[Federal Register Volume 79, Number 8 (Monday, January 13, 2014)]
[Rules and Regulations]
[Pages 2100-2101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00386]



38 CFR Part 36

RIN 2900-AO67

Loan Guaranty: Minimum Property and Construction Requirements

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.


SUMMARY: This final rule amends the Department of Veterans Affairs (VA) 
guaranteed loan regulations by clarifying VA's statutory authority to 
establish minimum property requirements for properties securing VA-
guaranteed loans. It does not make any substantive policy change or 
affect any substantive rights; rather, it merely cites more complete 
authority for the existing rule.

DATES: Effective Date: This rule is effective February 12, 2014.

FOR FURTHER INFORMATION CONTACT: John Bell III, Assistant Director for 
Loan Policy and Valuation (262), Veterans Benefits Administration, 
Department of Veterans Affairs, 810 Vermont Avenue NW., Washington, DC 
20420, at (202) 632-8823.

SUPPLEMENTARY INFORMATION: Minimum property requirements are necessary 
to ensure that a property is adequate security for a VA-guaranteed 
loan. Both 38 United States Code (U.S.C.) 3704(a) and 3710(b)(4) 
prohibit guarantees on properties that do not meet minimum 
acceptability requirements, as determined by the Secretary.
    The implementing regulation found at 38 Code of Federal Regulation 
(CFR) 36.4351 states that no loan for the purchase or construction of 
residential property shall be eligible for a VA guaranty unless the 
property complies with the Secretary's minimum property requirements 
for planning, construction, and general acceptability. Although Sec.  
36.4351 refers to 38 U.S.C. 3704(a), a

[[Page 2101]]

statutory provision that applies specifically to new or proposed 
construction, it does not include a reference to 38 U.S.C. 3710(b)(4), 
which applies generally to properties securing VA-guaranteed loans. 
This final rule amends 38 CFR 36.4351 so that it provides references to 
both of the relevant statutory provisions.
    This final rule does not affect any substantive rights or implement 
any policy changes. Pursuant to 38 U.S.C. 3710(b)(4), VA has had a 
longstanding policy of requiring that ``the nature and condition of the 
property [to secure a VA-guaranteed loan] is such as to be suitable for 
dwelling purposes.'' The requirements for general suitability can be 
found in chapter 12 of VA Pamphlet M26-7, sometimes called the Lender's 
Handbook. Similarly, pursuant to 38 U.S.C. 3704(a), VA has for decades 
retained a comprehensive list of requirements to ensure that homes that 
have been built for 1 year or less ``meet or exceed minimum 
requirements for planning, construction, and general acceptability 
prescribed by the Secretary.'' Those requirements, like those required 
under section 3710(b)(4), are also found in chapter 12 of M26-7.
    With the implementation of this final rule, participants in the VA 
guaranteed loan program will continue to follow longstanding policy and 
refer to M26-7 in determining whether a property being used as security 
can satisfy the statutory requirements for planning, construction, and 
general acceptability. The only change is a correction to the CFR so 
that 38 CFR 36.4351 properly reflects full statutory authority for VA's 
existing policies.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
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 effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action,'' which requires review by the Office 
of Management and Budget (OMB), as ``any 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 
this Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined, and it has 
been determined not to be a significant regulatory action under 
Executive Order 12866. VA's impact analysis can be found as a 
supporting document at http://www.regulations.gov, usually within 48 
hours after the rulemaking document is published. Additionally, a copy 
of the rulemaking and its impact analysis are available at VA's Web 
site at http://www1.va.gov/orpm/, by following the link for ``VA 
Regulations Published.''

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 given year. This final rule will have no such effect 
on State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule 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. The impact of this rule will be to clarify the existing statutory 
authority of the VA to prescribe minimum property requirements for 
existing and proposed or newly constructed properties. There should be 
no impact on individuals, small or large entities, or State or local 
governments. Therefore, this final rule is exempt pursuant to 5 U.S.C. 
605(b) from the initial and final regulatory flexibility analysis 
requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance Program number and title 
for the program affected by this document are 64.114, Veterans 
Housing--Guaranteed and Insured Loans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Jose D. 
Riojas, Chief of Staff, Department of Veterans Affairs, approved this 
document on December 6, 2013, for publication.

List of Subjects in 38 CFR Part 36

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

    Dated: January 8, 2014.
Robert C. McFetridge,
Director of Regulations Policy and Management, Office of the General 
Counsel, Department of Veterans Affairs.
    For the reasons set forth in the preamble, VA amends 38 CFR part 36 
as follows:


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

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

2. Revise Sec.  36.4351 to read as follows:

Sec.  36.4351  Minimum property and construction requirements.

    No loan for the purchase or construction of residential property 
shall be eligible for guaranty or insurance unless such property 
complies or conforms with those standards of planning, construction, 
and general acceptability that may be applicable thereto and prescribed 
by the Secretary pursuant to 38 U.S.C. 3704(a) or 38 U.S.C. 3710(b)(4), 
or both such sections, as applicable.

(Authority: 38 U.S.C. 3704(a), 3710(b)(4))

[FR Doc. 2014-00386 Filed 1-10-14; 8:45 am]