[Federal Register Volume 82, Number 147 (Wednesday, August 2, 2017)]
[Rules and Regulations]
[Pages 35902-35905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16106]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 36
RIN 2900-AP32
Loan Guaranty: Vendee Loan Fees
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
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SUMMARY: This document adopts as final a proposed rule of the
Department of
[[Page 35903]]
Veterans Affairs (VA) Loan Guaranty Service to amend its regulations to
establish reasonable fees that VA may charge in connection with the
origination and servicing of vendee loans made by VA. Fees mentioned in
this rulemaking are consistent with those charged in the private
mortgage industry, and such fees will help VA to ensure the
sustainability of this vendee loan program. The loans that will be
subject to the fees are not veterans' benefits. This rule will also
ensure that all direct and vendee loans made by the Secretary are safe
harbor qualified mortgages.
DATES: Effective Date: This rule is effective September 1, 2017.
FOR FURTHER INFORMATION CONTACT: Andrew Trevayne, Assistant Director
for Loan and Property Management (261), Veterans Benefits
Administration, Department of Veterans Affairs, 810 Vermont Ave. NW.,
Washington, DC 20420, (202) 632-8795 (this is not a toll-free number).
SUPPLEMENTARY INFORMATION: On October 26, 2016, VA published a proposed
rule in the Federal Register, at 81 FR 74382, to amend VA regulations
to establish reasonable fees in connection with loans made by VA,
commonly referred to as vendee loans. The fees associated with vendee
loans are standard in the mortgage industry. The vendee loans that are
subject to the fees are not veterans' benefits and are available to any
purchasers, including investors, who qualify for the loan.
Specifically, this rulemaking will permit VA to establish a fee to help
cover costs associated with loan origination. The rule will also permit
certain reasonable fees to be charged following loan origination,
during loan servicing. Pursuant to this rulemaking, VA will begin
charging fees for ad-hoc services performed at the borrower's request
or for the borrower's benefit, as well as standard fees specified in
loan instruments. Lastly, third-party fees, those not charged by VA,
are included in this rule solely to clarify for borrowers the various
costs that a borrower may incur when obtaining a vendee loan.
The public comment period for the proposed rule closed on December
27, 2016. VA received one comment. For the reasons explained below, VA
adopts, with a change, the proposed rule that revises VA's authority to
charge reasonable fees associated with vendee loans at 38 CFR 36.4500,
36.4501, 36.4528, 36.4529, and 36.4530.
VA received one comment on the proposed rule from an individual.
The commenter was unclear regarding whether or not VA will use
discretion in determining fees. The commenter questioned whether fees
will be waived under the following circumstances: When a veteran is
purchasing a home from another veteran, including circumstances where
the purchaser is a disabled veteran in receipt of compensation; when a
non-profit or non-veteran purchaser seeks a vendee loan to house
homeless veterans; or when an individual in receipt of VA Family
Caregiver Program benefits seeks to purchase a repossessed home to
provide care for a veteran with a serious injury. The commenter also
expressed concern that this was not a veterans' benefit program
intended to keep a veteran in his or her home and that the Secretary's
focus should essentially be on retention options. Lastly, the commenter
requested veterans' benefits not be used to fund this program.
In its proposed rule, VA discussed that the Secretary has the
discretion to negotiate fees on a case-by-case basis (81 FR 74382,
74383). The very nature of the Secretary's discretion might permit the
waiver of fees in unique situations. Additionally, as stated in the
preamble to the proposed rule, VA states that the Secretary may make
vendee loans to certain entities pursuant to 38 U.S.C. 2041 for the
purpose of assisting homeless veterans and their families in acquiring
shelter (81 FR 74382). Specifically, 38 U.S.C. 2041(b)(2)(C) states
that the Secretary may use discretion when determining whether or not
to waive fees if appropriate in situations regarding homeless veterans.
In regard to the commenter's concern regarding purchasers who are
disabled veterans in receipt of compensation, VA notes that 38 U.S.C.
3729(c) prohibits VA from charging a loan fee to ``a veteran who is
receiving compensation (or who, but for the receipt of retirement pay
or active service pay, would be entitled to receive compensation) or
[to] a surviving spouse of any veteran (including a person who died in
the active military, naval, or air service) who died from a service-
connected disability.'' In proposed Sec. 36.4528, VA stated that the
Secretary may charge a loan origination fee ``[i]n addition to the loan
fee required pursuant to 38 U.S.C. 3729.'' VA understands that this
language may be interpreted as VA attempting to charge a loan fee to
those veterans or surviving spouses who Congress exempted from loan
fees in 38 U.S.C. 3729(c). In order to clarify that VA is not charging
a fee prohibited by statute, VA is adding ``if any'' following ``[i]n
addition to the loan fee required pursuant to 38 U.S.C. 3729'' to
clarify that not all loans will carry the loan fee described in section
3729.
In regard to the commenter's concern that the vendee loan program
is not a home retention option, VA notes that, prior to a holder
foreclosing a VA-guaranteed loan, there are specific required actions
the holder must take that emphasize loss mitigation and retention
options for borrowers. All participating VA servicers adhere to these
regulations prior to initiating foreclosure sales. VA also notes that
the principal and interest resulting from the repayment of vendee loans
are deposited into the Veterans Housing Benefit Program Fund (VHBPF) to
help offset the housing operation costs of the Home Loan Guaranty
Program. Lastly, in response to the commenter's statement asking VA not
to use veterans' benefits to fund this program, VA notes that vendee
loans are not classified as veterans' benefits and are available to any
purchaser VA determines creditworthy and whose offer is awarded a sales
contract. Vendee loans enable VA to sell more of its properties and to
sell them at a faster rate, and as previously stated, the proceeds are
deposited into the VHBPF. The fees are consistent with the private
mortgage industry and will ensure the sustainability of the vendee loan
program.
Therefore, this rule finalizes the proposed rule with the change
noted above.
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'' requiring review by the Office of
Management and Budget (OMB), unless OMB waives such review, 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,
[[Page 35904]]
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 on VA's Web
site at http://www.va.gov/orpm/, by following the link for ``VA
Regulations Published from FY 2004 Through Fiscal Year to Date.''
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 the 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 one year. This final rule will have no such effect on
State, local, and tribal governments, or on the private sector.
Paperwork Reduction Act
This final rule contains no provisions constituting a collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).
Regulatory Flexibility Act
This final rule will affect individuals and small businesses who
choose to obtain a vendee loan from VA to finance the purchase of a VA-
owned property rather than alternate financing. A party who wants to
purchase a VA-owned property may choose whatever source of financing he
wishes. Presumably the purchaser would select the least expensive
financing option available, which may or may not be a VA vendee loan.
VA does not believe that this final rule will impose any significant
economic impact for the following reasons. Should the purchaser decide
that the VA vendee program was not the most economically advantageous
to the purchaser then the purchaser would obtain alternate financing.
Parties would have to choose to be subject to the impact, if any,
imposed by this rule.
Accordingly, the Secretary certifies that the adoption of 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. Therefore, under 5 U.S.C. 605(b),
this rulemaking is exempt from the final regulatory flexibility
analysis requirements of section 604.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number and title for the
program affected by this document is 64.114, Veterans Housing--
Guaranteed and Insured Loans.
List of Subjects in 38 CFR Part 36
Condominiums, Flood insurance, 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.
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. Gina S.
Farrisee, Deputy Chief of Staff, Department of Veterans Affairs,
approved this document on July 25, 2017, for publication.
Dated: July 26, 2017.
Michael Shores,
Director, Regulation Policy & Management, Office of the Secretary,
Department of Veterans Affairs.
For the reasons set out in the preamble, VA amends 38 CFR part 36,
subpart D, as set forth below:
PART 36--LOAN GUARANTY
0
1. The authority citation for part 36 continues to read as follows:
Authority: 38 U.S.C. 501 and 3720.
Subpart D--Direct Loans
0
2. Amend Sec. 36.4500 by:
0
a. Revising paragraph (c)(2).
0
b. Removing the authority citation following paragraph (c)(2).
0
c. Adding paragraph (e).
0
d. Adding an authority citation at the end of the section.
The revision and additions read as follows:
Sec. 36.4500 Applicability and qualified mortgage status.
* * * * *
(c) * * *
(2) Applicability of safe harbor qualified mortgage. Any VA direct
loan made by the Secretary pursuant to chapter 20 or 37 of title 38,
U.S.C., is a safe harbor qualified mortgage.
* * * * *
(e) Sections 36.4528, 36.4529, and 36.4530, which concern vendee
loans, shall be applicable to all vendee loans.
(Authority: 15 U.S.C. 1639C(b)(3)(B)(ii), 38 U.S.C. 2041, 3710,
3711, 3720, 3733, and 3761)
0
3. Amend Sec. 36.4501 by:
0
a. Adding in alphabetical order a definition for ``Safe harbor
qualified mortgage.''
0
b. Revising the definition ``Vendee loan.''
0
c. Removing the authority citation following the definition ``Vendee
loan.''
The addition and revision read as follows:
Sec. 36.4501 Definitions.
* * * * *
Safe harbor qualified mortgage means a mortgage that meets the
Ability-to-Repay requirements of sections 129B and 129C of the Truth-
in-Lending Act (TILA) regardless of whether the loan might be
considered a high cost mortgage transaction as defined by section 103bb
of TILA (15 U.S.C. 1602bb).
* * * * *
Vendee loan means a loan made by the Secretary for the purpose of
financing the purchase of a property acquired pursuant to chapter 37 of
title 38, United States Code. The terms of a vendee loan (e.g., amount
of down payment; amortization term; whether to escrow taxes, insurance
premiums, or homeowners' association dues; fees, etc.) are negotiated
between the Secretary and the borrower on a case-by-case basis, subject
to the requirements of 38 U.S.C. 2041 or 3733. Terms related to
allowable fees are also subject to Sec. Sec. 36.4528 through 36.4530.
* * * * *
0
4. Add Sec. Sec. 36.4528, 36.4529, and 36.4530 to read as follows:
Sec. 36.4528 Vendee loan origination fee.
(a) In addition to the loan fee required pursuant to 38 U.S.C.
3729, if any, the Secretary may, in connection with the origination of
a vendee loan, charge a borrower a loan origination fee not to exceed
one-and-a-half percent of the loan amount.
(b) All or part of such fee may be paid in cash at loan closing or
all or part may
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be included in the loan. The Secretary will not increase the loan
origination fee because the borrower chooses to include such fee in the
loan amount financed.
(c) In no event may the total fee agreed upon between the Secretary
and the borrower result in an amount that will cause the loan to be
designated as a high-cost mortgage as defined in 15 U.S.C. 1602(bb) and
12 CFR part 1026.
(Authority: 38 U.S.C. 2041, 3720, 3733)
Sec. 36.4529 Vendee loan post-origination fees.
(a) The Secretary may charge a borrower the following reasonable
fees, per use, following origination, in connection with the servicing
of any vendee loan:
(1) Processing assumption fee for the transfer of legal liability
of repaying the mortgage when the individual assuming the loan is
approved. Such fee will not exceed $300, plus the actual cost of the
credit report. If the assumption is denied, the fee will not exceed the
actual cost of the credit report;
(2) Processing subordination fee, not to exceed $350, to ensure
that a modified vendee loan retains its first lien position;
(3) Processing partial release fee, not to exceed $350, to exclude
collateral from the mortgage contract once a certain amount of the
mortgage loan has been paid;
(4) Processing release of lien fee, not to exceed $15, for the
release of an obligor from a mortgage loan in connection with a
division of real property;
(5) Processing payoff statement fee, not to exceed $30, for a
payoff statement showing the itemized amount due to satisfy a mortgage
loan as of a specific date;
(6) Processing payment by phone fee, not to exceed $12, when a
payment is made by phone and handled by a servicing representative; and
(7) Processing payment by phone fee, not to exceed $10, when a
payment is made by phone and handled through an interactive voice
response system, without contacting a servicing representative.
(b) The specific fees to be charged on each account may be
negotiated between the Secretary and the borrower. The Secretary will
review the maximum fees under paragraph (a) of this section bi-annually
to determine that they remain reasonable.
(c) The Secretary may charge a borrower reasonable fees established
in the loan instrument, including but not limited to the following:
(1) Property inspection fees;
(2) Property preservation fees;
(3) Appraisal fees;
(4) Attorneys' fees;
(5) Returned-check fees;
(6) Late fees; and
(7) Any other fee the Secretary determines reasonably necessary for
the protection of the Secretary's investment.
(d) Any fee included in the loan instrument and permitted under
paragraph (c) of this section would be based on the amount customarily
charged in the industry for the performance of the service in the
particular area, the status of the loan, and the characteristics of the
affected property.
(Authority: 38 U.S.C. 2041, 3720, 3733)
Sec. 36.4530 Vendee loan other fees.
(a) In addition to the fees that may be charged pursuant to
Sec. Sec. 36.4528 and 36.4529 and the statutory loan fee charged
pursuant to 38 U.S.C. 3729, the borrower may be required to pay third-
party fees for services performed in connection with a vendee loan.
(b) Examples of the third party fees that may be charged in
connection with a vendee loan include, but are not limited to:
(1) Termite inspections;
(2) Hazard insurance premiums;
(3) Force-placed insurance premiums;
(4) Courier fees;
(5) Tax certificates; and
(6) Recorder's fees.
(Authority: 38 U.S.C. 2041, 3720, 3733)
[FR Doc. 2017-16106 Filed 8-1-17; 8:45 am]
BILLING CODE 8320-01-P