[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]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 36
RIN 2900-AR97
Loan Guaranty: Servicer Regulation Changes
AGENCY: Department of Veterans Affairs.
ACTION: Final rule.
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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