This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

79142 

Vol. 85, No. 237 

Wednesday, December 9, 2020 

1See 12 U.S.C. 1715u(b); 24 CFR 203.371; 

Mortgagee Letter 2020–06, FHA’s Loss Mitigation 

Options for Single Family Borrowers Affected by the 

Presidentially-Declared COVID–19 National 

Emergency in Accordance with the CARES Act 

(Apr. 1, 2020), https://www.hud.gov/sites/dfiles/ 

OCHCO/documents/20-06hsngml.pdf; Mortgagee 

Letter 2020–22, FHA’s COVID–19 Loss Mitigation 

Options (Jul. 8, 2020), https://www.hud.gov/sites/ 

dfiles/OCHCO/documents/20-22hsgml.pdf. See also 

42 U.S.C. 1472(h)(14); 7 CFR 3555.304(d). 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 36 

RIN 2900–AR05 

Loan Guaranty: COVID–19 Veterans 

Assistance Partial Claim Payment 

Program 

AGENCY: Department of Veterans Affairs. 

ACTION: Proposed rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) proposes to establish the 

COVID–19 Veterans Assistance Partial 

Claim Payment program (COVID– 

VAPCP), a temporary program to help 

veterans return to making normal loan 

payments on a VA-guaranteed loan 

(guaranteed loan) after exiting a 

Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act) forbearance 

period. Under this proposed program, a 

servicer could consider a partial claim 

option after the servicer has evaluated 

all loss-mitigation options for feasibility. 

If the veteran qualifies and opts to move 

forward, VA would act as a mortgage 

investor of last resort by purchasing the 

amount of indebtedness necessary to 

bring the veteran’s guaranteed loan 

current. The veteran would have up to 

60 months to defer repayment to VA 

and up 120 months to repay the loan in 

full, with the interest rate fixed at 1 

percent per annum. 

DATES: Comments must be received on 

or before January 8, 2021. 

ADDRESSES: Comments may be 

submitted through www.Regulations.gov 

or mailed to Stephanie Li, Chief of 

Regulations, Loan Guaranty Service 

(26), Veterans Benefits Administration, 

Department of Veterans Affairs, 810 

Vermont Avenue NW, Washington, DC 

20420. Please note that due to 

circumstances associated with the 

COVID–19 pandemic, VA discourages 

the submission of comments by mail. 

Comments should indicate that they are 

submitted in response to ‘‘RIN 2900– 

AR05—Loan Guaranty: COVID–19 

Veterans Assistance Partial Claim 

Payment Program.’’ Comments received 

will be available at regulations.gov for 

public viewing, inspection or copies. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Trevayne, Assistant Director, 

Loan Property and Management, Loan 

Guaranty Service (26), Veterans Benefits 

Administration, Department of Veterans 

Affairs, 810 Vermont Avenue NW, 

Washington, DC 20420, (202) 632–8862. 

(This is not a toll-free telephone 

number.) 

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule 

One of the primary goals of VA’s 

Home Loan Guaranty Service is to help 

veterans who use their guaranteed loan 

benefit retain their homes and avoid 

foreclosure. To that end, VA and loan 

servicers intervene dynamically when 

guaranteed loans are more than 60 days 

in default. Such actions to assist 

veterans in default not only help 

veterans retain their homes and 

minimize damage to their credit ratings, 

but also help produce cost savings to the 

Government. 

Given the unique needs of veterans 

and loan servicers during the novel 

coronavirus disease (COVID–19) 

national emergency, VA proposes to 

initiate a temporary program that would 

establish a partial claim option to aid 

veterans who suffer financial hardship 

due to COVID–19. VA’s program would 

be modeled after existing partial claim 

programs already available to borrowers 

with other federally backed loans; that 

is, those guaranteed or insured by the 

U.S. Department of Housing and Urban 

Development’s (HUD) Federal Housing 

Administration (FHA) and the U.S. 

Department of Agriculture’s (USDA) 

Rural Housing Service. 

Under VA’s proposed COVID–VAPCP, 

servicers would consider a veteran for 

the program only after evaluating the 

feasibility of loss-mitigation options that 

are already available in VA’s program. If 

a servicer determines that the veteran 

satisfies the COVID–VAPCP 

requirements and the veteran elects to 

participate, VA would purchase the 

veteran’s forborne indebtedness, which 

is similar to VA’s existing loan refund 

process. As a mortgage investor of last 

resort, VA would purchase the amount 

of indebtedness that is necessary to 

bring the veteran’s guaranteed loan 

current. The veteran would repay VA 

for this amount, and the indebtedness 

would be secured as a lien against the 

veteran’s home upon execution and 

recordation of the security instrument. 

The servicer would handle all aspects of 

the origination. With the veteran’s 

guaranteed loan brought current, the 

veteran would resume making regularly 

scheduled monthly loan payments to 

the servicer. The veteran would also 

repay VA for the new loan, under the 

terms proposed below. The new loan 

would be serviced under VA’s existing 

loan portfolio. 

While VA’s proposed COVID–VAPCP 

would bear many similarities to the 

COVID-related partial claim programs 

offered by FHA and USDA,1 VA’s 

program would not be identical to 

either. Similarities to such agencies’ 

programs would include the following: 

(1) The guaranteed loan for which a 

partial claim payment is requested must 

have been, on March 1, 2020, either 

current or less than 30 days past due; (2) 

a partial claim payment would only be 

payable to the servicer if the veteran 

missed at least one scheduled monthly 

payment under a CARES Act 

forbearance and at least one such 

payment remains unpaid; (3) VA would 

only pay one partial claim payment per 

veteran; (4) the veteran would need to 

occupy, as the veteran’s residence, the 

property securing the guaranteed loan 

for which the partial claim is associated; 

and (5) the servicer would be required 

to determine whether the veteran 

satisfies the program requirements, to 

prepare the appropriate loan documents 

on VA’s behalf, and to bring the 

veteran’s guaranteed loan current, 

before submitting to VA a request for 

partial claim payment. 

Distinguishing aspects of VA’s 

program would include the following: 

(1) The partial claim payment could not 

exceed 15 percent of the unpaid 

principal balance of the guaranteed loan 

as of the date the veteran entered into 

a CARES Act forbearance; (2) the 

veteran would have up to 120 months 

to repay the partial claim VA paid to the 

servicer on the veteran’s behalf; (3) 


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2Mortgage Bankers Association, National 

Delinquency Survey Data, 2010 through 2020, 

https://www.mba.org/news-research-and-resources/ 

research-and-economics/single-family-research/ 

national-delinquency-survey. 

3See VBA Annual Benefits Report: Home Loan 

Guaranty, Fiscal Year 2019, page 19, https://

www.benefits.va.gov/REPORTS/abr/docs/2019- 

loan-guaranty.pdf. 

4 38 CFR 36.4350(a). 

5 VA Servicer Handbook, VA Manual 26–4, Chap. 

4: Delinquent Loan Servicing, 4.01a. (Feb. 26, 2019), 

https://www.benefits.va.gov/WARMS/docs/ 

admin26/m26_04/Ch4.docx. 

6 38 CFR 36.4317(c)(7) (requiring an electronic 

default notification (EDN) when the guaranteed 

loan becomes at least 61 days delinquent). 

7 38 CFR 36.4319. 

8 38 CFR 36.4319(a). 

9A repayment plan is a ‘‘written executed 

agreement by and between the borrower and the 

holder to reinstate a loan that is 61 or more calendar 

days delinquent, by requiring the borrower to pay 

each month over a fixed period (minimum of three 

months duration) the normal monthly payments 

plus an agreed upon portion of the delinquency 

each month.’’ 38 CFR 36.4301. 

10A special forbearance is ‘‘a written agreement 

executed by and between the holder and the 

borrower where the holder agrees to suspend all 

payments or accept reduced payments for one or 

more months, on a loan 61 or more calendar days 

delinquent, and the borrower agrees to pay the total 

delinquency at the end of the specified period or 

enter into a repayment plan.’’ 38 CFR 36.4301. 

11 VA Servicer Handbook, VA Manual 26–4, 

Chap. 5: Loss Mitigation, 5.06 (Feb. 26, 2019), 

https://www.benefits.va.gov/WARMS/docs/ 

admin26/m26_04/Ch5_Loss_Mitigation.docx. 

repayment in full would be required 

immediately upon the veteran’s transfer 

of title to the property, the refinancing 

of the guaranteed loan for which the 

partial claim payment is associated, or 

payment in full of such guaranteed loan; 

(4) VA would automatically defer a 

veteran’s monthly payments for the first 

60 months of the loan, meaning that a 

veteran would not have to make any 

payment to VA during the period of 

deferment; (5) a veteran would be 

allowed to pay during such deferment, 

without premium or fee, the entire 

indebtedness or any portion thereof, 

provided that such portion is not less 

than what would be due for one full 

monthly payment as specified in the 

loan documents; (6) VA would charge a 

fixed interest rate of 1.00 percent per 

annum on the loan; and (7) VA would 

require servicers to certify that the 

veteran’s monthly residual income, as 

described in 38 CFR 36.4340(e), would 

be adequate to meet living expenses 

after estimated monthly shelter 

expenses (e.g., payments on the 

guaranteed loan) have been paid and 

other monthly obligations have been 

met. 

Another distinguishing aspect of VA’s 

program is that VA would expect that 

servicers consider the partial claim 

payment option only as a last resort, 

after a servicer has evaluated the 

feasibility of providing loss-mitigation 

options that are already available in 

VA’s program. Consistent with VA’s 

existing regulations and policies, 

servicers would evaluate a veteran’s 

financial situation and, if appropriate, 

offer the veteran options that are within 

the servicer’s financial capabilities and 

business model. 

As initial CARES Act forbearance 

periods near their end, VA stakeholders 

confront numerous decisions that have 

far-reaching consequences. Many 

veterans, for example, must decide 

whether to request additional 

forbearance and watch their forborne 

indebtedness grow, or attempt to resume 

their regularly scheduled monthly 

payments, despite potential hardships 

and uncertainties caused by the national 

emergency. VA’s partial claim 

assistance may well be the determining 

factor for certain veterans, affecting the 

extent to which they can recover 

financially from the crisis. Similarly, 

servicers must evaluate their liquidity 

positions and other factors to determine 

how to make the advances necessary for 

investor requirements. Some servicers 

may even be questioning whether they 

can stay afloat, which ultimately harms 

not just the servicer, but also the 

veterans whose guaranteed loans are 

being serviced. 

VA’s proposed COVID–VAPCP would 

create a ‘‘soft landing’’ for certain 

veterans, enabling them to return to 

their regularly scheduled monthly 

payments without suffering another 

financial shock. The program would 

also provide a lifeline for certain 

servicers, thereby mitigating the risk 

that veterans would be left without the 

benefit of prudent loan servicing. 

II. Background 

A. VA’s Existing Policies for Delinquent 

Loans 

VA’s loan administration policies and 

oversight have resulted in one of the 

lowest foreclosure inventory rates in the 

industry over the past decade.2 Data 

reported in the most recent Veterans 

Benefits Administration Annual 

Benefits Report reflects that such 

policies and oversight saved 

approximately 100,000 veterans from 

foreclosure annually over the past four 

fiscal years.3

VA requires holders of guaranteed 

loans to establish and maintain a loan 

servicing program consistent with 

industry standards.4 If a veteran misses 

one loan payment, the guaranteed loan 

becomes delinquent.5 Once a 

guaranteed loan reaches 61 days 

delinquent, servicers are required to 

report the delinquency to VA, to work 

with the veteran to consider lossmitigation options or alternatives to 

foreclosure, and to report updates on the 

status of the guaranteed loan to VA.6

Upon notification to VA, a VA loan 

technician will review the case, monitor 

servicer activities, and intervene as 

needed during the delinquency to 

ensure that the servicer has provided 

adequate servicing and has presented all 

appropriate options to attempt to 

reinstate the guaranteed loan or avoid 

foreclosure. 

Servicers are ultimately responsible 

for utilizing loss-mitigation options and 

alternatives to foreclosure to help 

veterans avoid foreclosure. VA 

regulations allow VA to pay an 

incentive to a servicer whenever the 

servicer completes one of five borrowerassistance actions (i.e., loss-mitigation 

options and alternatives to foreclosure).7

Additionally, while VA generally does 

not require servicers to pursue lossmitigation options and alternatives to 

foreclosure in a particular order, VA has 

informed servicers of VA’s preferred 

order of alternatives (i.e., a hierarchy for 

review), as follows: Repayment plan, 

special forbearance, loan modification, 

compromise sale, and deed-in-lieu of 

foreclosure.8

Loss-mitigation options are pursued 

with the intent of bringing the 

delinquent guaranteed loan current and 

keeping the veteran in his or her home. 

As mentioned, these options include 

repayment plans, special forbearances, 

and loan modifications. Under a 

repayment plan, the borrower agrees to 

pay the normal monthly payment plus 

an agreed upon portion of the 

delinquency each month to the 

servicer.9 A special forbearance 

suspends or reduces a borrower’s 

normal monthly payments for an agreed 

upon period of time.10 A loan 

modification permanently changes one 

or more terms of the guaranteed loan 

and may include re-amortization of the 

balance due. While all loan 

modifications must meet the 

requirements set forth by 38 CFR 

36.4315, VA generally classifies a loan 

modification as one of four types— 

traditional loan modification, streamline 

modification, VA affordable 

modification, and VA disaster 

modification—depending on a 

borrower’s circumstances.11

Servicers generally pursue 

compromise sales and deeds-in-lieu of 

foreclosure when a traditional, private 

sale is not feasible and the borrower 

either has no desire to retain the 

property or when a loss-mitigation 

option is not feasible given the 

borrower’s current financial 

circumstances. Under a compromise 


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12A compromise sale is a sale to a third party for 

an amount less than is sufficient to repay the 

unpaid balance on the guaranteed loan where the 

holder has agreed in advance to release the lien in 

exchange for the proceeds of such sale. 38 CFR 

36.4301. VA requirements for a compromise sale are 

set forth by 38 CFR 36.4322(e). 

13 VA requirements for a DIL of foreclosure are set 

forth by 38 CFR 36.4322(f). 

14 38 CFR 36.4319(c). 

15See 38 U.S.C. 3732(a)(2); 38 CFR 36.4320. 

16U.S. Bureau of Labor Statistics, Labor Force 

Statistics from the Current Population Survey, 

https://www.bls.gov/ces. 

17Public Law 116–136, section 4022(c)(1) (Mar. 

27, 2020). 

18 Id. 

sale (sometimes called a short sale), the 

servicer agrees to release the guaranteed 

loan obligation in exchange for the 

proceeds of a sale to a third party for an 

amount that is less than the borrower’s 

total indebtedness on the guaranteed 

loan.12 Under this alternative, the 

servicer recovers some portion of the 

unpaid balance of the guaranteed loan 

through the sale. In cases where there is 

little or no likelihood of a private sale 

or compromise sale, servicers should 

consider a deed-in-lieu of foreclosure. 

Under this alternative to foreclosure, the 

borrower voluntarily transfers title to 

the property to the servicer in exchange 

for a release of all obligations under the 

guaranteed loan.13 VA considers 

compromise sales and deeds-in-lieu of 

foreclosure to be successfully completed 

when the servicer files a claim under 

VA’s guaranty.14

In cases where servicers are unable to 

complete a loss-mitigation option or an 

alternative to foreclosure, servicers 

must, before initiating a foreclosure, 

provide VA with the option of what is 

commonly called a ‘‘loan refund.’’ This 

process, authorized under 38 U.S.C. 

3732, is where VA takes assignment of 

the existing guaranteed loan 

indebtedness in exchange for VA’s 

payment to the servicer of the unpaid 

principal balance, plus accrued 

interest.15 The loan is then placed into 

VA’s portfolio, and the veteran makes 

loan payments to VA. VA’s internal data 

from fiscal year 2015 to date indicates 

that VA has completed an average of 20 

loan refunds per fiscal year. 

VA has employed contractors since 

the late 1990s to perform loan boarding 

and servicing functions for VA’s 

portfolio. VA’s portfolio currently 

comprises approximately 4,500 loans 

totaling approximately $420 million. 

Notably, this amounts to about half the 

number of loans that VA has held in 

previous years. The portfolio includes 

refunded loans, as well as the loans 

where VA was, in contrast to its role in 

the refunding program, the direct lender 

(as in the Native American Direct Loan 

and vendee loan programs; neither of 

which would be affected under this 

rulemaking). 

B. COVID–19 Emergency and CARES 

Act Forbearances 

By late March 2020, the COVID–19 

national emergency was significantly 

affecting the economy. Between March 

15 and May 15, 2020, over 35 million 

Americans filed initial jobless claims, 

and the unemployment rate climbed to 

over 14 percent in April—the highest 

monthly level since 1948, which is 

when the U.S. Bureau of Labor Statistics 

started tracking this data.16

On March 27, 2020, the President 

signed the CARES Act into law. Section 

4022(b) of the Act, in relevant part, 

states that borrowers with a ‘‘Federally 

backed mortgage loan’’ (e.g., a VAguaranteed loan) experiencing a 

financial hardship due, directly or 

indirectly, to the COVID–19 emergency 

may request forbearance on such loan, 

regardless of delinquency status, by 

submitting a request to the borrower’s 

servicer and affirming that the borrower 

is experiencing a financial hardship 

during the COVID–19 emergency. Upon 

such a request, servicers must, with no 

additional documentation required 

other than the borrower’s attestation to 

a financial hardship caused by the 

COVID–19 emergency, and with no fees, 

penalties, or interest (beyond the 

amounts scheduled or calculated as if 

the borrower made all contractual 

payments on time and in full under the 

terms of the housing loan contract) 

provide the forbearance for up to 180 

days.17 The forbearance period can be 

extended for an additional period of up 

to 180 days at the request of the 

borrower, provided that the borrower’s 

request for an extension is made during 

the covered period. Either the initial or 

extended period of forbearance may be 

shortened at the borrower’s request.18

While borrowers can postpone loan 

payments under a CARES Act 

forbearance, borrowers are still obliged 

to repay the forborne indebtedness. In 

other words, forbearance is not 

forgiveness. However, many borrowers 

simply have no choice but to postpone 

payments to weather the economic 

storm. Given the broad protections 

afforded by CARES Act forbearances, 

servicers have utilized such 

forbearances as a primary tool in 

helping borrowers who are struggling to 

afford housing loan payments due to the 

COVID–19 emergency. 

The CARES Act does not specify how 

borrowers receiving CARES Act 

forbearances must repay the forborne 

payments. To ensure that servicers do 

not attempt to require immediate 

payment of forborne amounts upon the 

borrower’s exit from a CARES Act 

forbearance (as can be required under a 

special forbearance), VA issued 

guidance notifying servicers that they 

should not require a veteran to make a 

lump sum payment equal to what would 

have been due if a forbearance was not 

in effect, after the forbearance period 

ends. VA is instead encouraging 

servicers to consider other lossmitigation options, such as those 

described above. 

As of August 1, 2020, VA’s internal 

data showed that approximately 149,645 

active guaranteed loans are in a CARES 

Act forbearance (approximately 4.3 

percent of all active guaranteed loans). 

Of those loans, 61,795 were current as 

of March 1, 2020, and were also paid 

current through July 31, 2020. An 

additional 51,043 loans were current as 

of March 1, 2020, but were no longer 

current through July 31, 2020, meaning 

the veteran missed at least one loan 

payment between such dates. 

C. COVID–19 Emergency: PostForbearance Options and PostDelinquency Options 

VA and the servicing industry have 

significant experience applying VA’s 

current loss-mitigation policies to assist 

veterans struggling financially due to 

major disasters, such as natural disasters 

like hurricanes and floods. 

Nevertheless, there are many key 

differences between discrete natural 

disasters and the widespread and longlasting crisis caused by the COVID–19 

pandemic. 

The current national emergency will 

likely have more far-reaching 

consequences of greater magnitudes for 

veterans than the consequences posed 

by a natural disaster, for example. 

Unlike a natural disaster, it is 

impossible to approximate when the 

imminent danger caused by a global 

pandemic will recede. Generally, at the 

outset of natural disasters like 

hurricanes and floods, public policy 

experts can reasonably predict the 

endpoint of imminent danger, after 

which an assessment of the damage and 

impact to the borrower may be 

completed. A comparable endpoint to 

the COVID–19 pandemic is much more 

difficult to predict because multiple 

factors change daily, including rates of 

infection and death. Rising and falling 

infection rates directly influence 

economic factors such as employment 

levels and expected borrower income. 

These factors are also affected by policy 


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19 Deloitte, Mortgage Series on Management 

Estimates, pg. 7, https://www2.deloitte.com/ 

content/dam/Deloitte/us/Documents/risk/us-aersmsme-perational-considerations-july2013r.pdf. 

20Urban Institute, The Price Tag for Keeping 29 

Million Families in Their Homes: $162 Billion, 

(Mar. 27, 2020), https://www.urban.org/urban-wire/ 

price-tag-keeping-29-million-families-their-homes162-billion; Mortgage Bankers Association (MBA), 

Share of Mortgage Loans in Forbearance Declines 

Slightly to 7.20%, (Aug. 24, 2020), https://

www.mba.org/2020-press-releases/august/share-ofmortgage-loans-in-forbearance-declines-slightly-to720. 

21 Id. 

22 VA Circular 26–20–33, Deferment as a COVID– 

19 Loss-Mitigation Option for CARES Act 

Forbearance Cases, (Sept. 14, 2020), https://

www.benefits.va.gov/HOMELOANS/documents/ 

circulars/26_20_33.pdf. 

23See 38 CFR 36.4338(a) (authorizing VA, 

notwithstanding any requirement, condition, or 

limitation stated in or imposed by regulations 

governing guaranteed loans, to relieve undue 

prejudice to a debtor, holder, or other person, 

which might otherwise result, if VA finds that such 

action does not adversely affect the interests of the 

Government or impair the vested rights of any 

person affected thereby). See also Executive Order 

13924, 85 FR 31353 (May 19, 2020) (stating that 

agencies should, to the extent possible, address the 

economic consequences of the COVID–19 

emergency by rescinding, modifying, waiving, or 

providing exemptions from regulations and other 

requirements that may inhibit economic recovery); 

Executive Order 13945, 85 FR 49935 (Aug. 8, 2020) 

(stating that it is the policy of the United States to 

minimize, to the greatest extent possible, residential 

evictions and foreclosures during the ongoing 

COVID–19 national emergency). 

approaches that may vary at federal, 

state, and local levels. 

Further, unlike geographically and 

temporally bounded disasters, COVID– 

19 has spread across the globe over the 

course of months, affecting communities 

of all sizes and compositions. Borrowers 

will likely not have safety nets in place 

to mitigate the harrowing outcomes. 

Conversely, borrowers affected by major 

natural disasters like hurricanes and 

floods often are covered by hazard and 

other insurance policies, which can 

help to offset financial losses. 

The duration, scope, and impact of 

the COVID–19 pandemic, along with the 

lack of safety nets to help absorb the 

financial upheaval, has created 

enormous challenges for the housing 

finance market. When borrowers do not 

make their regularly scheduled monthly 

loan payments, loan servicers are often 

contractually obligated to step in and 

advance such missed amounts to the 

loan holder.19 The volume of CARES 

Act forbearances in a servicer’s 

portfolio, coupled with the protracted 

length of such a forbearance (i.e., up to 

360 days), has placed many servicers in 

a position where they may be required 

to cover up to 12 months of loan 

payments for a significant segment of 

the loans they service. Federally backed 

mortgages, that is, those for which 

servicers must generally grant CARES 

Act forbearances upon a borrower’s 

request, account for approximately 70 

percent of all housing loans in the 

United States.20 Recent data reveals that 

approximately 7 percent of all housing 

loans in the United States, 

corresponding to 3.6 million 

homeowners, are currently in 

forbearance.21 This increased number of 

borrowers in forbearance means that 

servicers can be left without budgetary 

resources to offer certain loss-mitigation 

options to borrowers, including veterans 

with VA-guaranteed loans. 

VA notes that most VA-guaranteed 

loans are not held by the lenders that 

originate the loans. Rather, lenders that 

are issuers approved by the Government 

National Mortgage Association (Ginnie 

Mae) often originate VA-guaranteed 

loans, package them into loan pools, 

and issue mortgage-backed securities 

(MBS) backed by such pools. Ginnie 

Mae can then guarantee, to MBS 

investors, the timely payment of 

principal and interest on such 

securities. Because Ginnie Mae requires 

servicers to purchase such securitized 

loans out of the Ginnie Mae pools before 

completing a loan modification, 

servicers facing liquidity shortages due 

to, for example, covering an 

unprecedented amount of forborne loan 

payments, may not be financially able to 

purchase such loans out of the pools. 

This means that such servicers would 

not be able to offer crucial loan 

modifications to veterans. 

Servicers’ decreased ability to offer 

loan modifications due to the 

repurchase requirement discussed above 

is especially significant given that 

veterans with large amounts of forborne 

indebtedness may not be able to return 

to normal loan repayment under other 

available loss-mitigation options. For 

example, while a veteran who ceased 

making payments under a CARES Act 

forbearance for 360 days may be able to 

resume making regularly scheduled 

monthly loan payments, postforbearance, the veteran may be unable 

to repay a whole year’s worth of missed 

payments under a repayment plan, in a 

relatively short timeframe established 

by a servicer that may be facing 

liquidity strains. 

Similarly, a special forbearance may 

also not be financially feasible from the 

perspective of both the veteran and the 

servicer. A central issue is the ability of 

the borrower to repay forborne 

indebtedness over a relatively short 

period. A special forbearance could be 

problematic in that the veteran would 

have even more forborne indebtedness 

to repay, and the servicer would need to 

advance additional payments without 

receiving any offsetting payments from 

the veteran. 

Given the issues described above, the 

unprecedented nature of the COVID–19 

emergency, its impact on the economy, 

and the lengthy forbearance period 

authorized under the CARES Act (i.e., 

up to 360 days), VA is continuously 

evaluating how best to help veterans 

with large amounts of forborne 

indebtedness avoid foreclosure. For 

example, VA recently issued guidance 

clarifying that servicers may offer what 

the servicing industry commonly calls 

loan ‘‘deferment,’’ as a novel home 

retention option.22 Under this option, 

the servicer would allow the veteran to 

defer repayment of forborne payments 

until the guaranteed loan matures, is 

refinanced, or otherwise paid in full, or 

when the borrower transfers the 

property, whichever occurs first. The 

deferred indebtedness would not accrue 

any additional interest, and the veteran 

would not incur any fees or costs 

associated with the deferment option. 

The option would not necessarily 

require the servicer to modify the 

existing guaranteed loan. Ordinarily, 

VA’s regulation at 38 CFR 36.4310(a) 

would prohibit a final installment 

payment on a guaranteed loan from 

exceeding two times the average of the 

preceding installments. In cases where 

veterans have deferred several months’ 

worth of payments, the final installment 

(i.e., the total deferred indebtedness), 

will often exceed the limit. However, in 

order to provide veterans with a full 

gamut of options, VA temporarily 

waived 23 this limit for certain cases 

where servicers can offer a loan 

deferment option that complies with 

VA’s policy guidance. 

While loan deferment may present the 

best option for certain borrowers, many 

servicers are facing a liquidity crunch 

and lack financial resources to float 

large amounts of forborne indebtedness 

for what can be, depending on the case, 

two to three decades. As a result, VA 

continues to consider innovative ways 

to assist veterans mitigate the effects of 

the COVID–19 emergency, including 

options that, until recently, were not 

considered or utilized in VA’s home 

loan program. 

D. The Partial Claim Loss-Mitigation 

Option 

As part of VA’s effort to analyze all 

possible options that could help 

veterans, VA considered home retention 

options available to borrowers with 

other types of federally backed 

mortgages; that is, those available 

through single-family loan guarantee/ 

insurance programs administered by 


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24See 12 U.S.C. 1715u(b); 24 CFR 203.371. See 

also 42 U.S.C. 1472(h)(14); 7 CFR 3555.304(d) and 

3555.307. 

25Mortgagee Letter 2020–06, FHA’s Loss 

Mitigation Options for Single Family Borrowers 

Affected by the Presidentially-Declared COVID–19 

National Emergency in Accordance with the CARES 

Act, (Apr. 1, 2020), https://www.hud.gov/sites/ 

dfiles/OCHCO/documents/20-06hsngml.pdf; 

Mortgagee Letter 2020–22, FHA’s COVID–19 Loss 

Mitigation Options, (Jul. 8, 2020), https://

www.hud.gov/sites/dfiles/OCHCO/documents/20- 

22hsgml.pdf. 

26See 38 U.S.C. 3720(a), 3720(a)(3) through (5), 

and 3720(f). 

27See 12 U.S.C. 1709; 42 U.S.C. 1472(h)(2). 

28See 38 U.S.C. 3703(a)(1). While VA notes that 

the guaranty may be higher on loans with lower 

balances, such as 50 percent for loans with balances 

less than or equal to $45,000, the average balance 

on guaranteed loans has exceeded $200,000 since 

2008. See VBA Annual Benefits Reports, Fiscal 

Years 2008 to 2019, https://www.benefits.va.gov/ 

REPORTS/abr/docs/2019-loan-guaranty.pdf (Fiscal 

Year 2019); https://www.benefits.va.gov/REPORTS/ 

abr/archive.asp (Fiscal Years 2008 to 2018). 

29 12 U.S.C. 1715u(b)(2)(A); 42 U.S.C. 

1472(h)(14)(A). 

FHA and USDA. Notably, both agencies 

offer a ‘‘partial claim’’ as part of the 

suite of loss-mitigation options available 

to borrowers and servicers.24 More 

recently, FHA announced COVID–19 

specific guidelines to maximize use of 

its partial claim option while providing 

streamlined loss-mitigation for 

borrowers and servicers.25 Under these 

programs, the partial claim option 

defers the repayment of housing loan 

principal through the creation of an 

interest-free subordinate loan (payable 

to the Government) that is generally not 

due until the primary loan is paid off. 

During the COVID–19 emergency, both 

FHA and USDA have authorized 

servicers to utilize the partial claim 

option to cover all housing loan 

payments borrowers do not make while 

under a CARES Act forbearance, up to 

30 percent of the unpaid principal 

balance, subject to certain requirements. 

III. Legal Authority 

Unlike FHA and USDA, VA has never 

had explicit authority to establish a 

partial claim option. To help veterans 

recover from the financial hardships 

posed by the COVID–19 national 

emergency, VA looked to its loan refund 

authority in 38 U.S.C. 3732 and the 

broad powers authorized under 38 

U.S.C. 3720. When read together, the 

text of these two sections authorizes VA 

to establish the COVID–VAPCP as an 

emergency measure. 

Under 38 U.S.C. 3732(a), VA has the 

legal right to prevent a foreclosure by 

purchasing indebtedness that VA has 

already guaranteed. VA refers to such a 

purchase as a loan refund. If VA 

exercises the option, the holder must 

assign the loan to VA. VA then steps 

into the shoes of the holder and often 

allows for a loan modification, which 

makes the terms more affordable for the 

veteran. 

VA also has broad powers under 38 

U.S.C. 3720, ‘‘notwithstanding the 

provisions of any other law,’’ to 

purchase assets and pay any claim, 

however acquired, relating to or arising 

from matters in the VA-guaranteed loan 

program and to offer forbearances or 

indulgences to veterans who have 

suffered loss due to disasters.26 In 

applying the authorities as a consistent, 

coherent framework, VA would, by way 

of a loan to the veteran, purchase from 

the servicer the veteran’s CARES Act 

indebtedness and establish repayment 

terms favorable to the veteran, while 

leaving intact the veteran’s guaranteed 

loan. 

IV. COVID–19 Veterans Assistance 

Partial Claim Payment Program 

VA, therefore, proposes to establish a 

temporary program that would provide 

a partial claim option to certain veterans 

who are financially impacted by 

COVID–19. Under VA’s proposed 

COVID–VAPCP, servicers would present 

the partial claim option to a veteran 

only after evaluating the feasibility of 

loss-mitigation options already available 

in VA’s program (i.e., repayment plan, 

special forbearance, and loan 

modification). If the veteran qualifies 

and opts to move forward with a partial 

claim option, VA would purchase the 

veteran’s forborne indebtedness, like 

when VA refunds a guaranteed loan. 

Acting as a mortgage investor of last 

resort, VA would purchase the amount 

of indebtedness that is necessary to 

bring the veteran’s guaranteed loan 

current (instead of the whole amount of 

the guaranteed loan, as would be the 

case in a typical loan refund). The 

veteran would repay VA for this 

amount, and the indebtedness would be 

secured as a lien against the veteran’s 

home upon execution and recordation 

of the security instrument. The servicer 

would handle all aspects of the 

origination of the new COVID–VAPCP 

loan. The new loan would be serviced 

under VA’s existing loan portfolio. 

To ensure that veterans can benefit 

from a partial claim option in ways like 

FHA and USDA borrowers, VA proposes 

to mirror requirements from FHA’s and 

USDA’s COVID–19 partial claim 

programs, whenever feasible. Therefore, 

like FHA’s and USDA’s COVID-related 

partial claim programs, VA’s proposed 

COVID–VAPCP would only be available 

for guaranteed loans that were, on 

March 1, 2020, either current or less 

than 30 days past due. Additionally, 

VA’s partial claim payment would only 

be payable to a servicer on behalf of a 

veteran if there remains unpaid at least 

one scheduled monthly payment that 

the veteran missed while under a 

CARES Act forbearance. VA notes that 

some borrowers have continued to make 

their monthly loan payments despite 

being under a CARES Act forbearance. 

A partial claim payment option would 

be unnecessary for those individuals 

because there would be no forborne 

indebtedness to resolve upon exiting the 

forbearance. Consistent with FHA’s 

COVID–19 National Emergency 

Standalone Partial Claim, VA would 

only pay one partial claim payment per 

veteran and require that the veteran 

occupy, as a residence, the property 

securing the guaranteed loan for which 

the partial claim is requested. Also 

consistent with FHA and USDA, VA’s 

proposed COVID–VAPCP would require 

the servicer to determine whether the 

veteran satisfies the program 

requirements, prepare the appropriate 

loan documents on VA’s behalf, and 

bring the veteran’s guaranteed loan 

current, prior to submitting to VA a 

request for partial claim payment. 

While VA’s proposed COVID–VAPCP 

would bear many similarities to FHA 

and USDA’s COVID-related partial 

claim programs, it would not be 

identical to either program. VA notes 

that FHA and USDA provide 100 

percent and 90 percent backing on their 

guaranteed/insured loans,27

respectively, whereas VA’s guaranty is 

typically no more than 25 percent.28

VA’s smaller guaranty is relevant for 

two reasons. 

First, compared to FHA- and USDAbacked loans with similar loan balances, 

VA-guaranteed loans generally expose 

the Government to less financial risk per 

loan. While VA’s unique mission 

requires VA to promote favorable 

outcomes for veterans, which might 

increase costs, VA must also continue to 

be a responsible steward of taxpayer 

funds. VA has determined that any 

proposed amount of assistance via a 

partial claim option cannot cause VA to 

incur financial risk that would eclipse 

the guaranty. 

Therefore, while both the FHA and 

USDA partial claim programs provide 

payment to the servicer, on the 

borrower’s behalf, up to 30 percent of 

the unpaid principal balance at the time 

of initial default,29 VA’s proposed 

program would provide for payment to 

the servicer, on the veteran’s behalf, up 

to 15 percent of the unpaid principal 

balance of the guaranteed loan as of the 

date the veteran entered into a CARES 


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30See 24 CFR 203.341, 203.371, and 203.401 

(casting FHA’s partial claim as an ‘‘application for 

insurance benefits’’). See also 7 CFR 3555.304(d)(8) 

(stating that a USDA loss claim will be adjusted by 

any amount of mortgage recovery advance 

reimbursed to the lender). 

31 VA’s analysis of the net present value of partial 

claim payments made in accordance with the 

COVID–VAPCP was based on a review of the 10- 

year Treasury Yield Rate from Jan. 1, 2020, through 

Aug. 28, 2020. 

32 38 CFR 36.4301 defines holder as ‘‘[t]he lender 

or any subsequent assignee or transferee of the 

guaranteed obligation or the authorized servicing 

agent (also referred to as ‘‘the servicer’’) of the 

lender or of the assignee or transferee.’’ 

33 38 CFR 36.4315(a)(6). 34See VA Circular 26–20–33, Deferment as a 

COVID–19 Loss-Mitigation Option for CARES Act 

Forbearance Cases, (Sept. 14, 2020), https://

www.benefits.va.gov/HOMELOANS/documents/ 

circulars/26_20_33.pdf. 

Act forbearance. VA notes that, based on 

an initial analysis of loans in 

forbearance, VA believes that a 15 

percent cap would provide sufficient 

room for servicers to bring the 

guaranteed loans current, even if a 

veteran invokes the maximum period of 

forbearance; that is, 360 days, under the 

CARES Act. 

FHA and USDA do not charge 

borrowers interest on the subordinate 

indebtedness that results from a partial 

claim payment. Also, in such programs, 

no payment on the subordinate 

indebtedness is generally due until such 

time as the property securing the 

insured/guaranteed loan is transferred 

or sold or the insured/guaranteed loan 

is refinanced or otherwise paid-in-full. 

However, in both programs, the partial 

claim is essentially treated as an 

advance paid to the servicer, on behalf 

of the borrower, enabling the insured/ 

guaranteed loan to return to current.30

This arrangement is to be expected 

given that FHA and USDA back all, or 

nearly all, of the insured/guaranteed 

loan. VA, on the other hand, views its 

partial claim payment option more like 

its loan refund program. As previously 

discussed, under the loan refund 

program, VA generally takes assignment 

of the guaranteed loan in exchange for 

VA’s payment of the unpaid balance of 

the obligation, plus accrued interest. In 

the event VA takes the loan into its own 

portfolio for servicing, no guaranty 

claim is paid. The veteran continues to 

pay interest on the indebtedness and 

monthly payments as obligated, but to 

VA as noteholder, not to the former loan 

servicer. 

Under this rulemaking, VA proposes 

to make COVID–VAPCP loans on terms 

extremely favorable to veterans; 

providing a lifeline to veterans as they 

recover financially. First, VA proposes 

to require repayment of the loan within 

120 months of origination or upon the 

veteran’s transfer of title to the property, 

the refinancing of the guaranteed loan 

with which the partial claim payment is 

associated, or payment in full otherwise 

of such guaranteed loan. VA would also 

automatically defer any monthly 

payments for the first 60 months of the 

loan. Based on the partial claim loan 

balances that VA anticipates, VA 

believes this time horizon would 

provide veterans with a reasonable path 

to repayment without additional undue 

financial hardship. 

VA also proposes to charge a nominal, 

fixed interest rate of 1.00 percent per 

annum on any loan established under 

the COVID–VAPCP. VA notes that this 

is below what is generally charged for 

VA’s portfolio loans (including 

refunded loans) and, in fact, represents 

no more than the approximate net 

present value of the money to be paid 

to servicers on behalf of veterans.31 In 

other words, the 1.00 percent interest 

rate established under the COVID– 

VAPCP represents roughly the 10-year 

cost of borrowing money from the U.S. 

Treasury that would be needed to 

reimburse servicers, on behalf of 

veterans, for partial claim payments. 

The relatively small size of VA’s 

guaranty is also relevant because the 

holder 32 of a VA-guaranteed loan bears 

significantly more financial risk for a 

VA-guaranteed loan than for a loan 

insured or guaranteed by FHA or USDA. 

Due to VA’s smaller guaranty 

percentage, the servicer has just as 

much, if not more, financial interest 

than the Government in seeing a 

delinquent VA-guaranteed loan brought 

current because, unlike in FHA and 

USDA’s programs, VA will not pay more 

than 25 percent of the loan. Given the 

holder’s significant financial incentive 

to offer a veteran the loss-mitigation 

option that is most likely to help the 

veteran return to normal repayment, VA 

generally does not prescribe which lossmitigation options servicers must first 

offer to a veteran before considering 

other options. 

Therefore, where FHA has mandated 

that servicers consider every owneroccupant borrower exiting a CARES Act 

forbearance who was current or less 

than 30 days past due as of March 1, 

2020, for a COVID–19 National 

Emergency Standalone Partial Claim, 

and USDA has authorized a Disaster 

Mortgage Recovery Advance for 

similarly situated borrowers, VA would 

not mandate that servicers consider 

veterans for a partial claim payment 

option. Rather, VA would expect 

servicers to consider the feasibility of 

loss-mitigation options before 

considering a partial claim payment. 

Consistent with VA’s existing 

regulations and policies, servicers 

would evaluate a veteran’s financial 

situation and, if appropriate, offer lossmitigation options that are within the 

servicer’s financial capabilities and 

business model. 

VA further notes that, because of the 

way the COVID–VAPCP is structured, 

the COVID–VAPCP is a standalone 

home retention option. In other words, 

the COVID–VAPCP cannot be combined 

with loss-mitigation options, such as a 

special forbearance or loan 

modification, to assist borrowers who 

are exiting CARES Act forbearances. For 

example, a servicer cannot tack on a 

special forbearance period to the end of 

a CARES Act forbearance and then use 

the COVID–VAPCP to bring the 

guaranteed loan current. When a 

servicer offers a special forbearance to 

assist the borrower in returning to 

normal repayment, it indicates that the 

servicer views the option as the most 

prudent choice based on the 

circumstances. Similarly, if a servicer 

brings a veteran’s guaranteed loan 

current through a loan modification, but 

shortly thereafter the veteran cannot 

make payments on the modified loan, 

the servicer cannot then pursue a partial 

claim payment. A loan modification 

requires servicers to ensure that the 

guaranteed loan ‘‘will be reinstated to 

performing status by virtue of the loan 

modification.’’ 33 If the servicer 

reinstated the guaranteed loan to 

performing status by virtue of the loan 

modification, there would not be any 

remaining ‘‘indebtedness that [would 

be] necessary to bring the guaranteed 

loan current,’’ under VA’s proposed rule 

text below. 

By requiring servicers to consider 

loss-mitigation options before 

evaluating a veteran for COVID–VAPCP, 

VA’s proposed policy would help 

ensure that veterans are afforded 

options that may be more advantageous 

to them than a partial claim, without 

imposing additional administrative 

requirements on servicers. For example, 

servicers that have adequate resources 

to offer deferment 34 as a home retention 

option would be able to do so under 

VA’s proposed program. Deferment can 

present a better option for certain 

veterans as compared to the COVID– 

VAPCP because, as explained above, the 

deferred amount does not accrue 

interest and may provide a veteran 

significantly more time before a 

payment would become due. Moreover, 

without a requirement that certain 

veterans be evaluated for COVID– 

VAPCP, servicers willing and able to 


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35See Public Law 99–576, section 402(b) (Oct. 28, 

1986); 55 FR 4829, 4869 (Feb. 12, 1990); 56 FR 

9835, 9853 (Mar. 8, 1991). 

36This example assumes a starting guaranteed 

loan balance of $245,000, fixed 3.75 percent interest 

rate, 360-month loan term, and monthly escrows of 

$453.20. 

offer deferments would not have to alter 

their servicing process, train employees, 

and possibly upgrade technology to 

complete such evaluations. 

Nevertheless, the option of COVID– 

VAPCP assistance may very well be 

necessary to ensure certain veterans can 

recover financially. In this regard, as 

servicers evaluate their liquidity 

positions and other factors, to determine 

how to make the advances necessary for 

investor requirements, some servicers 

may find themselves unable to offer 

certain loss-mitigation options, such as 

a loan modification. VA notes that, 

unlike a loan modification, a partial 

claim payment under VA’s proposed 

COVID–VAPCP would not require the 

guaranteed loan to be purchased out of 

the Ginnie Mae pools. Thus, for these 

servicers, and the veterans whose 

guaranteed loans they service, the 

assistance VA is proposing would 

ensure veterans are afforded an option 

that enables them to retain their home, 

while simultaneously helping servicers 

avoid liquidity crunches, thereby 

affording veterans prudent and 

uninterrupted loan servicing. 

As mentioned above, VA’s proposed 

COVID–VAPCP would be available to 

veterans whose guaranteed loan was 

current or less than 30 days past due as 

of March 1, 2020, and who certify that 

they can resume making scheduled 

monthly payments, on time and in full. 

VA, however, would also require 

servicers to ensure that the veteran’s 

monthly residual income, as described 

in 38 CFR 36.4340(e), is adequate to 

meet living expenses after estimated 

monthly shelter expenses (e.g., 

payments on the guaranteed loan) have 

been paid and other monthly obligations 

have been met. Residual income has 

long been a critical component of VA 

underwriting.35 As the information 

collected from the veteran to conduct 

this analysis coincides with the 

information already requested to 

evaluate VA’s existing loss-mitigation 

options, this residual income 

requirement would help ensure that 

servicers have considered all lossmitigation options for feasibility before 

pursuing a partial claim payment. 

Veterans would ultimately benefit from 

this additional financial assessment 

because servicers would be able to 

evaluate the financial impact of lossmitigation options, such as loan 

modification, compared to a partial 

claim option. Take, for example, a 

veteran who enters a CARES Act 

forbearance with 300 monthly payments 

remaining and an unpaid principal 

balance of $239,450. Given a total 

monthly payment of $1,587.83, at the 

end of a 12-month forbearance period, 

the veteran would owe $19,054 in 

missed guaranteed loan payments.36 A 

loan modification at the same interest 

rate and a new 30-year term would 

result in a $26 decrease in monthly loan 

payments but $39,518 in additional 

interest over the life of the guaranteed 

loan. Conversely, a VA partial claim 

payment would result in a $341.58 per 

month payment to VA in years 6 

through 10 but only $1,441 in additional 

interest over the life of the guaranteed 

loan. 

In cases where the servicer could not 

offer a deferment but could perhaps 

offer a modification, the partial claim 

option might present an even more 

beneficial outcome for both the veteran 

and the servicer. As the partial claim 

option would require the servicer to 

determine that the veteran can meet 

residual income standards, the veteran 

would not necessarily need the shortterm savings of reduced monthly loan 

payments under a loan modification. It 

could be more beneficial for such a 

veteran to realize an overall interest 

savings of $38,077 under a partial claim 

option. 

V. Section-by-Section Analysis of the 

Proposed Regulatory Amendments 

As previously noted, VA is proposing 

the COVID–VAPCP as a temporary 

program to help veterans return to 

making normal loan payments on their 

guaranteed loans after exiting a CARES 

Act forbearance period. VA further 

noted that its existing loss-mitigation 

and other servicing regulations and 

policies remain in effect. Thus, to avoid 

confusion, VA is proposing to add a 

new subpart F to part 36 of the Code of 

Federal Regulations (CFR) to contain the 

regulations that would govern this 

temporary program. The following 

outlines VA’s proposed regulations, 

with further explanation of each 

individual section, as necessary. 

A. Section 36.4800 Applicability 

In proposed § 36.4800, VA would note 

that this subpart applies to all loans 

guaranteed by VA, to the extent such 

loans are affected by the COVID–19 

national emergency. 

B. Section 36.4801 Definitions 

In proposed § 36.4801, VA would set 

forth the definitions applicable to new 

subpart F. 

VA would define ‘‘alternative to 

foreclosure’’, ‘‘CARES Act forbearance’’, 

‘‘CARES Act indebtedness’’, 

‘‘Guaranteed loan’’, ‘‘Loss-mitigation 

option’’, ‘‘Secretary’’, and ‘‘Servicer’’ as 

set out in the regulatory text below. 

C. Section 36.4802 General Purpose of 

the COVID–19 Veterans Assistance 

Partial Claim Payment Program 

In § 36.4802, VA would set forth the 

general purpose of the COVID–VAPCP. 

Intending to provide some introductory 

context for this novel option within 

VA’s home loan program, VA would 

state that the COVID–VAPCP is a 

temporary program to help veterans 

who have suffered a COVID–19 

financial hardship. Notwithstanding the 

requirements elsewhere in part 36 

regarding payment of a guaranty claim 

or refunding a loan, this proposed 

section would allow VA to assist a 

veteran exiting a CARES Act 

forbearance by purchasing from the 

servicer the veteran’s CARES Act 

indebtedness. Such a purchase would 

be called a partial claim payment. In 

exchange for VA’s partial claim 

payment on behalf of the veteran, the 

veteran would have to agree to repay the 

Secretary, in the amount of such partial 

claim payment, upon loan terms 

established by the Secretary. 

D. Section 36.4803 General 

Requirements of the COVID–19 Veterans 

Assistance Partial Claim Payment 

Program 

In § 36.4803, VA would set forth the 

general requirements of the COVID– 

VAPCP. First, VA would require that the 

loan for which a partial claim payment 

is requested must be a guaranteed loan 

that was, on March 1, 2020, either 

current or less than 30 days past due. 

Second, VA would require that the 

veteran on whose behalf VA would pay 

a partial claim payment both received a 

CARES Act forbearance and missed at 

least one scheduled monthly payment. 

Third, VA would require that there 

remains unpaid at least one scheduled 

monthly payment that the veteran did 

not make while under a CARES Act 

forbearance. Fourth, VA would require 

the veteran to certify that the veteran 

can resume making scheduled monthly 

payments, on time and in full, and that 

the veteran occupies, as the veteran’s 

residence, the property securing the 

guaranteed loan for which the partial 

claim is requested. Fifth, VA would 

require the servicer to determine and 

certify that the veteran’s monthly 

residual income, as described in 

§ 36.4340(e), will be adequate to meet 

living expenses after estimated monthly 

shelter expenses have been paid and 


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37Mortgagee Letter 2020–22, FHA’s COVID–19 

Loss Mitigation Options, (Jul. 8, 2020), https://

www.hud.gov/sites/dfiles/OCHCO/documents/20- 

22hsgml.pdf. 

other monthly obligations have been 

met. Lastly, VA would require the 

veteran to execute, in a timely manner, 

all loan documents necessary to 

establish an obligation to repay the 

Secretary for the partial claim payment. 

E. Section 36.4804 Partial Claim 

Payment as Last Resort 

In § 36.4804, VA would state that a 

partial claim payment would be an 

option of last resort. VA would reiterate 

that the COVID–VAPCP is designed to 

address the financial hardships due, 

directly or indirectly, to the COVID–19 

national emergency. VA would state 

that servicers must consider all possible 

loss-mitigation options and that VA 

expects the partial claim payment 

option would be considered only as a 

last resort, after a servicer has evaluated 

loss-mitigation options for feasibility. 

VA would also state that the servicer 

would be able to immediately proceed 

to offering an alternative to foreclosure 

if the veteran notifies the servicer that 

the veteran does not want to retain 

ownership of the property securing the 

guaranteed loan. 

F. Section 36.4805 Terms of the Partial 

Claim Payment 

In § 36.4805, VA would set forth the 

terms of the partial claim payment. In 

paragraph (a), in order for a partial 

claim payment to be payable, the 

servicer would be required to submit to 

the Secretary, not later than 90 days 

after the date the veteran exits the 

CARES Act forbearance, a request for 

such payment, as prescribed in 

proposed § 36.4807. This would require 

a servicer to evaluate the veteran for all 

loss-mitigation options, as well as a 

partial claim option, and prepare and 

execute the appropriate loan 

documents, all before submitting an 

application to VA. VA notes that 90 

days is consistent with FHA’s COVID– 

19 loss-mitigation policies.37

Nevertheless, in recognition of the fact 

that servicers will be faced with large 

numbers of borrowers exiting 

forbearance in the coming year, VA is 

specifically requesting comments on the 

proposed timeframe to complete these 

actions and submit an application for 

partial claim payment. 

Paragraph (b) of this section would 

state that the amount of the partial claim 

payment that VA would pay to the 

servicer, as calculated under proposed 

paragraph (e), shall not exceed 15 

percent of the unpaid principal balance 

of the guaranteed loan. For the purposes 

of proposed paragraph (b), the unpaid 

principal balance of the guaranteed loan 

would mean such balance as of the date 

the veteran entered into a CARES Act 

forbearance. Paragraph (c) would state 

that VA would pay only one partial 

claim payment per guaranteed loan. 

Paragraph (d) would state that VA 

would pay only one partial claim 

payment per veteran. 

In proposed paragraph (e)(1), VA 

would state that because VA would pay 

only one partial claim payment per 

guaranteed loan, and only one partial 

claim payment per veteran, a servicer 

would be required, in calculating the 

amount of partial claim payment to be 

paid by VA to the servicer, to include 

the full amount of indebtedness that is 

necessary to bring the guaranteed loan 

current. In paragraph (e)(2), VA would 

state that to bring the guaranteed loan 

current, servicers must include in the 

partial claim payment the full CARES 

Act indebtedness, comprising (i) all 

scheduled but missed monthly 

payments of principal and interest; and 

(ii) as applicable, all scheduled but 

missed monthly escrow payments for 

real estate taxes and insurance 

premiums, or where the guaranteed loan 

documents do not provide for monthly 

escrowing, all payments the servicer 

made to real estate tax authorities and 

insurance providers, on the veteran’s 

behalf, during the CARES Act 

forbearance. 

VA chose to require inclusion of 

payments of taxes and insurance 

because veterans are generally obligated, 

under the terms of the documents that 

establish a guaranteed loan, to keep 

current their taxes and insurance 

premiums. VA internal data shows that, 

in a little more than 99 percent of the 

time, servicers of guaranteed loans 

require borrowers to remit monthly, in 

addition to their principal and interest 

payments, the amounts necessary to 

ensure payment of the full year’s tax 

and insurance obligations. When 

servicers require such monthly 

remittances, they hold the funds in 

escrow accounts until the sums are due. 

When the veteran’s tax and insurance 

obligations become due, the servicer 

takes out of the escrow accounts the 

amounts necessary to keep the taxes up 

to date and the insurance coverage in 

place. 

If the guaranteed loan documents 

provide for monthly escrow obligations, 

the loan can be considered in default 

when such obligations are missed. The 

default, and the resultant consequences 

of default, are the same as if the veteran 

defaults on payments of principal and 

interest. Because an objective of the 

COVID–VAPCP is to help bring 

veterans’ guaranteed loans current 

without additional financial hardship 

(e.g., having to find a way to replenish 

escrow accounts), VA determined the 

veteran’s obligation could not be fully 

met unless VA also included in the 

partial claim calculation the amounts to 

cover missed escrow payments. 

Also, VA is proposing under 

§ 36.4805(e)(3) that, in cases where 

veterans make monthly escrow 

payments for taxes or insurance 

premiums, or both, servicers would be 

required to include not just the forborne 

amounts of taxes and insurance 

escrows, but also those amounts that are 

due within 31 days of the date the 

veteran executes the COVID–VAPCP 

note and security instrument. This is to 

help ensure a smooth handoff of the full 

obligation, rather than to learn, perhaps 

months after the fact, that an escrow 

payment was missed during the transfer 

of paperwork. 

VA recognizes that there are cases 

where a veteran does not make escrow 

payments to the servicer for taxes or 

insurance premiums. In such cases, 

corresponding to less than 1 percent of 

guaranteed loans, the veterans make 

their payments directly to tax 

authorities and insurance providers. In 

such cases, while servicers are not 

taking funds from escrow accounts to 

make these payments, servicers still 

monitor whether the veteran satisfies 

the veteran’s tax and insurance 

obligations. 

Notably, VA requires servicers to 

obtain and retain a lien of proper 

dignity; that is, a primary lien, for all 

guaranteed loans. In that regard, VA can 

adjust its guaranty and take other 

actions against servicers that allow, for 

example, tax authorities to jeopardize 

the primacy of the guaranteed loan lien. 

Similarly, VA requires servicers to 

ensure that the property is adequately 

insured. In instances where a veteran 

does not pay taxes or insurance 

premiums timely, the servicer will 

advance payments, from its own funds, 

to avoid a lapse in payment, and to 

ensure that future guaranty payments, if 

any, are not jeopardized. 

In cases where servicers were forced 

to advance payment on a veteran’s 

behalf to tax authorities or insurance 

providers because the veteran (who 

normally makes payments directly to 

such entities) did not meet such 

obligations during a CARES Act 

forbearance, the veteran would need to 

repay the servicer to bring the 

guaranteed loan current. That is why 

VA proposes to require these obligations 


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38See 38 U.S.C. 3732(a)(2)(A) (stating that VA’s 

refund authority includes ability to ‘‘pay the holder 

of the obligation the unpaid balance of the 

obligation plus accrued interest’’). 

39See Public Law 116–136, section 4022(b)(3) 

(Mar. 27, 2020) (expressly prohibiting a servicer 

from charging any ‘‘fees, penalties, or interest 

beyond the amounts scheduled or calculated as if 

the borrower made all contractual payments on 

time and in full under the terms of the mortgage 

contract’’). 

in the partial claim payment.38 VA 

would not, however, authorize 

inclusion of any such amounts to cover 

payments that were not due on the date 

the veteran executes the COVID–VAPCP 

note and security instrument. 

For example, consider a veteran who 

pays property taxes directly to their 

local tax office on a semi-annual basis 

(i.e., on the first of January and of July) 

and elects a seven-month CARES Act 

forbearance beginning May 1, 2020. 

Assuming the veteran does not pay the 

property tax bill on July 1, 2020, the 

servicer would advance payment from 

its own funds. The veteran then exits 

the CARES Act forbearance on 

November 1, 2020 and executes the note 

and security instrument, consistent with 

proposed § 36.4806, on December 1, 

2020. The partial claim payment 

amount calculated under paragraph (e) 

would include the amount of taxes paid 

by the servicer on behalf of the veteran 

in July. The veteran, however, would be 

responsible for paying the property tax 

bill due on January 1, 2021, and no 

dollar amount would be included in the 

partial claim payment to account for the 

fact that the veteran was in forbearance 

five out of the six months leading up to 

the next property tax bill. 

The previous example contrasts with 

a veteran whose monthly loan payment 

to the servicer includes an amount that 

is set aside in an escrow account to be 

used for payment of property taxes. 

Using the same dates as above, the 

servicer would still advance payment 

from its own funds to cover the July 

property tax bill. However, the partial 

claim payment amount calculated under 

paragraph (e) will include the monthly 

scheduled amounts for taxes that should 

have been paid as part of the monthly 

loan payments missed for May through 

December 2020. The servicer would be 

reimbursed from this amount for the 

advance payment made in July; the 

remaining amount would be deposited 

into the veteran’s escrow account and 

would be available for use when the 

January 1, 2021, property tax bill is due. 

While VA does not intend to create 

differences between veterans who 

escrow and who do not escrow, VA 

notes the complexities associated with 

determining and disbursing funds to the 

servicer to cover tax and/or insurance 

bills that are not yet due and payable. 

In this regard, allowing for inclusion of 

such amounts in a partial claim 

payment might assume that veterans 

who opt to pay taxes or insurance 

premiums directly to taxing authorities 

or insurance providers set aside funds 

each month to save up for tax and 

insurance bills that come due 

throughout the year. It would also put 

servicers in a situation where they 

would be required either to remit the 

amount paid as part of the partial claim 

directly to the veteran or make another 

payment on behalf of the veteran. Both 

scenarios could create unnecessary 

confusion. There would also be need for 

oversight by VA to ensure that any 

amounts to cover future payments not 

collected as part of a scheduled monthly 

loan payment are calculated correctly 

and ultimately used for their intended 

purpose (i.e., taxes or insurance, or 

both). 

Given VA’s estimate that less than 1 

percent of veterans pay their taxes and/ 

or insurance directly to the appropriate 

authority/provider, rather than through 

monthly escrow payments to their 

servicer, VA proposes that, for partial 

claim payments associated with these 

veterans’ guaranteed loans, a servicer 

can include only amounts the servicer 

actually paid on behalf of the veteran 

during the CARES Act forbearance 

period. Nevertheless, VA invites public 

comment on whether VA should cover 

prorated amounts associated with 

missed guaranteed loan payments for 

these veterans and, if so, how VA might 

best accomplish this for veterans and 

servicers. 

In proposed paragraph (e)(3), VA 

would also require servicers to include 

all scheduled monthly payments 

(comprising principal, interest, and 

escrow payments for real estate taxes 

and insurance premiums) that are due 

within 31 days of the date the veteran 

executes the note and security 

instrument described in proposed 

§ 36.4806. VA notes that any such 

payment due within 31 days of such 

date may be considered part of the 

veteran’s obligation to bring the 

guaranteed loan current. As such, VA 

would require servicers to include this 

amount in the partial claim payment. 

From a practical standpoint, this means 

that a veteran who executes, on January 

15, 2021, a COVID–VAPCP note and 

security instrument described in 

§ 36.4806, would not have a guaranteed 

loan payment due to the servicer until 

March 1, 2021, as the February 1, 2021 

payment would be due within 31 days 

and would need to be included in the 

partial claim amount. (Note: As 

explained below, the veteran would not 

have to begin repaying VA under the 

COVID–VAPCP loan until 2026.) 

Additionally, as discussed below, VA 

proposes to allow servicers to include, 

if applicable, all scheduled monthly 

payments (comprising principal, 

interest, and escrow payments for real 

estate taxes and insurance premiums) 

that were missed after March 1, 2020, 

but before the veteran was granted a 

CARES Act forbearance, provided the 

guaranteed loan was, as of March 1, 

2020, current or less than 30 days past 

due. However, in order to include these 

payments, the servicer must waive any 

late charges and fees associated with 

these missed payments. 

VA recognizes that some borrowers 

may not have been immediately aware 

of the availability of forbearance under 

the CARES Act, but nevertheless missed 

their guaranteed loan payment(s) due to 

circumstances related to the COVID–19 

national emergency before requesting 

forbearance. The effect of the above 

requirements would be to enable 

veterans, whose loans meet the criteria, 

to bring their guaranteed loans current 

via the COVID–VAPCP. In that 

circumstance, the servicer would 

include, if applicable, certain payments 

not paid between March 1, 2020, and 

the date the veteran entered the CARES 

Act forbearance in the amount of the 

partial claim payment. Additionally, 

under proposed paragraph (e)(3)(iii), VA 

would require servicers to include the 

actual amount of recording fees, 

recording taxes, or other charges levied 

by the recording authority, that must be 

paid in order to record the security 

instrument described in proposed 

§ 36.4806. 

In proposed paragraph (e)(4), VA 

would clarify that servicers shall not 

include any amounts in the partial 

claim total that are not listed by 

paragraph (e)(2) or (3). This means 

servicers could not include any 

amounts, for example, for fees, 

penalties, or interest, beyond the 

amounts scheduled or calculated as if 

the borrower made all contractual 

payments on time and in full under the 

terms of the guaranteed loan, or any late 

charges and fees that the veteran 

incurred between March 1, 2020, and 

the date the veteran entered the CARES 

Act forbearance.39

In proposed paragraph (e)(5), VA 

would state that nothing in proposed 

§ 36.4805 shall preclude a veteran from 

making an optional payment or a 

servicer from waiving a veteran’s 

indebtedness, such that the amount of 

partial claim payment would not exceed 


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the 15 percent cap described in 

proposed paragraph (b). 

As explained above, VA’s initial 

analysis of guaranteed loans in 

forbearance suggests that a 15 percent 

cap (based on the unpaid principal 

balance as of the date the veteran 

entered into a CARES Act forbearance) 

would provide enough room for 

servicers to bring the guaranteed loans 

current, even if a veteran invokes the 

maximum period of forbearance; that is, 

360 days, under the CARES Act. In the 

event that the amount needed to bring 

an eligible veteran’s guaranteed loan 

current exceeds 15 percent of the 

unpaid principal balance, VA would 

allow a veteran to make an optional 

payment or a servicer to waive the 

veteran’s indebtedness, such that the 

partial claim payment would not exceed 

the 15 percent cap. 

In proposed paragraph (e)(6), VA 

would explain that if the servicer 

miscalculates the partial claim amount, 

resulting in an overpayment to the 

servicer, the amount of such 

overpayment shall constitute a liability 

of the servicer to the United States. The 

servicer would be required to remit the 

overpaid amount immediately to VA. In 

paragraph (e)(7), VA would state that if 

the servicer miscalculates the partial 

claim amount, resulting in 

underpayment (i.e., an amount 

insufficient to bring the guaranteed loan 

current), the servicer would be required 

to waive the difference. 

Finally, proposed paragraph (e)(8) 

would prohibit servicers from including 

any amounts for a monthly payment 

that is scheduled to be paid on a date 

that is more than 31 days after the 

veteran executes the note and security 

instrument described in § 36.4806. 

Under proposed paragraph (f), the 

servicer would be required to prepare a 

note and security instrument in favor of 

‘‘the Secretary of Veterans Affairs, an 

Officer of the United States’’. Using the 

‘‘Department of Veterans Affairs’’ or the 

‘‘United States’’ is legally incorrect. 

Furthermore, certain states have their 

own Departments of Veterans Affairs, 

and without the explicit distinction 

made here, confusion could result. 

Therefore, it is critical that the note and 

security instrument read in favor of ‘‘the 

Secretary of Veterans Affairs, an Officer 

of the United States’’. 

VA would require that the note be 

consistent with the terms described in 

proposed § 36.4806 and include all 

borrowers who are obligated on the 

guaranteed loan. The security 

instrument would also be required to 

include all persons (borrowers, as well 

as non-borrowers) who hold a title 

interest in the property securing the 

guaranteed loan. In proposed paragraph 

(g), subject to the requirement that the 

servicer submit the application for a 

partial claim payment to VA not later 

than 90 days after the date the veteran 

exits the CARES Act forbearance, VA 

would require all loan documents to be 

fully executed not later than 90 days 

after the veteran exits the CARES Act 

forbearance. Proposed paragraph (h) 

would require the servicer to record the 

security instrument timely, as 

prescribed in § 36.4807. Finally, in 

paragraph (i), the servicer would be 

prevented from charging, or allowing to 

be charged, to the veteran any fee in 

connection with the COVID–VAPCP. 

G. Section 36.4806 Terms of the 

Assistance to the Veteran 

If a veteran chooses to accept VA’s 

assistance (i.e., a partial claim payment 

to the servicer, on the veteran’s behalf), 

the veteran, and all co-borrowers on the 

guaranteed loan, would be required to 

execute a note and security instrument 

in favor of ‘‘the Secretary of Veterans 

Affairs, an Officer of the United States’’. 

In addition, all non-borrowers holding a 

title interest in the property would be 

required to sign the security instrument. 

VA would establish the terms of the 

note and security instrument. 

Specifically, VA would require the note 

and security instrument to include the 

amount to be repaid to the Secretary, by 

the veteran, to be the amount calculated 

under § 36.4805(e). The interest rate on 

the loan created by the note and security 

instrument would be required to be 

fixed at 1.00 percent per annum. VA 

would automatically defer monthly 

payments for the first 60 months of the 

loan, meaning that there would be no 

payment due to the Secretary during the 

period of deferment. Interest would 

accrue on the loan during such 

deferment and a borrower could, 

without premium or fee, make payments 

during such deferment for the entire 

indebtedness, or any portion thereof, 

provided that such portion is not less 

than what would be due for one 

monthly payment as calculated based 

on a 60-month term. VA would require 

the term of the loan to be 120 months. 

The loan would be amortized fully 

within the term of the loan in 

accordance with any generally 

recognized plan of amortization 

requiring approximately equal monthly 

payments. VA would require repayment 

in full immediately upon the veteran’s 

transfer of title to the property, the 

refinancing, or payment in full 

otherwise, of the guaranteed loan with 

which the partial claim payment is 

associated. 

H. Section 36.4807 Application for 

Partial Claim Payment 

In proposed § 36.4807, VA would 

require the veteran and the servicer to 

complete an application form prescribed 

by the Secretary. 

Along with a complete application 

form, the original note (required by 

proposed § 36.4805) must be included 

when the servicer submits a request for 

a partial claim. Not later than 180 days 

following the date the security 

instrument (as required by § 36.4805) is 

fully executed, the servicer would be 

required to provide VA with the original 

security instrument and evidence that 

the servicer recorded such instrument. If 

the recording authority causes a delay, 

the servicer could request an extension 

of time, in writing, from VA. 

Servicers would utilize VA’s existing 

loan servicing platform, the VA Loan 

Electronic Reporting Interface (VALERI) 

system, to report the partial claim 

payment event. Servicers would need to 

report the event within seven days of 

the borrower’s execution of the note 

required by § 36.4805. Below, VA has 

identified the specific data elements 

that servicers must input into VALERI 

when reporting the partial claim event. 

DATA ELEMENT DEFINITIONS

Event name Data elements Business definition of data element 

Partial claim ........ Principal amount ..................................... Total dollar amount of all scheduled but missed monthly payments of principal, 

as described in § 36.4805(e)(2)(i) and (e)(3)(ii), and all scheduled monthly payments of principal due within 31 days of the date the veteran executes the 

note and security instrument described in § 36.4806. 

Partial claim ........ Interest amount ....................................... Total dollar amount of all scheduled but missed monthly payments of interest, as 

described in § 36.4805(e)(2)(i) and (e)(3)(ii), and all scheduled monthly payments of interest due within 31 days of the date the veteran executes the note 

and security instrument described in § 36.4806. 


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40 50 U.S.C. 1622(d). 

DATA ELEMENT DEFINITIONS—Continued 

Event name Data elements Business definition of data element 

Partial claim ........ Tax payments missed amount ................ Total dollar amount of all scheduled but missed monthly escrow payments for 

real estate taxes, as described in § 36.4805(e)(2)(ii) and (e)(3)(ii), and all 

scheduled monthly escrow payments for real estate taxes due within 31 days 

of the date the veteran executes the note and security instrument described in 

§ 36.4806. 

Partial claim ........ Insurance payments missed amount ...... Total dollar amount of all scheduled but missed monthly escrow payments for insurance premiums, as described in § 36.4805(e)(2)(ii) and (e)(3)(ii), and all 

scheduled monthly escrow payments for insurance premiums due within 31 

days of the date the veteran executes the note and security instrument described in § 36.4806. 

Partial claim ........ Tax advance amount .............................. Total dollar amount of all payments the servicer made to real estate tax authorities on the veteran’s behalf, as described in § 36.4805(e)(2)(ii). 

Partial claim ........ Tax advance date ................................... The date on which the servicer made the tax advance on the veteran’s behalf, as 

described in § 36.4805(e)(2)(ii). 

Partial claim ........ Insurance advance amount .................... Total dollar amount of all payments the servicer made to insurance providers on 

the veteran’s behalf, as described in § 36.4805(e)(2)(ii). 

Partial claim ........ Insurance advance date ......................... The date on which the servicer made the insurance advance on veteran’s behalf, 

as described in § 36.4805(e)(2)(ii). 

Partial claim ........ Recording fees ........................................ Total dollar amount of recording fees, recording taxes, or other charges levied by 

the recording authority, that must be paid in order to record the security instrument, as described in § 36.4805(e)(3)(iii). 

Partial claim ........ Partial claim origination date .................. The date the borrower executes the note required by § 36.4805. 

Partial claim ........ Partial claim first payment due date ....... The date on which the first payment on the partial claim loan is due to the Secretary. 

Partial claim ........ Partial claim maturity date ...................... The date on which the final payment on the partial claim loan is due to the Secretary. 

Partial claim ........ Partial claim P&I payment amount ......... The monthly payment corresponding to principal and interest on the partial claim 

loan. 

Partial claim ........ Partial claim legal description ................. The legal description of the property. 

Partial claim ........ Partial claim lien position ........................ The lien position of the partial claim loan. 

Partial claim ........ Second borrower birth date .................... The birth dates of all co-borrowers. 

VA has proposed VA Standard Form 

26–10213, Application for a COVID–19 

Veterans Assistance Partial Claim 

Payment (COVID–VAPCP), to collect 

basic information necessary to identify 

the borrower(s), the servicer, and the VA 

loan number for the guaranteed loan for 

which partial claim payment is being 

requested. This form would also collect 

information regarding the date the 

veteran entered into a CARES Act 

forbearance, along with the unpaid 

principal balance on that date, the latter 

of which is necessary to determine the 

maximum amount of the partial claim 

payment under proposed § 36.4805. VA 

proposes that the servicer must indicate, 

on the proposed form, the date on 

which the borrower will resume 

monthly guaranteed loan payments to 

the servicer, along with the amount of 

those monthly payments. The servicer 

would then provide the amount of 

partial claim payment being requested, 

along with the date the note and 

security instrument were executed, as 

required under proposed § 36.4805. 

Finally, both the borrower and servicer 

would sign statements certifying to the 

elements required under proposed 

§ 36.4803. 

Further documentation would only be 

reviewed under VA’s existing auditing 

and oversight processes. 

I. Section 36.4808 No Effect on the 

Servicing of the Guaranteed Loan 

In § 36.4808, VA would require 

servicers to continue to service the 

guaranteed loan in accordance with 

subpart B of part 36. The liability of the 

United States for any guaranteed loan 

would decrease or increase pro rata with 

any decrease or increase of the amount 

of the unpaid portion of the guaranteed 

loan. A partial claim payment would 

not affect the guaranty percentage 

established at the time the guaranteed 

loan was made. Receipt of a partial 

claim payment would not eliminate a 

servicer’s option under 38 U.S.C. 3732, 

to convey to the Secretary the security 

for the guaranteed loan in the event 

such loan is foreclosed or if the veteran 

executes a deed-in-lieu of foreclosure. 

J. Section 36.4809 Expiration of the 

COVID–19 Veterans Assistance Partial 

Claim Payment Program 

In proposed § 36.4809, VA would note 

that the Secretary will not accept a 

request for a partial claim payment after 

the date that is 180 days after the date 

the COVID–19 national emergency ends 

(as provided under the National 

Emergencies Act), unless a veteran’s 

CARES Act forbearance does not end 

until after such date. In cases where a 

veteran’s CARES Act forbearance ends 

after the subject date, the Secretary 

could still accept a request for a partial 

claim payment, provided that such 

request is submitted to the Secretary not 

later than 90 days after the date the 

veteran exits the CARES Act 

forbearance. However, in no event 

would the Secretary accept a request for 

a partial claim payment after September 

9, 2021. 

In proposing September 9, 2021, as 

the last date on which VA could accept 

a request for a partial claim payment, 

VA notes that this date is 180 days from 

the one-year anniversary of the 

President’s March 13, 2020 COVID–19 

national emergency declaration. Under 

the National Emergencies Act, any 

‘‘national emergency declared by the 

President . . . not otherwise previously 

terminated, shall terminate on the 

anniversary of the declaration of that 

emergency if, within the ninety-day 

period prior to each anniversary date, 

the President does not publish in the 

Federal Register and transmit to the 

Congress a notice stating that such 

emergency is to continue . . .’’ 40

Without clear indication of whether the 

national emergency will be extended 

beyond its one-year anniversary, and the 

future state of the economy and lending 


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41 38 U.S.C. 3704(d). 

42 Id. 

43 Id. 

44 38 U.S.C. 3704(d). 

45 Id. 

46 Id. 

47 38 CFR 36.4333(a)(2). 

industry, VA finds it prudent to publish 

a termination date that is tied to the 

one-year anniversary and also provides 

sufficient notice for VA and servicers to 

close out any actions related to the 

program. It also provides sufficient time 

for VA to extend the sunset date via 

rulemaking, depending on VA’s 

continued monitoring of the national 

emergency and its impact on veterans. 

K. Section 36.4810 Oversight of the 

COVID–19 Veterans Assistance Partial 

Claim Payment Program 

In proposed § 36.4810, VA would set 

forth the parameters for oversight of the 

COVID–VAPCP. It is an almost verbatim 

restatement of 38 U.S.C. 3704(d). 

Specifically, subject to notice and 

opportunity for a hearing, whenever the 

Secretary finds with respect to a partial 

claim payment that any servicer has 

failed to maintain adequate loan 

accounting records, or to demonstrate 

proper ability to service loans 

adequately or to exercise proper credit 

judgment or has willfully or negligently 

engaged in practices otherwise 

detrimental to the interest of veterans or 

of the Government, the Secretary could 

refuse either temporarily or 

permanently to guarantee or insure any 

loans made by such servicer and may 

bar such servicer from servicing or 

acquiring guaranteed loans.41

Notwithstanding the above, but subject 

to § 36.4328, the Secretary would not 

refuse to pay a guaranty or insurance 

claim on guaranteed loans theretofore 

entered into in good faith between a 

veteran and such servicer.42 The 

Secretary could also refuse either 

temporarily or permanently to guarantee 

or insure any loans made by a lender or 

holder refused the benefits of 

participation under the National 

Housing Act pursuant to a 

determination of the Secretary of 

Housing and Urban Development.43

As noted above, VA would utilize its 

existing loan refund process to handle 

applications for partial claim payments 

via the VA Loan Electronic Report 

Interface (VALERI). Upon receipt of an 

application, VA would conduct a twotier review and approval of the partial 

claim payment, utilizing information 

already in its VALERI systems to verify 

that the servicer has brought the 

veteran’s guaranteed loan current, that 

the amount requested is consistent with 

other proposed requirements, and that 

VA has received all necessary 

documentation. Partial claim payments 

would also be subject to VA’s oversight 

and audit activities as part of VA’s 

regular monitoring related to adequacy 

of loan servicing. If VA determines, 

during an audit, that a servicer did not 

follow VA’s requirements when 

participating in the COVID–VAPCP, 

proposed § 36.4810 would expressly 

authorize appropriate enforcement 

actions. 

L. Conforming Technical Amendments 

VA proposes to add new section 38 

CFR 36.4336 that would reiterate VA’s 

parameters for oversight of loan 

servicing. This technical amendment is 

necessary to ensure that servicers 

adhere to the parameters outlined in 

§ 36.4804, wherein the servicer must 

consider the partial claim payment 

option after evaluating loss-mitigation 

options in subpart B for feasibility. As 

with proposed § 36.4810, it would 

include an almost verbatim restatement 

of 38 U.S.C. 3704(d). Under this new 

section, subject to notice and 

opportunity for a hearing, whenever the 

Secretary finds that any servicer has 

failed to maintain adequate loan 

accounting records, or to demonstrate 

proper ability to service loans 

adequately or to exercise proper credit 

judgment or has willfully or negligently 

engaged in practices otherwise 

detrimental to the interest of veterans or 

of the Government, the Secretary may 

refuse either temporarily or 

permanently to guarantee or insure any 

loans made by such servicer and may 

bar such servicer from servicing or 

acquiring guaranteed loans.44

Notwithstanding the above, but subject 

to § 36.4328, the Secretary would not 

refuse to pay a guaranty or insurance 

claim on guaranteed loans theretofore 

entered into in good faith between a 

veteran and such servicer.45 The 

Secretary may also refuse either 

temporarily or permanently to guarantee 

or insure any loans made by a lender or 

holder refused the benefits of 

participation under the National 

Housing Act pursuant to a 

determination of the Secretary of 

Housing and Urban Development.46 VA 

also proposes to amend 38 CFR 

36.4333(a)(2) to ensure that records 

referenced in proposed §§ 36.4336 and 

36.4810 are included in VA’s 

maintenance of record requirements. 

Currently, holders are required to 

‘‘maintain records supporting their 

decision to approve any loss-mitigation 

option for which an incentive is paid in 

accordance with § 36.4319(a).’’ 47 VA 

proposes to delete the phrase ‘‘for which 

an incentive is paid in accordance with 

§ 36.4319(a).’’ To ensure that VA’s 

partial claim payment option is covered, 

VA would add a sentence noting that 

the holder would be required to 

maintain records supporting their 

decision to pursue a partial claim 

payment under the COVID–19 Veterans 

Assistance Partial Claim Payment 

program as established by proposed 

subpart F. Regarding the length of the 

recordkeeping requirement, VA 

proposes to retain an element of the 

status quo, namely that such records 

shall be retained a minimum of three 

years from the date of any incentive 

paid in accordance with § 36.4319(a) or 

the date the veteran’s guaranteed loan is 

made current via the COVID–VAPCP, 

whichever is later. Finally, VA proposes 

to amend the specific authority for 

§ 36.4333 to include 38 U.S.C. 3704(d), 

as this section requires the maintenance 

of adequate loan accounting records. 

VI. Specific Questions for Comment 

While VA welcomes comments on all 

aspects of this proposed rule, VA 

specifically requests comments on the 

following: 

1. Is the servicer’s 90-day deadline as 

proposed by § 36.4805 to submit the 

request for partial claim payment 

reasonable? If not, what would be a 

reasonable timeframe, recognizing VA’s 

goal of ensuring that veterans exiting a 

CARES Act forbearance are evaluated 

and processed for home retention 

actions in a timely manner? 

2. Is information collected as part of 

a complete loss-mitigation evaluation 

adequate to determine a borrower(s) 

monthly residual income as described 

by 38 CFR 36.4340(e)? If not, what 

additional information would be needed 

from the borrower(s)? 

3. Understanding that many veterans 

and servicers are in need of VA’s 

assistance, but also that veterans, 

servicers, and other stakeholders would 

need time to understand and implement 

VA’s proposed regulatory requirements, 

VA seeks public comment as to how a 

final rule that is not effective for 30 or 

60 days following publication might 

negatively impact veterans, servicers, 

and other stakeholders. VA also requests 

input as to whether there would be 

enough time for industry 

implementation of the partial claim 

payment program if VA were to publish 

a final rule that is effective 7 days after 

publication. Please be specific in 

communicating any concerns, including 

any additional costs associated with 

accelerated timetables for training, 

technology upgrades, etc. 


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48 5 U.S.C. 553(c). 

49Public Law 116–136, section 4022(b)(2) (Mar. 

27, 2020). 

50 Id. 

51 VA uses data from InfoUSA and Factiva to 

determine the industry (as identified by the primary 

NAICS code) for the active VA-guaranteed loan 

servicers. For industries where size standards are 

determined by the average annual revenue, VA 

compares the revenue of each servicer in these 

industries, as reported in InfoUSA and Factiva, to 

the SBA annual revenue threshold for small 

businesses. For industries where size standards are 

determined by assets, VA compares the relevant 

SBA threshold for small businesses to asset data 

from the FDIC for servicers with primary NAICS 

codes 522110 (Commercial Banking) and 522120 

(Savings Institutions), and asset data from the 

NCUA for lenders with a primary NAICS code of 

522130 (Credit Unions). 

52U.S. Small Business Administration, SBA 

Table of Size Standards, (2019), https://

www.sba.gov/sites/default/files/2019-08/ 

SBA%20Table%20of%20Size%20Standards_

Effective%20Aug%2019%2C%202019_Rev.pdf. 

53 VA averages the sales volumes from Factiva for 

all servicers considered small, including those 

primarily considered commercial banks, savings 

institutions, and credit unions. 

4. In the case of a veteran who pays 

real estate taxes and/or insurance 

premiums directly to a tax authority or 

insurance provider, should VA allow 

the partial claim payment to include 

amounts corresponding to what will be 

due on tax and/or insurance bills, where 

the bills were not due and payable 

during the veteran’s CARES Act 

forbearance? If so, should such amounts 

be prorated to correspond only to the 

months during which the veteran was 

under forbearance? How should 

servicers handle monies in cases where 

such future tax and insurance premium 

payments are not due and payable at the 

time of the partial claim payment, 

resulting in an excess of funds being 

paid to the servicer? Should servicers 

remit such amounts directly to the 

veteran? Or should servicers be required 

to hold such amounts in escrow until 

the bills become due and payable? How 

should VA conduct oversight of these 

activities? 

VII. Explanation of Comment Period 

VA is issuing this proposed rule with 

a 30-day public comment period. The 

Administrative Procedure Act (APA) 

does not specify the length of the 

comment period, requiring only that an 

agency give the public an ‘‘opportunity 

to participate.’’ 48 Agencies commonly 

allow 30 to 60 days for comment on a 

proposed rule. VA is shortening the 

comment period to 30 days because this 

rule is proposed in response to 

heightened concerns surrounding the 

COVID–19 national emergency and 

outcomes for veterans as they exit 

CARES Act forbearance periods. 

Under section 4022 of the CARES Act, 

enacted on March 27, 2020, borrowers 

may obtain up to 180 days of 

forbearance on their Federally backed 

loans.49 VA-guaranteed loans are 

considered Federally backed. Section 

4022 also provides borrowers the option 

of extending the forbearance for an 

additional 180 days.50 Section 4022 

allows borrowers to shorten their 

periods of forbearance. This means that 

some borrowers may have already 

exited CARES Act forbearances and 

more borrowers could do so at any time. 

As initial CARES Act forbearance 

periods near their end, VA stakeholders 

confront numerous decisions that have 

far-reaching consequences. Many 

veterans, for example, must decide 

whether to request additional 

forbearance and watch their forborne 

indebtedness grow, or attempt to resume 

their regularly scheduled monthly 

payments, despite potential hardships 

and uncertainties caused by the national 

emergency. VA’s partial claim 

assistance may well be the determining 

factor for certain veterans, affecting the 

extent to which they can recover 

financially from the crisis. Similarly, 

servicers must evaluate their liquidity 

positions and other factors to determine 

how to make the advances necessary for 

investor requirements. Some servicers 

may even be questioning whether they 

can stay afloat, which ultimately harms 

not just the servicer, but also the 

veterans whose guaranteed loans are 

being serviced. Many of these servicers 

will find that the assistance VA is 

proposing for veterans may 

simultaneously be the servicer’s lifeline, 

thereby affording veterans prudent and 

uninterrupted loan servicing. 

Despite the urgency noted above, VA 

strongly believes that the novelty of this 

program, including the differences 

between VA’s proposed partial claim 

payment program and other federal 

agencies’ partial claim programs, 

necessitates an opportunity for public 

input before finalization and 

implementation. VA did consider 

implementing this program via an 

interim final rule but decided 

stakeholder feedback was needed in 

advance of implementation in a number 

of specific areas, as addressed in section 

VI above. Further, VA recognizes that 

allowing for servicers to communicate 

potential concerns with VA’s rule ahead 

of implementation would ensure 

veterans are better served when the final 

rule goes into effect. Balancing the need 

for a final regulation against the need for 

public input on this new partial claim 

option, VA believes that a 30-day public 

comment period is appropriate to 

ensure VA can gather input from 

interested parties while accelerating the 

process toward a final rule to assist 

veterans. 

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. The Office of 

Information and Regulatory Affairs has 

determined that this rule is an 

economically 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 Regulatory Impact 

Analysis (RIA) are available on VA’s 

website at http://www.va.gov/orpm/, by 

following the link for ‘‘VA Regulations 

Published From FY 2004 Through Fiscal 

Year to Date.’’ 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this proposed 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). To 

assess whether the proposed rule can be 

expected to have a ‘‘significant 

economic impact’’ on small entities, VA 

considers the annual cost of the rule for 

small entities compared to their annual 

revenue. VA was able to determine the 

size of 89 out of 108 companies that 

service VA-guaranteed loans in CARES 

Act forbearances, where the borrowers 

could likely qualify for assistance via a 

partial claim. VA made this 

determination using the size standards 

from the Small Business Administration 

(SBA).51 52 VA used data from InfoUSA 

and Factiva (two business data 

providers) along with data from the 

Federal Deposit Insurance Corporation 

(FDIC) and the National Credit Union 

Administration (NCUA). Out of the 89 

servicers for which VA has sufficient 

data to determine their size, 26 (or 29.21 

percent) are considered small by SBA 

standards. The average annual revenue 

of those 26 small servicers is $11.98 

million.53


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To determine the economic burden of 

the proposed rule on small entities, VA 

compares the average annual costs of 

the rule that fall on small servicers to 

the average annual revenue of the small 

servicers. The costs of the rule come 

from rule familiarization and the 

Paperwork Reduction Act (PRA) costs, 

which include the costs for servicers to 

complete the VA form 26–10213 and 

prepare and execute the original note 

and security instrument. The cost of 

rule familiarization is $99.90 for each 

guaranteed loan servicer, including the 

small servicers. The PRA cost estimates 

vary across servicers depending on how 

many CARES Act forbearance loans they 

service that either meet or could 

potentially meet COVID–VAPCP 

requirements. 

As described in the impact analysis, 

the lower and upper bound estimates for 

the number of borrowers who will likely 

qualify for assistance via a partial claim 

are 33,644 and 60,512, respectively. VA 

estimates that 28.538 percent of those 

loans are serviced by small entities, or 

between 9,601 and 17,269 loans. Given 

the total PRA cost for servicers of $54.96 

per loan, the total PRA cost per average 

small servicer is $20,295.04 at the lower 

bound and $36,504.01 at the upper 

bound. 

The total cost of this rule per average 

small VA-guaranteed loan servicer 

ranges from $20,395 ($99.90 + 

$20,295.04) to $36,604 ($99.90 + 

$36,504.01), while the average annual 

revenue to small servicers is $11.98 

million. VA considers a rule to have a 

‘‘significant economic impact’’ when the 

total annual cost associated with the 

rule for a small entity is equal to or 

exceeds 1 percent of annual revenue. 

The total upper bound cost to small 

servicers is 0.30 percent of the average 

annual revenue to small servicers. This 

ratio is calculated using the total costs 

on small servicers, rather than the total 

annual costs. In subsequent years, 

absent the rule familiarization costs and 

with the dispersion of the PRA costs, 

the average annual cost to small 

servicers is even below that level. Thus, 

the rule is not expected to have a 

significant economic impact on the 

small servicers. 

To assess whether the rule can be 

expected to affect a ‘‘substantial number 

of small entities,’’ VA considers a ratio 

that captures the incidence of small VA 

servicers in the potential universe of 

servicers. Specifically, VA uses the ratio 

of small VA servicers with guaranteed 

loans in CARES Act forbearance that are 

likely to participate in the partial claim 

program to the total number of VA 

servicers with guaranteed loans in 

CARES Act forbearance that are likely to 

participate in the partial claim program. 

As described above, 26 VA servicers out 

of the 89 servicers with sufficient data 

available are small (29.21 percent). 

Therefore, the proposed rule is expected 

to affect a substantial number of small 

entities. 

While the proposed rule is expected 

to affect a substantial number of small 

entities, the impact will not be 

economically significant. On this basis, 

the Secretary certifies that the adoption 

of this proposed rule will not have a 

significant economic impact on a 

substantial number of small entities as 

they are defined in the Regulatory 

Flexibility Act. Therefore, pursuant to 5 

U.S.C. 605(b), the initial and final 

regulatory flexibility analysis 

requirements of 5 U.S.C. 603 and 604 do 

not apply. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

of 1995 requires, at 2 U.S.C. 1532, that 

agencies prepare an assessment of 

anticipated costs and benefits before 

issuing any rule that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

(adjusted annually for inflation) in any 

one year. This proposed rule would 

have no such effect on State, local, and 

tribal governments, or on the private 

sector. 

Paperwork Reduction Act 

This proposed rule includes 

provisions constituting both revised and 

new collections of information under 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521) that require 

approval by the Office of Management 

and Budget (OMB). Accordingly, under 

44 U.S.C. 3507(d), VA has submitted a 

copy of this rulemaking action to OMB 

for review. 

OMB assigns control numbers to 

collections of information it approves. 

VA may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless it 

displays a currently valid OMB control 

number. Proposed §§ 36.4333, 36.4336, 

36.4803, 36.4805, 36.4806, 36.4807, and 

36.4810 contain collections of 

information under the Paperwork 

Reduction Act of 1995. If OMB does not 

approve the collections of information 

as requested, VA will immediately 

remove the provisions containing a 

collection of information or take such 

other action as is directed by OMB. 

Comments on the collections of 

information contained in this proposed 

rule should be submitted to the Office 

of Management and Budget, Attention: 

Desk Officer for the Department of 

Veterans Affairs, Office of Information 

and Regulatory Affairs, Washington, DC 

20503 or submitted through 

www.Regulations.gov. Comments 

should indicate that they are submitted 

in response to ‘‘RIN 2900–AR05.’’ 

OMB is required to make a decision 

concerning the collections of 

information contained in this proposed 

rule between 30 and 60 days after 

publication of this document in the 

Federal Register. Therefore, a comment 

to OMB is best assured of having its full 

effect if OMB receives it within 30 days 

of publication. 

The Department considers comments 

by the public on proposed collections of 

information in— 

• Evaluating whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Department, including 

whether the information will have 

practical utility; 

• Evaluating the accuracy of the 

Department’s estimate of the burden of 

the proposed collections of information, 

including the validity of the 

methodology and assumptions used; 

• Enhancing the quality, usefulness, 

and clarity of the information to be 

collected; and 

• Minimizing the burden of the 

collections of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

such as permitting electronic 

submission of responses. 

The collections of information 

contained in 38 CFR 36.4333, 36.4336, 

and 36.4810 are described immediately 

following this paragraph, under its 

respective title. 

Title: Maintenance of Records. 

OMB Control No.: 2900–0515. 

CFR Provisions: 38 CFR 36.4333, 

36.4336, and 36.4810. 

Summary of collection of information: 

These requirements are covered under 

OMB control number 2900–0515. VA 

proposes to revise this information 

collection to include the proposed 

revisions to § 36.4333 and new 

proposed §§ 36.4336 and 36.4810. 

Under current 38 CFR 36.4333, VA 

requires holders to maintain and lenders 

to retain all records pertaining to loans 

guaranteed by VA. Under this same 

authority, VA has a right to inspect, 

examine, or audit, at a reasonable time 

and place, such records to ensure 

program participants are in compliance 

with applicable laws, regulations, 

policies, procedures, and contract 

provisions. The revised collection of 

information in proposed 38 CFR 


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36.4333 would require holders to 

maintain records supporting their 

decision to approve any home retention 

option exercised by the servicer and 

borrower. The holder would also be 

required to maintain records supporting 

their decision to pursue a partial claim 

payment under the COVID–19 Veterans 

Assistance Partial Claim Payment 

program. VA would require those 

records to be retained a minimum of 3 

years from the date of any incentive 

paid in accordance with § 36.4319(a) or, 

in the case of a partial claim payment 

under the COVID–19 Veterans 

Assistance Partial Claim Payment 

program, the date the veteran’s 

guaranteed loan is made current under 

such program, whichever is later, and 

shall include, but not be limited to, 

credit reports, verifications of income, 

employment, assets, liabilities, and 

other factors affecting the obligor’s 

credit worthiness, worksheets, and other 

documents supporting the holder’s 

decision. In § 36.4336, VA would be 

authorized to take action if it found that 

a servicer failed to maintain adequate 

loan accounting records, to demonstrate 

proper ability to service loans 

adequately, to exercise proper credit 

judgment, or has willfully or negligently 

engaged in practices otherwise 

detrimental to the interest of veterans or 

of the Government. In § 36.4810, VA 

would extend that authority to a partial 

claim payment. 

Description of need for information 

and proposed use of information: The 

information collected as a result of 

revisions associated with this 

rulemaking will be used by VA to 

conduct servicer oversight, including 

the COVID–19 Veteran Assistance 

Partial Claim Payment program. 

Description of likely respondents: The 

respondent population under the 

current information collection is 

comprised of holders and lenders, 

particularly, the individuals with 

oversight roles in the company, such as 

a compliance officer. There is no change 

to this section as a result of this 

rulemaking. 

Estimated number of respondents: 

Under the current information 

collection, VA estimates an ongoing 

hour burden associated with holders 

and lenders submitting files to VA in 

association with normal audit activities. 

VA also estimates an hour burden 

associated with lenders who may 

voluntarily submit loan records to VA in 

a computable data format as it begins to 

pilot that technology. VA does not 

anticipate additional submissions as a 

result of the proposed revisions to 

§§ 36.4333, 36.4336, and 36.4810. 

Estimated frequency of responses: 

Under the current information 

collection, VA estimates a one-time 

response to an audit request or 

voluntary electronic submission. VA 

does not anticipate an increase in the 

frequency of responses. 

Estimated average burden per 

response: The revisions proposed in this 

rule would neither increase nor 

decrease the average burden per 

response, which in this case would be 

the time a servicer spends uploading 

records requested by VA in conjunction 

with servicer audit and oversight 

activities. Similarly, VA notes that 

recordkeeping requirements related to 

servicing and loss-mitigation activities 

are consistent with customary and usual 

business practices for loan holders 

(servicers); VA therefore assigns no 

additional time burden to servicers in 

maintaining such records, including 

those contemplated by the revisions 

proposed in this rule. 

Estimated total annual reporting and 

recordkeeping burden: VA does not, 

with this proposed rulemaking, 

anticipate any change in the total 

annual reporting and recordkeeping 

burden. In that regard, VA’s proposed 

revisions to this existing information 

collection merely expand the 

documentation/information that 

servicers must keep in their records in 

regard to existing VA-guaranteed loans 

and loss-mitigation activities associated 

with those loans, the cost of which falls 

within customary and usual business 

practices. Moreover, VA would request 

such records for the purpose of 

conducting oversight of VA’s proposed 

COVID–VAPCP under existing audit 

and oversight programs with no 

anticipated impact in the number of 

loans for which servicers will have to 

provide VA with additional 

information. 

Estimated cost to respondents per 

year: VA anticipates no additional costs 

to respondents based on proposed 

revisions associated with this 

rulemaking. 

The collections of information 

contained in 38 CFR 36.4803, 36.4805, 

36.4806, and 36.4807 are described 

immediately following this paragraph, 

under its respective title. 

Title: Application for a COVID–19 

Veterans Assistance Partial Claim 

Payment (COVID–VAPCP). 

OMB Control No.: 2900–XXXX 

(NEW). 

CFR Provisions: 38 CFR 36.4803, 

36.4805, 36.4806, and 36.4807. 

Summary of collection of information: 

The new collection of information in 

proposed 38 CFR 36.4803 would require 

the veteran to certify that the veteran 

can resume making scheduled monthly 

payments, on time and in full, and that 

the veteran occupies, as the veteran’s 

residence, the property securing the 

guaranteed loan for which the partial 

claim is requested. In § 36.4803, the 

servicer would be required to certify 

that the veteran’s monthly residual 

income, as described in § 36.4340(e), 

will be adequate to meet living expenses 

after estimated monthly shelter 

expenses have been paid and other 

monthly obligations have been met. In 

§ 36.4805, the servicer would be 

required to prepare a note and security 

instrument in favor of ‘‘the Secretary of 

Veterans Affairs, an Officer of the 

United States’’. VA would require that 

the note be consistent with the terms 

described in § 36.4806 and include all 

borrowers who are obligated on the 

guaranteed loan. The security 

instrument would be required to 

include all persons (borrowers, as well 

as non-borrowers) who have a title 

interest in the property securing the 

guaranteed loan. The servicer would be 

required to record the security 

instrument timely, as prescribed in 

§ 36.4807. 

In § 36.4806, VA would require the 

veteran, and all co-borrowers on the 

guaranteed loan, to execute a note and 

security instrument in favor of ‘‘the 

Secretary of Veterans Affairs, an Officer 

of the United States’’. VA would require 

specific terms in the note and security 

instrument. Specifically, VA would 

require the note and security instrument 

to include the amount to be repaid to 

the Secretary, by the veteran, to be the 

amount calculated under § 36.4805(e). 

The interest rate on the loan created by 

the note and security instrument would 

be required to be fixed at 1.00 percent 

per annum. VA would automatically 

defer monthly payments for the first 60 

months of the loan, meaning that there 

would be no payment due to the 

Secretary during the period of 

deferment. A borrower could, without 

premium or fee, make payments during 

such deferment for the entire 

indebtedness, or any portion thereof, 

provided that such portion is not less 

than what would be due for one 

monthly payment as calculated based 

on a 60-month term. VA would require 

the term of the loan to be 120 months. 

The loan would be amortized fully 

within the term of the loan in 

accordance with any generally 

recognized plan of amortization 

requiring approximately equal monthly 

payments. VA would require repayment 

in full immediately upon the veteran’s 

transfer of title to the property, the 

refinancing, or payment in full 


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54To estimate costs associated with servicer 

respondent burden, VA used the Bureau of Labor 

Statistics (BLS) median hourly wage for loan 

officers (occupation code 13–2072) of $36.64 per 

hour. To estimate costs associated with veteran 

respondent burden, VA used the median hourly 

wage for all occupations of $25.72 per hour. This 

information is available at https://www.bls.gov/oes/ 

current/oes_nat.htm#13-0000. 

otherwise, of the guaranteed loan with 

which the partial claim payment is 

associated. 

In § 36.4807, VA would require the 

veteran and the servicer to complete an 

application form prescribed by the 

Secretary. VA would also state that 

along with the completed form, the 

servicer must provide VA with the 

original note required by § 36.4805. Not 

later than 180 days following the date 

the security instrument, required by 

§ 36.4805, is fully executed, the servicer 

would be required to provide VA with 

the original security instrument and 

evidence that the servicer recorded such 

instrument. If the recording authority 

causes a delay, VA would allow the 

servicer to request an extension of time, 

in writing, from VA. The servicer would 

also be required to report information 

related to the partial claim application 

to VA electronically. 

VA proposes to collect information for 

the partial claim payment application, 

including the certifications outlined in 

36.4803, through use of a new 

standardized form. Proposed VA form 

26–10213, Application for a COVID–19 

Veterans Assistance Partial Claim 

Payment (COVID–VAPCP), would 

collect basic information necessary to 

identify the borrower(s), the servicer, 

and the VA loan number for the 

guaranteed loan for which partial claim 

payment is being requested. This form 

would also collect information 

regarding the date the veteran entered 

into a CARES Act forbearance, along 

with the unpaid principal balance on 

that date, the latter of which is 

necessary to determine the maximum 

amount of the partial claim payment 

under § 36.4805. VA proposes on this 

form that the servicer must indicate, on 

the proposed form, the date on which 

the borrower will resume monthly 

guaranteed loan payments to the 

servicer, along with the amount of those 

monthly payments. The servicer would 

then provide the amount of partial claim 

payment being requested, along with the 

date the note and security instrument 

were executed, as required under 

§ 36.4805. Finally, both the borrower 

and servicer would sign statements 

certifying to those elements required 

under § 36.4803. 

Description of need for information 

and proposed use of information: The 

information will be used by VA to 

determine if the veteran qualifies for a 

partial claim payment and, if qualified, 

to administer the payment. 

Description of likely respondents: 

Veterans and servicers pursuing a 

partial claim payment. 

Estimated number of respondents: VA 

notes that due to the unprecedented 

nature of the current national 

emergency and the novelty of VA’s 

partial claim payment program, there is 

some uncertainty as to how many 

respondents would be impacted by this 

proposed rulemaking. As discussed in 

VA’s regulatory impact analysis, VA has 

estimated a lower/upper bound of 

estimated partial claim payments 

associated with this temporary program 

that corresponds directly to those who 

would be subject to the paperwork 

requirements associated with this 

rulemaking. VA has further estimated a 

distribution of these partial claim 

payments (or respondents) over fiscal 

years 2021 and 2022. Given that this 

proposed temporary program is limited 

to help veterans recover financially from 

the COVID–19 national emergency, VA 

does not anticipate any partial claim 

payments (or applications) will be 

received in FY 2023 and beyond. To 

ensure that VA’s paperwork burden 

estimate coincides with its regulatory 

impact analysis, VA has presented a 

range of paperwork burden estimates. 

However, for purposes of calculating 

annual reporting and recordkeeping 

costs, VA will utilize the average of 

these estimates, annualized over two 

years (FY 2021 and 2022). 

Using the lower/upper bound from 

VA’s regulatory impact analysis, VA 

estimates the total number of 

respondents would fall between 33,644 

and 60,512. Over the two-year period of 

this information collection, the annual 

number of respondents is therefore 

estimated to fall between 16,822 and 

30,256, with an average annual number 

of respondents equal to 23,539. 

Estimated frequency of responses: 

One time per application for partial 

claim payment. 

Estimated average burden per 

response: 60 minutes for veterans 

(includes 15 minutes to complete VA 

form 26–10213, 15 minutes to gather 

and submit any additional financial 

information needed to enable the 

servicer to make an assessment under 38 

CFR 36.4340(e), and 30 minutes to 

understand and execute the original 

note and security instrument). 90 

minutes for servicers (includes 15 

minutes to complete VA form 26–10213, 

15 minutes to review additional 

financial information provided by the 

veteran to assess residual income under 

38 CFR 36.4340(e), and 1 hour to 

prepare and execute the original note 

and security instrument). 

Estimated total annual reporting and 

recordkeeping burden: VA estimates the 

total annual reporting and 

recordkeeping burden falls between 

42,055 and 75,640 burden hours. Using 

VA’s average annual number of 

respondents (23,539), VA estimates a 

total annual reporting and 

recordkeeping burden of 58,847 hours 

(23,539 hours for veterans; 35,308 hours 

for servicers). 

Estimated cost to respondents per 

year: VA estimates the annual cost to 

respondents falls between $1,357,198 

and $2,441,053. Using VA’s average 

annual number of respondents, VA 

estimates the total cost to all 

respondents to be $1,899,108 per year.54

(23,539 burden hours for veterans × 

$25.72 per hour) + (35,308 burden for 

servicers × $36.64 per hour). 

Title: VA Loan Electronic Reporting 

Interface (VALERI) System. 

OMB Control No.: 2900–0021. 

CFR provisions: 38 CFR part 36, 

subpart B, and 38 CFR 36.4807. 

Summary of collection of information: 

The information collection requirements 

under 38 CFR part 36, subpart B, which 

include reporting requirements for 

servicers, are currently assigned OMB 

control number 2900–0021 and set to 

expire on November 30, 2020. In 

proposed § 36.4807, VA would require 

servicers to report a partial claim event 

to VA through its existing electronic 

loan servicing system. This new 

reporting requirement therefore requires 

revisions to the existing information 

collection under control number 2900– 

0021. VA therefore seeks to renew and 

revise this information collection, to 

include proposed revisions to § 36.4807. 

The servicer is already required to 

report information associated with 

reinstating the loan as current, as 

outlined at 38 CFR 36.4317(c)(15), and 

covered by the existing information 

collection. VA proposes to revise its 

information collection to collect new 

data elements specific to the servicer 

executing a partial claim. This new 

information would be transmitted 

through a VALERI Events Bulk Upload 

template. 

Description of need for information 

and proposed use of information: 

Regarding the information requested 

under proposed 38 CFR 36.4807, the 

information will be used by VA to 

determine if the veteran qualifies for a 

partial claim option and, if qualified, to 

administer the payment to the servicer 

on behalf of the veteran. It will also 

serve as a way for VA to track the 

occurrence of the partial claim home 

retention event. 


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79158 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Proposed Rules 

Description of likely respondents: The 

renewal encompasses all servicers 

reporting servicing activity on loans to 

VA. The revisions encompass a subset 

of this group; specifically, servicers 

requesting a partial claim payment on 

behalf of a veteran. 

Estimated number of respondents: VA 

does not anticipate any change in the 

estimated number of respondents based 

on VA’s renewal request or proposed 

revisions to this information collection 

requirement. The current estimated 

number of respondents reflects the 

estimated number of VA servicers 

required to submit loan servicing 

information to VA annually. As such, 

the servicers who will submit 

information in conjunction with the 

partial claim payment option are 

contemplated in the current estimated 

respondent population. 

Estimated frequency of responses: VA 

does not anticipate any change in the 

estimated frequency of responses based 

on VA’s renewal request or proposed 

revisions to this information collection 

as servicers are required to report 

activity on every VA-guaranteed loan in 

their servicing portfolio, regardless of 

the home retention options pursued. 

Estimated average burden per 

response: VA does not anticipate any 

change in the average burden per 

response based on VA’s renewal request 

or proposed revisions to this 

information collection. Under the 

existing information collection, VA 

estimates a one-minute respondent 

burden as the information reported 

through VALERI is automated. 

Estimated total annual reporting and 

recordkeeping burden: VA does not 

anticipate any change in the total 

annual reporting and recordkeeping 

burden currently associated with this 

information collection. VA’s proposed 

revisions to this existing information 

collection merely expand the list of 

possible home retention events to be 

reported by servicers to include the 

partial claim option. 

Estimated cost to respondents per 

year: There are no new or increased 

costs to respondents based on this 

renewal request or proposed revisions to 

this information collection. As noted 

above, there is no change in the 

estimated average number of 

respondents and average burden per 

response for reporting activities 

associated with this information 

collection. VA acknowledges that 

servicers will be required to incorporate 

new information into the VALERI 

Events Bulk Upload template within 

their current servicing platforms. 

However, VA estimates a de minimis 

cost for servicers because servicers 

already utilize VALERI and the Events 

Bulk Upload template format to report 

all servicing activity to VA. 

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, Housing, Individuals 

with disabilities, Loan programs— 

housing and community development, 

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. 

Brooks D. Tucker, Assistant Secretary 

for Congressional and Legislative 

Affairs, Performing the Delegable Duties 

of the Chief of Staff, Department of 

Veterans Affairs, approved this 

document on October 15, 2020, for 

publication. 

Jeffrey M. Martin, 

Assistant Director, Office of Regulation Policy 

& Management, Office of the Secretary, 

Department of Veterans Affairs. 

For the reasons stated in the 

preamble, the Department of Veterans 

Affairs proposes to amend 38 CFR part 

36 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. 

■ 2. Amend § 36.4333 by revising 

paragraph (a)(2) and the two 

parenthetical sentences at the end of the 

section to read as follows: 

§ 36.4333 Maintenance of records. 

(a) * * * 

(2) The holder shall maintain records 

supporting their decision to approve 

any loss mitigation option. The holder 

shall maintain records supporting their 

decision to pursue a partial claim 

payment under the COVID–19 Veterans 

Assistance Partial Claim Payment 

program established under subpart F of 

this part. Such records shall be retained 

a minimum of 3 years from the date of 

any incentive paid in accordance with 

§ 36.4319(a) or, in the case of a partial 

claim payment under the COVID–19 

Veterans Assistance Partial Claim 

Payment program, the date the veteran’s 

guaranteed loan is made current under 

such program, whichever is later, and 

shall include, but not be limited to, 

credit reports, verifications of income, 

employment, assets, liabilities, and 

other factors affecting the obligor’s 

credit worthiness, work sheets, and 

other documents supporting the 

holder’s decision. 

* * * * * 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number XXXX–XXXX) 

(Authority: 38 U.S.C. 3703(c)(1), 3704(d)) 

■ 3. Add § 36.4336 to read as follows: 

§ 36.4336 Oversight of servicing. 

(a) Subject to notice and opportunity 

for a hearing, whenever the Secretary 

finds that any servicer has failed to 

maintain adequate loan accounting 

records, or to demonstrate proper ability 

to service loans adequately or to 

exercise proper credit judgment or has 

willfully or negligently engaged in 

practices otherwise detrimental to the 

interest of veterans or of the 

Government, the Secretary may refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

such servicer and may bar such servicer 

from servicing or acquiring guaranteed 

loans. 

(b) Notwithstanding paragraph (a) of 

this section, but subject to § 36.4328, the 

Secretary will not refuse to pay a 

guaranty or insurance claim on 

guaranteed loans theretofore entered 

into in good faith between a veteran and 

such servicer. 

(c) The Secretary may also refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

a lender or holder refused the benefits 

of participation under the National 

Housing Act pursuant to a 

determination of the Secretary of 

Housing and Urban Development. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–0515) 

(Authority: 38 U.S.C. 3703, 3704(d), 3720) 

■ 4. Add subpart F to read as follows: 

Subpart F—COVID–19 Recovery 

Measures 

Sec. 

36.4800 Applicability. 

36.4801 Definitions. 

36.4802 General purpose of the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 


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Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Proposed Rules 79159 

36.4803 General requirements of the 

COVID–19 Veterans Assistance Partial 

Claim Payment program. 

36.4804 Partial claim payment as last resort. 

36.4805 Terms of the partial claim 

payment. 

36.4806 Terms of the assistance to the 

veteran. 

36.4807 Application for partial claim 

payment. 

36.4808 No effect on the servicing of the 

guaranteed loan. 

36.4809 Expiration of the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

36.4810 Oversight of the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

§ 36.4800 Applicability. 

This subpart applies to all loans 

guaranteed by VA, to the extent such 

loans are affected by the COVID–19 

national emergency. 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4801 Definitions. 

The following definitions of terms 

apply to this subpart: 

Alternative to foreclosure means an 

alternative to foreclosure for which the 

Secretary may pay an incentive under 

§ 36.4319. These alternatives include 

compromise sale (sometimes called a 

short sale) and deed-in-lieu of 

foreclosure. 

CARES Act forbearance means 

forbearance of scheduled monthly 

guaranteed loan payments, as granted to 

a veteran under section 4022 of the 

Coronavirus Aid, Relief, and Economic 

Security Act (Pub. L. 116–136). 

CARES Act indebtedness means the 

dollar amount the veteran is obligated to 

pay under the guaranteed loan terms, 

but that is not collected during a CARES 

Act forbearance. 

Guaranteed loan means a loan 

guaranteed under chapter 37 of title 38, 

United States Code. 

Loss-mitigation option means a lossmitigation option for which the 

Secretary may pay an incentive under 

§ 36.4319. These options include a 

repayment plan, special forbearance, 

and loan modification. 

Secretary means the Secretary of 

Veterans Affairs, or any employee of the 

Department of Veterans Affairs (VA) 

authorized to act in the Secretary’s 

stead. 

Servicer means, for the purposes of 

this subpart, the holder, servicer, or 

servicing agent, as defined in § 36.4301. 

The terms can apply jointly or severally, 

or jointly and severally. 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4802 General purpose of the COVID– 

19 Veterans Assistance Partial Claim 

Payment program. 

The COVID–19 Veterans Assistance 

Partial Claim Payment program is a 

temporary program to help veterans 

who have suffered a COVID–19 

financial hardship. Notwithstanding the 

requirements elsewhere in this part 

regarding payment of a guaranty claim 

or refunding a loan, VA may assist a 

veteran exiting a CARES Act 

forbearance by purchasing from the 

servicer the veteran’s CARES Act 

indebtedness. Such a purchase is called 

a partial claim payment. In exchange for 

VA’s partial claim payment on behalf of 

the veteran, the veteran must agree to 

repay the Secretary, in the amount of 

such partial claim payment, upon loan 

terms established by the Secretary. 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4803 General requirements of the 

COVID–19 Veterans Assistance Partial 

Claim Payment program. 

The following general requirements 

must be met before the Secretary will 

allow for participation in the COVID–19 

Veterans Assistance Partial Claim 

Payment program: 

(a) The loan for which a partial claim 

payment is requested must be a 

guaranteed loan that was, on March 1, 

2020, either current or less than 30 days 

past due; 

(b) The veteran on whose behalf VA 

will pay a partial claim payment both 

received a CARES Act forbearance and 

missed at least one scheduled monthly 

payment; 

(c) There remains unpaid at least one 

scheduled monthly payment that the 

veteran did not make while under a 

CARES Act forbearance; 

(d) The veteran certifies that the 

veteran can resume making scheduled 

monthly payments, on time and in full, 

and that the veteran occupies, as the 

veteran’s residence, the property 

securing the guaranteed loan for which 

the partial claim payment is requested; 

(e) The servicer determines and 

certifies that the veteran’s monthly 

residual income, as described in 

§ 36.4340(e), will be adequate to meet 

living expenses after estimated monthly 

shelter expenses have been paid and 

other monthly obligations have been 

met; and 

(f) The veteran executes, in a timely 

manner, all loan documents necessary 

to establish an obligation to repay the 

Secretary for the partial claim payment. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number XXXX–XXXX) 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4804 Partial claim payment as last 

resort. 

(a) The Veterans Assistance Partial 

Claim Payment program is designed to 

address the financial hardships due, 

directly or indirectly, to the COVID–19 

national emergency. Servicers must 

consider all possible loss-mitigation 

options. VA expects that the partial 

claim payment option will be 

considered only as a last resort, after a 

servicer has evaluated loss-mitigation 

options for feasibility. 

(b) If the veteran notifies the servicer 

that the veteran does not want to retain 

ownership of the property securing the 

guaranteed loan, the servicer may 

immediately proceed to offering an 

alternative to foreclosure. 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4805 Terms of the partial claim 

payment. 

(a) In order for a partial claim 

payment to be payable, the servicer 

must submit to the Secretary, not later 

than 90 days after the date the veteran 

exits the CARES Act forbearance, a 

request for such payment, as prescribed 

in § 36.4807. 

(b) The amount of the partial claim 

payment that VA will pay to the 

servicer, as calculated under paragraph 

(e) of this section, shall not exceed 15 

percent of the unpaid principal balance 

of the guaranteed loan. For the purposes 

of this paragraph (b), the unpaid 

principal balance of the guaranteed loan 

means such balance as of the date the 

veteran entered into a CARES Act 

forbearance. 

(c) VA will pay only one partial claim 

payment per guaranteed loan. 

(d) VA will pay only one partial claim 

payment per veteran. 

(e)(1) Because VA will pay only one 

partial claim payment per guaranteed 

loan, and only one partial claim 

payment per veteran, a servicer must, 

when calculating the amount of partial 

claim payment to be paid by VA to the 

servicer, include the full amount of 

indebtedness that is necessary to bring 

the guaranteed loan current. 

(2) To bring the guaranteed loan 

current, servicers must include the full 

CARES Act indebtedness, comprising— 

(i) All scheduled but missed monthly 

payments of principal and interest; and 

(ii) As applicable, all scheduled but 

missed monthly escrow payments for 

real estate taxes and insurance 

premiums, or where the guaranteed loan 

documents do not provide for monthly 

escrowing, all payments the servicer 

made to real estate tax authorities and 

insurance providers, on the veteran’s 

behalf, during the CARES Act 

forbearance. 


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79160 Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Proposed Rules 

(3) Also in bringing the guaranteed 

loan current, servicers must include— 

(i) All scheduled monthly payments 

(comprising principal, interest, and 

escrow payments for real estate taxes 

and insurance premiums) due within 31 

days of the date the veteran executes the 

note and security instrument described 

in § 36.4806; 

(ii) If applicable, all scheduled 

monthly payments (comprising 

principal, interest, and escrow 

payments for real estate taxes and 

insurance premiums) that were missed 

after March 1, 2020, but before the 

veteran was granted the CARES Act 

forbearance; and 

(iii) The actual amount of recording 

fees, recording taxes, or other charges 

levied by the recording authority, that 

must be paid in order to record the 

security instrument described in 

§ 36.4806. 

(4) Except for amounts identified in 

paragraphs (e)(2) and (3) of this section, 

servicers shall not include any amounts 

(e.g., fees, penalties, or interest) beyond 

the amounts scheduled or calculated as 

if the borrower made all contractual 

payments on time and in full under the 

terms of the guaranteed loan. 

(5) Nothing in this section shall 

preclude a veteran from making an 

optional payment or a servicer from 

waiving a veteran’s indebtedness, such 

that the amount of partial claim 

payment would not exceed the 15 

percent cap described in paragraph (b) 

of this section. 

(6) If the servicer miscalculates the 

partial claim amount, resulting in an 

overpayment to the servicer, the amount 

of such overpayment shall constitute a 

liability of the servicer to the United 

States. The servicer must remit the 

overpaid amount immediately to VA. 

(7) If the servicer miscalculates the 

partial claim amount, resulting in 

underpayment (i.e., an amount 

insufficient to bring the guaranteed loan 

current), the servicer must waive the 

difference. 

(8) Servicers shall not include any 

amounts for a monthly payment that is 

scheduled to be paid on a date that is 

more than 31 days after the veteran 

executes the note and security 

instrument described in § 36.4806. 

(f) The servicer must prepare a note 

and security instrument in favor of ‘‘the 

Secretary of Veterans Affairs, an Officer 

of the United States’’. 

(1) The note must be consistent with 

the terms described in § 36.4806 and 

include all borrowers who are obligated 

on the guaranteed loan; and 

(2) The security instrument must 

include all persons (borrowers, as well 

as non-borrowers) who hold a title 

interest in the property securing the 

guaranteed loan. 

(g) Subject to paragraph (a) of this 

section, all loan documents must be 

fully executed not later than 90 days 

after the veteran exits the CARES Act 

forbearance. 

(h) The servicer must record the 

security instrument timely, as 

prescribed in § 36.4807. 

(i) The servicer must not charge, or 

allow to be charged, to the veteran any 

fee in connection with the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number XXXX–XXXX) 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4806 Terms of the assistance to the 

veteran. 

(a) If a veteran chooses to accept VA’s 

assistance (i.e., a partial claim payment 

to the servicer, on the veteran’s behalf), 

the veteran, and all co-borrowers on the 

guaranteed loan, must execute a note 

and security instrument in favor of ‘‘the 

Secretary of Veterans Affairs, an Officer 

of the United States’’. 

(b) Specific terms of the note and 

security instrument shall include the 

following: 

(1) The amount to be repaid to the 

Secretary, by the veteran, is the amount 

calculated under § 36.4805(e); 

(2) The interest rate on the loan 

created by the note and security 

instrument must be fixed at 1.00 percent 

per annum; 

(3)(i) Monthly payments are 

automatically deferred for the first 60 

months of the loan, meaning that there 

is no payment due to the Secretary 

during the period of deferment; 

(ii) Interest will accrue on the loan 

during such deferment; and 

(iii) A borrower may, without 

premium or fee, make payments during 

such deferment for the entire 

indebtedness, or any portion thereof 

provided that such portion is not less 

than what would be due for one 

monthly payment as calculated based 

on a 60-month term; 

(4) The term of the loan must be 120 

months; 

(5) The loan shall be amortized fully 

within the term of the loan in 

accordance with any generally 

recognized plan of amortization 

requiring approximately equal monthly 

payments; and 

(6) Repayment in full is required 

immediately upon— 

(i) The veteran’s transfer of title to the 

property; or 

(ii) The refinancing, or payment in 

full otherwise, of the guaranteed loan 

with which the partial claim payment is 

associated. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number XXXX–XXXX) 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4807 Application for partial claim 

payment. 

(a) The veteran and the servicer must 

complete an application form prescribed 

by the Secretary. 

(b) Along with a complete application 

form, the servicer must provide VA with 

the original note required by § 36.4805. 

Not later than 180 days following the 

date the security instrument, required 

by § 36.4805, is fully executed, the 

servicer must provide VA with the 

original security instrument and 

evidence that the servicer recorded such 

instrument. If the recording authority 

causes a delay, the servicer may request 

an extension of time, in writing, from 

VA. 

(c) Servicers must report a partial 

claim event to VA through VA’s existing 

electronic loan servicing system within 

seven days of the borrower’s execution 

of the note required by § 36.4805. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

numbers XXXX–XXXX and XXXX–XXXX) 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4808 No effect on the servicing of the 

guaranteed loan. 

(a) Servicers must continue to service 

the guaranteed loan in accordance with 

subpart B of this part. 

(b) The liability of the United States 

for any guaranteed loan shall decrease 

or increase pro rata with any decrease 

or increase of the amount of the unpaid 

portion of the guaranteed loan. A partial 

claim payment does not affect the 

guaranty percentage established at the 

time the guaranteed loan was made. 

(c) Receipt of a partial claim payment 

shall not eliminate a servicer’s option 

under 38 U.S.C. 3732 to convey to the 

Secretary the security for the guaranteed 

loan. 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4809 Expiration of the COVID–19 

Veterans Assistance Partial Claim Payment 

program. 

(a) Subject to paragraph (b) of this 

section, the Secretary will not accept a 

request for a partial claim payment after 

the date that is 180 days after the date 

the COVID–19 national emergency ends 

(as provided under the National 

Emergencies Act). 


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Federal Register / Vol. 85, No. 237 / Wednesday, December 9, 2020 / Proposed Rules 79161 

(b) If a veteran’s CARES Act 

forbearance does not end until after the 

date described in paragraph (a) of this 

section, the Secretary may still accept a 

request for a partial claim payment, 

provided that such request is submitted 

to the Secretary not later than 90 days 

after the date the veteran exits the 

CARES Act forbearance. 

(c) Notwithstanding paragraphs (a) 

and (b) of this section, the Secretary will 

not accept a request for a partial claim 

payment after September 9, 2021. 

(Authority: 38 U.S.C. 3703(c), 3720, 3732) 

§ 36.4810 Oversight of the COVID–19 

Veterans Assistance Partial Claim Payment 

program. 

(a) Subject to notice and opportunity 

for a hearing, whenever the Secretary 

finds with respect to a partial claim 

payment that any servicer has failed to 

maintain adequate loan accounting 

records, or to demonstrate proper ability 

to service loans adequately or to 

exercise proper credit judgment or has 

willfully or negligently engaged in 

practices otherwise detrimental to the 

interest of veterans or of the 

Government, the Secretary may refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

such servicer and may bar such servicer 

from servicing or acquiring guaranteed 

loans. 

(b) Notwithstanding paragraph (a) of 

this section, but subject to § 36.4328, the 

Secretary will not refuse to pay a 

guaranty or insurance claim on 

guaranteed loans theretofore entered 

into in good faith between a veteran and 

such servicer. 

(c) The Secretary may also refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

a lender or holder refused the benefits 

of participation under the National 

Housing Act pursuant to a 

determination of the Secretary of 

Housing and Urban Development. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number XXXX–XXXX) 

(Authority: 38 U.S.C. 3703, 3704(d), 3720) 

[FR Doc. 2020–26964 Filed 12–8–20; 8:45 am] 

BILLING CODE 8320–01–P 


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