[Federal Register Volume 83, Number 195 (Tuesday, October 9, 2018)]
[Rules and Regulations]
[Page 50506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21370]



38 CFR Part 36

RIN 2900-AO65

Loan Guaranty: Ability-to-Repay Standards and Qualified Mortgage 
Definition Under the Truth-in-Lending Act

AGENCY: Department of Veterans Affairs.

ACTION: Agency determination; status of interim final rule.


SUMMARY: The Department of Veterans Affairs (VA) published an interim 
final rule on May 9, 2014, implementing provisions of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). 
This document informs the public that VA will not be publishing a final 
rule to adopt the provisions in the interim final rule that published 
on May 9, 2014. However, VA will be publishing a separate regulation in 
the near future that will supersede the provisions in the interim final 
rule that published on May 9, 2014.

DATES: This document is effective October 9, 2018.

FOR FURTHER INFORMATION CONTACT: Greg Nelms, Assistant Director (26), 
Veterans Benefits Administration, Department of Veterans Affairs, 810 
Vermont Avenue NW, Washington, DC 20420, (202) 632-8795. (This is not a 
toll-free number.)

SUPPLEMENTARY INFORMATION: On May 9, 2014, VA published in the Federal 
Register (79 FR 26620) its interim final rule (IFR) pursuant to the 
Dodd-Frank Act, Public Law 111-203, 124 Stat. 1376 (2010). Among other 
things, the Dodd-Frank Act established many reforms to Federal 
oversight of residential mortgage lending, including a requirement that 
lenders be able to demonstrate that, at the time a mortgage loan is 
made to a borrower, the borrower is reasonably able to repay the 
mortgage loan. Public Law 111-203, sec. 1411 (codified at 15 U.S.C. 
1639c). Such mortgage loans are referred to generally as qualified 
mortgages (QMs).
    VA specified in the IFR that almost all VA loans meeting VA's 
underwriting standards would be considered safe harbor QMs. 79 FR 
26622-26623. The loans that would not be considered safe harbor QMs 
would be certain Interest Rate Reduction Refinance Loans (IRRRLs), 
specifically those meeting the requirements for guaranty but failing to 
meet IRRRL-specific seasoning and recoupment requirements for safe 
harbor protections. While these types of IRRRLs could still be deemed 
QMs, they would receive the designation of rebuttable presumption QM 
rather than safe harbor QM. 79 FR 26624. VA also specified income 
verification requirements for IRRRLs. Id.
    VA received a total of 22 comments on the IFR. Most of the 
commenters were industry participants in the VA Home Loan program or 
representatives of the lending community. A few individuals also 
commented. No comments were received from veterans' service 
organizations or veterans expressing concerns about the use of their VA 
home loan benefit. Most commenters sought clarification of the IFR. 
Several commenters were fully supportive of the rule. VA appreciates 
the comments received on the IFR.
    On May 24, 2018, section 309 of Economic Growth, Regulatory Relief, 
and Consumer Protection Act (Pub. L. 115-174) superseded certain 
elements of the IFR. The law's seasoning and recoupment requirements 
for IRRRLs effectively eliminated the category of rebuttable 
presumption QM. Section 309 also imposed other requirements that, while 
not in conflict with the IFR, were not contemplated at the time of the 
IFR's publication. Consequently, rather than finalizing the IFR, VA 
will need to revise its qualified mortgage criteria in a future 
rulemaking. VA will in its future rulemaking take into account the 
spirit of the comments submitted in response to the IFR. Until such 
future rulemaking is final, the IFR remains in effect. To the extent 
any provision of the IFR conflicts with or is superseded by Public Law 
115-174, Public Law 115-174 controls.
    On May 25, 2018, VA released a policy guidance update in Circular 
26-18-13 to inform program participants about the impact of Public Law 
115-174 on VA home loan financing. Loan applications taken on or after 
May 25, 2018 must meet the requirements of the new law to be eligible 
for guaranty by the VA.

Signing Authority

    The Secretary of Veterans Affairs 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. Robert L. 
Wilkie, Secretary, Department of Veterans Affairs, approved this 
document on September 26, 2018, for publication.

    Dated: September 26, 2018.
Jeffrey M. Martin,
Impact Analyst, Office of Regulation Policy & Management, Office of the 
Secretary, Department of Veterans Affairs.
[FR Doc. 2018-21370 Filed 10-4-18; 4:15 pm]