Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Proposed Rules 85863 

1The Commission voted 4–0 to approve 

publication of this notice of extension of comment 

period. 

1 38 U.S.C. 3710(b)(4); see also 38 U.S.C. 3711. 2 38 U.S.C. 3704(a). 

3 38 U.S.C. 3762(c)(2). 

4Lenders Handbook, VA Pamphlet 26–7, https:// 

www.benefits.va.gov/warms/pam26_7.asp. 

5 Id. 

(NPGA) submitted a similar request to 

extend the public comment period for 

the NPR by 60 days. The Commission 

has considered these requests to extend 

the comment period. To provide 

additional time for stakeholders to 

prepare comments for the rulemaking, 

the Commission will grant an extension 

of the comment period to January 25, 

2024.1

Alberta E. Mills, 

Secretary, Consumer Product Safety 

Commission. 

[FR Doc. 2023–27128 Filed 12–8–23; 8:45 am] 

BILLING CODE 6355–01–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 36 

RIN 2900–AS02 

Loan Guaranty: Minimum Property 

Requirements for VA-Guaranteed and 

Direct Loans 

AGENCY: Department of Veterans Affairs. 

ACTION: Advance notice of proposed 

rulemaking. 

SUMMARY: The Department of Veterans 

Affairs (VA) is requesting public 

comment on the minimum property 

requirements (MPRs) for VA-guaranteed 

and direct loans. VA will consider 

information received in response to this 

advance notice of proposed rulemaking 

(ANPRM) in implementing the 

Improving Access to the VA Home Loan 

Benefit Act of 2022 (the Act). The Act 

requires VA to consider making changes 

to MPRs in prescribing updated 

regulatory requirements regarding 

appraisals. This ANPRM seeks public 

input to better understand areas for 

improvement in MPRs, including 

whether VA should consider adopting 

an approach that aligns with other 

industry-wide property standards 

already in existence. 

DATES: Comments must be received on 

or before February 9, 2024. 

ADDRESSES: Comments must be 

submitted through www.regulations.gov. 

Except as provided below, comments 

received before the close of the 

comment period will be available at 

www.regulations.gov for public viewing, 

inspection, or copying, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post the comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: https://

www.regulations.gov. VA will not post 

on www.regulations.gov public 

comments that make threats to 

individuals or institutions or suggest 

that the commenter will take actions to 

harm an individual. VA encourages 

individuals not to submit duplicative 

comments. We will post acceptable 

comments from multiple unique 

commenters even if the content is 

identical or nearly identical to other 

comments. Any public comment 

received after the comment period’s 

closing date is considered late and will 

not be considered in the final 

rulemaking. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Li, Assistant Director for 

Regulations, Legislation, Engagement 

and Training, and Terry Rouch, 

Assistant Director for Loan Policy and 

Valuation, 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: VA must 

ensure that any property financed 

through a VA-guaranteed or direct loan 

is suitable for dwelling purposes.1

Additionally, any loan for either the 

purchase or construction of a residential 

property, in which construction was 

completed within one year of the loan, 

must meet or exceed minimum 

requirements for planning, construction, 

and general acceptability, as prescribed 

by VA.2 Also, any direct housing loan 

made by VA under the Native American 

Direct Loan (NADL) program must meet 

minimum requirements for planning, 

construction, improvement, and general 

acceptability, as prescribed by VA.3

In 38 CFR 36.4351 and 36.4527(c)(4), 

VA implemented the above noted 

statutory requirements, and in the 

Lenders Handbook, VA maintains a list 

of MPRs.4 The following table reflects 

that list.5

TABLE 1—VA PAMPHLET 26–7, LENDERS HANDBOOK, CHAPTER 12—MINIMUM PROPERTY REQUIREMENTS

Topic Topic name Topic Topic name 

1 ........... Minimum Property Requirement Procedures. 23 ......... Heating. 

2 ........... Marketable Real Estate Entity. 24 ......... Leased Mechanical Systems and Equipment. 

3 ........... Space Requirements. 25 ......... Alternative Energy Equipment. 

4 ........... Access. 26 ......... Roof Covering. 

5 ........... Encroachments. 27 ......... Attics. 

6 ........... Drainage and Topography. 28 ......... Crawl Spaces. 

7 ........... Geological or Soil Instability, Subsidence, and Sinkholes. 29 ......... Basements. 

8 ........... Special Flood Hazard Area. 30 ......... Swimming Pools. 

9 ........... Coastal Barrier Resources System. 31 ......... Burglar Bars. 

10 ......... Lava Flow Hazard Areas. 32 ......... Lead-Based Paint. 

11 ......... Non-Residential Use. 33 ......... Wood Destroying Insects/Fungus/Dry Rot. 

12 ......... Zoning. 34 ......... Radon Gas. 

13 ......... Local Housing/Planning Authority Code Enforcement. 35 ......... Potential Environmental Problem. 

14 ......... Utilities. 36 ......... Stationary Storage Tanks. 

15 ......... Water Supply and Sanitary Facilities. 37 ......... Mineral, Oil and Gas Reservations or Leases. 

16 ......... Individual Water Supply. 38 ......... High Voltage Electric Transmission Lines. 

17 ......... Individual Sewage Disposal. 39 ......... High Pressure Gas and Liquid Petroleum Pipelines. 

18 ......... Shared Wells. 40 ......... Properties Near Airports. 

19 ......... Community Water Supply/Sewage Disposal Requirements. 41 ......... Manufactured Home Classified as Real Estate. 

20 ......... Hazards. 42 ......... Modular Homes. 

21 ......... Defective Conditions. 43 ......... Energy Conservation and Sustainability. 

22 ......... Mechanical Systems. 44 ......... Requests for Waiver of MPR Repairs. 


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85864 Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Proposed Rules 

6Public Law 117–308, 136 Stat. 4393. 

7 Id. 

8Selling Guide: Fannie Mae Single Family, B4– 

1.3–06, Fannie Mae, (Aug. 2, 2023), https://sellingguide.fanniemae.com; The Single-Family Seller/ 

Servicer Guide, Exhibit 36 Condition and Quality 

Ratings and Level of Updating Definitions, Freddie 

Mac, (May 31, 2017), https://guide.freddiemac.com/ 

app/guide/exhibit/36; Uniform Appraisal Dataset, 

Freddie Mac, https://sf.freddiemac.com/toolslearning/uniform-mortgage-data-program/ 

uad#business-resources (last visited Aug. 23, 2023). 

9This information collection is approved by the 

Office of Management and Budget (OMB) under 

Control Number 2900–0890. 

In addition to MPRs being a legal 

requirement, they also serve as a 

safeguarding function by exposing 

potential defects or maintenance issues 

that could have a significant effect on a 

property’s value. 

Section 3 of the Act 6 directs the 

Secretary to consider making changes 

applicable to MPRs.7 Therefore, VA is 

issuing this ANPRM to request public 

comment as the agency considers 

regulatory amendments pertaining to 

MPRs. While VA welcomes all 

comments regarding MPRs, VA is 

particularly interested in hearing from 

the public on the below noted 

questions. 

Questions for Comment 

(1)(a) What are the advantages and/or 

disadvantages of VA MPRs noted in the 

above table as compared with similar 

requirements found in other Federal 

housing programs and conventional 

sources of financing (e.g., property 

condition requirements)? 

(b) What policies or processes specific 

to VA MPRs could be streamlined, 

modified, or eliminated to enhance your 

experience with the VA home loan 

program? 

(c) Please also provide any general 

suggestions for improvement or 

comments on the current VA MPRs. 

(2)(a) Should VA replace the above 

noted VA MPRs with the property 

condition ratings outlined in Fannie 

Mae’s Selling Guide or Freddie Mac’s 

Single-Family Seller/Servicer Guide, 

and included in the Uniform Appraisal 

Dataset (UAD) 8

(b) If VA were to guarantee or make 

loans only on properties with a 

condition rating of C1, C2, C3, or C4, 

either based on the initial appraisal or 

following repairs, what would be the 

advantages and/or disadvantages for a 

borrower? For VA and taxpayers? For 

lenders and servicers? 

(c) Could the below noted property 

condition ratings be used by VA in 

another way to determine MPRs? 

By way of background, the UAD 

defines all fields required for an 

appraisal submission for specific 

appraisal forms (e.g., Fannie Mae Form 

1004) and standardizes definitions and 

responses for a key subset of fields. 

When completing an appraisal that 

conforms to the UAD, the appraiser 

assigns one of the standardized 

condition ratings pursuant to the 

definitions in the Fannie Mae Selling 

Guide or Freddie Mac Seller/Servicer 

Guide and presented in Table 2 below. 

These ratings identify the condition of 

the improvements for the subject 

property and comparable sales. 

VA appraisers utilize industrystandard forms to complete appraisals 

for VA-guaranteed loans. As such, VA 

already collects information regarding 

the UAD property condition rating as 

part of a VA appraisal.9 As VA 

considers how to streamline the 

appraisal process, one option could be 

to utilize this existing appraisal 

information to determine whether a 

property is suitable for dwelling 

purposes rather than provide appraisers 

with a lengthy list of specific MPRs to 

evaluate. In reviewing the UAD property 

condition ratings, VA believes that 

properties rated C1 through C4 would 

best align with VA’s statutory 

requirement and existing MPRs, but is 

open to public feedback on this issue. 

TABLE 2—UNIFORM APPRAISAL DATASET (UAD) PROPERTY CONDITION RATINGS

Rating Description in Fannie Mae Selling and Freddie Mac Seller/Servicer Guides 

C1 ..................... The improvements have been very recently constructed and have not previously been occupied. The entire structure and all 

components are new and the dwelling features no physical depreciation. 

C2 ..................... The improvements feature no deferred maintenance, little or no physical depreciation, and require no repairs. Virtually all 

building components are new or have been recently repaired, refinished, or rehabilitated. All outdated components and finishes have been updated and/or replaced with components that meet current standards. Dwellings in this category either 

are almost new or have been recently completely renovated and are similar in condition to new construction. 

C3 ..................... The improvements are well-maintained and feature limited physical depreciation due to normal wear and tear. Some components, but not every major building component, may be updated or recently rehabilitated. The structure has been well-maintained. 

C4 ..................... The improvements feature some minor deferred maintenance and physical deterioration due to normal wear and tear. The 

dwelling has been adequately maintained and requires only minimal repairs to building components/mechanical systems 

and cosmetic repairs. All major building components have been adequately maintained and are functionally adequate. 

C5 ..................... The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation, or updating. The functional utility and overall livability are somewhat diminished due to 

condition, but the dwelling remains useable and functional as a residence. 

C6 ..................... The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to 

affect the safety, soundness, or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components. 

(3) VA is interested in hearing how 

the current MPRs may be impacting 

certain groups of veteran borrowers, 

including those traditionally 

underserved in the housing finance 

industry. As VA considers changes to 

the MPRs, VA is exploring how best to 

ensure all eligible individuals for the 

VA home loan benefit are served. 

(a) Please describe any needs of 

groups of veterans who might be 

underserved due to the current MPRs 

and how the VA home loan program 

could address those needs. 

(b) Please describe any VA MPRs that 

might restrict utilization by any group(s) 

of veterans that are traditionally 

underserved in the housing finance 

industry. What changes could VA make 

to its MPRs to encourage more 

utilization by these groups? 

(4) VA is interested in hearing how 

changes to the MPRs might affect lender 

participation which, in turn, could 

affect a veteran borrower’s access to the 

benefit. 

(a) As an interested stakeholder, in 

your opinion, what type(s) of MPRs are 

helpful in protecting veteran borrowers, 

lenders, servicers, and VA? 

(b) What type(s) of changes related to 

MPRs would encourage more lenders 


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Federal Register / Vol. 88, No. 236 / Monday, December 11, 2023 / Proposed Rules 85865 

and broker/agent entities to increase 

their participation in the VA home loan 

program? 

(5)(a) As an interested stakeholder, in 

your opinion, are waivers of certain 

MPRs necessary in the VA home loan 

buying process? If so, please explain. 

(b) Would your answer change if VA

adopted a more generalized approach to 

MPRs, such as the property condition 

ratings in the Fannie Mae Selling Guide 

or Freddie Mac Seller/Servicer Guide 

and UAD, versus the current MPRs? 

Executive Orders 12866, 13563 and 

14094 

Executive Order 12866 (Regulatory 

Planning and Review) directs agencies 

to assess the costs and benefits of 

available regulatory alternatives and, 

when regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, and other advantages; 

distributive impacts; and equity). 

Executive Order 13563 (Improving 

Regulation and Regulatory Review) 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. Executive Order 

14094 (Executive order on Modernizing 

Regulatory Review) supplements and 

reaffirms the principles, structures, and 

definitions governing contemporary 

regulatory review established in 

Executive Order 12866 of September 30, 

1993 (Regulatory Planning and Review), 

and Executive Order 13563 of January 

18, 2011 (Improving Regulation and 

Regulatory Review). The Office of 

Information and Regulatory Affairs has 

determined that this rule is a significant 

regulatory action under Executive Order 

12866, as amended by Executive Order 

14094. The Regulatory Impact Analysis 

associated with this rulemaking can be 

found as a supporting document at 

www.regulations.gov. 

Signing Authority 

Denis McDonough, Secretary of 

Veterans Affairs, approved and signed 

this document on December 4, 2023, 

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. 

Jeffrey M. Martin, 

Assistant Director, Office of Regulation Policy 

& Management, Office of General Counsel, 

Department of Veterans Affairs. 

[FR Doc. 2023–27068 Filed 12–8–23; 8:45 am] 

BILLING CODE 8320–01–P 


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