[Federal Register Volume 80, Number 225 (Monday, November 23, 2015)]
[Notices]
[Page 73041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29787]


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DEPARTMENT OF VETERANS AFFAIRS


Loan Guaranty: Net Value Percentage Update

AGENCY: Department of Veterans Affairs (VA).

ACTION: Notice.

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SUMMARY: This notice provides information to lenders and mortgage 
holders in the U.S. Department of Veterans Affairs (VA) home loan 
guaranty program concerning the percentage to be used in calculating 
the purchase price of a property that secured a terminated loan. The 
new percentage is 15.95 percent.

DATES:  The new percentage is effective December 23, 2015.

FOR FURTHER INFORMATION CONTACT: Andrew Trevayne, Assistant Director 
for Loan and Property Management, Department of Veterans Affairs, 810 
Vermont Ave. NW., Washington, DC 20420, (202) 632-8795 (not a toll-free 
number).

SUPPLEMENTARY INFORMATION: The VA home loan guaranty program, 
authorized by 38 U.S.C. chapter 37, offers a partial guaranty against 
loss to loan holders who are the holders of home loans to veterans. 
When a veteran borrower defaults on a VA-guaranteed loan, VA is 
obligated to pay a guaranty claim to the loan holder. See 38 U.S.C. 
3732. If the requirements of 38 U.S.C. 3732(c) are satisfied, a 
foreclosing loan holder also has the option of conveying a foreclosed 
property to VA. Requirements related to conveyance of properties are 
found at 38 CFR 36.4322 through 36.4326. A key component in the 
conveyance of a property to VA is the net value of the property to the 
Government. Net value is prescribed in 38 U.S.C. 3732(c) and further 
defined at 38 CFR 36.4301.
    Essentially, net value is the fair market value of the property, 
minus the total costs the Secretary estimates would be incurred by VA 
resulting from the acquisition and disposition of the property for 
property operating expenses, selling expenses, and administrative cost. 
See 38 CFR 36.4301. The costs of acquisition and disposition are 
represented by a percentage that VA computes annually. Id. VA refers to 
the computed percentage as the cost factor. Id.
    In computing the cost factor, VA determines the average operating 
expenses incurred for managing properties that were sold during the 
preceding fiscal year, as well as the average administrative cost to VA 
associated with the property management activity. The cost factor 
calculation also includes an amount equal to the gain or loss 
experienced by VA on the resale of those properties. VA annually 
analyzes its property management results and computes a new cost 
factor. The cost factor that is applicable to program participants is 
the cost factor most recently published in the Notices section of the 
Federal Register. See 38 CFR 36.4301.
    The published cost factor remained unchanged at 11.87 percent 
between 1999 and 2012, as VA was concerned that a dramatic increase 
would have caused risk-averse lenders to significantly limit VA 
lending, impose stricter credit overlays, or cease making VA-guaranteed 
loans altogether. The net effect would have diminished the ability of 
veteran borrowers to use their VA home loan guaranty benefit, and the 
no-downpayment option and foreclosure-avoidance protections associated 
with it.
    As market conditions improved, and in an effort to more closely 
reflect the costs of real property disposition, VA began a measured 
approach to increasing the cost factor in FY 2012, by raising it to 
14.95 percent.
    VA is continuing its measured approach to align its published cost 
factor with property disposition costs. In order to more accurately 
reflect the costs of acquiring, managing, and reselling properties in 
the home loan guaranty program, VA is revising the net value cost 
factor to 15.95 percent. Accordingly, the loan holder (or its 
authorized servicing agent) will use a 15.95 percent cost factor to 
calculate the subtraction from the fair market value to arrive at the 
net value of the property under the provisions of 38 CFR 36.4322(c). 
This revised cost factor will be used in net value calculations made by 
loan holders and servicers, beginning on December 23, 2015.

    Dated: November 18, 2015.
Jeffrey M. Martin,
Program Manager, Regulation Policy and Management, Office of the 
General Counsel.
[FR Doc. 2015-29787 Filed 11-20-15; 8:45 am]
 BILLING CODE 8320-01-P