91624 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 

(a)(4) of this section, as applicable); a 

statement that all of the members of the 

organization elect that it be excluded 

from all of subchapter K; a statement 

indicating where a copy of the 

agreement under which the organization 

operates is available (or if the agreement 

is oral, from whom the provisions of the 

agreement may be obtained); and all 

information required by the form and 

instructions to the Form 1065 for an 

election under paragraph (a) of this 

section. 

(ii) * * * If an unincorporated 

organization described in paragraph 

(a)(1) of this section and either 

paragraph (a)(2) or (3) of this section 

(but not a specified applicable 

unincorporated organization) does not 

make the election provided in section 

761(a) in the manner prescribed by 

paragraph (b)(2)(i) of this section, it will 

nevertheless be deemed to have made 

the election if it can be shown from all 

the surrounding facts and circumstances 

that it was the intention of the members 

of such organization at the time of its 

formation to secure exclusion from all of 

subchapter K beginning with the first 

taxable year of the organization. * * * 

(3) * * * 

(i) * * * Application for permission 

to revoke the election must be made by 

submitting a letter ruling request that 

complies with the requirements of Rev. 

Proc. 2024–1 or successor guidance. 

* * * * * 

(f) Applicability date—(1) In general. 

Except as provided in paragraphs (d) 

and (f)(2) of this section, this section 

applies to taxable years ending on or 

after March 11, 2024. 

(2) Exceptions. Paragraphs (a)(4)(iv) 

and (a)(5)(iv) of this section, the fifth 

sentence of paragraph (b)(2)(i) of this 

section, the first sentence of paragraph 

(b)(2)(ii) of this section, and the last 

sentence of paragraph (b)(3)(i) of this 

section, apply to taxable years ending 

on or after November 20, 2024. 

Heather C. Maloy, 

Acting Deputy Commissioner. 

[FR Doc. 2024–26962 Filed 11–19–24; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 36 

RIN 2900–AS16 

Loan Guaranty: Loan Reporting and 

Partial or Total Loss of Guaranty or 

Insurance 

AGENCY: Department of Veterans Affairs. 

ACTION: Proposed rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) proposes to amend its 

regulations governing loan reporting 

requirements for lenders that participate 

in the VA-guaranteed home loan 

program and circumstances when VA 

would assert a defense for partial or 

total loss of guaranty or insurance for 

lenders and holders. These proposed 

amendments would support VA’s 

ongoing efforts to modernize and 

transform technology and processes 

within the guaranteed home loan 

program, capitalizing on industry 

standard datasets. In addition, the 

proposed regulatory changes would 

update and enhance the loan guaranty 

reporting requirements for lenders, 

providing veterans stronger protections 

against noncompliant loans through 

improved transparency and oversight of 

the program. 

DATES: Comments must be received on 

or before January 21, 2025. 

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 

www.regulations.gov as soon as possible 

after they have been received. 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; however, we will post 

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. In accordance with the 

Providing Accountability Through 

Transparency Act of 2023, a 100 word 

Plain-Language Summary of this 

proposed rule is available at 

Regulations.gov, under RIN 2900– 

AS16(P). 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Li, Assistant Director for 

Regulations, Legislation, Engagement, 

and Training; Terry Rouch, Assistant 

Director for Loan Policy and Valuation; 

and Colin Deaso, Assistant Director for 

Data and Technology Solutions, Loan 

Guaranty (26), Veterans Benefits 

Administration, Department of Veterans 

Affairs, 1800 G Street NW, Washington 

DC 20006, (202) 632–8862. (This is not 

a toll-free telephone number.) 

SUPPLEMENTARY INFORMATION: 

I. Purpose of This Rulemaking 

VA proposes to amend its reporting 

regulation at 38 CFR 36.4303 and its 

partial or total loss of guaranty or 

insurance regulation at 38 CFR 36.4328 

to support its ongoing efforts to 

modernize and transform technology 

and processes within its VA-guaranteed 

home loan program and to make the 

regulations more reader-friendly. VA is 

accomplishing the technological 

transformation by updating reporting 

requirements and connecting with 

lenders and holders through application 

programming interfaces (APIs). Utilizing 

APIs will more efficiently and 

effectively support veterans, lenders, 

servicers, and other stakeholders who 

participate in the VA-guaranteed home 

loan program. Specifically, VA would 

launch an API ecosystem in which VA 

and veterans would, through increased 

VA oversight capabilities, have stronger 

protections against noncompliant 

lenders and holders. Additionally, 

lenders and holders would have more 

assurance and confidence in using their 

authority to close VA-guaranteed loans 

on an automatic basis and in carrying 

out lending and servicing functions in 

VA’s home loan program. 

To help ensure success, updates to 38 

CFR 36.4303 and 36.4328 are necessary. 

Amendments to § 36.4303 would 

expand loan reporting requirements by 

allowing VA, lenders, and holders to 

take advantage of technological 

improvements that APIs provide, 

resulting in more efficient and more 

effective program administration. 

Section 36.4328 amendments would 

clarify provisions addressing partial or 

total loss of the guaranty or insurance 

when VA identifies fraud, material 

misrepresentations, or other 

noncompliance with VA requirements. 

II. Section-by-Section Analysis of the 

Proposed Regulatory Amendments 

A. 38 CFR 36.4303—Reporting 

Requirements 

1. Reporting Loans Closed on an 

Automatic Basis 

VA proposes to revise § 36.4303(a) to 

add the heading, ‘‘Automatically 

guaranteed loans’’, and provide that, for 

loans automatically guaranteed under 

38 U.S.C. 3703(a)(1), a lender of a class 

described under 38 U.S.C. 3702(d), 

would be required to report the loan, 

after loan closing, in an electronic 


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format using an API, as designated by 

the Secretary. The proposed rule would 

further require that such a lender must, 

not later than 15 days after the loan 

closing date, use the designated API to 

report a loan to VA. When reporting the 

loan, the lender must also use the 

designated API to submit the 

appropriate funding fee as prescribed by 

38 U.S.C. 3729 and required information 

regarding the loan, including the loan 

application (e.g., the Uniform Loan 

Application Dataset—ULAD), closing 

disclosures (e.g., the Uniform Closing 

Dataset—UCD), and any other 

information required by the Secretary. 

VA further proposes to explain that 

VA would announce in the Federal 

Register any designation of a new API 

at least 60 days before a lender would 

be required to use the API for reporting 

the loan and submitting the funding fee 

and loan information. The notice would 

provide the name of the newly 

designated API(s) and a link to VA’s 

website where VA would maintain and 

update technical details about the 

operative API(s). At the expiration of the 

notice period, using the designated 

API(s) when reporting the loan, 

including submission of the funding fee 

and loan information to VA, would be 

a pre-condition to VA issuing a loan 

guaranty certificate (LGC). 

The proposed amendments would be 

more consistent with standard industry 

practice for electronic reporting. 

Additionally, they would allow for more 

efficient loan oversight. For example, 

currently, if a funding fee is required, 

the lender collects the fee at closing and 

electronically remits the funds to VA 

within 15 days of closing via VA’s 

electronic Funding Fee Payment System 

(FFPS). The lender also reports the loan 

using WebLGY, a different system. 

Thus, lenders have to submit documents 

and remittances to two VA systems, 

using manual processes. Due to the 

manual processes and separate systems 

necessary, VA currently allows the 

lender 60 days within which to submit 

the loan information. See 38 CFR 

36.4313(e)(3) and (4). But under the new 

electronic reporting system, VA would 

retire FFPS and combine reporting the 

loan and remittance of the VA funding 

fee into one automated process. 

Furthermore, because of the 

simplification and automation, the 60- 

day submission process could be 

handled efficiently within 15 days. 

VA is committed to a user-friendly 

API environment that improves the 

overall experience with VA—not 

launching technological improvements 

for their own sake. VA also understands 

that many lenders have already been 

working with other API environments. 

Accordingly, VA welcomes feedback, 

including technical, on how VA can 

maximize the efficiencies that come 

through reporting loans using APIs and 

how VA’s proposed process might be 

further refined. To that end, VA has 

already published on VA’s website the 

specifications for five APIs that are in 

various stages of development, 

including the API the Secretary plans to 

designate as the first API for reporting 

guaranteed loans. 

The designated API would allow 

lenders to report loan information 

electronically utilizing their Loan 

Origination Software (LOS). This is 

another advantage to the API ecosystem, 

because the LOS is already widely 

accepted throughout the industry. Most 

lenders use the Mortgage Industry 

Standards Maintenance Organization 

(MISMO’s) standards in the delivery of 

closing disclosure data to other federal, 

or federally sponsored, housing agencies 

such as Fannie Mae, Freddie Mac, and 

the Department of Housing and Urban 

Development (HUD). With VA’s 

designated API for reporting the loan, 

lenders would be able to electronically 

report information in the UCD and 

ULAD via API directly from the lenders’ 

LOS in accordance with MISMO 

standards. In the end, the designated 

API for loan reporting would allow for 

the full automation of the funding fee 

payment, loan reporting, and issuance 

of the LGC via lenders’ LOS. Overall, 

based on industry data and widely held 

principles, VA assesses that the 

standardization of data reporting would 

lead to better accuracy, consistency, and 

clarity surrounding the loans VA 

guarantees and would promote a more 

consistent approach between VA and 

lenders. 

Lenders would also make the required 

certifications related to the loan, using 

the API, including, for example, that the 

loan conforms with the applicable 

provisions of 38 U.S.C. chapter 37 and 

of the regulations concerning guaranty 

or insurance of loans to veterans. 

The lender certifications are 

consistent with current regulations and 

approved information collections. See 

Office of Management and Budget 

(OMB) Control Number 2900–0909. The 

primary difference under the proposal is 

that the certifications would be 

submitted using the designated API(s), 

again saving resources and time for 

lenders and VA. 

VA would also continue to require 

that a veteran make certain certifications 

at the time the loan is closed. Veterans 

would not notice any change. The 

primary change for lenders would be 

that, as with their own certifications, 

they would report a veteran’s 

certifications using the designated 

API(s). One veteran certification would 

relate to past or present occupancy of 

the property. In the case of a loan for the 

purchase or construction of a residential 

property, or for a cash-out refinance, the 

veteran would be required to certify that 

the veteran intends to occupy such 

property as the veteran’s home. See 38 

U.S.C. 3704(c). In the case of a loan for 

the repair, alteration, or improvement of 

residential property, the veteran would 

be required to certify that the veteran 

occupies the property as the veteran’s 

home. An exception to this is if the 

home improvement or refinancing loan 

is for extensive changes to the property 

that would prevent the veteran from 

occupying the property while the work 

is being completed. In such a case, the 

veteran would be required to certify that 

the veteran intends to occupy or 

reoccupy the property as the veteran’s 

home upon completion of the 

substantial improvements or repairs. 

Another exception would be for an 

interest rate reduction refinance loan 

(commonly referred to as an IRRRL), 

where the veteran would be required to 

certify that the veteran either occupies 

the property as the veteran’s home or 

had previously occupied it as the 

veteran’s home. The certifications are 

required by statute, as are the differing 

occupancy requirements based on loan 

type. See 38 U.S.C. 3703(c), 3704(c), 

3710(e). 

In the event a veteran is in active-duty 

status as a member of the Armed Forces 

and is unable to occupy the property 

because of such status, VA would accept 

a certification from the spouse of the 

veteran that the veteran’s spouse 

occupies or intends to occupy the 

property as his or her home or a 

certification from the veteran’s attorneyin-fact or from the legal guardian of a 

dependent child of the veteran that the 

dependent child occupies or intends to 

occupy the property as the dependent 

child’s home. See 38 U.S.C. 3704(c)(2). 

In the case of an interest rate 

reduction refinancing loan, the veteran 

must certify as to meeting one of the 

occupancy requirements at 38 CFR 

36.4307(a)(2). See U.S.C. 3710(e)(1)(F). 

The certifications required are 

consistent with current statutory and 

regulatory requirements. Id. 

Lastly, VA would provide that upon 

VA’s acceptance of the information, VA 

would issue the LGC, subject to 

provisions of proposed § 36.4328. 

2. Reporting Loans That Require VA’s 

Prior Approval 

VA proposes to remove current 

paragraphs (b), (c), and (d) of 38 CFR 

36.4303 and add a new paragraph (b). 


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Proposed paragraph (b) would include 

the heading, ‘‘Prior-approval loans’’, 

and provide that, in the case of any loan 

made by a lender without the authority 

to close loans on an automatic basis or 

any loan where the Secretary provides 

advance notice of the need for prior 

approval, the lender would be required 

to report the loan to the Secretary before 

the loan closing for the Secretary’s 

review. Lenders would be required to 

report the loan in an electronic format 

and using an API, if an API is 

designated by the Secretary for this 

purpose. While VA anticipates releasing 

an API for lenders to submit loans that 

require prior approval by the Secretary, 

this API is not currently ready. As such, 

the Secretary would direct lenders 

under the proposed rule to continue 

using VA’s current loan reporting 

system, WebLGY, to submit certain preclosing and underwriting loan 

information for the Secretary’s review. 

As with automatically guaranteed loans, 

VA would propose to include language 

in paragraph (b) that would require VA 

to announce in the Federal Register any 

designation of a new API at least 60 

days before a lender would be required 

to use the API. 

The loan information that must be 

submitted before loan closing would 

include the loan application (that is, the 

Uniform Residential Loan Application 

(URLA), credit reports obtained in 

connection with the loan application, 

certain VA forms as required by the 

Secretary, the occupancy certification as 

noted in proposed § 36.4303(a)(2)(iv) 

obtained at the time of loan application, 

and any other information the Secretary 

determines necessary for a 

determination. 

Upon VA’s review and approval of the 

above information, VA would issue a 

certificate of commitment, which would 

commit an LGC to the holder of the loan 

upon the payment of the full proceeds 

of the loan for the purposes described in 

the original report and provided the 

requirements in proposed 

§ 36.4303(b)(4) are met. If VA does not 

approve the loan, VA would notify the 

lender that the loan cannot be closed as 

a VA-guaranteed loan; however, the 

lender may resubmit the loan to VA for 

prior approval after the lender corrects 

any issues identified by VA. 

The lender would be required to 

report the loan to VA not later than 15 

days after the loan closing date using 

the same API as when reporting loans 

closed on an automatic basis. The 

submission would also include the 

following items: the appropriate funding 

fee as prescribed by 38 U.S.C. 3729; the 

information prescribed in proposed 

§ 36.4303(a)(2)(ii); evidence that any 

conditions identified by the Secretary in 

the certificate of commitment are 

satisfied in order for the Secretary to 

issue an LGC; evidence showing the 

property securing the loan is that for 

which the certificate of commitment 

was issued; evidence that all property 

purchased or acquired with the 

proceeds of the loan has been 

encumbered as required by VA; and 

lender and veteran certifications 

prescribed in proposed 

§ 36.4303(a)(2)(iii) and (iv), respectively. 

Lastly, VA would provide that upon 

VA’s acceptance of the information, VA 

would issue the LGC, subject to 

provisions of proposed § 36.4328. 

These reporting requirements for 

loans that require pre-approval from VA 

are generally not new. The change 

would be the method of transmission to 

VA, meaning that the lender would 

transmit the information using the 

designated API. VA notes, too, that 

prior-approval loans constitute less than 

one percent of VA’s guaranty portfolio. 

3. Failure To Close Prior-Approval 

Loans and Late Reporting of Loans 

VA proposes to redesignate current 

paragraphs (e) and (f) of 38 CFR 36.4303 

as new paragraphs (b)(6) and (c), 

respectively. VA would also revise 

newly redesignated paragraphs (b)(6) 

and (c). 

Proposed paragraph (b)(6) would 

provide that if the lender does not close 

the loan on which prior approval was 

obtained, the certificate of commitment 

would have no further effect. 

Proposed paragraph (c) would include 

a heading to be styled, ‘‘Late reporting 

of closed loans’’, and would provide 

that, for loans not reported in 

accordance with the timing 

requirements of this section, evidence of 

guaranty would be issued only if the 

loan report is accompanied by a 

statement from the lending institution 

that explains why the loan was reported 

late and whether, since origination, the 

loan was in default. VA would require 

the statement to identify the case or 

cases in issue and to set forth the 

specific reason or reasons why the loan 

was not submitted on time. Upon 

receipt of such a statement, VA would 

issue evidence of guaranty. A pattern of 

late reporting and the reasons therefore 

would be considered by VA in taking 

action under §§ 36.4336 and 36.4353. 

VA believes that this change, to include 

referencing existing authority to take 

action under § 36.4336, would serve as 

a deterrence for late reporting of loans 

to VA. 

4. Evidence of Guaranty and Clarifying 

or Conforming Amendments 

VA proposes to redesignate current 

paragraph (g) as new paragraph (d). The 

heading would be styled, ‘‘Form of 

guaranty evidence.’’ Substantively, 

proposed paragraph (d) would provide 

that, for guaranteed loans, evidence of a 

guaranty would be issued by the 

Secretary as an LGC and that, for 

insured loans, notice of credit to an 

insurance account would be given to the 

lender. This revision would be to 

improve clarity and readability. 

VA would remove current paragraphs 

(h) and (j) and redesignate current 

paragraph (i) as new paragraph (e). VA 

would also revise new paragraph (e) by 

adding the heading, ‘‘Exclusions from 

the guaranty or insurance amount’’, and 

clarifying that the amounts referenced 

are those disbursed by a lender. 

Lastly, VA would redesignate current 

paragraphs (k) and (l) as new paragraphs 

(f) and (g) and would revise new 

paragraphs (f) and (g) by adding the 

headings, ‘‘Veteran’s right to exit 

purchase contract’’ and ‘‘Processing and 

reporting a loan assumption’’, 

respectively. VA also proposes to revise 

new paragraph (g) to conform any 

internal references to this new 

paragraph and correct the references in 

new paragraph (g)(1)(ii)(D), which 

currently references paragraphs (l)(1)(i), 

(I)(1)(i)(B), and (l)(1)(i)(A), rather than 

(g)(1)(i), (g)(1)(i)(B), and (g)(1)(i)(A), 

respectively. 

5. Information Collections and 

Authority Citations 

Section 36.4303 already contains 

collections of information under the 

provisions of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501–3521) that 

are approved by the Office of 

Management and Budget (OMB). The 

information collection associated with 

proposed § 36.4303(g), pertaining to 

assumptions, is currently approved 

under OMB control number 2900–0516. 

The information collection associated 

with proposed § 36.4303(a)(2)(iv), 

pertaining to the veteran’s occupancy 

certification, is currently approved 

under OMB control number 2900–0521. 

VA is not proposing any substantive 

revisions to these provisions or the 

information collections but is proposing 

to add OMB control number 2900–0521 

to the list of approved information 

collections at the end of the section. 

Similarly, VA proposes to add OMB 

control number 2900–0909 to the list of 

approved information collections at the 

end of § 36.4303. This approved 

information collection pertains to 

existing lender reporting requirements 


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Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 91627 

for both automatically guaranteed loans 

and prior-approval loans. This includes 

information and certifications required 

under current § 36.4303(a), (c), (d), and 

(f). With this proposed rule, VA is 

revising the information required by a 

lender to include additional loan 

origination information including but 

not limited to the loan application (e.g., 

ULAD) and closing disclosures (e.g., 

UCD). VA also proposes to amend the 

format (i.e., collection instrument) 

lenders will use to submit this 

information to reflect the use of APIs. 

Accordingly, VA has outlined these 

changes in the below Paperwork 

Reduction Act section and any 

incremental burden costs or savings to 

the public. 

VA notes that it currently has 

approval from OMB to collect loan 

application information and closing 

disclosures under the information 

collection associated with 38 CFR 

36.4333. This rule, in part, pertains to 

lenders’ requirement to maintain loan 

origination records and VA’s authority 

to request an audit of such records as 

necessary for oversight and program 

management. Under the current 

approved information collection (OMB 

control number 2900–0515), VA 

requires lenders to upload the ULAD 

and UCD for any loan selected for audit 

(also known as Full File Loan Review). 

With this proposed rule, lenders will 

have already submitted this information 

when they report the loan to VA for an 

LGC. As such, separate from this 

rulemaking, VA intends to revise the 

information collection at 38 CFR 

36.4333 to remove the duplicate 

information collection. 

Finally, VA proposes to remove the 

paragraph-specific authority citations 

and amend the authority citation at the 

end of § 36.4303. 

B. Partial or Total Loss of Guaranty or 

Insurance 

VA proposes to rewrite § 36.4328, 

which addresses how lender or holder 

noncompliance with VA requirements 

can affect the guaranty and VA’s 

payment of the guaranty. The rule has 

not been updated for some time, and VA 

believes modernizing the style would 

promote transparency, help 

stakeholders better understand VA’s 

longstanding policy, and improve VA’s 

oversight function. For example, VA 

would add headings at the paragraph 

level, as headings throughout the 

section would help VA employees and 

stakeholders better understand which 

provisions apply to a given situation, 

such as material misrepresentations in 

origination compared to servicing. The 

goal is to minimize legalese and arrange 

the section under a more orderly 

framework. In addition, VA would 

codify a requirement for indemnifying 

VA when a lender fails to comply with 

certain requirements. 

1. Forgeries and Falsifications of 

Documents 

Paragraph (a) of § 36.4328 would be 

revised under the heading ‘‘No liability 

on the guaranty or insurance due to 

forgery or falsification of documents.’’ 

The revision would explain that VA 

would have no liability on account of a 

guaranty or insurance of a loan, or any 

certificate or other evidence thereof, if— 

a signature to the note, the mortgage, or 

any other loan papers is a forgery; the 

application for guaranty or insurance is 

a forgery; or the certificate of discharge 

or the certificate of eligibility is 

counterfeited or falsified, or is not 

issued by the Government. 

The current rule’s phrase, ‘‘Subject to 

the incontestable provisions,’’ would be 

deleted. The deletion is because, for 

some readers, the phrase can perhaps 

give the wrong impression that VA has 

no enforcement authority over a 

guaranteed loan. It is VA’s position that 

the introductory clause was inserted 

originally to emphasize what was, at the 

time, a newly enacted law providing 

more guaranty stability. VA has not 

intended the phrase to imply that VA 

has no way of addressing losses caused 

by forgeries, fraud, or material 

misrepresentations, nor has VA applied 

it that way. 

Another historical reference that is 

not necessary anymore is the date, July 

1, 1948. References in paragraph (a) to 

the date ‘‘July 1, 1948’’ would be 

deleted, because VA’s guaranty portfolio 

no longer includes any loans made that 

long ago. Any substantive difference 

that may have applied at one point has 

been overtaken by time. 

In short, the substance under which 

VA applies paragraph (a) today would 

not change under the proposed rule’s 

paragraph (a). The proposal would 

instead eliminate outdated text for 

clearer intent. 

2. Material Misrepresentation by a 

Lender 

VA would replace current paragraph 

(b) of § 36.4328 by inserting the heading, 

‘‘Material misrepresentation by a 

lender’’, and specifying the actions VA 

may take after learning of a material 

misrepresentation. Specifically, the rule 

would provide that if a lender knew or 

should have known of a material 

misrepresentation at the time of 

reporting the loan to VA under 

§ 36.4303, VA may adjust the maximum 

guaranty amount on the LGC or demand 

indemnification from the lender. 

Paragraph (b)(1) would apply to 

instances where a material 

misrepresentation is identified before 

VA issues the LGC. Paragraph (b)(2) 

would apply to instances where a 

material misrepresentation is identified 

after VA issues the LGC. Paragraph 

(b)(3) would provide an opportunity for 

the lender to take corrective action, 

when the Secretary determines it 

appropriate, and either have the full 

guaranty amount restored or cancel the 

indemnification, as applicable. 

Under paragraph (b)(1) of § 36.4328, 

which would include the heading, 

‘‘Material misrepresentation is 

identified before VA issues the loan 

guaranty certificate’’, VA would notify 

the lender of VA’s findings that the 

lender made a material 

misrepresentation when reporting the 

loan and would issue the loan guaranty 

certificate with a maximum guaranty 

amount of one dollar. For example, in 

a situation where a lender reported to 

VA a $400,000 loan but VA found an 

improper charge of $100, VA would, 

under paragraph (b)(1), notify the lender 

that the LGC is issued in the amount of 

$1 rather than the expected $100,000. 

Under paragraph (b)(2), which would 

address, as the heading would indicate, 

instances where a ‘‘Material 

misrepresentation is identified after VA 

issues the loan guaranty certificate,’’ VA 

would notify the originating lender of 

VA’s findings and that the maximum 

guaranty amount on the loan has been 

reduced to $1, if the originating lender 

is the current loan holder. Alternatively, 

if the originating lender is not the 

current loan holder, VA would require 

the originating lender to indemnify VA, 

as provided in paragraph (c). 

Paragraph (b)(3) of § 36.4328 would be 

introduced with the heading, 

‘‘Corrective action by lender.’’ 

Paragraph (b)(3)(i) would explain that, 

when notifying the lender of VA’s 

findings under paragraph (b)(1) or (2), 

VA would also identify corrective 

action(s), if any, VA determines 

necessary to remediate the effects of the 

material misrepresentation. After VA 

receives evidence confirming the effects 

of the material misrepresentation have 

been remediated, VA would either 

restore the guaranty to the full amount 

or cancel the indemnification, as 

applicable. Paragraph (b)(3)(ii) would 

state that, if VA determines the effects 

of the material misrepresentation cannot 

be remediated, VA would not offer the 

originating lender the opportunity to 

take corrective action. VA would require 

the originating lender to indemnify VA, 

as provided in paragraph (c). 


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The proposed revisions would 

improve the readability of the 

regulation; not change the substantive 

way VA conducts oversight and works 

with lenders and holders to help ensure 

a fair outcome for VA, veterans, lenders, 

and holders. For example, consistent 

with current policy, VA would not limit 

the application of the regulation to 

commissions of fraud, as violations 

resulting from misrepresentations that 

were made without malintent can be 

just as damaging to veterans and the 

Government as an act of fraud. It is 

longstanding policy that, when VA finds 

a veteran has been wrongly charged a 

fee, for example, VA does not need a 

finding of fraud to instruct the lender to 

reimburse the veteran for the improper 

charge. VA instructs the lender that the 

charge must be reimbursed. VA notes, 

too, that the applicable statute does not, 

in authorizing VA to assert defenses, 

mention intent. See 38 U.S.C. 3721. 

Similarly, VA has for some time 

offered lenders the opportunity to 

indemnify VA against any eventual loss 

when the lender violated one of VA’s 

regulations. Although VA has not 

codified the procedure explicitly until 

now, the indemnification process has 

proven effective for all stakeholders. 

The veteran continues to receive all the 

advantages that accompany a VAguaranteed loan. The holder continues 

to be able to rely on the guaranty. The 

market continues to consider the VA 

guaranty a premium certification. 

Importantly, too, VA continues to be 

able to protect the taxpayer against 

losses VA would not have incurred had 

VA known of a violation at the time of 

issuing the LGC, using a common riskshifting mechanism in the financial 

industry. 

VA would delete the term ‘‘willful’’ 

from the current rule, but again, VA 

does not expect that lenders or holders 

would notice a change in VA’s 

approach. As with the illustration 

regarding the improper $100 charge, VA 

already considers the improper charge a 

material misrepresentation, even if just 

the lender’s mistake. This is because the 

lender is responsible for ensuring its 

own compliance with VA’s statutes and 

regulations. Yet, the lender submitted 

the loan for guaranty, requesting a 

higher guaranty amount than VA would 

have guaranteed had VA known of the 

improper charge. Plus, the veteran who 

obtained the guaranteed loan has been 

wrongly required to pay $100, and VA 

believes that, in such a circumstance, 

the veteran deserves to be made whole 

by the lender. VA also already works 

with the lender to ensure the veteran is 

reimbursed for the improper charge. 

Thus, the proposed rule would more 

specifically outline current procedures 

than the current rule does but would not 

change the expectations lenders and 

holders have come to rely on. 

VA understands the importance of 

being able to rely on VA’s guaranty, 

particularly given how critical it is to 

the secondary investment market, which 

supplies to many in the lending 

industry the liquidity necessary for 

making VA-guaranteed loans. VA 

believes the additional clarity under the 

proposed rule would help further that 

stability, rather than detract from it, as 

it would make clearer the policies and 

procedures VA has employed for some 

time in addressing noncompliance. Yet 

at the same time, the revision would 

serve as a clear reminder to lenders that 

in originating loans or servicing loans of 

veterans with VA-guaranteed loans, the 

lender must ensure the representations 

they make to VA align with the facts as 

represented. 

3. Indemnification by the Lender 

VA would, under the heading 

‘‘Indemnification after VA issues the 

loan guaranty certificate,’’ replace 

paragraph (c) of § 36.4328 to codify the 

indemnification process applicable to a 

loan where fraud or a material 

misrepresentation is identified after VA 

has issued the LGC. One type of 

indemnification, applicable to 

noncompliance with underwriting 

requirements in § 36.4340, would have 

a 5-year term, including any subsequent 

interest rate reduction refinancing loans, 

under proposed paragraph (c)(1). The 

other type of indemnification would 

apply to noncompliance for reasons 

other than underwriting decisions under 

§ 36.4340. Under proposed paragraph 

(c)(2), the duration of this latter type 

would last the life of the loan, including 

any subsequent interest rate reduction 

refinancing loans. 

Proposed paragraph (c)(1) of § 36.4328 

would include the heading of, 

‘‘Violations of underwriting 

requirements’’, and state that, if VA 

determines the originating lender made 

a material misrepresentation relating to 

the credit underwriting of a loan 

pursuant to the provisions of § 36.4340, 

the originating lender must abstain from 

filing a guaranty or insurance claim in 

the event of a loan default and must 

indemnify VA for any and all losses 

arising from or related to a guaranty or 

insurance claim made on the loan 

within five years of the date of the loan 

guaranty certificate, including any 

subsequent interest rate reduction 

refinancing loans. A few examples of 

material misrepresentations related to 

the provisions of § 36.4340 are failures 

to (i) verify assets, employment, and 

credit reports (38 CFR 36.4340(j)); (ii) 

determine or accurately determine the 

veteran’s acceptable debt-to-income 

ratio (38 CFR 36.4340(c)); or (iii) ensure 

residual income guidelines were met (38 

CFR 36.4340(e)). 

The proposed five-year 

indemnification for underwriting 

deficiencies would reflect VA’s 

longstanding policy that underwriting is 

critical to a lender’s assessment of a 

veteran’s ability to repay, while also 

recognizing that as time passes any 

underwriting deficiencies are less likely 

to be responsible for a loan default by 

the veteran. VA believes that five years 

of stable payment history by the veteran 

provides enough time to assure VA that 

any default thereafter is likely due to 

factors unrelated to any underwriting 

deficiencies at origination. VA also 

believes a shorter period does not offer 

adequate protection against preventable 

defaults or deterrence against lenders 

who might otherwise adopt a pattern of 

noncompliance as a business model. A 

longer timeframe, however, may unduly 

damage lenders’ interests and affect 

lender participation in helping to 

deliver the home loan benefit to 

veterans. 

To further support VA’s proposed 

five-year indemnification policy, VA 

reviewed the performance of 157 

indemnified loans with five-year 

agreements signed on or after January 

12, 2017. Historically, VA-guaranteed 

loans have maintained some of the 

lowest foreclosure rates in the industry, 

often below one percent. However, VA 

observed 12 foreclosures that occurred 

within the five-year indemnification 

period as opposed to only two 

foreclosures outside of the five-year 

indemnification period. Further, onethird of foreclosures occurring during 

the indemnification period (four out of 

12 foreclosures) happened between 

years three and five. Based on this 

analysis, VA proposes to continue its 

current policy of requiring a five-year 

indemnification period for any 

underwriting deficiencies. 

The proposed carryover to include 

interest rate reduction refinance loans 

likewise reflects VA’s longstanding 

policy. Interest rate reduction refinance 

loans, unlike purchase loans and cashout refinance loans, are guaranteed 

using the veteran’s same entitlement 

from the loan being refinanced and do 

not require a new, full underwriting. 

See 38 U.S.C. 3710(e) and 38 CFR 

36.4307. Because of this, the same risks 

associated with noncompliance in the 

original underwriting violations are 

associated with the interest rate 

reduction refinance loan. If VA were not 

to apply the indemnification, 


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unscrupulous lenders could avoid 

accountability because of a loophole (for 

example, through strategic 

noncompliance, then an interest rate 

reduction refinance loan, along with 

another origination fee to the lender, to 

thwart enforcement). Thus, VA believes 

it is necessary to close the loophole by 

ensuring the indemnification continues 

to cover interest rate reduction 

refinances, as well as the original loan, 

during the five-year indemnification 

period. 

VA also proposes that recovery under 

the indemnification would be 

irrespective of whether the material 

misrepresentation in the loan 

underwriting directly leads to a loan 

default. VA’s current standard practice 

for indemnification agreements is not 

based on VA having to establish a causal 

connection between the violation and 

the default, and VA believes 

establishing causation as a threshold 

would be inconsistent with proper risk 

management practices. Additionally, 

investigations necessary to establish the 

cause would be overly taxing on VA’s 

limited resources, especially when 

viewed in light of the fact that, if VA 

had known of the underwriting 

violation, VA never would have 

guaranteed the loan in the first place. 

Under proposed paragraph (c)(2) of 

§ 36.4328, an originating lender would 

be required to indemnify VA for a 

longer period for the originating lender’s 

fraud or for the originating lender’s 

material misrepresentation related to 

non-underwriting violations. 

Specifically, paragraph (c)(2) would 

include the heading, ‘‘Non-underwriting 

related violations’’, and would state that 

if VA determines the originating lender 

committed fraud or made an 

uncorrectable material 

misrepresentation relating to 

noncompliance with requirements other 

than those prescribed in § 36.4340, the 

originating lender must abstain from 

filing a guaranty or insurance claim in 

the event of a loan default and must 

indemnify VA for any and all losses 

arising from or related to a guaranty or 

insurance claim, for the life of the loan, 

including any subsequent interest rate 

reduction refinancing loans. 

Regarding fraud, VA believes there 

should not be a scenario where a lender 

can choose whether defrauding the 

Government is financially worth the 

risk. VA does not tolerate fraud. 

Indemnification for the life of the loan, 

as well as for any later interest rate 

reduction refinance loans, would 

protect the veteran by ensuring that the 

veteran receives all the loan servicing 

advantages that accompany a VAguaranteed loan and would protect the 

government against any losses. 

Even if made without fraudulent 

intent, a material misrepresentation that 

cannot be remediated or one that is not 

related to underwriting noncompliance 

can leave violations unresolved over the 

duration of the loan. The defects simply 

cannot be resolved. Accordingly, VA 

believes it is appropriate, and consistent 

with sound financial practice common 

among industry participants, to shift the 

risk from the entity harmed by the 

material misrepresentation (in this case, 

veterans, the integrity of VA’s program, 

and taxpayers at-large) back to the 

originating lender that knew or should 

have known of an uncorrectable 

noncompliance. The indemnification 

would be irrespective of whether 

material misrepresentation is causally 

connected to a default and would apply 

to later interest rate reduction refinance 

loans, for the reasons explained above. 

In proposed paragraph (c)(3), under 

the heading ‘‘Notice of 

indemnification’’, VA would specify 

that the Secretary would notify the 

lender when VA determines that a loan 

is subject to indemnification. 

Procedurally, a paper agreement 

would no longer be used when 

completing an indemnification 

agreement. When VA discovers a fraud 

or material misrepresentation, VA and 

the originating lender would 

communicate via one or more of the 

designated APIs described under 

proposed § 36.4303. This would provide 

more efficiency, require fewer resources, 

and align with industry expectations of 

using technology to help ease 

administrative burden. 

4. Guaranty Adjustments to Holders 

VA proposes to add a new paragraph 

(d) to 38 CFR 36.4328, under the 

heading, ‘‘Guaranty adjustments to 

holder’’, to reduce possible confusion 

surrounding the current regulation’s 

application to holders. VA proposes 

paragraph (d)(1), with the heading, 

‘‘Fraud in obtaining the guaranty or 

insurance’’, to provide that VA would 

have no liability on account of a 

guaranty or insurance, or any loan 

guaranty certificate, with respect to a 

transaction in which VA determines the 

holder or holder’s agent participated in 

fraud in obtaining the guaranty or 

insurance. In other words, the holder is 

not a holder in due course if the holder 

colluded with the originating lender in 

defrauding VA. So, the rule would mean 

that, even if a holder was not the 

originating lender, if the holder was 

directly involved or complicit in the 

fraud at origination, VA would not have 

liability on the guaranty. 

In proposed paragraph (d)(2), VA 

would state, under the heading ‘‘Holder 

fraud in obtaining a claim payment on 

the guaranty or insurance’’, that VA 

would have no liability on a guaranty or 

insurance claim if the holder commits 

fraud in obtaining a claim payment from 

VA on the guaranty or insurance of a 

loan. As explained in the paragraphs 

related to fraud by lenders, VA believes 

a holder that commits fraud against the 

government forfeits the protections 

Congress wanted to provide the 

secondary market under 38 U.S.C. 3721. 

Paragraph (d)(3) would include the 

heading ‘‘Material misrepresentations 

related to the quantum or quality of 

title’’, and would state that VA may 

adjust the amount of the guaranty or 

insurance, or any loan guaranty 

certificate, if VA determines the holder 

knew or should have known, at the time 

the holder reports the loan for guaranty 

claim, of a material misrepresentation as 

to the quantum or quality of, or title to, 

the property securing the loan such that 

the property would not have been 

acceptable to prudent lending 

institutions, investors, informed buyers, 

title companies, and attorneys, 

generally, in the community in which 

the property is situated. VA would not, 

however, adjust the guaranty or 

insurance amount for title exceptions 

enumerated as acceptable under 

§ 36.4354(b), unless otherwise specified 

in subpart B. 

The proposed phrasing is almost 

identical to the current rule. The 

changes are intended as clarifications. 

For instance, VA would replace 

‘‘limitations’’ under § 36.4354(b) with 

‘‘title exceptions enumerated as 

acceptable,’’ to eliminate some of the 

current ambiguity that may surround 

VA’s intent. Similarly, VA would add 

the caveat ‘‘unless otherwise specified’’ 

in subpart B, to remind readers that the 

rule is part of a coherent and consistent 

framework and cannot be taken out of 

context. A good example of how this 

might apply can be found in § 36.4327, 

which addresses authorized and 

unauthorized releases of security. If a 

holder allowed a new oil and gas 

lease—a type of title exception that 

could generally be acceptable under 

§ 36.4354(b)—but did so without 

following the steps prescribed in 

§ 36.4327 for partial releases in interest, 

the unauthorized release could affect 

the amount of guaranty payable on an 

eventual default. This is the way VA 

applies the current rule, but VA believes 

the current rule’s text may not express 

it clearly enough. Thus, VA believes 

that, as a part of this regulatory update, 

VA should specify the scope of the rule 

more explicitly. 


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1U.S. Small Business Administration, SBA Table 

of Size Standards, Retrieved from: https://

www.sba.gov/document/support-table-sizestandards. 

Paragraph (d)(4) would include the 

heading ‘‘Noncompliance with servicing 

requirements and material 

misrepresentation in reporting.’’ 

Paragraph (d)(4)(i) would provide that 

VA may adjust amounts payable to the 

holder if VA determines the holder 

failed to comply with the statutory 

requirements under 38 U.S.C. chapter 

37 or the implementing regulations 

concerning guaranty or insurance of 

loans to veterans at 38 CFR part 36 or 

if VA determines the holder knew or 

should have known of a material 

misrepresentation in reporting to the 

Secretary or in submitting a claim to VA 

for payment of the guaranty or 

insurance. Paragraph (d)(4)(ii) would 

specify that the burden of proof would 

be upon the holder to establish that no 

increase of ultimate liability is 

attributable to such failure or 

misrepresentation. Paragraph (d)(4)(iii) 

would explain that the amount of 

increased liability of the Secretary 

would be offset by deduction from the 

amount of the guaranty or insurance 

otherwise payable, or if based upon loss 

related to property that secured the 

guaranteed loan, would be offset by 

crediting to the indebtedness the 

amount of the impairment as proceeds 

of the sale of security in the final 

accounting to the Secretary. Paragraph 

(d)(4)(iv) would provide that, to the 

extent the loss resultant from the failure 

or misrepresentation prejudices the 

Secretary’s right of subrogation, 

acceptance by the holder of the guaranty 

or insurance payment would 

subordinate the holder’s right to those of 

the Secretary. 

In revising the rule, VA would 

eliminate the list of potential reasons for 

adjustment found in current paragraphs 

(b)(1) through (9). Stakeholders should 

not misconstrue this change to mean 

that VA would no longer consider the 

failures outlined in the current rule as 

reasons to adjust the guaranty. Rather, 

VA simply believes that the new rewrite 

would eliminate the need to enumerate 

them in the current way. For instance, 

current paragraph (b)(1) of § 36.4328 

reminds that one of the fundamental 

requirements for a VA-guaranteed loan 

is that it be obtained and retained as a 

superior lien. See 38 CFR 36.4328(b)(1). 

See also, for example, 38 U.S.C. 3703(d) 

and 38 CFR 36.4327. The proposed rule 

would omit the specific enumeration of 

this as an example of a failure that 

would result in an adjustment. But even 

so, VA would, under the proposed rule, 

still adjust the guaranty for such a 

failure, because proposed paragraph 

(d)(4)(i) would provide that VA may 

adjust the amount of the guaranty or 

insurance, or any loan guaranty 

certificate, if VA determines the holder 

failed to comply with the statutory 

requirements under 38 U.S.C. chapter 

37 or the implementing regulations 

concerning guaranty or insurance of 

loans to veterans. VA welcomes 

comment on whether stakeholders 

would prefer to retain a more 

illustrative list as a way of providing 

stakeholders further understanding. VA 

does not intend for an attempt at 

simplification of the rule to result in 

holders being unsettled about the 

reliability of the guaranty; nor does VA 

want veterans, consumer advocates, or 

those concerned about the welfare of 

program solvency to be concerned about 

the scope of the change. 

5. Liability After Payment of Guaranty 

or Insurance, or VA Purchase 

VA would redesignate current 

paragraph (c) of 38 CFR 36.4328 as new 

paragraph (e). VA would revise new 

paragraph (e) to clarify the wording for 

readability, but the proposed change is 

not substantive. 

6. Additional Remedies 

In § 36.4328, VA would add a new 

paragraph (f), under the heading, 

‘‘Additional remedies’’, to ensure full 

transparency related to VA’s 

enforcement authorities. VA would 

provide that, any action VA takes under 

this section may be taken in addition to 

other remedies available to VA, such as 

debarment and suspension pursuant to 

38 U.S.C. 3704 and 2 CFR parts 180 and 

801 or loss of automatic processing 

authority pursuant to 38 U.S.C. 3702, or 

other actions by the Government under 

any other law including but not limited 

to title 18 U.S.C. and 31 U.S.C. 3732. 

Although the paragraph is not legally 

necessary to preserve VA’s rights of 

enforcement, VA believes an 

intentional, explicit redundancy would 

be helpful in emphasizing the point that 

this section does not constitute the full 

range of potential action VA could or 

would take if VA discovered, for 

instance, a pattern of intentional 

material misrepresentations, seemingly 

incorporated into business practices 

after a monetary cost-benefit calculus. 

Lastly, VA would revise the authority 

citation for § 36.4328 to note 38 U.S.C. 

3703, 3704, 3710, 3720, 3721, and 3732. 

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 proposed 

rulemaking 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. 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this proposed rule would 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 could 

be expected to have a ‘‘significant 

economic impact’’ on a substantial 

number of small entities, VA considers 

the annual costs and transfer payments 

of the rule for and from small entities 

compared to their annual revenue. As 

described in the impact analysis, the 

estimated impacts of this rulemaking on 

lenders include transfers from lenders to 

VA associated with overcharge fees and 

guarantee claim amounts, the cost of 

rule familiarization and system updates 

to lenders, and cost savings associated 

with reduced burden associate with API 

utilization. A more detailed discussion 

of these impacts can be found in the 

impact analysis. 

VA was able to estimate the size of 

1,203 out of 1,450 active lenders that 

originated VA loans within the past 

three fiscal years using a combination of 

sources. VA relied on the size standards 

from the Small Business Administration 

(SBA) 1 and used data from Data Axle 

and Factiva (two business data 

providers) along with data from the 


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2 VA uses data from Data Axle and Factiva to 

determine the industry (as identified by the primary 

North American Industry Classification System 

[NAICS] code) for the active VA home loan lenders. 

For industries where size standards are determined 

by annual revenue, VA compares the revenue of 

each lender in these industries as reported in Data 

Axle 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 lenders 

with primary NAICS codes 522110 (Commercial 

Banking) and 522180 (Savings Institutions and 

Other Depository Credit Intermediation), and asset 

data from the NCUA for lenders with a primary 

NAICS code of 522130 (Credit Unions). 

3 VA averages the sales volumes from Data Axle 

and Factiva for all lenders considered small, 

including those primarily considered commercial 

banks, savings institutions, and credit unions. 

4 VA scales the costs/transfers by first dividing 

the total average annual volume of loans guaranteed 

by small lenders in the past three full fiscal years 

(319,924) by the total average annual loans 

guaranteed in the same period by all lenders with 

enough information to classify their size 

(1,004,465). Multiplying that ratio (31.85) by the 

total costs and transfers that vary depending on 

lender size gives VA the total costs and transfers 

that fall on small lenders. Dividing the total costs 

and transfers that fall on small lenders by the total 

estimated number of small lenders (703), which is 

the percent of small lenders from the classified 

population (58.4%) multiplied by all VA lenders 

(1,450)) provides the average annual cost and 

transfers for and from each small lender. 

Federal Deposit Insurance Corporation 

(FDIC) and the National Credit Union 

Administration (NCUA).2 Of the 1,203 

lenders with sufficient data for VA to 

estimate their size, 703 (58.4%) are 

considered small. The average annual 

revenue of these 640 lenders is 

estimated at $25.51 million.3

The costs of the one-time rule 

familiarization in the first year of the 

rule (fiscal year [FY] 2025) are estimated 

at approximately $240 for each lender, 

including the small lenders. VA 

estimates that the net cost savings to 

lenders from the reduction in reporting 

burdens and system updates ranges 

from $1,066 (FY 2025) to $1,110 (FY 

2034) per small lender.4 The estimated 

transfer payment from lenders in the 

form of overcharge fees and guarantee 

claim amounts ranges from $2,547 (FY 

2025) to $9,373 (FY 2034) per small 

lender. Adding these impacts results in 

the average estimated annual burden of 

[$2,547 + $240 ¥$1,066 = ] $1,721 to 

[$9,373 ¥$1,110 = ] $8,263 per small 

lender from the first and final years of 

the analysis period (FY 2025 and FY 

2034), respectively. VA considers a 

significant economic impact to equal or 

exceed 3 percent of annual revenue. The 

burden of the rule as a proportion of 

small lender revenue ranges from 0.007 

percent to 0.032 percent for FY 2025 

and FY 2034, respectively. On this 

basis, the Secretary certifies that 

adopting this proposed rule would not 

have a significant economic impact on 

a substantial number of small entities as 

they are defined in the Regulatory 

Flexibility Act. Therefore, under 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 

As noted above, this proposed rule 

contains collections of information 

under the provisions of the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501– 

3521) that are currently approved by 

OMB but do not require revision. These 

information collections have valid OMB 

control numbers of 2900–0516 and 

2900–0521. Additionally, this proposed 

rule includes provisions constituting a 

revised collection of information under 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521) that requires 

approval by OMB under existing OMB 

control number 2900–0909. 

Accordingly, under 44 U.S.C. 3507(d), 

VA has submitted a copy of this 

rulemaking action to OMB for review 

and approval. 

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. If OMB does not approve the 

collection of information as requested, 

VA will immediately remove the 

provisions containing the collection of 

information or take such other action as 

is directed by OMB. 

Comments on the revised collection of 

information contained in this 

rulemaking should be submitted 

through www.regulations.gov. 

Comments should be sent within 60 

days of publication of this rulemaking. 

The collection of information associated 

with this rulemaking can be viewed at: 

www.reginfo.gov/public/do/PRAMain. 

OMB is required to make a decision 

concerning the collection of information 

contained in this rulemaking between 

30 and 60 days after publication of this 

rulemaking 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. This does not affect the 

deadline for the public to comment on 

the provisions of this rulemaking. 

The Department considers comments 

by the public on a revised collection of 

information in— 

• Evaluating whether the revised 

collection of information is 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 revised collection 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 

collection 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, 

e.g., permitting electronic submission of 

responses. 

The revised collection of information 

associated with this rulemaking 

contained in 38 CFR 36.4303 is 

described immediately following this 

paragraph, under its respective title. 

Title: Guaranteed or Insured Loan 

Reporting Requirements. 

OMB Control No: 2900–0909. 

CFR Provision: 38 CFR 36.4303. 

• Summary of collection of 

information: The revised collection of 

information would require all lenders 

that participate in the VA-guaranteed 

home loan program to submit the 

reporting and certification requirements 

as noted in proposed 38 CFR 36.4303 in 

an electronic format using an API, as 

designated by the Secretary. While VA 

currently requires lenders to report 

certain loan information and 

certifications as part of the existing loan 

guaranty certificate and reporting 

process, this proposed rule would 

require additional information 

including the loan application (e.g., 

Uniform Loan Application Dataset), 

closing disclosures (e.g., Uniform 

Closing Dataset), and other information 

necessary for VA evaluation and 

oversight purposes. Additionally, 

lenders would be required to submit 

information using an API rather than the 

current system, WebLGY. 

• Description of need for information 

and proposed use of information: VA 

would use this information to ensure 

that veterans have stronger protections 


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5Bureau of Labor Statistics. (2024). May 2023– 

National Occupational Employment and Wage 

Estimates. Retrieved from: https://www.bls.gov/oes/ 

current/oes_nat.htm; Occupation code 13–2072. 

against lenders closing nonconforming 

loans through increased VA oversight, 

as the Guaranty Remittance API would 

allow VA to review 100 percent of 

guaranteed loans for policy 

conformance with certain VA statutory 

and regulatory requirements that VA 

only currently evaluates on three 

percent of loans as part of its full file 

loan review and audit processes. 

Specifically, VA would be able to 

evaluate loan closing data on 100 

percent of guaranteed loans for VA 

policy conformance with certain 

statutory, regulatory, or other 

requirements. As a result, VA would be 

able to cite defenses to paying the 

guaranty based on fraud or material 

misrepresentation and establish partial 

defenses to the amount payable on the 

guaranty or insurance. Lenders and 

holders would have a clear 

understanding of how failure to comply 

with VA’s statutory and regulatory 

requirements affect the guaranty to be 

paid by VA. 

• Description of likely respondents: 

Lenders. 

• Estimated number of respondents: 

Loans reported and certified: 484,019 

annually. 

Loans requiring VA prior approval: 

1,815 annually. 

Loans requiring Late Reporting 

Statements: 24,201 annually. 

• Estimated frequency of responses: 

One time per transaction. 

• Estimated average burden per 

response: 

Loans reported and certified: 0.008 

hours (about 30 seconds). This proposed 

rulemaking would result in an estimated 

reduction of 0.15 average burden hour 

per response (about 9 minutes) for this 

information collection. 

Loans requiring VA prior approval: 

0.008 hours (about 30 seconds). This 

proposed rulemaking would result in an 

estimated reduction of 0.04 average 

burden hour per response (about 2 

minutes and 30 seconds) for this 

information collection. 

Loans requiring Late Reporting 

Statements: 0.03 hours (about 2 

minutes). VA does not estimate any 

incremental change to the average 

burden hour per response for this 

information collection. 

• Estimated total annual reporting 

and recordkeeping burden: VA 

estimates a total annual reporting and 

recordkeeping burden of 4,612 hours for 

lenders. Using VA’s revised estimate of 

total annual responses (loans) of 

484,019 (down from 843,150 loans) loan 

estimate, this rulemaking would result 

in incremental annual burden hour 

savings of 72,675 burden hours. 

Loans reported for Guaranty 

(including prior approval): 3,886 hours 

((484,019+1,815) × 0.008 hours). 

• Estimated cost to respondents per 

year: VA estimates the annual burden 

cost to lenders to be $187,339.5 Using 

VA’s revised estimate of total annual 

responses (loans) of 484,019, this 

rulemaking would result in incremental 

annual burden cost savings of 

$2,836,172 for FY 2025 (average of high/ 

low estimated net cost savings) and 

incremental annual burden cost savings 

of $2,952,050 in the following outyears. 

• VA also estimates this proposed 

rulemaking results in a one-time system 

alignment cost to lenders and LOS 

providers ranging from $88,288 to 

$143,468. More details about this 

estimate can be found in the impact 

analysis. 

List of Subjects in 38 CFR Part 36 

Condominiums, Housing, Individuals 

with disabilities, Loan programs— 

housing and community development, 

Loan programs—Indians, Loan 

programs—veterans, Manufactured 

homes, Mortgage insurance, Veterans. 

Signing Authority 

Denis McDonough, Secretary of 

Veterans Affairs, approved and signed 

this document on November 12, 2024, 

and authorized the undersigned to sign 

and submit the document to the Office 

of the Federal Register for publication 

electronically as an official document of 

the Department of Veterans Affairs. 

Jeffrey M. Martin, 

Assistant Director, Office of Regulation Policy 

& Management, Office of General Counsel, 

Department of Veterans Affairs. 

For the reasons stated in the 

preamble, the Department of Veterans 

Affairs 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. 

Subpart B—Guaranty or Insurance of 

Loans to Veterans with Electronic 

Reporting 

■ 2. Revise and republish § 36.4303 to 

read as follows: 

§ 36.4303 Reporting requirements. 

(a) Automatically guaranteed loans. 

(1) For loans automatically guaranteed 

under 38 U.S.C. 3703(a)(1), a lender of 

a class described under 38 U.S.C. 

3702(d) shall report the loan in an 

electronic format using an application 

programming interface, as designated by 

the Secretary. VA will announce in the 

Federal Register any designation of a 

new application programming interface 

at least 60 days before a lender would 

be required to use the application 

programming interface for reporting the 

loan. The lender must also submit the 

information required under paragraph 

(a)(2) of this section using the 

application programming interface 

designated by the Secretary. 

(2) The lender must submit the 

following not later than 15 days after the 

loan closing date: 

(i) The appropriate funding fee as 

prescribed by 38 U.S.C. 3729; 

(ii) Required information regarding 

the loan, including but not limited to 

the loan application (e.g., Uniform Loan 

Application Dataset), closing 

disclosures (e.g., Uniform Closing 

Dataset), and any other information 

required by the Secretary as necessary to 

issue a loan guaranty certificate; 

(iii) Required lender certifications 

related to the loan; and 

(iv) Certification of the veteran at the 

time the loan is closed as to their 

occupancy of the property. 

(A) In the case of a loan for the 

purchase or construction of a residential 

property, the veteran shall certify that 

the veteran intends to occupy such 

property as the veteran’s home. 

(B) In the case of a loan for the repair, 

alteration, or improvement of residential 

property, the veteran shall certify that 

the veteran presently occupies the 

property as the veteran’s home. An 

exception to this paragraph (a)(2)(iv)(B) 

is if the home improvement or 

refinancing loan is for extensive changes 

to the property that will prevent the 

veteran from occupying the property 

while the work is being completed. In 

such a case, the veteran shall certify that 

the veteran intends to occupy or 

reoccupy the property as the veteran’s 

home upon completion of the 

substantial improvements or repairs. 

(C) In the event a veteran is in activeduty status as a member of the Armed 

Forces and is unable to occupy the 

property because of such status, VA will 

accept: 

(1) A certification from the spouse of 

the veteran that the veteran’s spouse 

occupies or intends to occupy the 

property as their home as required by 

paragraphs (a)(2)(iv)(A) and (B) of this 

section; or 

(2) A certification from the veteran’s 

attorney-in-fact or from the legal 

guardian of a dependent child of the 

veteran that the dependent child 


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occupies or intends to occupy the 

property as the dependent child’s home 

as required by paragraphs (a)(2)(iv)(A) 

and (B) of this section. 

(D) In the case of an interest rate 

reduction refinancing loan, the veteran 

shall certify as to meeting one of the 

occupancy requirements at 

§ 36.4307(a)(2). 

(3) Upon acceptance of the 

information prescribed in paragraph 

(a)(2) of this section, VA shall issue the 

loan guaranty certificate subject to the 

provisions of § 36.4328. 

(b) Prior-approval loans. (1) In the 

case of a loan made by a lender without 

the authority to close loans on an 

automatic basis or any loan where the 

Secretary provides advance notice of the 

need for prior approval, the lender must 

report the loan to the Secretary before 

the loan closing for the Secretary’s 

review. The lender must report the loan 

in an electronic format and, if 

designated by the Secretary, using an 

application programming interface. VA 

will announce in the Federal Register 

any designation of a new application 

programming interface at least 60 days 

before a lender would be required to use 

the application interface for reporting 

the loan for review prior to the loan 

closing. The lender must also submit the 

information required under paragraph 

(b)(2) of this section. 

(2) The lender must submit certain 

pre-closing and underwriting loan 

documents, including but not limited 

to— 

(i) The loan application (e.g., Uniform 

Residential Loan Application); 

(ii) Credit reports obtained in 

connection with the loan; 

(iii) Certain VA forms as required by 

the Secretary; 

(iv) The occupancy certification 

prescribed in paragraph (a)(2)(iv) of this 

section obtained at the time of loan 

application; and 

(v) Any other information requested 

by the Secretary. 

(3) Upon review and approval of the 

of the information prescribed by 

paragraph (b)(2) of this section, VA 

shall: 

(i) Issue a certificate of commitment 

which shall commit a loan guaranty 

certificate to the holder of the loan upon 

the payment of the full proceeds of the 

loan for the purposes described in the 

original report and provided the 

requirements in paragraph (b)(4) of this 

section are met; or 

(ii) Notify the lender that the loan 

cannot close as a VA-guaranteed loan; 

however, the lender may resubmit the 

loan to VA for prior approval after the 

lender corrects any issues identified by 

VA. 

(4) The lender would be required to 

report the loan to VA not later than 15 

days after the loan closing date using 

the same application programming 

interface (API) as when reporting loans 

closed on an automatic basis. The 

lender must also submit the following, 

using the designated API, not later than 

15 days after the loan closing date: 

(i) The appropriate funding fee as 

prescribed by 38 U.S.C. 3729; 

(ii) The information prescribed in 

paragraph (a)(2)(ii) of this section; 

(iii) Evidence that any conditions 

identified by the Secretary in the 

certificate of commitment are satisfied 

in order for the Secretary to issue a loan 

guaranty certificate; 

(iv) Evidence showing the property 

securing the loan is that for which the 

certificate of commitment was issued; 

(v) Evidence that all property 

purchased or acquired with the 

proceeds of the loan has been 

encumbered as required by VA; 

(vi) Required lender certifications for 

the loan; and 

(vii) The occupancy certification 

prescribed in paragraph (a)(2)(iv) of this 

section obtained at the time of loan 

closing. 

(5) Upon acceptance of the 

information prescribed in paragraph 

(b)(4) of this section, VA shall issue the 

loan guaranty certificate subject to the 

provisions of § 36.4328. 

(6) If the lender does not close the 

loan for which VA prior approval was 

obtained, the certificate of commitment 

shall have no further effect. 

(c) Late reporting of closed loans. For 

loans not reported within the timing 

requirements of this section, evidence of 

guaranty will be issued only if the loan 

report is accompanied by a statement 

from the lending institution that 

explains why the loan was reported late 

and whether, since origination, the loan 

was in default. The statement must 

identify the case or cases in issue and 

set forth the specific reason or reasons 

why the loan was not submitted on 

time. Upon receipt of such a statement, 

evidence of guaranty will be issued. A 

pattern of late reporting and the reasons 

therefore will be considered by VA in 

taking action under §§ 36.4336 and 

36.4353. 

(d) Form of guaranty evidence. 

Evidence of a guaranty shall be issued 

by the Secretary as a loan guaranty 

certificate. For insured loans, notice of 

credit to an insurance account will be 

given to the lender. 

(e) Exclusions from the guaranty or 

insurance amount. Any amounts that 

are disbursed by a lender for an 

ineligible purpose shall be excluded in 

computing the amount of guaranty or 

insurance credit. 

(f) Veteran’s right to exit purchase 

contract. No guaranty or insurance 

commitment or evidence of guaranty or 

insurance will be issuable in respect to 

any loan to finance a contract that: 

(1) Is for the purchase, construction, 

repair, alteration, or improvement of a 

dwelling or farm residence; 

(2) Is dated on or after June 4, 1969; 

(3) Provides for a purchase price or 

cost to the veteran in excess of the 

reasonable value established by the 

Secretary; and 

(4) Was signed by the veteran prior to 

the veteran’s receipt of notice of such 

reasonable value; unless such contract 

includes, or is amended to include, a 

provision that reads substantially as 

follows: 

Figure 1 to Paragraph (f)(4) 

It is expressly agreed that, 

notwithstanding any other provisions of 

this contract, the purchaser shall not 

incur any penalty by forfeiture of 

earnest money or otherwise be obligated 

to complete the purchase of the property 

described herein, if the contract 

purchase price or cost exceeds the 

reasonable value of the property 

established by the Department of 

Veterans Affairs. The purchaser shall, 

however, have the privilege and option 

of proceeding with the consummation of 

this contract without regard to the 

amount of the reasonable value 

established by the Department of 

Veterans Affairs. 

(g) Processing and reporting a loan 

assumption. With respect to any loan 

for which a commitment was made on 

or after March 1, 1988, the Secretary 

must be notified whenever the holder 

receives knowledge of disposition of the 

residential property securing a VAguaranteed loan. 

(1) If the seller applies for prior 

approval of the assumption of the loan, 

then: 

(i) A holder (or its authorized 

servicing agent) who is an automatic 

lender must examine the 

creditworthiness of the purchaser and 

determine compliance with the 

provisions of 38 U.S.C. 3714. The 

creditworthiness review must be 

performed by the party that has 

automatic authority. If both the holder 

and its servicing agent are automatic 

lenders, then they must decide between 

themselves which one will make the 

determination of creditworthiness, 

whether the loan is current, and 

whether there is a contractual obligation 

to assume the loan, as required by 38 

U.S.C. 3714. If the actual loan holder 

does not have automatic authority and 


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91634 Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 

its servicing agent is an automatic 

lender, then the servicing agent must 

make the determinations required by 38 

U.S.C. 3714 on behalf of the holder. The 

actual holder will remain ultimately 

responsible for any failure of its 

servicing agent to comply with the 

applicable law and VA regulations. 

(A) If the assumption is approved and 

the transfer of the security is completed, 

then the notice required by this 

paragraph (g) shall consist of the credit 

package (unless previously provided in 

accordance with paragraph (g)(1)(i)(B) of 

this section) and a copy of the executed 

deed and/or assumption agreement as 

required by VA office of jurisdiction. 

The notice shall be submitted to the 

Department with the VA receipt for the 

funding fee provided for in 

§ 36.4313(e)(2). 

(B) If the application for assumption 

is disapproved, the holder shall notify 

the seller and the purchaser that the 

decision may be appealed to the VA 

office of jurisdiction within 30 days. 

The holder shall make available to that 

VA office all items used by the holder 

in making the holder’s decision in case 

the decision is appealed to VA. If the 

application remains disapproved after 

60 days (to allow time for appeal to and 

review by VA), then the holder must 

refund $50 of any fee previously 

collected under the provisions of 

§ 36.4313(d)(8). If the application is 

subsequently approved and the sale is 

completed, then the holder (or its 

authorized servicing agent) shall 

provide the notice described in 

paragraph (g)(1)(i)(A) of this section. 

(C) In performing the requirements of 

paragraph (g)(1)(i)(A) or (B) of this 

section, the holder must complete its 

examination of the creditworthiness of 

the prospective purchaser and advise 

the seller no later than 45 days after the 

date of receipt by the holder of a 

complete application package for the 

approval of the assumption. The 45-day 

period may be extended by an interval 

not to exceed the time caused by delays 

in processing of the application that are 

documented as beyond the control of 

the holder, such as employers or 

depositories not responding to requests 

for verifications, which were timely 

forwarded, or follow-ups on those 

requests. 

(ii) If neither the holder nor its 

authorized servicing agent is an 

automatic lender, the notice to VA shall 

include: 

(A) Advice regarding whether the loan 

is current or in default; 

(B) A copy of the purchase contract; 

and 

(C) A complete credit package 

developed by the holder which the 

Secretary may use for determining the 

creditworthiness of the purchaser. 

(D) The notice and documents 

required by this section must be 

submitted to the VA office of 

jurisdiction no later than 35 days after 

the date of receipt by the holder of a 

complete application package for the 

approval of the assumption, subject to 

the same extensions as provided in 

paragraph (g)(1)(i) of this section. If the 

assumption is not automatically 

approved by the holder or its authorized 

agent, pursuant to the automatic 

authority provisions, $50 of any fee 

collected in accordance with 

§ 36.4313(d)(8) must be refunded. If the 

Department of Veterans Affairs does not 

approve the assumption, the holder will 

be notified and an additional $50 of any 

fee collected under § 36.4313(d)(8) must 

be refunded following the expiration of 

the 30-day appeal period set out in 

paragraph (g)(1)(i)(B) of this section. If 

such an appeal is made to the 

Department of Veterans Affairs, then the 

review will be conducted at the 

Department of Veterans Affairs office of 

jurisdiction by an individual who was 

not involved in the original disapproval 

decision. If the application for 

assumption is approved and the transfer 

of security is completed, then the holder 

(or its authorized servicing agent) shall 

provide the notice required in paragraph 

(g)(1)(i)(A) of this section. 

(2) If the seller fails to notify the 

holder before disposing of property 

securing the loan, the holder shall notify 

the Secretary within 60 days after 

learning of the transfer. Such notice 

shall advise whether or not the holder 

intends to exercise its option to 

immediately accelerate the loan and 

whether or not an opportunity will be 

extended to the transferor and transferee 

to apply for retroactive approval of the 

assumption under the terms of this 

paragraph (g). 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

numbers 2900–0516, 2900–0521, and 2900– 

0909). 

(Authority: 38 U.S.C. 3702, 3703, 3704, 3710, 

3714, and 3729) 

■ 3. Revise and republish § 36.4328 to 

read as follows: 

§ 36.4328 Partial or total loss of guaranty 

or insurance. 

(a) No liability on the guaranty or 

insurance due to forgery or falsification 

of documents. VA will have no liability 

on account of a guaranty or insurance of 

a loan, or any certificate or other 

evidence thereof, if— 

(1) A signature to the note, the 

mortgage, or any other loan papers is a 

forgery; 

(2) The application for guaranty or 

insurance is a forgery; or 

(3) The certificate of discharge or the 

certificate of eligibility is counterfeited 

or falsified or is not issued by the 

Government. 

(b) Material misrepresentation by a 

lender. If a lender knew or should have 

known of a material misrepresentation 

at the time of the reporting of the loan 

to VA under § 36.4303, VA may adjust 

the maximum guaranty amount on the 

loan guaranty certificate or VA may 

demand indemnification from the 

lender, as provided in paragraph (c) of 

this section. 

(1) Material misrepresentation is 

identified before VA issues the loan 

guaranty certificate. VA will notify the 

lender of VA’s findings that the lender 

made a material misrepresentation 

when reporting the loan and VA will 

issue the loan guaranty certificate with 

a maximum guaranty amount of one 

dollar. 

(2) Material misrepresentation is 

identified after VA issues the loan 

guaranty certificate. VA will notify the 

originating lender of VA’s findings and 

that— 

(i) If the originating lender is the 

current loan holder, the maximum 

guaranty amount on the loan has been 

reduced to one dollar; or 

(ii) If the originating lender is not the 

current loan holder, VA is requiring the 

lender to indemnify VA for a guaranty 

or insurance claim for the life of the 

loan, including any subsequent interest 

rate reduction refinancing loans, as 

provided in paragraph (c) of this 

section. 

(3) Corrective action by lender. (i) 

When notifying the lender of VA’s 

findings under paragraph (b)(1) or (2) of 

this section, VA will also identify 

corrective action(s), if any, VA 

determines necessary to remediate the 

effects of the material 

misrepresentation. After VA receives 

evidence confirming the effects of the 

material misrepresentation have been 

remediated, VA may either restore the 

guaranty to the full amount or cancel 

the indemnification, as applicable. 

(ii) If VA determines the effects of the 

material misrepresentation cannot be 

remediated, VA will require the 

originating lender to indemnify VA, as 

provided in paragraph (c) of this 

section. 

(c) Indemnification after VA issues 

the loan guaranty certificate. Except as 

provided in paragraph (b) of this 

section, for loans closed on or after 

[EFFECTIVE DATE OF FINAL RULE], a 


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Federal Register / Vol. 89, No. 224 / Wednesday, November 20, 2024 / Proposed Rules 91635 

lender agrees to indemnify VA in 

accordance with the following: 

(1) Violations of underwriting 

requirements. If VA determines the 

originating lender made a material 

misrepresentation relating to the credit 

underwriting of a loan pursuant to the 

provisions of § 36.4340, the originating 

lender must abstain from filing a 

guaranty or insurance claim in the event 

of a loan default and must indemnify 

VA for any and all losses arising from 

or related to a guaranty or insurance 

claim made on the loan within five 

years of the date of the loan guaranty 

certificate, including any subsequent 

interest rate reduction refinancing loans. 

Examples of a material 

misrepresentation related to the 

provisions of § 36.4340 include the 

lender’s failure to— 

(i) Verify assets, employment, and 

credit reports (§ 36.4340(j)); 

(ii) Determine or accurately determine 

the veteran’s acceptable debt-to-income 

ratio (§ 36.4340(c)); or 

(iii) Ensure residual income 

guidelines were met (§ 36.4340(e)). 

(2) Non-underwriting related 

violations. If VA determines the 

originating lender committed fraud or 

made an uncorrectable material 

misrepresentation relating to 

noncompliance with requirements other 

than those prescribed in § 36.4340, the 

originating lender must abstain from 

filing a guaranty or insurance claim in 

the event of a loan default and must 

indemnify VA for any and all losses 

arising from or related to a guaranty or 

insurance claim, for the life of the loan, 

including any subsequent interest rate 

reduction refinancing loans. 

(3) Notice of indemnification. The 

Secretary will notify the lender when 

VA determines that a loan is subject to 

indemnification. 

(d) Guaranty adjustments to holder— 

(1) Fraud in obtaining the guaranty or 

insurance. There shall be no liability on 

account of a guaranty or insurance, or 

any loan guaranty certificate, with 

respect to a transaction in which VA 

determines the holder or holder’s agent 

participated in fraud in procuring the 

guaranty or insurance. 

(2) Holder fraud in obtaining a claim 

payment on the guaranty or insurance. 

There shall be no liability on a guaranty 

or insurance claim if the holder 

commits fraud in obtaining a claim 

payment from VA on the guaranty or 

insurance of a loan. 

(3) Material misrepresentations 

related to the quantum or quality of 

title. VA may adjust the amount of the 

guaranty or insurance, or any loan 

guaranty certificate, if VA determines 

the holder knew or should have known, 

at the time the holder reports the loan 

for guaranty claim, of a material 

misrepresentation as to the quantum or 

quality of, or title to, the property 

securing the loan such that the property 

would not have been acceptable to 

prudent lending institutions, investors, 

informed buyers, title companies, and 

attorneys, generally, in the community 

in which the property is situated. VA 

will not, however, adjust the guaranty or 

insurance amount for title exceptions 

enumerated as acceptable under 

§ 36.4354(b), unless otherwise specified 

in this subpart. 

(4) Noncompliance with servicing 

requirements and material 

misrepresentation in reporting. (i) VA 

may adjust the amounts payable to the 

holder if VA determines— 

(A) The holder failed to comply with 

the statutory requirements under 38 

U.S.C. chapter 37 or the implementing 

regulations concerning guaranty or 

insurance of loans to veterans at 38 CFR 

part 36; or 

(B) The holder knew or should have 

known of a material misrepresentation 

in reporting to the Secretary or in 

submitting a claim to VA for payment of 

the guaranty or insurance. 

(ii) The burden of proof would be 

upon the holder to establish that no 

increase of ultimate liability is 

attributable to such failure or 

misrepresentation. 

(iii) The amount of increased liability 

of the Secretary would be offset by 

deduction from the amount of the 

guaranty or insurance otherwise 

payable, or if based upon loss related to 

property that secured the guaranteed 

loan, would be offset by crediting to the 

indebtedness the amount of the 

impairment as proceeds of the sale of 

security in the final accounting to the 

Secretary. 

(iv) To the extent the loss resultant 

from the failure or misrepresentation 

prejudices the Secretary’s right of 

subrogation, acceptance by the holder of 

the guaranty or insurance payment 

would subordinate the holder’s right to 

those of the Secretary. 

(e) Liability after payment of guaranty 

or insurance, or VA loan purchase. If 

after the payment on a guaranty or an 

insurance loss, or after a loan is 

transferred pursuant to § 36.4320(a), the 

Secretary discovers any fraud, material 

misrepresentation, or failure to comply 

with the regulations at 38 CFR part 36 

and determines that an increased loss to 

the Government resulted therefrom, 

then the transferor or person to whom 

such payment was made shall be liable 

to the Secretary for the amount of the 

loss caused by such fraud, material 

misrepresentation, or failure. 

(f) Additional remedies. Any action 

VA takes under this section may be 

taken in addition to other remedies 

available to VA, such as debarment and 

suspension pursuant to 38 U.S.C. 3704 

and 2 CFR parts 180 and 801 or loss of 

automatic processing authority pursuant 

to 38 U.S.C. 3702, or other actions by 

the Government under any other law 

including but not limited to title 18 

U.S.C. and 31 U.S.C. 3732. 

(Authority: 38 U.S.C. 3703, 3704, 3710, 3720, 

3721, and 3732) 

[FR Doc. 2024–26776 Filed 11–19–24; 8:45 am] 

BILLING CODE 8320–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 271 

[EPA–R04–RCRA–2024–0451; FRL–12278– 

02–R4] 

Tennessee: Final Authorization of 

State Hazardous Waste Management 

Program Revisions 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: Tennessee has applied to the 

Environmental Protection Agency (EPA) 

for final authorization of changes to its 

hazardous waste program under the 

Resource Conservation and Recovery 

Act (RCRA), as amended. The EPA has 

reviewed Tennessee’s application and 

has determined, subject to public 

comment, that these changes satisfy all 

requirements needed to qualify for final 

authorization. Therefore, in the ‘‘Rules 

and Regulations’’ section of this Federal 

Register, we are authorizing Tennessee 

for these changes as a final action 

without a prior proposed rule. If we 

receive no adverse comment, we will 

not take further action on this proposed 

rule. 

DATES: Comments must be received on 

or before December 20, 2024. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R04– 

RCRA–2024–0451, at https://

www.regulations.gov. Follow the online 

instructions for submitting comments. 

Once submitted, comments cannot be 

edited or removed from 

www.regulations.gov. The EPA may 

publish any comment received to its 

public docket. Do not submit 

electronically any information you 

consider to be Confidential Business 

Information (CBI) or other information 

whose disclosure is restricted by statute. 

Multimedia submissions (audio, video, 

etc.) must be accompanied by a written 


khammond on DSK9W7S144PROD with PROPOSALS