## Chapter 17 VA Sanctions Against Program Participants

#### Overview

+------------+---------------------------------------------------------+
| ##### In   | > VA is authorized to impose sanctions against persons  |
| troduction | > or entities who take actions which are detrimental to |
|            | > the VA loan guaranty program. The type and severity   |
|            | > of the sanction imposed is based on                   |
|            |                                                         |
|            | -   the type of participant (for example, lender,       |
|            |     builder, management broker, etc.), and              |
|            |                                                         |
|            | -   the nature of the actions (for example., fraud,     |
|            |     significant deficiencies in performance, ongoing    |
|            |     disregard for VA requirements, and so on).          |
|            |                                                         |
|            | > Sanctions may be imposed in the form of               |
|            |                                                         |
|            | -   civil money penalties, and/or                       |
|            |                                                         |
|            | -   the participant's full or partial exclusion from    |
|            |     participation in the VA loan guaranty program for a |
|            |     certain period of time.                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### App  | > VA provides appeal rights to all program participants |
| eal Rights | > against whom sanctions are imposed. The notice        |
|            | > informing the participant that sanctions will be or   |
|            | > are imposed explains what the participant must do to  |
|            | > appeal VA's decision.                                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > This chapter contains the following topics.           |
| #### In th |                                                         |
| is Chapter |                                                         |
+------------+---------------------------------------------------------+

  ---------------------------------------------------------- ------------
  Topic                                                      See Page

  17.01 Program Participants                                 17-2

  17.02 False Lender Certification                           17-6

  17.03 Withdrawal of Automatic Authority                    17-7

  17.04 Withdrawal of LAPP Authority                         17-11

  17.05 Debarment and Suspension                             17-15

  17.06 Limited Denial of Participation (LDP)                17-18

  17.07 Unfair Contract Provisions or Marketing Practices    17-21

  17.08 Violations of Equal Housing Opportunity Laws         17-23
  ---------------------------------------------------------- ------------

#### 17.01 Program Participants

+------------+---------------------------------------------------------+
| #####      | > Any person or entity conducting business related to   |
| Program Pa | > the VA loan guaranty program is considered a program  |
| rticipants | > participant. This includes, but is not limited to     |
|            |                                                         |
|            | -   lenders                                             |
|            |                                                         |
|            | -   employees of lenders                                |
|            |                                                         |
|            | -   loan holders                                        |
|            |                                                         |
|            | -   loan servicers                                      |
|            |                                                         |
|            | -   builders                                            |
|            |                                                         |
|            | -   real estate brokers or agents                       |
|            |                                                         |
|            | -   management brokers                                  |
|            |                                                         |
|            | -   repair contractors                                  |
|            |                                                         |
|            | -   compliance inspectors                               |
|            |                                                         |
|            | -   fee appraisers                                      |
|            |                                                         |
|            | -   salespersons, and                                   |
|            |                                                         |
|            | -   manufactured home manufacturers, dealers or park    |
|            |     operators.                                          |
|            |                                                         |
|            | > ***Note***: A person is **not** considered a program  |
|            | > participant just because he or she obtains a VA loan. |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Prog | > VA may impose sanctions against a program participant |
| ram Partic | > who is also a veteran eligible for loan guaranty      |
| ipant Also | > benefits. This does not preclude the veteran from     |
|  A Veteran | > using his or her entitlement to obtain a              |
|            | > VA-guaranteed loan.                                   |
+------------+---------------------------------------------------------+

Continued on next page

17.01 Program Participants, Continued

+------------+---------------------------------------------------------+
| ##### Full | > A participant who is fully excluded may not           |
|  Exclusion |                                                         |
|            | -   conduct any type of VA loan guaranty business, or   |
|            |                                                         |
|            | -   have another party conduct such business on his or  |
|            |     her behalf.                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > Partial exclusion may involve limitations on          |
| ## Partial |                                                         |
|  Exclusion | -   the role the participant may play, or               |
|            |                                                         |
|            | -   how the participant conducts VA loan guaranty       |
|            |     business.                                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### P    | > Program participants may not                          |
| rogram Par |                                                         |
| ticipants  | -   do VA business with an excluded party if the type   |
| and Exclud |     of transaction involved is prohibited by the terms  |
| ed Parties |     of the party's exclusion, or                        |
|            |                                                         |
|            | -   allow an employed excluded party to perform         |
|            |     prohibited duties.                                  |
|            |                                                         |
|            | > Violation of the above restrictions may result in VA  |
|            | > sanctions against the program participant doing       |
|            | > business with (or employing) the excluded party.      |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > Participants may check the *List of Parties Excluded  |
| # Identify | > From Federal Procurement and Nonprocurement Programs* |
| ing Exclud | > published by the U.S. General Services Administration |
| ed Parties | > (GSA).                                                |
|            | >                                                       |
|            | > The list can be obtained                              |
|            |                                                         |
|            | -   in hard copy by subscription through the            |
|            |     Superintendent of Documents, U.S. Government        |
|            |     Printing Office, Washington, DC 20402, and          |
|            |                                                         |
|            | -   electronically, via the Internet at                 |
|            |     [www.]{.underline}epls.arnet@gsa/gov.               |
|            |                                                         |
|            | -                                                       |
|            |                                                         |
|            | > ***Note***: Contact GSA at (202)501-4740, or, online  |
|            | > at epls.support@gsa.gov for details.                  |
+------------+---------------------------------------------------------+

Continued on next page

17.01 Program Participants, Continued

+------------+---------------------------------------------------------+
| #####      | > Some of the parties on this list may be excluded from |
|  Nature of |                                                         |
|  Exclusion | -   participation in the programs of all Federal        |
|            |     agencies, including VA, or                          |
|            |                                                         |
|            | -   a specific program of a specific Federal agency.    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > The cause and treatment codes provide information on  |
| #### Cause | > the nature of the exclusion. These codes are          |
|  and Treat | > described in the document and at the GSA website,     |
| ment Codes | > above.                                                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Call the contact person for the agency that placed    |
|  Obtaining | > the excluded party on the list if                     |
|  Informati |                                                         |
| on on Excl | -   more detail is necessary to confirm the identity of |
| uded Party |     a party on the list, or                             |
|            |                                                         |
|            | -   to clarify the nature or length of the sanction.    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### N    | > For parties placed on the non-procurement list by VA  |
| on-procure | > (indicated by the code "VA"), obtain any necessary    |
| ment List  | > clarifying information from the local VA office with  |
|            | > jurisdiction over the city and state listed in the    |
|            | > excluded party's address.                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Par  | > Some of the VA sanctioned parties may not appear on   |
| ties Not o | > the GSA list. Information on such parties can be      |
| n GSA List | > obtained by contacting the local VA office.           |
+------------+---------------------------------------------------------+

Continued on next page

17.01 Program Participants, Continued

+------------+---------------------------------------------------------+
| ##### Le   | > Lenders and other parties may want to check whether a |
| nder Check | > program participant has been excluded prior to        |
|  On Exclud |                                                         |
| ed Parties | -   employing the program participant, or               |
|            |                                                         |
|            | -   participating in a VA loan guaranty-related         |
|            |     transaction, if the program participant is also a   |
|            |     party to the transaction.                           |
|            |                                                         |
|            | > ***Note***: This does not refer to a veteran using    |
|            | > entitlement to obtain a VA loan.                      |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Reas | > The following illustrates some of the reasons why a   |
| ons For Le | > lender/other party would want to check on a           |
| nder Check | > participant's exclusion.                              |
|            |                                                         |
|            | -   A lender hiring an underwriter for its VA lending   |
|            |     activities may want to verify that the underwriter  |
|            |     is not an excluded party.                           |
|            |                                                         |
|            | -   A lender making a loan to a veteran for new         |
|            |     construction is told by another lender that the     |
|            |     builder has had problems with some of its HUD/FHA   |
|            |     transactions. The lender may want to verify that    |
|            |     the builder is not an excluded party.               |
|            |                                                         |
|            | -   A management broker establishing a panel of         |
|            |     contractors to do repairs to VA-owned properties    |
|            |     must ensure that none of the panel members are      |
|            |     excluded parties.                                   |
+------------+---------------------------------------------------------+

#### 17.02 False Lender Certification

+------------+---------------------------------------------------------+
| #####      | > A lender must submit a signed certification with each |
| Lender Cer | > loan submission indicating that in processing and     |
| tification | > underwriting the loan, the lender has complied with   |
|            |                                                         |
|            | -   VA requirements                                     |
|            |                                                         |
|            | -   regulations, and                                    |
|            |                                                         |
|            | -   the law.                                            |
|            |                                                         |
|            | > The specific language required in the certification   |
|            | > is found in Step 7 of "Lender Procedures" in Section  |
|            | > 4.01.                                                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > Any lender who knowingly and willfully makes a false  |
| ### False  | > certification may be subject to civil money penalties |
| Lender Cer | > equal to the greater of                               |
| tification |                                                         |
|            | -   two times the amount of the Government's loss on    |
|            |     the loan involved, or                               |
|            |                                                         |
|            | -   another appropriate amount, not to exceed \$10,000. |
|            |                                                         |
|            | > In addition to monetary penalties, VA may impose      |
|            | > other sanctions including, but not limited to         |
|            |                                                         |
|            | -   debarment and suspension, and                       |
|            |                                                         |
|            | -   loss of automatic authority.                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Lend | > Lenders assessed civil money penalties for a false    |
| ers Assess | > certification do not appear in *GSA's List of Parties |
| ed Monetar | > Excluded From Federal Procurement and Nonprocurement  |
| y Penalty  | > Programs*. Other program participants may still       |
|            | > transact VA business with these lenders.              |
|            | >                                                       |
|            | > ***Exception***: Lenders may appear on the GSA list   |
|            | > if another sanction is imposed against them in        |
|            | > conjunction with the civil money penalty. In such     |
|            | > cases, other program participants may be prohibited   |
|            | > from transacting business with them.                  |
+------------+---------------------------------------------------------+

#### 17.03 Withdrawal of Automatic Authority

+------------+---------------------------------------------------------+
| ###        | > VA can withdraw a lender's automatic authority for    |
| ## Withdra | > proper cause, after giving the lender 30 days'        |
| wal For Pr | > notice. This applies to both                          |
| oper Cause |                                                         |
|            | -   supervised, and                                     |
|            |                                                         |
|            | -   nonsupervised lenders.                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > The lender may continue processing loans on a prior   |
| #### Submi | > approval basis after automatic authority has been     |
| tting Loan | > withdrawn.                                            |
| s for Prio | >                                                       |
| r Approval | > ***Note***: It is the lender's responsibility to      |
|            | > submit all loans for prior approval as long as        |
|            | > automatic authority is withdrawn.                     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Lenders with their automatic authority withdrawn do   |
| #### VA Bu | > not appear in GSA's *List of Parties Excluded From    |
| siness Wit | > Federal Procurement and Nonprocurement Programs*.     |
| h Other Pa | > Other program participants may still transact VA      |
| rticipants | > business with these lenders.                          |
|            | >                                                       |
|            | > ***Exception***: Lenders may appear on the GSA list   |
|            | > if another sanction is imposed against them. In such  |
|            | > cases, other program participants may be prohibited   |
|            | > from transacting business with them.                  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Withdrawal for an indefinite period can be based on   |
| #### Withd |                                                         |
| rawal for  | -   failure to continue meeting basic qualifying        |
| an Indefin |     criteria                                            |
| ite Period |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   for supervised lenders this includes loss of status |
|            |     as an entity subject to examination and supervision |
|            |     by a Federal or state regulatory agency             |
|            |                                                         |
|            | -   for nonsupervised lenders this includes no approved |
|            |     underwriter, failure to maintain \$50,000 working   |
|            |     capital, and/or failure to file the required        |
|            |     financial statements                                |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   any of the causes for debarment set forth in [38    |
|            |     CFR 44.305]{.underline}, or                         |
|            |                                                         |
|            | -   poor underwriting or consistently careless          |
|            |     processing during the probationary period for       |
|            |     newly-approved nonsupervised automatic lenders.     |
|            |                                                         |
|            | > **\[[38 CFR 44.305]{.underline}\]**                   |
+------------+---------------------------------------------------------+

Continued on next page

17.03 Withdrawal of Automatic Authority, Continued

+------------+---------------------------------------------------------+
| ##### Wit  | > Refer to the following table for information on       |
| hdrawal Ti | > withdrawal time periods.                              |
| me Periods |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > A withdrawal period of 60 days can be based on any of |
| ### Withdr | > the following situations:                             |
| awal Perio |                                                         |
| d: 60 Days | -   Loan submissions show deficiencies in credit        |
|            |     underwriting after repeatedly being called to the   |
|            |     lender\'s attention.                                |
|            |                                                         |
|            | -   Use of unstable sources of income to qualify        |
|            |     borrower or ignoring significant adverse credit     |
|            |     items affecting applicant's creditworthiness.       |
|            |                                                         |
|            | -   Employment or deposit verifications are             |
|            |     hand-carried by applicants or otherwise improperly  |
|            |     permitted to pass through the hands of a third      |
|            |     party.                                              |
|            |                                                         |
|            | -   Loan submissions are consistently incomplete after  |
|            |     repeatedly being called to the lender\'s attention  |
|            |                                                         |
|            | -   There are continued instances of disregard of VA    |
|            |     requirements after repeatedly being called to the   |
|            |     lender\'s attention.                                |
+------------+---------------------------------------------------------+

Continued on next page

17.03 Withdrawal of Automatic Authority, Continued

+------------+---------------------------------------------------------+
| ###        | > A withdrawal period of 180 days can be based on any   |
| ## Withdra | > of the following situations:                          |
| wal Period |                                                         |
| : 180 Days | -   Loans conflict with VA credit standards and would   |
|            |     not have been made by a lender acting prudently.    |
|            |                                                         |
|            | -   Failure to disclose to VA significant obligations   |
|            |     or other information which affects the veteran's    |
|            |     ability to repay the loan, and which results in     |
|            |     undue risk to the Government.                       |
|            |                                                         |
|            | -   Employment or deposit verifications are handcarried |
|            |     by the applicant or otherwise mishandled, resulting |
|            |     in submission of significant misinformation to VA.  |
|            |                                                         |
|            | -   Substantiated complaints are received that the      |
|            |     lender misrepresented VA requirements to veterans   |
|            |     to the detriment of their interests.                |
|            |                                                         |
|            | > ***Example***                                         |
|            | >                                                       |
|            | > The veteran was dissuaded from seeking a lower        |
|            | > interest rate based on the lender\'s incorrect advice |
|            | > that such options were excluded by VA requirements.   |
|            |                                                         |
|            | -   Closing documents show instances of improper        |
|            |     charges to veteran after the impropriety of such    |
|            |     charges are called to lender's attention by VA, or  |
|            |     the lender refuses to refund such charges after     |
|            |     notification by VA.                                 |
|            |                                                         |
|            | -   Deliberate delays in scheduling loan closings.      |
+------------+---------------------------------------------------------+

Continued on next page

17.03 Withdrawal of Automatic Authority, Continued

+------------+---------------------------------------------------------+
| ####       | > A withdrawal period of 1-3 years can be based on any  |
| # Withdraw | > of the situations described in the table below.       |
| al Period: |                                                         |
|  1-3 Years |                                                         |
+------------+---------------------------------------------------------+

  ----------------------------------- -----------------------------------
  Situation                           Example

  Failure to properly disburse loans  Loan disbursement checks are
                                      returned due to insufficient funds.

  Involvement by the lender in the    Knowingly permitting the veteran to
  improper use of a veteran\'s        violate occupancy requirements, or
  entitlement                         lender involvement in the veteran's
                                      sale of entitlement to a third
                                      party.

                                      Lender makes the loan with the
                                      knowledge that the veteran is not
                                      purchasing the property to be his
                                      or her home. Instead, the veteran
                                      intends to transfer title to a
                                      third party who assumes the loan
                                      shortly after closing.
  ----------------------------------- -----------------------------------

#### 17.04 Withdrawal of LAPP Authority

+------------+---------------------------------------------------------+
| #####      | > The authority to determine value under LAPP is a      |
|  LAPP is a | > privilege delegated to lenders at VA's discretion.    |
|  Privilege | > Lenders maintain this privilege by complying with all |
|            | > applicable LAPP-related VA requirements.              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > VA can amend or withdraw the special privilege of     |
| Withdrawal | > LAPP authority from a lender for proper cause. This   |
|  or Amendm | > applies to both supervised and nonsupervised lenders  |
| ent for Pr | > with automatic authority that have been granted LAPP  |
| oper Cause | > authority.                                            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Wi   | > LAPP authority can be withdrawn for a specific or     |
| thdrawal T | > indefinite period of time.                            |
| ime Period |                                                         |
+------------+---------------------------------------------------------+

Continued on next page

17.04 Withdrawal of LAPP Authority, Continued

+------------+---------------------------------------------------------+
| #####      | > The following is a non-inclusive list of examples of  |
|  Examples  | > proper cause that can form a basis for withdrawal of  |
| of Withdra | > LAPP authority.                                       |
| wal for Pr | >                                                       |
| oper Cause | > ***Technical incompetence***                          |
|            | >                                                       |
|            | > Conduct demonstrating insufficient knowledge of       |
|            | > industry-accepted appraisal principles, techniques    |
|            | > and practices and/or the inability to adequately      |
|            | > apply them in reviewing appraisal reports and making  |
|            | > value determinations for VA purposes.                 |
|            | >                                                       |
|            | > ***Substantive or repetitive errors***                |
|            | >                                                       |
|            | > A substantive error is one which significantly        |
|            | > involves the value determination or condition of the  |
|            | > property. In the aggregate, nonsubstantive errors     |
|            | > which are frequently repeated may also indicate that  |
|            | > LAPP case reviews are being performed in a careless   |
|            | > or negligent manner.                                  |
|            | >                                                       |
|            | > ***Disregard for VA requirements***                   |
|            | >                                                       |
|            | > Continued disregard for the VA requirements and       |
|            | > procedures outlined in VA regulations, guidelines,    |
|            | > instructions or applicable laws, after the problem    |
|            | > has been brought to the lender\'s attention.          |
|            | >                                                       |
|            | > ***Failure to meet qualification requirements***      |
|            | >                                                       |
|            | > The lender or the lender's staff appraisal reviewer   |
|            | > (SAR) no longer meets the basic LAPP qualification    |
|            | > requirements (see Chapter 15).                        |
|            | >                                                       |
|            | > ***Civil judgments and convictions***                 |
+------------+---------------------------------------------------------+

Continued on next page

17.04 Withdrawal of LAPP Authority, Continued

+------------+---------------------------------------------------------+
| ####       | > Generally, VA will provide written notice at least 30 |
| # Notice o | > days prior to imposition of the sanction to           |
| f Sanction |                                                         |
|            | -   the lender's staff appraisal reviewer (SAR)         |
|            |                                                         |
|            | -   the lending officer responsible for the quality of  |
|            |     the SAR's work, and                                 |
|            |                                                         |
|            | -   any other appropriate official(s).                  |
|            |                                                         |
|            | > ***Note***: VA's notice provides the basis for the    |
|            | > sanction and information on how to exercise appeal    |
|            | > rights.                                               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > VA is not required to give 30 days' notice if the     |
| # Governme | > Government's interests are exposed to immediate risk  |
| nt at Imme | > from the lender's activities. The withdrawal is       |
| diate Risk | > effective immediately in such cases.                  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Once LAPP authority is withdrawn, VA must             |
| #### Deter |                                                         |
| mining Rea | -   make all determinations of reasonable value for the |
| sonable Va |     lender, and                                         |
| lue and Is |                                                         |
| suing CRVs | -   issue the Certificates of Reasonable Value (CRVs).  |
|            |                                                         |
|            | > ***Note***: For any withdrawal longer than 90 days,   |
|            | > the lender must reapply to VA to participate in LAPP. |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Imp  | > As an alternative, VA may impose a probationary       |
| osition of | > period for a specified period to further evaluate     |
|  Probation | > LAPP-related performance. During that period, the VA  |
| ary Period | > office, at its discretion, may require                |
|            |                                                         |
|            | -   VA review of appraisal reports and lender notices   |
|            |     of value                                            |
|            |                                                         |
|            | -   VA staff issuance of the lender's VA value notices  |
|            |                                                         |
|            | -   increased VA quality control review of the          |
|            |     lender\'s LAPP cases, or                            |
|            |                                                         |
|            | -   other measures designed to monitor and improve      |
|            |     performance.                                        |
+------------+---------------------------------------------------------+

Continued on next page

17.04 Withdrawal of LAPP Authority, Continued

+------------+---------------------------------------------------------+
| #          | > Withdrawal or amendment of a lender's LAPP authority  |
| #### Other | > does not preclude VA from                             |
|  Sanctions |                                                         |
|            | -   also withdrawing automatic processing authority, or |
|            |                                                         |
|            | -   taking debarment or suspension action against the   |
|            |     lender for the same cause.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Rela | > Lenders with their LAPP authority withdrawn do not    |
| tionship W | > appear in GSA's *List of Parties Excluded From        |
| ith Other  | > Federal Procurement and Nonprocurement Programs.*     |
| Program Pa | >                                                       |
| rticipants | > Other program participants may still transact VA      |
|            | > business with these lenders.                          |
|            | >                                                       |
|            | > ***Exception***: Lenders may appear on the GSA list   |
|            | > if another sanction is imposed against them. In such  |
|            | > cases, other program participants may be prohibited   |
|            | > from transacting business with them.                  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > As long as LAPP authority is withdrawn, it is the     |
| #### Respo | > lender's responsibility to ensure that VA, and not    |
| nsbilities | > the lender                                            |
|  of Lender |                                                         |
|            | -   makes all determinations of reasonable value, and   |
|            |                                                         |
|            | -   issues CRVs on its loans.                           |
+------------+---------------------------------------------------------+

#### 17.05 Debarment and Suspension

+------------+---------------------------------------------------------+
| #####      | > Debarment is a sanction that in most cases excludes   |
|  Debarment | > the program participant from any participation in the |
|            | > nonprocurement programs of any Federal agency,        |
|            | > including VA's loan guaranty program.                 |
|            | >                                                       |
|            | > ***Note***: Occasionally debarment is used to exclude |
|            | > the participant from only certain types of            |
|            | > transactions.                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### D    | > Debarment is effective for a period appropriate to    |
| ebarment T | > the seriousness of the cause. Often a period of 3     |
| ime Period | > years is deemed appropriate.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Suspension has the same impact as debarment, but is   |
| Suspension | > imposed on a temporary basis, pending the outcome of  |
|            |                                                         |
|            | -   investigative                                       |
|            |                                                         |
|            | -   legal, or                                           |
|            |                                                         |
|            | -   debarment proceedings.                              |
|            |                                                         |
|            | > ***Note***: Suspension can be followed by debarment   |
|            | > if the results of the proceedings warrant.            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Su   | > Suspension generally does not exceed 18 months. It is |
| spension T | > imposed for a temporary period pending                |
| ime Period |                                                         |
|            | -   investigative                                       |
|            |                                                         |
|            | -   legal, or                                           |
|            |                                                         |
|            | -   debarment proceedings.                              |
|            |                                                         |
|            | > ***Note***: An additional period of debarment may     |
|            | > follow.                                               |
+------------+---------------------------------------------------------+

Continued on next page

17.05 Debarment and Suspension, Continued

+------------+---------------------------------------------------------+
| #####      | > The debarred or suspended participant is excluded     |
|  Geographi | > from targeted activities in all locations.            |
| c Scope of |                                                         |
|  Exclusion |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > All loan guaranty program participants debarred by VA |
| #### Debar | > are listed in GSA's *List of Parties Excluded From    |
| red Loan G | > Federal Nonprocurement Programs*. Most of these       |
| uaranty Pa | > debarments are Government-wide.                       |
| rticipants | >                                                       |
|            | > The GSA list contains government-wide debarments of   |
|            | > parties who cannot participate in the nonprocurement  |
|            | > programs of any Federal agency.                       |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Part | > Any program participant (individual or entity) and/or |
| icipant is | > affiliate can be debarred or suspended. If the        |
|  an Entity | > participant is an entity, the sanction can be imposed |
|            | > against the                                           |
|            |                                                         |
|            | -   entire organization                                 |
|            |                                                         |
|            | -   a certain part of the organization, or              |
|            |                                                         |
|            | -   only certain individuals.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### VA R | > VA can impose debarments or suspensions based on any  |
| egulations | > of a multitude of causes outlined in VA regulations   |
|            |                                                         |
|            | -   [38 CFR 44.305]{.underline}, and                    |
|            |                                                         |
|            | -   [38 CFR.44.405]{.underline}.                        |
|            |                                                         |
|            | > **\[[38 CFR 44.305]{.underline}\]**                   |
|            | >                                                       |
|            | > **\[[38 CFR 44.405]{.underline}\]**                   |
+------------+---------------------------------------------------------+

Continued on next page

17.05 Debarment and Suspension, Continued

+------------+---------------------------------------------------------+
| #####      | > The regulations authorize VA to debar or suspend      |
| Causes for | > participants for "Any other cause of so serious or    |
|            | > compelling a nature that it affects the present       |
| ##### Deb  | > responsibility of a person." These causes include,    |
| arment or  | > but are not limited to                                |
| Suspension |                                                         |
|            | -   conviction of, or civil judgment for, fraud,        |
|            |     embezzlement, theft, forgery, falsification or      |
|            |     destruction of records, commission of an offense    |
|            |     evidencing serious lack of integrity                |
|            |                                                         |
|            | -   violation of the terms of a public agreement or     |
|            |     transaction so serious as to affect the integrity   |
|            |     of an agency program                                |
|            |                                                         |
|            | -   knowingly doing business with a debarred,           |
|            |     suspended, ineligible, or voluntarily excluded      |
|            |     person, or                                          |
|            |                                                         |
|            | -   failure to pay debts owed to the Federal            |
|            |     Government.                                         |
|            |                                                         |
|            | > **\[[38 CFR 44.305]{.underline}\]**                   |
|            | >                                                       |
|            | > **\[[38 CFR 44.405]{.underline}\]**                   |
+------------+---------------------------------------------------------+

#### 17.06 Limited Denial of Participation (LDP)

+------------+---------------------------------------------------------+
| ##### In   | > A Limited Denial of Participation (LDP)               |
| troduction |                                                         |
|            | -   is a sanction imposed by a local VA office limiting |
|            |     a program participant's activities within that      |
|            |     local VA office's jurisdiction                      |
|            |                                                         |
|            | -   can either exclude the program participant from     |
|            |     participation in any VA loan guaranty activities in |
|            |     the geographic area or just certain types of loan   |
|            |     guaranty activities in the geographic area, and     |
|            |                                                         |
|            | -   can be the sole sanction against a participant, or  |
|            |     a means to immediately end unacceptable conduct     |
|            |     while more severe sanctions are considered.         |
|            |                                                         |
|            | > ***Note:*** An LDP may prohibit the participant from  |
|            | > performing VA appraisals, but not from acting as a    |
|            | > management broker or in another role.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### Part | > If the participant is an entity, the sanction can be  |
| icipant is | > imposed against                                       |
|  an Entity |                                                         |
|            | -   the entire organization                             |
|            |                                                         |
|            | -   a certain part of the organization, or              |
|            |                                                         |
|            | -   only certain individuals.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### LDP  | > An LDP can be imposed against any program participant |
| Exceptions | > (individual or entity) and/or affiliate except        |
|            |                                                         |
|            | -   lenders                                             |
|            |                                                         |
|            | -   employees of lenders, and                           |
|            |                                                         |
|            | -   manufactured home manufacturers.                    |
+------------+---------------------------------------------------------+

Continued on next page

17.06 Limited Denial of Participation (LDP), Continued

+------------+---------------------------------------------------------+
| ##### Caus | > VA can impose LDPs based on any of a multitude of     |
| es for LDP | > causes outlined in VA regulations [38 CFR             |
|            | > 44.705]{.underline}. These causes include, but are    |
|            | > not limited to                                        |
|            |                                                         |
|            | -   irregularities in a participant's or contractor's   |
|            |     performance in the VA loan guaranty program         |
|            |                                                         |
|            | -   failure to satisfy contractual obligations or to    |
|            |     proceed in accordance with contract specifications  |
|            |                                                         |
|            | -   construction deficiencies deemed by VA to be the    |
|            |     participant's responsibility, and                   |
|            |                                                         |
|            | -   failure to proceed in accordance with VA            |
|            |     requirements or to comply with VA regulations.      |
|            |                                                         |
|            | > **\[[38 CFR 44.705]{.underline}\]**                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### LDP  | > A local VA office may also impose an LDP as a         |
| as Recipro | > reciprocal action because an LDP or other sanction    |
| cal Action | > was imposed upon the participant by                   |
|            |                                                         |
|            | -   another VA office, or                               |
|            |                                                         |
|            | -   an office of another Federal agency, such as HUD or |
|            |     USDA.                                               |
|            |                                                         |
|            | > A VA office may also notify local offices of another  |
|            | > Federal agency that the LDP action has been taken.    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > The participant is excluded from targeted activities  |
| #### Juris | > only within the jurisdiction of the VA office         |
| diction Re | > imposing the sanction. If other VA offices impose a   |
| strictions | > reciprocal LDP, the exclusion applies within their    |
|            | > jurisdictions also.                                   |
+------------+---------------------------------------------------------+

Continued on next page

17.06 Limited Denial of Participation (LDP), Continued

+------------+---------------------------------------------------------+
| ##### App  | > No additional appeal rights are provided to the       |
| eal Rights | > participant for reciprocal LDPs. The participant is   |
|            | > provided appeal rights with the original LDP only,    |
|            | > and may choose to exercise them at that time.         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > LDPs can be imposed for a specified period up to 12   |
| #### LDP T | > months.                                               |
| ime Period |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > In the case of builders with unresolved construction  |
| ## Builder | > deficiencies, the LDP may be for                      |
| s With Unr |                                                         |
| esolved De | -   an indefinite period pending correction of the      |
| ficiencies |     construction deficiencies, or                       |
|            |                                                         |
|            | -   a specified period up to 12 months.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### O    | > LDP parties are not listed in GSA's *List of Parties  |
| btaining L | > Excluded From Federal Procurement and Nonprocurement  |
| DP Party I | > Programs*. Therefore, information must be obtained    |
| nformation | > from the local VA office.                             |
+------------+---------------------------------------------------------+

#### 17.07 Unfair Contract Provisions or Marketing Practices

+------------+---------------------------------------------------------+
| ##### In   | > VA may impose sanctions, such as debarment,           |
| troduction | > suspension, or LDP against participants who use       |
|            | > contracts of sale, or methods or practices in the     |
|            | > marketing of properties, which are unfair or          |
|            | > prejudicial to veteran-purchasers. Unethical          |
|            | > practices based upon experience and standards         |
|            | > generally observed by reputable homebuilders and      |
|            | > other reputable program participants are              |
|            |                                                         |
|            | -   barred by VA, and                                   |
|            |                                                         |
|            | -   grounds for sanctions.                              |
|            |                                                         |
|            | > ***Note***: Chapter 9 provides examples of unfair     |
|            | > contractual provisions or features.                   |
+------------+---------------------------------------------------------+

Continued on next page

17.07 Unfair Contract Provisions or Marketing Practices, Continued

+------------+---------------------------------------------------------+
| ##         | > Unfair marketing practices include, but are not       |
| ### Unfair | > limited to                                            |
|  Marketing |                                                         |
|  Practices | -   enforcement of unfair contractual provisions        |
|            |                                                         |
|            | -   requiring purchasers to execute so-called           |
|            |     "contracts" which legally bind the purchasers but   |
|            |     do not bind the seller to deliver the property when |
|            |     completed to the purchasers                         |
|            |                                                         |
|            | > ***Example***: limiting a seller's liability to the   |
|            | > refund of the earnest money deposit                   |
|            |                                                         |
|            | -   advertising that a property or project is "VA       |
|            |     guaranteed" or "VA approved" or "VA inspected" in   |
|            |     such a way as to lead veterans to believe that VA   |
|            |     guarantees the construction and workmanship\        |
|            |     ***Note***: "VA financing available," "Eligible for |
|            |     VA financing," or similar advertising is            |
|            |     acceptable.                                         |
|            |                                                         |
|            | -   delaying tactics on the part of the builder to      |
|            |     postpone completion of the property or the closing  |
|            |     of the sale after completion in an effort to induce |
|            |     the veteran to agree to a modification of a firm    |
|            |     contract such as                                    |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   the substitution of inferior materials              |
|            |                                                         |
|            | -   the omission of appliances, or                      |
|            |                                                         |
|            | -   an increase in price.                               |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   failure of the seller or agent of the seller of     |
|            |     proposed or newly constructed property to place     |
|            |     deposits or downpayments received from              |
|            |     veteran-purchasers in a special trust account , as  |
|            |     required by 38 U.S.C. 3706                          |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   failure to place downpayments or earnest money      |
|            |     deposits in a trust fund or in escrow when required |
|            |     by law or by local practice on existing properties, |
|            |     or                                                  |
|            |                                                         |
|            | -   failure or inability of the seller to return the    |
|            |     deposit when and if required under the contract     |
|            |     when it is not required or not customary for these  |
|            |     deposits to be "isolated," and                      |
|            |                                                         |
|            | > **\[[38 U.S.C. 3706]{.underline}\]**                  |
|            |                                                         |
|            | -   failure of the seller of proposed or newly          |
|            |     constructed property to state in the sales          |
|            |     agreement, when applicable, that the property was   |
|            |     or will be constructed under FHA compliance         |
|            |     inspection procedures pursuant to *section 203(i)   |
|            |     or 221(d)(2) of the National Housing Act.*          |
+------------+---------------------------------------------------------+

#### 17.08 Violations of Equal Housing Opportunity Laws

+------------+---------------------------------------------------------+
| ##### In   | > VA may impose sanctions, such as debarment,           |
| troduction | > suspension, or LDP against participants who violate   |
|            | > statutory provisions and regulations governing equal  |
|            | > opportunity in housing. These laws and regulations    |
|            | > include                                               |
|            |                                                         |
|            | -   Equal Credit Opportunity Act (ECOA)                 |
|            |                                                         |
|            | -   The Fair Housing Act                                |
|            |                                                         |
|            | -   Section 527 of the National Housing Act, and        |
|            |                                                         |
|            | -   VA Regulations at [38 CFR 36.4363]{.underline}      |
|            |                                                         |
|            | > **\[[38 CFR 36.4363]{.underline}\]**                  |
|            | >                                                       |
|            | > Based on these provisions and VA's policy on unfair   |
|            | > marketing practices, VA may impose sanctions if any   |
|            | > party involved or financially interested in the       |
|            | > construction or sale of property has declined to sell |
|            | > property to an eligible veteran because of            |
|            |                                                         |
|            | -   race                                                |
|            |                                                         |
|            | -   color                                               |
|            |                                                         |
|            | -   sex                                                 |
|            |                                                         |
|            | -   handicap                                            |
|            |                                                         |
|            | -   familial status                                     |
|            |                                                         |
|            | -   religion, or                                        |
|            |                                                         |
|            | -   national origin.                                    |
+------------+---------------------------------------------------------+

Continued on next page

17.08 Violations of Equal Housing Opportunity Laws, Continued

+------------+---------------------------------------------------------+
| ####       | > This regulation requires a certification by builders  |
| # Equal Ho | > or other parties requesting the following types of VA |
| using Cert | > appraisals                                            |
| ification  |                                                         |
|            | -   a Master Certificate of Reasonable Value on         |
|            |     proposed or existing housing, or                    |
|            |                                                         |
|            | -   an individual appraisal of existing housing that    |
|            |     was not previously occupied.                        |
|            |                                                         |
|            | > The certification provides that the builder or other  |
|            | > party will not decline to sell the appraised property |
|            | > to a prospective purchaser because of his or her      |
|            |                                                         |
|            | -   race                                                |
|            |                                                         |
|            | -   color                                               |
|            |                                                         |
|            | -   religion                                            |
|            |                                                         |
|            | -   sex, or                                             |
|            |                                                         |
|            | -   national origin.                                    |
|            |                                                         |
|            | > ***Note***: This requirement is satisfied by          |
|            | > completion of VA Form 26-8791, *VA Affirmative        |
|            | > Marketing Certification.*                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Any veteran obtaining a VA-guaranteed loan is also    |
| #### Veter | > required to certify that he or she will not decline   |
| an Equal H | > to sell the home in the future based on these         |
| ousing Cer | > discriminatory factors. The certification is found in |
| tification | > the *Veteran's Certifications* on [VA Form            |
|            | > 26-1820]{.underline}, Report and Certification of     |
|            | > Loan Disbursement*.*                                  |
+------------+---------------------------------------------------------+

Amend or Withdraw the Special Privilege of LAPP Authority, 17-11

Appeal Rights to all Program Participants, 17-1

Cause and Treatment Codes, 17-4

Causes for LDP, 17-19

Debarment, 17-15

Debarment or Suspension Causes, 17-17

Debarred Loan Guaranty Participants, 17-16

Determining Reasonable Value and Issuing CRVs, 17-13

Disregard for VA Requirements - Example, 17-12

Equal Housing Certification, 17-24

Excluded Party, 17-4

Failure to Meet Qualification Requirements - Example, 17-12

False Lender Certification, 17-6

Full Exclusion, 17-3

Government at Risk, 17-13

GSA List, 17-4

Identifying Excluded Parties Internet Address, 17-3

Jurisdiction Restrictions, 17-19

LAPP Privilege, 17-11

LDP as Reciprocal Action, 17-19

LDP Exceptions, 17-18

LDP Party Information, 17-20

LDP Time Period, 17-20

Limited Denial of Participation (LDP), 17-18

Monetary Penalty, 17-6

Nature of Exclusion, 17-4

Non Procurement List, 17-4

Notice of Sanction, 17-13

Other Program Participants, 17-14

Partial Exclusion, 17-3

Participant Also A Veteran, 17-2

Participant is an Entity, 17-16, 17-18

Participants who Violate Statutory Provisions and Regulations, 17-23

Probationary Period, 17-13

Program Participants, 17-2

Reasons For Lender Check, 17-5

Responsbilities of Lender, 17-14

Sanctions, 17-1

Scope of Exclusion, 17-16

Submitting Loans, 17-7

Substantive or Repetitive Errors - Example, 17-12

Suspension, 17-15

Technical Incompetence - Withdrawal Example, 17-12

Type of Participant, 17-1

Unfair Contract Provisions or Marketing Practices, 17-21

Unfair Marketing Practices, 17-22

Unresolved Deficiencies, 17-20

VA Business With Other Participants, 17-7

VA Loan Guaranty Program, 17-1

VA May Impose Sanctions, 17-21

VA Regulations on Debarments or Suspensions, 17-16

VA's Policy on Unfair Marketing Practices, 17-23

Verifying Excluded Parties, 17-5

Veteran Equal Housing Certification, 17-24

Violations of Equal Housing Opportunity Laws, 17-23

Withdrawal for an Indefinite Period, 17-7

Withdrawal For Proper Cause, 17-7

Withdrawal Period: 1-3 Years, 17-10

Withdrawal Period: 180 Days, 17-9

Withdrawal Period: 60 Days, 17-8

Withdrawal Time Periods, 17-8