Loan Guaranty: Vendee Loan Fees, 35902-35905 [2017-16106]

Download as PDF 35902 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Rules and Regulations understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency’s responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1– 888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. jstallworth on DSKBBY8HB2PROD with RULES C. Collection of Information This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). D. Federalism and Indian Tribal Governments A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. Also, this rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. If you believe this rule has implications for federalism or Indian tribes, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above. E. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of VerDate Sep<11>2014 15:35 Aug 01, 2017 Jkt 241001 their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. F. Environment We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of a safety zone for the filming of a scene for a television series, where objects will be thrown off the bridge on the South Branch of the Chicago River in Chicago, IL. It is categorically excluded from further review under paragraph 34(g) of Figure 2–1 of the Commandant Instruction. A Record of Environmental Consideration (REC) supporting this determination is available in the docket where indicated in the ADDRESSES section of this preamble. We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule. G. Protest Activities The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels. List of Subjects in 33 CFR Part 165 Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways. For the reasons discussed in the preamble, the Coast Guard amends 33 CFR parts 165 as follows: PART 165—REGULATED NAVIGATION AREAS AND LIMITED ACCESS AREAS 1. The authority citation for part 165 continues to read as follows: ■ Authority: 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 Department of Homeland Security Delegation No. 0170.1. 2. Add § 165.T09–0702 to read as follows: ■ § 165.T09–0702 Safety Zone; South Branch of the Chicago River, Chicago, IL. (a) Location. All U.S. navigable waters of the South Branch of the Chicago River, within a 300 foot radius of the Cermak Road Bridge in Chicago, IL. (b) Enforcement period. This rule will be enforced on August 4, 2017 from 8 p.m. to 11:59 p.m. (c) Regulations. (1) In accordance with the general regulations in § 165.23, entry into, transiting, or anchoring within this safety zone is prohibited unless authorized by the Captain of the Port Lake Michigan or a designated on-scene representative. (2) This safety zone is closed to all vessel traffic, except as may be permitted by the Captain of the Port Lake Michigan or a designated on-scene representative. (3) The ‘‘on-scene representative’’ of the Captain of the Port Lake Michigan is any Coast Guard commissioned, warrant or petty officer who has been designated by the Captain of the Port Lake Michigan to act on his or her behalf. (4) Vessel operators desiring to enter or operate within the safety zone shall contact the Captain of the Port Lake Michigan or an on-scene representative to obtain permission to do so. The Captain of the Port Lake Michigan or an on-scene representative may be contacted via VHF Channel 16 or at (414) 747–7182. Vessel operators given permission to enter or operate in the safety zone must comply with all directions given to them by the Captain of the Port Lake Michigan, or an onscene representative. Dated: July 27, 2017. Thomas J. Stuhlreyer, Captain, U.S. Coast Guard, Captain of the Port, Lake Michigan. [FR Doc. 2017–16253 Filed 8–1–17; 8:45 am] BILLING CODE 9110–04–P DEPARTMENT OF VETERANS AFFAIRS 38 CFR Part 36 RIN 2900–AP32 Loan Guaranty: Vendee Loan Fees Department of Veterans Affairs. Final rule. AGENCY: ACTION: This document adopts as final a proposed rule of the Department of SUMMARY: E:\FR\FM\02AUR1.SGM 02AUR1 jstallworth on DSKBBY8HB2PROD with RULES Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Rules and Regulations 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 tollfree 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 VerDate Sep<11>2014 15:35 Aug 01, 2017 Jkt 241001 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 § 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 PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 35903 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 VAguaranteed 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, E:\FR\FM\02AUR1.SGM 02AUR1 35904 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Rules and Regulations 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. jstallworth on DSKBBY8HB2PROD with RULES 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 VerDate Sep<11>2014 15:35 Aug 01, 2017 Jkt 241001 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. § 36.4500 Applicability and qualified mortgage status. Catalog of Federal Domestic Assistance (Authority: 15 U.S.C. 1639C(b)(3)(B)(ii), 38 U.S.C. 2041, 3710, 3711, 3720, 3733, and 3761) 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 1. The authority citation for part 36 continues to read as follows: ■ Authority: 38 U.S.C. 501 and 3720. Subpart D—Direct Loans PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 * * * * (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. 3. Amend § 36.4501 by: a. Adding in alphabetical order a definition for ‘‘Safe harbor qualified mortgage.’’ ■ b. Revising the definition ‘‘Vendee loan.’’ ■ c. Removing the authority citation following the definition ‘‘Vendee loan.’’ The addition and revision read as follows: ■ ■ § 36.4501 Definitions. * * * * * Safe harbor qualified mortgage means a mortgage that meets the Ability-toRepay 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-bycase basis, subject to the requirements of 38 U.S.C. 2041 or 3733. Terms related to allowable fees are also subject to §§ 36.4528 through 36.4530. * * * * * ■ 4. Add §§ 36.4528, 36.4529, and 36.4530 to read as follows: § 36.4528 2. Amend § 36.4500 by: a. Revising paragraph (c)(2). b. Removing the authority citation following paragraph (c)(2). ■ c. Adding paragraph (e). ■ d. Adding an authority citation at the end of the section. The revision and additions read as follows: ■ ■ ■ * 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 E:\FR\FM\02AUR1.SGM 02AUR1 Federal Register / Vol. 82, No. 147 / Wednesday, August 2, 2017 / Rules and Regulations 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) jstallworth on DSKBBY8HB2PROD with RULES § 36.4529 fees. Vendee loan post-origination (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; VerDate Sep<11>2014 15:35 Aug 01, 2017 Jkt 241001 (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) § 36.4530 Vendee loan other fees. (a) In addition to the fees that may be charged pursuant to §§ 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 thirdparty 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] 35905 Work (10P4C), Veterans Health Administration, Department of Veterans Affairs, 810 Vermont Avenue NW., Washington, DC 20420, (202) 461–6780. (This is not a toll-free number.) On June 8, 2017, at 82 FR 26592, VA amended what had been the § 60.15 series of 38 CFR part 60 to eliminate use of VA Form 10–0408A, found at 38 CFR 60.15. VA amended the section heading and heading for paragraph (b) in the § 60.15 series to reflect the June 8, 2017, amendment. At the time of the amendments, VA inadvertently failed to include the accompanying instruction amending the section and paragraph headings. The rule became effective on July 10, 2017; however, the Federal Register could not revise the section and corresponding paragraph (b) heading without the missing amendatory instruction. Consequently, the Electronic Code of Federal Regulations, published by the Government Printing Office, could not implement the change, noting an ‘‘inaccurate amendatory instruction’’ at 38 CFR 60.15. With this notice, VA is amending § 60.15 to correct the accompanying instruction amending the section and paragraph headings in the regulation. SUPPLEMENTARY INFORMATION: List of Subjects in 38 CFR Part 60 Health care, Housing, Reporting and recordkeeping requirements, Travel, Veterans. BILLING CODE 8320–01–P Correcting Amendments DEPARTMENT OF VETERANS AFFAIRS 38 CFR Part 60 For the reasons discussed in the preamble, VA is correcting 38 CFR part 60 with the following amendments: PART 60—FISHER HOUSES AND OTHER TEMPORARY HOUSING RIN 2900–AP45 Fisher Houses and Other Temporary Lodging; Correction Department of Veterans Affairs. Correcting amendments. 1. The authority citation for part 60 continues to read as follows: ■ AGENCY: ACTION: The Department of Veterans Affairs is correcting a final rule that eliminated the use of VA Form 10– 0408A when veterans receiving treatment or care seek temporary lodging at a VA Fisher House for their relatives, close friends, or caregivers that was published in the Federal Register (82 FR 26592) on June 8, 2017. DATES: The correction is effective August 2, 2017. FOR FURTHER INFORMATION CONTACT: Jennifer Koget, National Fisher House and Family Hospitality Program Manager, Care Management and Social SUMMARY: PO 00000 Frm 00023 Fmt 4700 Sfmt 9990 Authority: 38 U.S.C. 501, 1708. 2. In § 60.15, revise the section heading and the paragraph (b) heading are revised to read as follows: ■ § 60.15 Process for requesting Fisher House or other temporary lodging. * * * * * (b) Processing requests. * * * * * * * * Dated: July 27, 2017. Michael Shores, Director, Regulation Policy & Management, Office of the Secretary, Department of Veterans Affairs. [FR Doc. 2017–16196 Filed 8–1–17; 8:45 am] BILLING CODE 8320–01–P E:\FR\FM\02AUR1.SGM 02AUR1

Agencies

[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.

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

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

[[Page 35905]]

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