[Federal Register Volume 89, Number 70 (Wednesday, April 10, 2024)]
[Rules and Regulations]
[Pages 25142-25144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07113]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 36

RIN 2900-AR97


Loan Guaranty: Servicer Regulation Changes

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Veterans Affairs (VA) is renaming and 
clarifying certain loss-mitigation terms used in VA's regulations. VA 
is making these changes to align the names and definitions with their 
general use in the housing finance industry. VA believes that these 
revisions will help avoid confusion and enable servicers and veterans 
to address loan defaults more quickly and effectively.

DATES: This rule is effective May 10, 2024.

FOR FURTHER INFORMATION CONTACT: Andrew Trevayne, Assistant Director 
for Loan and Property Management, and Stephanie Li, Assistant Director 
for Regulations, Legislation, Engagement, and Training, Loan Guaranty 
Service (26), Veterans Benefits Administration, Department of Veterans 
Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 632-8862. 
(This is not a toll-free telephone number.)

SUPPLEMENTARY INFORMATION: On July 20, 2023, VA published a proposed 
rule in the Federal Register (88 FR 46720) to rename and clarify 
certain loss-mitigation terms used in VA's regulations to better align 
such name and terms with their general use in the housing finance 
industry. The public comment period for the proposed rule closed on 
September 18, 2023. VA is adopting as final the proposed regulatory 
changes with the grammatical edit as noted below.
    VA received one comment that did not address the subject of the 
rulemaking but instead requested VA ban realtors from transactions 
involving veterans or their survivors. VA finds this comment to be 
outside the scope of this rulemaking and, therefore, will make no 
changes to the regulatory text based on this comment.
    In the proposed rule, VA discussed that the Agency would remove the 
references to ``written'' and ``executed'' in regard to a repayment 
plan and a special forbearance agreement and replace them with a 
requirement for the repayment plan or special forbearance agreement be 
documented 88 FR 46720, 46721. However, VA inadvertently kept the term 
``executed'' in the proposed amendment to the definition of ``special 
forbearance.'' Therefore, VA is correcting the error in this final rule 
by replacing the current rule's phrase, ``a written agreement 
executed'' with ``a documented agreement,'' as proposed, and removing 
the term ``executed.'' The corrected definition of special forbearance 
reads in this final rule, ``a documented agreement by and between the 
holder and the borrower.'' The deletion is grammatical only, not 
substantive, and reflects VA's intent as explained in the proposal.
    The purpose of this paragraph is to clarify the Agency's intent 
with respect to the severability of the provisions of this final rule. 
Each provision that the Agency has amended is capable of operating 
independently, and the Agency intends them to be severable. If any 
provision of this rule is determined by judicial review or operation of 
law to be invalid, the Agency would not intend that partial 
invalidation to render the remainder of this rule invalid. Likewise, if 
the application of any portion of this final rule to a particular 
circumstance were determined to be invalid, the agencies would intend 
that the rule remain applicable to all other circumstances.

Executive Orders 12866, 13563, and 14094

    Executive Order 12866 (Regulatory Planning and Review) directs 
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 14094 (Executive Order on 
Modernizing Regulatory Review) supplements and reaffirms the 
principles, structures, and definitions governing contemporary 
regulatory review established in Executive Order 12866 of September 30, 
1993 (Regulatory Planning and Review), and Executive Order 13563 of 
January 18, 2011 (Improving Regulation and Regulatory Review). The 
Office of

[[Page 25143]]

Information and Regulatory Affairs has determined that this rulemaking 
is not a significant regulatory action under Executive Order 12866, as 
amended by Executive Order 14094. The Regulatory Impact Analysis 
associated with this rulemaking can be found as a supporting document 
at www.regulations.gov.

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). However, this rulemaking will have a direct impact on a number of 
industries that service VA loans. VA defines a servicer as a mortgage 
company that collects funds for a debt incurred by a borrower to 
purchase a home. When a loan becomes delinquent after a borrower misses 
one or more mortgage payments, servicers are responsible for servicing 
delinquent loans and working with the borrower to reach an agreement 
that will bring the loan current or avoid foreclosure whenever 
feasible.
    A recent analysis indicated there are currently 450 servicers in 
varying industries that will be impacted by this rulemaking. This final 
rule will impose a one-time rule familiarization cost to servicers in 
2024, estimated at $55.91 per servicer regardless of size. The $55.91 
cost is derived by dividing the cost of rule familiarization, which is 
estimated to be $25,157, by the 450 servicers VA currently works with. 
To estimate the one-time rule familiarization cost, VA multiplies the 
number of servicers by the time needed for in-house or retained legal 
counsel to review and ensure compliance with the rule and their 
compensation rate. VA assumes that it would take 30 minutes for a 
lawyer to review the rulemaking. The compensation rate of the lawyers 
is estimated by multiplying their hourly wage rate ($78.74) by the 
fringe benefits factor, 1.42. Multiplying the number of servicers (450) 
by the time to review the rule (30 minutes) and their total 
compensation rate ($111.81 per hour) results in a one-time total cost 
of $25,157 in Fiscal Year (FY) 2024. This one-time cost in FY 2024 is 
offset by the long-term cost savings of this rulemaking from reduced 
agreement preparation and sharing efforts.
    VA considers a rulemaking to have a ``significant economic impact'' 
when the impact associated with the rulemaking for a small entity 
equals or exceeds 1 percent of annual revenue. Thus, this rulemaking is 
not expected to have a significant economic impact on the participating 
small servicers. After the first year of implementation, there will be 
a monetary benefit realized by servicers due to the reduction in burden 
this rulemaking will accomplish. Therefore, pursuant to 5 U.S.C. 
605(b), the initial and final regulatory flexibility analysis 
requirements of 5 U.S.C. 603 and 604 do not apply.

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

    Although this final rule contains provisions constituting 
collections of information under the provisions of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3521), there are no provisions 
associated with this rulemaking constituting any new collection of 
information or any revisions to the existing collection of information. 
The collections of information for 38 CFR 36.4317, 36.4319, and 36.4320 
are currently approved by Office of Management and Budget (OMB) and 
have been assigned OMB control number 2900-0021.

Congressional Review Act

    Pursuant to Subtitle E of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (known as the Congressional Review Act) (5 U.S.C. 
801 et seq.), the Office of Information and Regulatory Affairs 
designated this rule as not satisfying the criteria under 5 U.S.C. 
804(2).

List 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.

Signing Authority

    Denis McDonough, Secretary of Veterans Affairs, approved and signed 
this document on March 28, 2024, 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.

Luvenia Potts,
Regulation Development Coordinator, Office of Regulation Policy & 
Management, Office of General Counsel, Department of Veterans Affairs.

    For the reasons stated in the preamble, the Department of Veterans 
Affairs amends 38 CFR part 36 as set forth below:

PART 36--LOAN GUARANTY

Subpart B--Guaranty or Insurance of Loans to Veterans With 
Electronic Reporting

0
1. The authority citation for part 36, subpart B continues to read as 
follows:

    Authority: 38 U.S.C. 501 and 3720.


0
2. Amend Sec.  36.4301 by:
0
a. Removing the definition of ``Compromise sale'';
0
b. Revising the third sentence of ``Liquidation sale'';
0
c. Revising the definition of ``Repayment plan'';
0
d. Adding, in alphabetical order, the definition for ``Short sale''; 
and
0
e. Revising the definition of ``Special forbearance''.
    The revisions and addition read as follows:


Sec.  36.4301  Definitions.

* * * * *
    Liquidation sale. * * * This term also includes a short sale.
* * * * *
    Repayment plan. This is a documented agreement by and between the 
borrower and the holder to reinstate a loan that is 61 or more calendar 
days delinquent, by requiring the borrower to pay each month over a 
fixed period (minimum of three months duration) the normal monthly 
payments plus an agreed upon portion of the delinquency each month.
* * * * *
    Short sale. A sale to a third party for an amount less than is 
sufficient to repay the unpaid balance on the loan where the holder has 
agreed in advance to release the lien in exchange for the proceeds of 
such sale.
    Special forbearance. This is a documented agreement by and between 
the holder and the borrower where the holder agrees to suspend all 
payments or accept reduced payments for one or more months, on a loan 
61 or more calendar days delinquent, and the borrower agrees to pay the 
total delinquency at the end of the specified period or enter into a 
repayment plan.
* * * * *

[[Page 25144]]

Sec.  36.4315  [Amended]

0
3. Amend Sec.  36.4315(a) by removing ``written'' and adding in its 
place ``a documented''.


Sec.  36.4316  [Amended]

0
4. Amend Sec.  36.4316 by:
0
a. Removing ``documented'' in paragraphs (b)(2), (3), and (4); and
0
b. Removing ``written'' in paragraph (b)(6).

0
5. Amend Sec.  36.4317 by:
0
a. Removing ``agreement'' in paragraph (c)(18);
0
b. Removing ``Compromise sale'' and ``compromise sale'' and adding 
``Short sale'' and ``short sale'', respectively, in paragraph (c)(21); 
and
0
c. Revising paragraphs (c)(30) and (31).
    The revisions read as follows:


Sec.  36.4317  Servicer reporting requirements.

* * * * *
    (c) * * *
    (30) Basic claim information--when the servicer files a claim under 
guaranty. The servicer shall report this event within 365 calendar days 
of loan termination for non-VA purchase claims, and within 60 calendar 
days of the approval date for VA purchase claims.
    (31) VA purchase settlement--when VA purchases a loan and the 
servicer reports the tax and insurance information. The servicer shall 
report this event within 60 calendar days of the VA purchase approval 
date.
* * * * *


Sec.  36.4319  [Amended]

0
6. Amend Sec.  36.4319 by:
0
a. Removing ``special forbearance agreements'' and ``compromise sales'' 
and adding in their place ``special forbearances'' and ``short sales'', 
respectively, in paragraph (a);
0
b. Removing ``Compromise Sale'' and adding in its place ``Short Sale'' 
in the table in paragraph (b);
0
c. Removing ``compromise sale'' and adding in its place ``short sale'' 
in paragraph (c)(4).


Sec.  36.4320  [Amended]

0
7. Amend Sec.  36.4320 by:
0
a. Removing ``Refunding'' and adding in its place ``VA purchase'' in 
the heading;
0
b. Removing ``refund'' and adding in its place ``purchase'' in 
paragraph (c); and
0
c. Removing ``2900-0362'' and adding in its place ``2900-0021'' in the 
parenthesis at the end of the section.


Sec.  36.4322  [Amended]

0
8. Amend Sec. Sec.  36.4322(e)(1), (1)(ii), (2), and (f)(1)(iii) by 
removing ``compromise sale'' each place it appears and adding ``short 
sale'' in its place.

[FR Doc. 2024-07113 Filed 4-9-24; 8:45 am]
BILLING CODE 8320-01-P