has 
always interpreted Congress's omission as being intentional, meaning 
the Secretary should pay the greater of the available sums to eligible 
individuals who choose option (a)(3). This is consistent with the 
policy of the Specially Adapted Housing program which ``is intended to 
be of the highest beneficial character and, within reasonable legal 
bounds, should be liberally construed.'' VAOPGCPREC 13-95. The section 
would also tie the grant amount to the ``aggregate amount of assistance 
available'' rather than explicitly mentioning a dollar figure. In 
addition, the section would clarify the restrictions on duplication of 
benefits that currently exist in Sec.  36.4402(b)(1) and (b)(2). These 
restrictions are intended to reflect the limitations imposed by 38 
U.S.C. 2104(b) without imposing any additional limitation. Finally, the 
section would correct the citation of section 1712 by referring instead 
to 38 U.S.C. 1717.
    The proposed changes in Sec.  36.4402 are necessary for three 
reasons. First, by discussing the specifics of the PH grant, AH grant, 
and TRA grant plans, the proposed rule would better inform eligible 
individuals about their SAH options. Second, since the TRA grant was 
authorized by Public Laws 109-233 (``Veterans' Housing Opportunity and 
Benefits Improvement Act of 2006'') and 110-289 (``Housing and Economic 
Recovery Act of 2008''), which were enacted after VA issued the current 
SAH regulations, the proposed rule would update the SAH regulations to 
include relevant information about this benefit. Finally, eliminating 
specific dollar amounts from the regulatory text would allow the 
Secretary to adjust grant amounts, in accordance with applicable 
statutory provisions (38 U.S.C. 2102(e)), without amending the 
regulations. The intended effect of this action is clear, detailed, 
accurate regulations that will further assist eligible individuals in 
obtaining their SAH benefits.

Section 36.4403 Subsequent Use

    Currently, the SAH regulations do not provide any information about 
subsequent use of SAH grants. Prior to the enactment of Public Law 109-
233 in 2006, an individual could receive only one grant of assistance 
under the SAH program. Therefore, even if an individual had used only 
half of the aggregate amount of assistance available, the individual 
was unable to preserve the balance of assistance in order to reuse the 
benefit at a later date.

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    With the enactment of Public Law 109-233, the program was expanded 
to allow for up to three grant usages per eligible individual, subject 
to the aggregate amount of assistance available. Accordingly, we are 
proposing that Sec.  36.4403, ``Subsequent use,'' would describe the 
restrictions on obtaining more than one SAH grant. The section would 
discuss the number of times each grant may be used and the aggregate 
amount of assistance available. Additionally, the section would note 
that funds from subsequent grant usages may not be used retroactively; 
in other words, even if the eligible individual has not used the 
aggregate amount of assistance available, subsequent use funds may not 
reimburse for costs incurred prior to the enactment of the enabling 
legislation (June 15, 2006) or prior to the eligible individual's 
subsequent use grant approval. The intended effect of this action is 
regulations that are up to date and that will educate applicants and 
other interested persons about opportunities available through the SAH 
program.

Section 36.4404 Eligibility for Assistance

    38 U.S.C. 2101 sets forth the eligibility requirements for 
obtaining SAH assistance by dividing such requirements into two 
categories: (i) Disability requirements and (ii) feasibility and 
suitability requirements. The former prescribes the medical criteria 
necessary for eligibility; the latter establishes minimum standards for 
determining whether the proposed adaptations are consistent with the 
purpose of the SAH program and the applicant's unique circumstances. 
Applicants must satisfy the requirements of both statutory categories 
before being considered eligible to receive a grant of assistance.
    Currently, the regulations implementing the eligibility 
requirements are found at 38 CFR 36.4402. In that section, there is no 
discussion of the medical disability requirements for SAH eligibility, 
merely a reference to 38 U.S.C. 2101. Current Sec.  36.4402 details the 
feasibility and suitability requirements located at 38 U.S.C. 
2101(a)(3) and (b)(3), but it also lists the legal property interests, 
non-discrimination certifications, and flood insurance certifications 
that are acceptable to VA for the purpose of the SAH program. Although 
these last three requirements are important aspects of the SAH program, 
their placement in Sec.  36.4402 may be confusing, as one might infer 
that such considerations factor into an applicant's eligibility.
    Therefore, proposed Sec.  36.4404, ``Eligibility for assistance,'' 
would revise current Sec.  36.4402 by limiting its scope only to those 
criteria necessary for SAH eligibility: Disability requirements and 
feasibility and suitability requirements. In terms of disability 
requirements, the section would outline the statutory requirements. In 
terms of feasibility and suitability requirements, this section would 
outline the requirements set forth for PH grants in 38 U.S.C. 
2101(a)(3), for AH grants in section 2101(b)(3), and for TRA grants in 
section 2102A.
    The statutory meaning of PH grant feasibility is that an 
applicant's medical condition does not prevent him or her from living 
in the proposed housing unit, in the proposed locality, and that the 
applicant's present or anticipated income and expenses bear a proper 
relation to the proposed housing unit. Evidence of such feasibility 
might include, among other things, doctors' orders and credit reports.
    PH grant suitability means that the nature and condition of the 
proposed housing unit are suitable to the applicant's living needs. In 
most cases, the proposed rule would simplify the evidence one must 
submit at this stage by allowing him or her to provide materials as 
basic as non-scaled drawings and a specific list of the proposed 
adaptations. Depending on the applicant's condition and the proposed 
adaptations, however, a determination may require more detailed 
documentation, such as scaled plans and specifications. Additional 
aspects of this policy are discussed in the analysis of Sec. Sec.  
36.4405 and 36.4406.
    Like the PH grant, the AH grant's feasibility and suitability 
requirements in this proposed rule mirror the statute. Such 
requirements are based on residency and can be satisfied by the 
applicant certifying that he or she resides, and reasonably intends to 
reside, in the proposed housing unit. If the applicant's residence is 
not yet constructed, then the applicant must certify that he or she 
will be residing in, and reasonably intends to be residing in, the 
housing unit. An applicant may also be eligible for an AH grant if the 
existing housing unit, or the housing unit to be constructed, is owned 
by a member of the applicant's family.
    Proposed Sec.  36.4404 would also address another important aspect 
of eligibility. Because ownership interests, non-discrimination 
certifications, and flood certifications are not part of the 
eligibility determination, all references to such issues would be moved 
to other sections, as explained below. This action is necessary for two 
reasons. First, it is important that the SAH regulations state as 
clearly as possible which disability conditions make an individual 
eligible for which grant. Second, it is necessary to state expressly to 
the public that eligibility cannot be established (and, consequently, 
neither preconstruction costs nor construction costs may be incurred) 
until both the disability requirements and the feasibility and 
suitability requirements have been confirmed and documented. VA has 
authority to take this action pursuant to 38 U.S.C. 2101 and 2102A. The 
intended effect of this action is regulations that are up to date and 
that accurately describe all of the requirements that may make an 
individual eligible for SAH assistance.

Section 36.4405 Grant Approval

    Currently, the regulations provide little information regarding the 
SAH grant approval process. While regulations are not always the proper 
medium through which to explain detailed administrative procedures, it 
is important for applicants, eligible individuals, and other affected 
members of the public to understand the chronology of the program and 
what it means to them as far as incurring costs and moving forward with 
planning and construction. Thus, VA is proposing that the regulations 
contain details about the meanings, requirements, and implications of 
the SAH grant approval process.
    Under the current grant approval process, SAH agents at field 
facilities counsel applicants, in accordance with the program's 
operating manual (VBA Manual M26-12, ``Specially Adapted Housing Grant 
Processing Procedures, Loan Guaranty Operations Regional Office 
Manual,'' available at http://www.warms.vba.va.gov/M26_12.html), at 
each point in the application process. Changes to the SAH program 
(specifically, the subsequent use and TRA grant provisions of Public 
Laws 109-233 and 110-289) have rendered the program complex enough that 
specific regulatory guidance in the area of grant approval will 
simplify the process for all participants.
    Under proposed Sec.  36.4405, ``Grant approval,'' VA would 
formalize a two-staged grant approval process. The first stage of the 
approval process would lead to what proposed Sec.  36.4405(a) calls 
``conditional approval,'' at which point the Secretary may authorize 
certain preconstruction costs. The second stage, as set forth in 
proposed Sec.  36.4405(b), would culminate in ``final approval,'' and 
the Secretary's disbursement of the full grant proceeds.
    Conditional approval would be the Secretary's authorization for an

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applicant to move forward with more detailed planning of adaptations. 
An application would be approved conditionally on the date the 
Secretary determines that the individual has met all eligibility 
requirements, as set forth in proposed Sec.  36.4404, and that the 
applicant has not exceeded the grant usage and dollar limitations set 
forth in proposed Sec. Sec.  36.4402 and 36.4403.
    Once an applicant has obtained conditional approval, the Secretary 
may authorize him or her, in writing, to incur certain preconstruction 
costs pursuant to Sec.  36.4406. Such preconstruction costs could 
include architectural services, land surveys, attorneys' fees, and 
other costs or fees necessary to plan for grant use and would be 
limited to no more than 20 percent of the eligible individual's grant 
amount. Conditional approval must be granted before an applicant would 
be authorized to incur any preconstruction costs. Should an applicant 
incur preconstruction costs prior to conditional approval, he or she 
would not be reimbursed for those costs. This is because, pursuant to 
the authorizing statute, an applicant must be deemed eligible for grant 
assistance before the Secretary may approve the disbursement of any 
grant funds.
    An applicant who has obtained conditional approval would need to 
satisfy all requirements of Sec.  36.4405(b) before the Secretary would 
authorize final approval. One such requirement would be to provide the 
Secretary scaled plans and specifications for the planned adaptations. 
The Secretary must determine that the plans and specifications meet the 
minimum property and design requirements of the SAH program. VA's 
review of plans at this stage would differ from the feasibility and 
suitability determination under Sec.  36.4404. Under proposed Sec.  
36.4404, plans may be preliminary and need not be scaled, which would 
allow VA to determine eligibility without requiring a veteran or 
servicemember to expend personal funds in advance of the grant. The 
plans and specifications required at this stage, however, would need to 
be more detailed than those required to determine eligibility, as they 
would be relied upon during the inspection process and for the release 
of funds. In other words, at the beginning of this second and final 
stage, the Secretary already would have determined that the planned 
adaptations were suitable and feasible for the purposes of eligibility; 
nevertheless, the Secretary still would need to determine that the 
adaptations also met minimum property and design requirements before 
granting final approval and disbursing the remaining grant proceeds.
    Another important requirement in this stage is that an applicant 
who has obtained conditional approval must provide the Secretary 
evidence of sufficient ownership interest in the proposed housing unit. 
Though this requirement is not new, it would change substantially from 
current practice. As stated above, existing title requirements for PH 
grants, which are found at 38 CFR 36.4402, do not necessarily reflect 
the vast choices available to an applicant when planning an estate. For 
instance, a life-estate is a commonly used tool in estate-planning, yet 
VA's current regulations do not include the life-estate as an 
acceptable form of title.
    Under the proposed rule, an applicant would have more freedom in 
the type of estate that he or she chooses to obtain. Moreover, since 
the applicant would already be conditionally approved for a grant at 
this stage, meaning that the applicant's eligibility status would have 
been determined, he or she would be authorized to use a portion of the 
grant proceeds for attorneys' and other legal fees. VA believes that 
this change will open the door to SAH assistance for a number of 
veterans and servicemembers who might not otherwise be able to afford 
the upfront costs associated with the SAH program.
    In addition to the proposed new portions of the regulation 
described above, the final grant approval section would contain the 
joint ownership provisions, non-discrimination certifications, flood 
insurance requirements, and geographical limitations in current 
Sec. Sec.  36.4402(a)(5), 36.4402(a)(6), 36.4403, and 36.4411, 
respectively. The current rule on joint ownership would be revised in 
accordance with the statute in 38 U.S.C. 2102(c), making it clear that 
an eligible individual's available grant assistance would not be 
reduced simply because of a shared interest in a property. The non-
discrimination and flood insurance provisions would not contain new 
provisions, but they would be more intuitively located. The provisions 
relating to geographical limitations would be revised to eliminate 
specific references to Guam and American Samoa, because they are 
included within the meaning of the term ``Territories.'' This provision 
would also incorporate the provisions of Public Law 110-289 expressly 
permitting the Secretary, in his or her discretion, to provide SAH 
grants to otherwise eligible individuals residing outside the United 
States.
    The proposed amendments to the SAH grant approval process are 
necessary to reduce the possible confusion surrounding the process 
created by current regulations. Since numerous determinations must be 
made at various points on the SAH timeline, and since certain financial 
considerations (for example, reimbursements for preconstruction costs) 
are dependent upon the stage of an applicant's grant approval, it is 
important that the regulations are clear about exactly how such stages 
are structured. VA has authority to take this action pursuant to 38 
U.S.C. 2101 and 2102A. The intended effect of this action is more 
detailed regulations that make clear to the public the aspects of and 
practical differences between conditional approval and final approval 
of SAH grants.

Section 36.4406 Reimbursement of Costs and Disbursement of Grant Funds

    With the exception of current Sec. Sec.  36.4406 and 36.4410, 
current regulations provide little information about what costs an 
eligible individual may incur with SAH grant funds and when these costs 
may be incurred. Furthermore, since VA is proposing to include in the 
regulations the two-stage approval process, VA believes that the 
regulations also should explain more fully what costs may be incurred, 
when costs will be reimbursed, and when and how grant funds will be 
disbursed, depending on the status of conditional approval and final 
approval.
    Section 36.4406, ``Reimbursement of costs and disbursement of grant 
funds,'' would revise and expand upon current Sec.  36.4406 to explain 
how grant funds will be disbursed, and would set forth specific 
requirements for incurring and reimbursing certain preconstruction 
costs. The section would re-emphasize that conditional approval must be 
obtained in order for an applicant to incur allowable preconstruction 
costs and that there would be a 20 percent cap on such costs to 
preserve the remaining grant funds for construction, in the event that 
final approval is granted.
    The section also would substitute the broader framework of 
``construction-related costs'' for current Sec.  36.4404's limitations 
on costs allowable for grant computation. Construction-related costs, 
as defined under proposed Sec.  36.4401 would mean ``[a]n expense 
incurred for the purpose of or directly related to building, modifying, 
or adapting a housing unit by using specially adapted housing grant 
proceeds.'' Since each eligible individual would require different 
adaptations, VA believes that the broader framework would allow an 
eligible individual to achieve maximum

[[Page 51107]]

use of his or her grant proceeds and adapted property.
    In terms of grant disbursement after final approval, proposed Sec.  
36.4406 would be similar to current regulations in stating that the 
Secretary determines the method on a case-by-case basis. Currently, the 
Secretary generally requires that funds either be deposited into an 
escrow account so that an escrow agent can disburse funds directly to a 
contractor or that the funds be disbursed to a mortgage holder to 
reduce the outstanding principal indebtedness. This practice would 
remain in effect under the proposed rule.
    Finally, proposed Sec.  36.4406 would note that, in the event that 
an eligible individual dies at some point during the SAH grant 
timeline, the estate may be reimbursed for authorized preconstruction 
and construction related costs, but must submit requests for 
reimbursement that are timely under the proposed rule. Unfortunately, 
some eligible individuals will die before the adaptations to their 
housing units are finished. VA's new two-staged process will make it 
easier for eligible individuals' estates to recover costs where the 
individual had been determined eligible and had already expended 
personal funds. At the same time, a limitation on the timeframe in 
which an eligible individual's estate may seek such reimbursement is 
necessary. VA believes that one year from the date on which the Loan 
Guaranty Service becomes aware of the eligible individual's death would 
provide the estate sufficient time in which to submit the necessary 
documentation. Under the proposed rule, VA would require that requests 
for reimbursement be submitted within one year, except when the 
Secretary determines that equity and good conscience require otherwise.
    These actions are necessary in order to clarify what specific 
preliminary costs may be incurred, to detail the administrative 
requirements that must be followed in order to be properly reimbursed, 
and to explain the options regarding grant disbursement. This section 
takes into account the fact that, to obtain a grant, an eligible 
individual may have to incur certain reasonable expenses; and that, 
although SAH grants are made for the benefit of the eligible individual 
not his or her family, VA has a longstanding administrative practice of 
making an eligible individual's estate whole. In developing this 
section, we were also guided by a 1995 legal decision of the VA Office 
of the General Counsel (VAOPGCPREC 13-95), which held:

    The Veterans Benefits Administration (VBA) should issue 
regulations establishing what constitutes the final approval for 
granting SAH assistance. These regulations should also provide that 
VA may authorize a veteran who meets all initial qualifying criteria 
to incur certain preliminary costs prior to final grant approval. 
They may also permit VA to reimburse these costs to the estate of a 
veteran who dies prior to final approval if VA determines it is 
likely approval would have been given had the veteran lived.

    VA has authority to take this action pursuant to 38 U.S.C. 2101(d). 
The intended effect of this action is more detailed regulations that 
make clear to the public the costs that may be incurred and the 
temporal requirements for their reimbursement.

Section 36.4407 Guaranteed and Direct Loans

    Section 36.4407, ``Guaranteed and direct loans,'' would revise 
current Sec.  36.4409 to clarify its requirements. No substantive 
change to Sec.  36.4409 is intended.

Section 36.4408 Submission of Proof to the Secretary

    Proposed Sec.  36.4408, ``Submission of proof to the Secretary,'' 
would renumber current Sec.  36.4405. The change would be structural 
only.

Section 36.4409 Delegations of Authority

    Proposed Sec.  36.4409, ``Delegations of authority,'' would 
renumber current Sec.  36.4408. In addition, VA proposes updates to the 
list of positions with delegated authority to reflect changes in 
position titles and to add the Deputy Director, Loan Guaranty Service. 
VA has authority to take this action pursuant to 38 U.S.C. 501, 512, 
and 2101.

Section 36.4410 Supplementary Administrative Action

    Proposed Sec.  36.4410, ``Supplementary administrative action,'' 
would renumber previous Sec.  36.4407. It would also rephrase current 
Sec.  36.4407 in a reader-focused style. No substantive change is 
intended to current Sec.  36.4407.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any year. This proposed rule would have no such effect on 
State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act of 1995

    Although this document contains provisions constituting collections 
of information, under the provisions of the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3521), no new or proposed revised collections of 
information are associated with this proposed rule. The information 
collection provisions for Sec.  36.4400 et seq. are currently approved 
by the Office of Management and Budget (OMB) and have been assigned OMB 
control numbers 2900-0031, 2900-0047, 2900-0132, and 2900-0300.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a regulatory action as a ``significant regulatory 
action,'' requiring review by the Office of Management and Budget (OMB) 
unless OMB waives such review, if it is a regulatory action that is 
likely to result in a rule that may: (1) Have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    The economic, interagency, budgetary, legal, and policy 
implications of this proposed rule have been examined, and it has been 
determined to be a significant regulatory action under Executive Order 
12866.

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would 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. This proposed rule would directly affect only 
individuals. Therefore, pursuant to 5 U.S.C. 605(b), this proposed rule 
is exempt from the initial and final

[[Page 51108]]

regulatory flexibility analysis requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers and titles for 
the programs affected by this document are 64.106, Specially Adapted 
Housing for Disabled Veterans; and 64.118, Veterans Housing--Direct 
Loans for Certain Disabled Veterans.

Lists of Subjects in 38 CFR Part 36

    Condominiums, Housing, Indians, Individuals with disabilities, Loan 
programs--housing and community development, Loan programs--Indians, 
Loan programs--veterans, Manufactured homes, Mortgage insurance, 
Reporting and recordkeeping requirements, Veterans.

    Approved: June 26, 2009.
John R. Gingrich,
Chief of Staff, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs proposes to amend 38 CFR part 36 (subpart C) as set forth 
below.

PART 36--LOAN GUARANTY

    1. The authority citation for part 36 continues to read as follows:

    Authority:  38 U.S.C. 501 and as otherwise noted.

    2. Revise Subpart C to read as follows:
Subpart C--Assistance to Certain Individuals in Acquiring Specially 
Adapted Housing
Sec.
36.4400 Authority.
36.4401 Definitions.
36.4402 Grant types.
36.4403 Subsequent use.
36.4404 Eligibility for assistance.
36.4405 Grant approval.
36.4406 Reimbursement of costs and disbursement of grant funds.
36.4407 Guaranteed and direct loans.
36.4408 Submission of proof to the Secretary.
36.4409 Delegations of authority.
36.4410 Supplementary administrative action.

Subpart C--Assistance to Certain Individuals in Acquiring Specially 
Adapted Housing


Sec.  36.4400  Authority.

    The Secretary's authority to provide assistance in acquiring 
specially adapted housing is set forth in 38 U.S.C. chapter 21.

(Authority: 38 U.S.C. 501, 2101(d))

Sec.  36.4401  Definitions.

    The following definitions of terms apply to this subpart:
    Adapt: To make a housing unit suitable to, or fit for, the 
residential living needs of an eligible individual.

(Authority: 38 U.S.C. 501, 2101)


    Adapted housing grant or AH grant: A grant authorized under 38 
U.S.C. 2101(b), 2102(b).

(Authority: 38 U.S.C. 501, 2101, 2102)


    Aggregate amount of assistance available: The amounts specified at 
38 U.S.C. 2102(d) as adjusted in accordance with 38 U.S.C. 2102(e).

(Authority: 38 U.S.C. 501, 2101, 2102)


    Beneficial property interest: An interest deemed by the Secretary 
as one that provides (or will provide) an eligible individual a 
meaningful right to occupy a housing unit as a residence.

(Authority: 38 U.S.C. 501, 2101)


    Braces: Orthopedic appliances, including prosthetic devices, used 
for support.

(Authority: 38 U.S.C. 501, 2101)


    Construction-related cost: An expense incurred for the purpose of 
or directly related to building, modifying, or adapting a housing unit 
by using specially adapted housing grant proceeds.

(Authority: 38 U.S.C. 501, 2101)


    Disability: A compensable physical impairment, as determined by a 
Department of Veterans Affairs rating decision, that meets the criteria 
of 38 U.S.C. 2101(a)(2) or (b)(2).

(Authority: 38 U.S.C. 501, 2101)


    Eligible individual: For specially adapted housing purposes, a 
person who has served or is currently serving in the active military, 
naval, or air service, and who has been determined by the Secretary to 
be eligible for benefits pursuant to 38 U.S.C. chapter 21.

(Authority: 38 U.S.C. 501, 2101, 2101A)


    Eligible individual's family: Persons related to an eligible 
individual by blood, marriage, or adoption.

(Authority: 38 U.S.C. 501, 2101, 2102A)


    Housing unit: Any residential unit, including all necessary land, 
improvements, and appurtenances, together with such movable equipment 
or special features as are authorized by 38 U.S.C. 1717 and 2101. For 
the purposes of this definition, movable facilities is defined as such 
exercising equipment and other aids as may be allowed or required by 
the Chief Medical Director or designee; necessary land is defined as 
any plot of land the cost and area of which are not disproportionate to 
the type of improvements thereon and which is in keeping with the 
locality; and special fixtures and necessary adaptations is defined as 
construction features which are specially designed to overcome the 
physical limitations of the individual beneficiary and which are 
allowed or required by the Chief Medical Director or designee as 
necessary by nature of the qualifying disability.

(Authority: 38 U.S.C. 501, 1717, 2101)


    Ownership interest: An undivided property interest that the 
Secretary determines is a satisfactory:
    (1) Fee simple estate;
    (2) Life estate;
    (3) Functional equivalent of a life estate, such as that created by 
a valid trust, a long-term lease, or a land installment contract that 
will convert to a fee simple estate upon satisfaction of the contract's 
terms and conditions;
    (4) Ownership of stock or membership in a cooperative housing 
corporation entitling the eligible individual to occupy for dwelling 
purposes a single family residential unit in a development, project, or 
structure owned or leased by such corporation;
    (5) Lease, under the terms of a valid and enforceable Memorandum of 
Understanding between a tribal organization and the Secretary; or
    (6) Beneficial property interest in a housing unit located outside 
the United States.

(Authority: 38 U.S.C. 501, 2101, 3762)


    Paraplegic housing grant or PH grant: A grant authorized under 38 
U.S.C. 2101(a).

(Authority: 38 U.S.C. 501, 2101)


    Preconstruction cost: An authorized expense incurred by an eligible 
individual in anticipation of receiving final approval for a specially 
adapted housing grant.

(Authority: 38 U.S.C. 501, 2101)


    Reimburse: To pay specially adapted housing grant funds directly to 
an eligible individual (or an eligible individual's estate) for 
preconstruction costs or for construction-related costs.

(Authority: 38 U.S.C. 501, 2101)


    Reside: To occupy (including seasonal occupancy) as one's 
residence.

(Authority: 38 U.S.C. 501, 2101)


    Secretary: The Secretary of the United States Department of 
Veterans Affairs or any employee or agent authorized in Sec.  36.4409 
of this part to act on behalf of the Secretary.

(Authority: 38 U.S.C. 501, 2101)



[[Page 51109]]


    Specially adapted housing grant: A PH grant, AH grant, or TRA grant 
made to an eligible individual in accordance with the requirements of 
38 U.S.C. chapter 21 and this subpart.

(Authority: 38 U.S.C. 501, 2101)


    Temporary residence adaptations grant or TRA grant: A grant, the 
specific requirements and amount of which are outlined in 38 U.S.C. 
2102A and 2102(d).

(Authority: 38 U.S.C. 501, 2101, 2102A)

Sec.  36.4402  Grant types.

    (a) PH grant. The PH grant provides monetary assistance for the 
purpose of acquiring specially adapted housing pursuant to one of the 
following plans:
    (1) Where an eligible individual elects to construct a dwelling on 
land to be acquired by the eligible individual, the Secretary will pay, 
up to the aggregate amount of assistance available for PH grants, not 
more than 50 percent of the eligible individual's total costs for 
acquiring the land and constructing the dwelling.
    (2) Where an eligible individual elects to construct a dwelling on 
land already owned by the eligible individual, the Secretary will pay, 
up to the aggregate amount of assistance available for PH grants, not 
more than the lesser of:
    (i) 50 percent of the eligible individual's costs for the land and 
the construction of the dwelling, or
    (ii) 50 percent of the eligible individual's costs for the 
dwelling, plus the full amount of the unpaid balance, if any, of the 
cost to the individual of the necessary land.
    (3) Where an eligible individual elects to adapt a housing unit 
already owned by the eligible individual, to conform to the 
requirements of the eligible individual's disability, the Secretary 
will pay, up to the aggregate amount of assistance available for PH 
grants, the greater of:
    (i) The eligible individual's costs for making such adaptation(s), 
or
    (ii) 50 percent of the eligible individual's costs for making such 
adaptation(s), plus the lesser of:
    (A) 50 percent of the eligible individual's costs for acquiring the 
housing unit, or
    (B) The full amount of the unpaid balance, if any, of the cost to 
the individual of the housing unit.
    (4) Where an eligible individual has already acquired a suitably 
adapted housing unit, the Secretary will pay, up to the aggregate 
amount of assistance available for PH grants, the lesser of:
    (i) 50 percent of the eligible individual's cost of acquiring such 
housing unit, or
    (ii) The full amount of the unpaid balance, if any, of the cost to 
the individual of the housing unit.
    (b) AH grant. (1) The AH grant provides monetary assistance for the 
purpose of acquiring specially adapted housing pursuant to one of the 
following plans:
    (i) Where an eligible individual elects to construct a dwelling on 
land to be acquired by the eligible individual or a member of the 
eligible individual's family;
    (ii) Where an eligible individual elects to construct a dwelling on 
land already owned by the eligible individual or a member of the 
eligible individual's family;
    (iii) Where an eligible individual elects to adapt a housing unit 
already owned by the eligible individual or a member of the eligible 
individual's family; or
    (iv) Where an eligible individual elects to purchase a housing unit 
that is already adapted to the requirements of the eligible 
individual's disability.
    (2) Regardless of the plan chosen pursuant to paragraph (b)(1) of 
this section, the Secretary will pay the lesser of:
    (i) The actual cost, or, in the case of an eligible individual 
acquiring a housing unit already adapted with special features, the 
fair market value, of the adaptations determined by the Secretary to be 
reasonably necessary, or
    (ii) The aggregate amount of assistance available for AH grants.
    (c) TRA grant. The TRA grant provides monetary assistance for the 
purpose of adapting a housing unit owned by a member of the eligible 
individual's family, in which the eligible individual intends to reside 
temporarily. The Secretary will pay, up to the amounts specified at 38 
U.S.C. 2102A(b) for TRA grants, the actual cost of the adaptations.
    (d) Duplication of benefits. (1) If an individual is determined 
eligible for a PH grant, he or she may not subsequently receive an AH 
grant.
    (2) If an individual is determined eligible for an AH grant, and 
becomes eligible for a PH grant, he or she may receive PH grants and 
TRA grants up to the aggregate amount of assistance available for PH 
grants. However, any AH or TRA grants received by the individual before 
he or she was determined eligible for the PH grant will count towards 
the three grant limit in Sec.  36.4403.
    (3) If the Secretary has provided assistance to an eligible 
individual under 38 U.S.C. 1717, the Secretary will not provide 
assistance under this subpart that would result in duplicate payments 
for the same adaptations. However, nothing in this subpart prohibits an 
eligible individual from utilizing the assistance authorized under 38 
U.S.C. 1717 and 38 U.S.C. chapter 21 simultaneously, provided that no 
duplicate payments result.

(Authority: 38 U.S.C. 2102, 2102A, 2104)

Sec.  36.4403  Subsequent use.

    An eligible individual may receive up to three grants of assistance 
under 38 U.S.C. chapter 21, subject to the following limitations:
    (a) The aggregate amount of assistance available to an eligible 
individual for PH grant and TRA grant usage will be limited to the 
aggregate amount of assistance available for PH grants;
    (b) The aggregate amount of assistance available to an eligible 
individual for AH grant and TRA grant usage will be limited to the 
aggregate amount of assistance available for AH grants;
    (c) The TRA grant may only be obtained once and will be counted as 
one of the three grant usages; and
    (d) Funds from subsequent PH grant or AH grant usages may only pay 
for reimbursing specially adapted housing-related costs incurred on or 
after June 15, 2006 or the date on which the eligible individual is 
conditionally approved for subsequent assistance, whichever is later.

(Authority: 38 U.S.C. 2102, 2102A)


    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
number 2900-0132.)


Sec.  36.4404  Eligibility for assistance.

    (a) Disability requirements. (1) The PH grant is available to 
individuals with permanent and total service-connected disability who 
are entitled to compensation under 38 U.S.C. chapter 11 for any of the 
following conditions:
    (i) Loss, or loss of use, of both lower extremities so as to 
preclude locomotion without the aid of braces, crutches, canes, or a 
wheelchair;
    (ii) Blindness in both eyes having only light perception, plus loss 
or loss of use of one lower extremity;
    (iii) Loss, or loss of use, of one lower extremity, together with--
    (A) Residuals of organic disease or injury; or
    (B) The loss or loss of use of one upper extremity, which so affect 
the functions of balance or propulsion as to preclude locomotion 
without the aid of braces, crutches, canes, or a wheelchair;
    (iv) Loss, or loss of use, of both upper extremities so as to 
preclude use of the arms at or above the elbows; or

[[Page 51110]]

    (v) Any other injury identified as eligible for assistance under 38 
U.S.C. 2101(a).
    (2) The AH grant is available to individuals with permanent and 
total service-connected disability who are entitled to compensation 
under 38 U.S.C. chapter 11 for any of the following conditions:
    (i) Blindness in both eyes with 5/200 visual acuity or less;
    (ii) Anatomical loss, or loss of use, of both hands; or
    (iii) Any other injury identified as eligible for assistance under 
38 U.S.C. 2101(b).
    (3) The TRA grant is available to individuals with permanent and 
total service-connected disability who are entitled to compensation 
under 38 U.S.C. chapter 11 for any of the conditions described under 
paragraph (a)(1) of this section for the PH grant or paragraph (a)(2) 
of this section for the AH grant.
    (b) Feasibility and suitability requirements. (1) In order for an 
individual to be eligible for PH grant assistance, the Secretary must 
determine that:
    (i) It is medically feasible for the individual to reside outside 
of an institutional setting;
    (ii) It is medically feasible for the individual to reside in the 
proposed housing unit and in the proposed locality;
    (iii) The nature and condition of the proposed housing unit are 
suitable for the individual's residential living needs; and
    (iv) The cost of the proposed housing unit bears a proper relation 
to the individual's present and anticipated income and expenses.
    (2) In order for an individual to be eligible for AH grant 
assistance, the Secretary must determine that:
    (i) The individual is residing in and reasonably intends to 
continue residing in a housing unit owned by the individual or a member 
of the individual's family; or
    (ii) If the individual's housing unit is to be constructed or 
purchased, the individual will be residing in and reasonably intends to 
continue residing in a housing unit owned by the individual or a member 
of the individual's family.

(Authority: 38 U.S.C. 501, 2101, 2102, 2102A)

Sec.  36.4405  Grant approval.

    (a) Conditional approval. (1) The Secretary may provide written 
notification to an eligible individual of conditional approval of a 
specially adapted housing grant if the Secretary has determined that:
    (i) Disability requirements have been satisfied pursuant to Sec.  
36.4404(a);
    (ii) Feasibility and suitability requirements have been satisfied 
pursuant to Sec.  36.4404(b); and
    (iii) The eligible individual has not exceeded the usage and dollar 
limitations prescribed by Sec. Sec.  36.4402(d) and 36.4403.
    (2) Once conditional approval has been granted, the Secretary may 
authorize, in writing, an eligible individual to incur certain 
preconstruction costs pursuant to Sec.  36.4406.
    (b) Final approval. In order to obtain final approval for a 
specially adapted housing grant, the Secretary must determine that the 
following property requirements are met:
    (1) Proposed adaptations. The plans and specifications of the 
proposed adaptations demonstrate compliance with minimum property and 
design requirements of the specially adapted housing program.
    (2) Ownership.
    (i) In the case of PH grants, the eligible individual must have, or 
provide satisfactory evidence that he or she will acquire, an ownership 
interest in the housing unit.
    (ii) In the case of AH grants, the eligible individual or a member 
of the eligible individual's family must have, or provide satisfactory 
evidence that he or she will acquire, an ownership interest in the 
housing unit.
    (iii) In the case of TRA grants:
    (A) A member of the eligible individual's family must have, or 
provide satisfactory evidence that he or she will acquire, an ownership 
interest in the housing unit, and
    (B) The eligible individual and the member of the eligible 
individual's family who has or acquires an ownership interest in the 
housing unit must sign a certification as to the likelihood of the 
eligible individual's temporary occupancy of such residence.
    (iv) If the ownership interest in the housing unit is or will be 
vested in the eligible individual and another person, the Secretary 
will not for that reason reduce by percentage of ownership the amount 
of a specially adapted housing grant. However, to meet the ownership 
requirement for final approval of a specially adapted housing grant, 
the eligible individual's ownership interest must be of sufficient 
quantum and quality, as determined by the Secretary, to ensure the 
eligible individual's quiet enjoyment of the property.
    (3) Certifications. The eligible individual must certify, in such 
form as the Secretary will prescribe, that:
    (i) Neither the eligible individual, nor anyone authorized to act 
for the eligible individual, will refuse to sell or rent, after 
receiving a bona fide offer, or refuse to negotiate for the sale or 
rental of, or otherwise make unavailable or deny the housing unit 
acquired by this benefit, to any person because of race, color, 
religion, sex, familial status, disability, or national origin;
    (ii) The eligible individual, and anyone authorized to act for the 
eligible individual, recognizes that any restrictive covenant on the 
housing unit relating to race, color, religion, sex, familial status, 
disability, or national origin is illegal and void, and any such 
covenant is specifically disclaimed; and
    (iii) The eligible individual, and anyone authorized to act for the 
eligible individual, understands that civil action for preventative 
relief may be brought by the Attorney General of the United States in 
any appropriate U.S. District Court against any person responsible for 
a violation of the applicable law.
    (4) Flood insurance. The eligible individual's housing unit, if it 
is or becomes located in an area identified by the Federal Emergency 
Management Agency as having special flood hazards and in which flood 
insurance has been made available under the National Flood Insurance 
Act, as amended, must be covered by flood insurance. The amount of 
flood insurance must be at least equal to the lesser of the full 
insurable value of the housing unit or the maximum limit of coverage 
available for the particular type of housing unit under the National 
Flood Insurance Act, as amended. The Secretary will not approve any 
financial assistance for the acquisition or construction of a housing 
unit located in an area identified by the Federal Emergency Management 
Agency as having special flood hazards unless the community in which 
such area is situated is then participating in the National Flood 
Insurance Program.

(Authority: 38 U.S.C. 501, chapter 21, 42 U.S.C. 4012a, 4106(a)).


    (5) Geographical limits. Any real property purchased, constructed, 
or adapted with the proceeds of a specially adapted housing grant must 
be located:
    (i) Within the United States, which, for purposes of 38 U.S.C. 
chapter 21, includes the several States, Territories, and possessions, 
including the District of Columbia, and the Commonwealths of Puerto 
Rico and the Northern Mariana Islands; or,

[[Page 51111]]

    (ii) If outside the United States, in a country or political 
subdivision which allows individuals to have or acquire a beneficial 
property interest, and in which the Secretary, in his or her 
discretion, has determined that it is reasonably practicable for the 
Secretary to provide assistance in acquiring specially adapted housing.

(Authority: 38 U.S.C. 2101, 2101A, 2102A)


    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
numbers 2900-0031, 2900-0132, and 2900-0300.)


Sec.  36.4406  Reimbursement of costs and disbursement of grant funds.

    (a) After providing conditional approval of a specially adapted 
housing grant for an eligible individual pursuant to Sec.  36.4405, the 
Secretary may authorize the incurrence, prior to obtaining final 
specially adapted housing grant approval, of preconstruction costs of 
the types and subject to the limits specified in this paragraph.
    (1) Preconstruction costs to be incurred may not exceed 20 percent 
of the eligible individual's aggregate amount of assistance available, 
unless the individual is authorized by the Secretary in writing to 
incur specific preconstruction costs in excess of this 20 percent 
limitation. Preconstruction costs may include the following items:
    (i) Architectural services employed for preparation of building 
plans and specifications.
    (ii) Land surveys.
    (iii) Attorneys' and other legal fees.
    (iv) Other costs or fees necessary to plan for specially adapted 
housing grant use, as determined by the Secretary.
    (2) If the Secretary authorizes final approval, the Secretary will 
pay out of the specially adapted housing grant the preconstruction 
costs that the Secretary authorized in advance. If the specially 
adapted housing grant process is terminated prior to final approval, 
preconstruction costs incurred that the Secretary authorized in advance 
will be reimbursed to the eligible individual, or the eligible 
individual's estate pursuant to paragraph (c) of this section, but will 
be deducted from the aggregate amount of assistance available and the 
reimbursement will constitute one of the three permitted grant usages 
(see Sec.  36.4403).
    (b) After final approval, the Secretary will determine a method of 
disbursement that is appropriate and advisable in the interest of the 
eligible individual and the Government, and will pay the specially 
adapted housing grant accordingly. Disbursement of specially adapted 
housing grant proceeds generally will be made to third parties who have 
contracted with the veteran, to an escrow agent, or to the eligible 
individual's lender, as the Secretary deems appropriate. If the 
Secretary determines that it is appropriate and advisable, the 
Secretary may disburse specially adapted housing grant funds directly 
to an eligible individual where the eligible individual has incurred 
authorized preconstruction or construction-related costs and paid for 
such authorized costs using personal funds.
    (c) Should an eligible individual die before the Secretary 
disburses the full specially adapted housing grant, the eligible 
individual's estate must submit to the Secretary all requests for 
reimbursement within one year of the date the Loan Guaranty Service 
learns of the eligible individual's death. Except where the Secretary 
determines that equity and good conscience require otherwise, the 
Secretary will not reimburse an eligible individual's estate for a 
request that has not been received by the Department of Veterans 
Affairs within this timeframe.

(Authority: 38 U.S.C. 2101(d))

Sec.  36.4407  Guaranteed and direct loans.

    (a) In any case where, in addition to using the benefits of 38 
U.S.C. chapter 21, the eligible individual will use his or her 
entitlement to the loan guaranty benefits of 38 U.S.C. chapter 37, the 
complete transaction must be in accord with applicable regulations 
found in this part.
    (b) In any case where, in addition to using the benefits of 38 
U.S.C. chapter 21, the eligible individual will use a direct loan under 
38 U.S.C. 3711(i), the complete transaction must be in accord with the 
requirements of Sec.  36.4503 and the loan must be secured by the same 
housing unit to be purchased, constructed, or adapted with the proceeds 
of the specially adapted housing grant.
    (c) In any case where, in addition to using the benefits of 38 
U.S.C. chapter 21, the eligible individual will use the Native American 
Direct Loan benefit under 38 U.S.C. chapter 37, subchapter V, the 
eligible individual's ownership interest in the housing unit must 
comport with the requirements found in Sec. Sec.  36.4501, 36.4512, and 
36.4527 and in the tribal documents approved by the Secretary, which 
include, but may not be limited to, the Memorandum of Understanding, 
the residential lease of tribal-owned land, the tribal lending 
ordinances, and any relevant tribal resolutions.

(Authority: 38 U.S.C. 2101(d), 3711(i), 3762)

Sec.  36.4408  Submission of proof to the Secretary.

    The Secretary may, at any time, require submission of such proof of 
costs and other matters as the Secretary deems necessary.

(Authority: 38 U.S.C. 501, 2101(d))


    (The Office of Management and Budget has approved the 
information collection provisions in this section under control 
numbers 2900-0031 and 2900-0300.)


Sec.  36.4409  Delegations of authority.

    (a) Each employee of the Department of Veterans Affairs appointed 
to or lawfully filling any of the following positions is hereby 
delegated authority, within the limitations and conditions prescribed 
by law, to exercise the powers and functions of the Secretary with 
respect to assisting eligible individuals in acquiring specially 
adapted housing:
    (1) Under Secretary for Benefits.
    (2) Director, Loan Guaranty Service.
    (3) Deputy Director, Loan Guaranty Service.
    (4) Assistant Director, Loan Policy and Valuation.
    (5) Chief, Specially Adapted Housing, Loan Guaranty Service.
    (6) Director, VA Medical Center.
    (7) Director, VA Regional Office.
    (8) Loan Guaranty Officer.
    (9) Assistant Loan Guaranty Officer.
    (b) Nothing in this section will be construed to authorize the 
determination of basic eligibility or medical feasibility under Sec.  
36.4404(a), (b)(1)(i), or (b)(1)(ii) by any employee designated in this 
section, except as otherwise authorized.

(Authority: 38 U.S.C. 501, 512, ch. 21)

Sec.  36.4410  Supplementary administrative action.

    Subject to statutory limitations and conditions prescribed in title 
38, U.S.C., the Secretary may take such action as may be necessary or 
appropriate to relieve undue prejudice to an eligible individual or a 
third party contracting or dealing with such eligible individual which 
might otherwise result.

(Authority: 38 U.S.C. 501, 2101(d))


[FR Doc. E9-23842 Filed 10-2-09; 8:45 am]
BILLING CODE 8320-01-P