28692 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

1See 85 FR 79142 (Dec. 9, 2020); Public Law 116– 

136 (Mar. 27, 2020). 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 36 

RIN 2900–AR05 

Loan Guaranty: COVID–19 Veterans 

Assistance Partial Claim Payment 

Program 

AGENCY: Department of Veterans Affairs 

ACTION: Final rule 

SUMMARY: The Department of Veterans 

Affairs (VA) is establishing through this 

final rule the COVID–19 Veterans 

Assistance Partial Claim Payment 

program (COVID–VAPCP), a temporary 

program to help veterans return to 

making normal loan payments on a VAguaranteed loan (guaranteed loan) after 

exiting a forbearance for financial 

hardship due, directly or indirectly, to 

the COVID–19 national emergency. 

DATES: This rule is effective July 27, 

2021. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Trevayne, Assistant Director, 

Loan Property and Management, Loan 

Guaranty Service (26), Veterans Benefits 

Administration, Department of Veterans 

Affairs, 810 Vermont Avenue NW, 

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

(This is not a toll-free telephone 

number.) 

SUPPLEMENTARY INFORMATION: On 

December 9, 2020, VA published a 

proposed rule to establish a temporary 

program to assist veterans with VAguaranteed home loans who request 

forbearance under the Coronavirus Aid, 

Relief, and Economic Security (CARES) 

Act.1 The public comment period for 

the proposed rule closed on January 8, 

2021. 

Comments and questions submitted 

by veterans, lenders, servicers, 

consumer groups, and trade associations 

were generally supportive of VA’s 

initiative. However, commenters raised 

significant concerns about certain 

program features. Most notably, 

industry and consumer group 

commenters indicated that the COVID– 

VAPCP differed from the Federal 

Housing Administration’s (FHA’s) 

COVID–19 Standalone Partial Claim 

program. According to the commenters, 

these differences made the COVID– 

VAPCP less helpful to veterans and less 

workable for servicers. We read the 

general theme of the commenters’ 

recommendations to be that VA should 

finalize the rule with revisions that 

would make the COVID–VAPCP more 

similar to FHA’s COVID–19 Standalone 

Partial Claim program. 

In response to these comments, VA 

has made several revisions to the 

COVID–VAPCP in this final rule. Those 

changes, along with VA’s responses to 

the public comments (including VA’s 

responses where VA determined 

changes were not necessary), are 

described below. 

I. Summary of Key Changes to the Final 

Rule 

As discussed in the proposed rule, the 

COVID–VAPCP is a temporary program 

that establishes a partial claim option to 

aid veterans with VA-guaranteed loans 

who suffer financial hardship due to the 

COVID–19 national emergency. In 

developing this program, VA modeled 

certain features after existing partial 

claim programs already available to 

borrowers with other federally backed 

mortgages; specifically, those insured or 

guaranteed by the U.S. Department of 

Housing and Urban Development’s 

(HUD) FHA and the U.S. Department of 

Agriculture’s (USDA) Rural Housing 

Service. VA’s final rule aligns even 

more closely with both FHA’s and 

USDA’s partial claim programs. 

Significant changes to the final rule in 

response to public comments include 

the following: (1) The partial claim 

maximum limit suggested by the 

proposed rule is doubled from 15 

percent of the unpaid principal balance 

of the guaranteed loan as of the date the 

veteran entered into a COVID–19 

forbearance, to 30 percent of such 

balance; (2) the proposed requirement 

that the veteran repay the partial claim 

within 120 months is eliminated; (3) the 

proposed requirement that VA charge 

interest on the new loan is eliminated, 

meaning the COVID–VAPCP loan is a 

no-interest loan for the veteran; (4) the 

proposed requirement that servicers 

complete a financial evaluation of the 

veteran is eliminated; (5) the timeframe 

for servicers to submit a partial claim 

payment request to VA is increased 

from 90 to 120 days; and (6) the 

proposed requirement that the COVID– 

VAPCP be the option of last resort is 

eliminated, meaning that servicers can 

use the partial claim payment option, 

even if other home retention options are 

feasible, provided that the partial claim 

payment option is in the veteran’s 

financial interest. 

As the COVID–19 national emergency 

and the CARES Act pass their one-year 

anniversaries, VA stakeholders continue 

to confront decisions that have farreaching consequences. The COVID–19 

pandemic is still causing severe illness, 

death, and disruption in the economy 

on a significant scale. These effects have 

resulted in continued financial 

difficulties for many veterans. Veterans 

who requested forbearances under the 

CARES Act in the first half of 2020 are 

facing the reality of exiting forbearance 

with significant forborne indebtedness 

while still dealing with the pandemic. 

Other veterans who have managed to 

continue paying their mortgages are 

now deciding whether to request 

forbearance for the first time as the 

COVID–19 national emergency enters its 

second year. 

VA’s partial claim assistance may 

well be the determining factor for 

certain veterans, affecting the extent to 

which they can recover financially from 

the crisis. Similarly, servicers are 

evaluating their liquidity positions and 

other factors to determine how to make 

the advances necessary for investor 

requirements. Some servicers may even 

be questioning whether they can stay 

afloat, which ultimately harms not just 

the servicer, but also the veterans whose 

guaranteed loans are being serviced. 

The changes adopted by VA in this 

final rule are necessary to address the 

problems mentioned above. VA’s 

COVID–VAPCP creates a ‘‘soft landing’’ 

for certain veterans, enabling them to 

return to their regularly scheduled 

monthly payments without suffering 

another financial shock. The program 

also provides a lifeline for certain 

servicers, thereby mitigating the risk 

that veterans will be left without the 

benefit of prudent loan servicing. 

II. Discussion of Comments and Final 

Rule 

VA received eighteen comments in 

response to its proposed rule. Of those 

comments, twelve were from 

individuals and five were from lenders, 

servicers, trade organizations, or 

consumer groups. VA also received one 

comment co-signed by 27 national- and 

state-level trade and consumer 

organizations. Three commenters that 

joined the joint trade and consumer 

group comment also submitted their 

own comment, and VA has arranged 

those with the five other organizational 

comments. To the extent feasible, issues 

raised by commenters have been 

summarized and grouped together by 

similar topic. 

A. General Comments 

VA received ten comments from 

individuals expressing generalized 

support for the proposed rule. Of those, 

four comments were from individuals 

interested in participating in the 

program once it is finalized. 

Additionally, VA received one comment 

expressing negative sentiments about 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28693 

2The FHFA serves as conservator for the 

Government Sponsored Enterprises (GSEs) Freddie 

Mac and Fannie Mae. 

3 VA believes the commenter was referencing the 

CFPB rule found at the following link: https://

files.consumerfinance.gov/f/documents/cfpb_

interim-final-rule_respa_covid-19-related-lossmitigation-options.pdf (last accessed May 1, 2021). 

the proposed rule, though no specific 

complaints were provided. 

B. Alignment With Other Federal 

Housing Agency Programs 

As discussed above, a common 

recommendation was that VA adopt 

changes in the final rule to align the 

COVID–VAPCP with other federal 

housing agencies’ programs. Those 

include programs administered by FHA, 

USDA, and the Federal Housing Finance 

Agency (FHFA).2 Four commenters, 

including the joint trade and consumer 

group, expressed a preference that VA 

revise the COVID–VAPCP to be more 

similar to FHA’s COVID–19 Standalone 

Partial Claim program. These 

commenters noted that aligning the 

COVID–VAPCP with similar programs 

offered by other agencies would be in 

the best interest of veterans, servicers, 

and VA. One commenter stated that the 

program, without such alignment, 

would likely cause ‘‘substantial and 

unnecessary mortgage re-defaults and 

foreclosure.’’ 

In recommending that VA align the 

COVID–VAPCP with other federal 

partial claim programs, commenters 

focused on three specific program 

features. 

1. Repayment Terms of the Partial 

Claim Payment (38 CFR 36.4805): One 

commenter noted that VA should not 

charge 1.00 percent interest on the 

partial claim loan, as the financial 

situation faced by veterans during the 

COVID–19 national emergency is not 

due to the individual’s own fault. 

Another commenter questioned VA’s 

characterization of the repayment terms, 

including the 1.00 percent interest rate 

proposed by VA, as being ‘‘extremely 

favorable to veterans,’’ given that FHA 

and USDA partial claim programs do 

not charge interest (or fees) on partial 

claims. That commenter also noted that 

VA did not explain why it was 

necessary to charge interest on the 

partial claim payment. Finally, the 

commenter questioned whether the 

repayment terms, including the 1.00 

percent interest rate proposed by VA, 

were even permissible in states with 

prohibitions against negative 

amortization loans. 

Regarding VA’s proposed ten-year 

repayment term with a five-year 

payment deferral, two commenters 

asserted that this program feature would 

cause substantial increases in veterans’ 

monthly mortgage payments when 

repayment to VA began in year six, and 

that such increases would likely lead to 

payment shock and redefault. Both 

commenters pointed out that VA’s own 

example in the proposed rule resulted 

in a 20 percent monthly payment 

increase at year six. Citing lessons 

learned from the 2008 financial crisis, 

these commenters noted that the 

repayment structure utilized by FHA 

and USDA avoids payment shock. 

VA Response: VA agrees with 

comments opposing the proposed 1.00 

percent interest rate on the partial claim 

loan and the ten-year repayment term. 

VA believes that veterans who need 

assistance recovering from the economic 

effects of the COVID–19 pandemic 

should not be charged interest and 

should not face the risk of payment 

shock. As discussed in the section-bysection analysis below, VA is therefore 

adopting repayment terms similar to 

FHA and USDA, wherein the veteran 

will not be charged any fees or interest 

for the subordinate loan established 

under the COVID–VAPCP. Repayment 

in full is required immediately upon the 

veteran’s transfer of title to the property 

or the refinancing or payment in full 

otherwise of the guaranteed loan with 

which the partial claim payment is 

associated. 

The veteran may make payments for 

the indebtedness, in whole or in part, 

without charge or penalty, a policy that 

carries over from VA’s proposed rule 

and is consistent with FHA and USDA 

policies. 

2. Borrower Certifications and 

Residual Income Requirements (38 CFR 

36.4803): Five commenters, including 

the joint trade and consumer group, 

suggested that VA’s proposal contained 

unnecessary documentation 

requirements, including an application 

form, borrower and servicer 

certifications, and financial 

documentation requirements. One 

commenter proposed that VA require no 

documentation if the veteran was either 

current or less than 30 days past due on 

March 1, 2020. Two commenters 

specifically questioned VA’s proposed 

requirement that servicers certify as to 

a veteran’s monthly residual income 

being adequate as described in 38 CFR 

36.4340(e). Both commenters noted that 

if the purpose of the requirement is to 

assess the veteran’s ability to afford the 

additional partial claim payments, a 

current assessment is unlikely to 

provide any benefit because the 

veteran’s financial situation is likely to 

change over the next five years while 

payments on the subordinate loan are 

deferred. 

Similarly, three commenters pointed 

out that FHA, USDA, and the GSEs all 

have more streamlined documentation 

requirements that simplify access for 

borrowers and ensure relief is delivered 

timely. One commenter pointed out that 

VA’s proposed rule creates ‘‘at least six 

discrete steps for a veteran to 

successfully qualify for a partial claim’’ 

which, in some cases, was more 

rigorous than existing VA lossmitigation options. The commenter 

noted that the cumulative effect of these 

steps could ‘‘slow or suppress the 

partial claim enrollment process for 

veterans.’’ Additionally, the commenter 

highlighted that at least three 

requirements (financial evaluation, new 

borrower disclosures due to the interest 

being charged, and an application form) 

are not included in any other federal 

housing agency’s COVID–19 loss 

mitigation program. 

All three commenters noted that VA 

should follow the more streamlined 

options presented by the other federal 

agencies. One commenter also 

highlighted that loss mitigation offered 

at the outset of the Great Recession 

required large amounts of paperwork 

and ‘‘delayed relief and sometimes 

prevented borrowers from resolving 

their delinquencies.’’ That same 

commenter noted that enrolling in 

forbearance required no documentation, 

and specifically recommended that the 

COVID–VAPCP take advantage of the 

relaxed regulatory requirements 

announced by the Consumer Financial 

Protection Bureau (CFPB) in a June 2020 

interim final rule.3 The commenter 

asserted that VA should find a way to 

allow servicers to offer a partial claim 

option without completing an 

evaluation of all loss mitigation options 

available to the borrower based on a 

complete loss mitigation application 

(including financial information). The 

commenter stated that such flexibility is 

authorized by amendments made to 

CFPB’s Regulation X. 

VA Response: While VA cannot 

comment on the applicability of the 

CFPB’s recent amendments to 

Regulation X, VA does agree with 

commenters that requirements in VA’s 

proposed rule, namely, the certifications 

and residual income evaluation, are too 

stringent. VA notes that it did not 

intend to dissuade participation in the 

program, nor did it seek to create 

unnecessary paperwork for borrowers 

and servicers that could hinder relief. 

Rather, in requiring both veterans and 

servicers to certify as to the veteran’s 

financial situation, VA was attempting 

to ensure that veterans would not be put 

in a position where they would be 

28694 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

4See 12 U.S.C. 1715u(b)(2)A); see also 42 U.S.C. 

1472(h)(14)(A). 

5See question 2, 85 FR 79142, 79153 (Dec. 9, 

2020). 

6 85 FR 79142 (Dec. 9, 2020). 

unable to afford the COVID–VAPCP 

loan. Upon reviewing the comments, 

and in consideration of VA’s decision to 

eliminate interest charges and the tenyear repayment term, VA is finalizing 

the rule with requirements more aligned 

with FHA’s COVID–19 Standalone 

Partial Claim program. As described 

below in the section-by-section analysis, 

VA is eliminating the financial 

certification requirement and will allow 

servicers to use the partial claim 

payment option, even in cases where 

other home retention options are 

feasible, provided the partial claim 

payment option is in the veteran’s 

financial interest. 

As for the requirement that veterans 

certify their occupancy, VA notes that, 

much like FHA’s COVID–19 Standalone 

Partial Claim program for FHA 

borrowers, one purpose of VA’s COVID– 

VAPCP is to ensure that veterans remain 

safely housed during the pandemic. To 

help achieve this purpose, VA will still 

require that a veteran who participates 

in the COVID–VAPCP occupy, as the 

veteran’s residence, the property 

securing the guaranteed loan for which 

the partial claim is requested. However, 

VA has determined that it is sufficient 

for the servicer to assess this 

requirement without collecting a 

certification from the veteran. 

Given VA’s elimination of the 

certification requirements mentioned 

above, VA finds that the proposed 

application form is no longer necessary. 

With the exception of the certifications, 

most of the information collected and 

presented on the form will be captured 

on the note prepared by the servicer and 

presented to the veteran. VA has further 

determined that those data elements 

from the form that may not be included 

in the note, such as the date of the 

veteran’s next monthly mortgage 

payment to the servicer, are not critical 

to the rule and will likely be 

communicated from the servicer to the 

veteran in other ways. 

3. Maximum Amount of Assistance 

(38 CFR 36.4805(b)): Two commenters 

expressed concern over VA’s decision to 

limit assistance under the COVID– 

VAPCP to 15 percent of the unpaid 

principal balance (UPB) of the 

guaranteed loan at the time the veteran 

entered forbearance. Both commenters 

noted that FHA’s and USDA’s partial 

claim programs allow for assistance up 

to 30 percent of the UPB. One 

commenter further noted that, in 

calculating whether a 15 percent UPB 

cap would provide sufficient room for 

servicers to bring most guaranteed loans 

current, VA failed to consider the effect 

on older loans with smaller outstanding 

balances. Both commenters 

recommended that VA consider 

mirroring FHA’s and USDA’s 30 percent 

UPB caps; one commenter offered an 

alternative recommendation that VA 

consider eliminating the cap for low 

balance loans. 

VA Response: VA agrees with the 

commenters who recommended 

mirroring FHA’s and USDA’s 30 percent 

UPB caps. While an increase to a 

maximum UPB cap of 30 percent will 

not enable every loan currently under 

forbearance to meet the requirements for 

the COVID–VAPCP, this change in the 

final rule will allow approximately 

9,000 additional loans to participate 

(assuming other requirements such as 

occupancy and ability to resume regular 

monthly mortgage payments are met), 

with minimal additional financial risk 

to the Government. 

The increase to the UPB cap does not 

affect the unique option that VA 

included in its proposed rule, which 

would allow for a veteran to make an 

optional payment or for a servicer to 

waive amounts that would otherwise 

prevent a veteran from participating. 

Even with VA adopting a higher UPB 

cap in the final rule, VA is maintaining 

this feature of the program, as it could 

help more veterans be able to receive 

the assistance, at no additional cost to 

the program. 

VA declines at this time to increase 

the maximum amount of assistance 

beyond the 30 percent UPB cap or to 

eliminate the cap for smaller balance 

loans. This rulemaking marks the first 

time that VA has administered a partial 

claim program. VA firmly believes a 

new partial claim program is necessary 

to help veterans, but it constitutes a 

fundamental shift for VA and all 

stakeholders—veterans, the lending and 

servicing industry, investors who 

provide liquidity to the industry, 

Congress, and other federal agencies. 

Now VA is, in this final rule notice and 

before the program is underway, already 

doubling the proposed UPB cap to put 

it on par with the 30 percent UPB cap 

in both FHA’s and USDA’s partial claim 

programs. VA notes, too, that those caps 

are statutory, and Congress has not 

adjusted them in response to the 

national emergency.4 Since VA has 

never administered a partial claim 

program and Congress has limited 

FHA’s and USDA’s partial claims to 30 

percent UPB, VA does not have enough 

information at this time to accurately 

forecast the range of potential outcomes 

of pushing beyond the 30 percent cap. 

Furthermore, VA believes that if VA 

were to decide to push such a boundary, 

introduction of the concept would be 

better suited to an additional 

rulemaking where the public could 

provide additional input. 

C. Expand Coverage to Loans That 

Became Delinquent Before March 1, 

2020 (38 CFR 36.4803(a)) 

One commenter requested that VA 

consider eliminating the requirement 

proposed in 38 CFR 36.4803(a) that the 

guaranteed loan was, on March 1, 2020, 

either current or less than 30 days past 

due. The commenter noted that 

delinquency status was not a factor in 

section 4022 of the CARES Act as to 

whether a borrower could request 

forbearance; therefore, ‘‘the Moral and 

Ethical right thing to do is to allow 

(ALL) Veterans experiencing mortgage 

financial hardships to take advantage of 

[the COVID–VAPCP].’’ 

Another commenter referred to the 

delinquency issue in response to one of 

VA’s specific questions: Whether 

information collected as part of a 

complete loss-mitigation evaluation 

would be adequate to evaluate a 

borrower’s residual income under 38 

CFR 36.4340(e).5 The commenter 

suggested that VA require minimal 

documentation from veterans with loans 

that were delinquent on March 1, 2020. 

The commenter defined ‘‘minimal 

documentation’’ as proof of 30 days of 

income and an acceptable housing debtto-income ratio. Regarding borrowers 

with loans that were, on March 1, 2020, 

current or less than 30 days past due, 

the commenter recommended VA 

require no documentation. 

VA Response: While VA is committed 

to ensuring that assistance under this 

temporary program is widely available 

to veterans, VA declines to expand 

coverage to include loans that were not 

current or less than 30 days past due on 

March 1, 2020. As discussed in the 

proposed rule, the COVID–VAPCP is 

designed to be a temporary assistance 

program that provides a ‘‘soft landing’’ 

for veterans who, but for the COVID–19 

national emergency, would not be 

having difficulty paying their mortgage.6

To ensure that VA can target relief 

under the COVID–VAPCP to those 

veterans, VA believes it is necessary to 

maintain the requirement that the status 

of the loan on March 1, 2020, the date 

the COVID–19 national emergency 

became effective, be current or less than 

30 days past due. 

VA acknowledges that many veterans 

who were experiencing financial 

hardship pre-pandemic continued to 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28695 

7 VA Circular 26–20–25. Impact of CARES Act 

Forbearance on VA Purchase and Refinance 

Transactions, (June 30, 2020), https://vbaw.vba.va.

gov/HOMELOANS/docs/hot_topics/26-20-25.pdf. 

8 VA Circular 26–20–12. Extended Relief Under 

the CARES Act for those Affected by COVID–19, 

(Apr. 8, 2020), https://www.benefits.va.gov/ 

HOMELOANS/documents/circulars/26_20_12.pdf. 

9 VA Circular 26–20–33. Deferment as a COVID– 

19 Loss Mitigation Option for CARES Act 

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

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

circulars/26_20_33.pdf. 

10 VA Circular 26–20–33. Deferment as a COVID– 

19 Loss Mitigation Option for CARES Act 

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

vbaw.vba.va.gov/HOMELOANS/docs/hot_topics/ 

26_20_33.pdf. 

11 38 CFR 36.4319(a). 

12 85 FR 79142, 79147 (Dec. 9, 2020). 

13 38 CFR 36.4319(a). 

experience hardship and that, in some 

cases, their hardship may have 

worsened as a result of the pandemic. 

VA has provided alternative approaches 

to assist such veterans in retaining their 

homes. These include relaxed regulatory 

requirements to help veterans whose 

loans were already delinquent take 

advantage of historically low interest 

rates and refinance their mortgage, often 

times with a lower, more affordable, 

monthly mortgage payment.7 VA also 

issued guidance authorizing servicers to 

consider other VA home retention 

options.8 Finally, VA temporarily 

waived regulatory requirements 

prohibiting balloon payments to enable 

servicers to offer deferment as another 

home retention option for veterans 

exiting forbearance.9

D. Partial Claim Payment as Last Resort 

(38 CFR 36.4804) 

Five commenters, including the joint 

trade and consumer group, expressed 

confusion with VA’s proposal that 

servicers treat the partial claim payment 

as a last resort and recommended 

changes in the final rule. Several 

commenters requested that VA clarify 

where the partial claim payment fell in 

a ‘‘waterfall’’ of home retention options. 

Two commenters noted that it was not 

clear from VA’s proposed rule how 

servicers would know that the partial 

claim was being offered as a last resort. 

In this regard, the commenters pointed 

to language in the proposed rule that 

suggested a servicer may elect to utilize 

the partial claim even if the veteran 

qualifies for a loan modification. Three 

commenters, including the two just 

mentioned, felt that a partial claim 

payment should be evaluated on equal 

footing with other home retention 

options, consistent with current VA 

servicing policies, and be utilized when 

‘‘clearly in [the veteran’s] best financial 

interest.’’ 

One commenter noted that it was not 

clear whether proposed language 

referencing ‘‘all possible loss-mitigation 

options’’ included the deferment lossmitigation option referenced by VA 

Circular 26–20–33.10 The commenter 

requested that VA clarify in the final 

rule whether deferment was to be 

considered before a partial claim 

payment. Another commenter was 

concerned that it was unclear from the 

proposed rule whether a servicer may 

refuse to offer a partial claim payment 

if a veteran specifically requested it and 

the servicer determined another loss 

mitigation option was available. Finally, 

one commenter recommended that VA 

follow FHA and offer a streamlined 

partial claim option as the first step in 

a waterfall of foreclosure alternatives. 

VA Response: VA has determined that 

changes in the final rule are necessary 

to clarify how VA expects servicers to 

offer the COVID–VAPCP. VA also agrees 

that referencing the partial claim 

payment option as a last resort might 

lead to an unintended restriction on 

program participation. 

Generally, VA expects servicers to 

provide veterans with home retention 

options that are in the veteran’s 

financial interest. To ensure that VA can 

assist as many veterans as possible in 

retaining their homes and recovering 

from the pandemic, VA is modifying the 

final rule such that the COVID–VAPCP 

will no longer be characterized as an 

option of last resort. 

Commenters correctly noted that VA 

has a longstanding history of not 

prescribing a required ‘‘waterfall’’ of 

home retention options. VA has instead 

advised of VA’s preferred order of 

consideration for standard home 

retention options.11 As explained in the 

proposed rule, one reason supporting 

this policy is that, in VA’s program, 

lenders, servicers, or other entities that 

own the loan (loan holders) often bear 

significantly more financial risk than 

the Government.12 Also, VA recognizes 

that individual circumstances may lead 

to ‘‘out of the ordinary’’ 

considerations.13

In keeping with this longstanding 

policy, VA declines to require servicers 

to offer a partial claim payment to 

veterans, particularly as part of a 

prescribed waterfall of home retention 

options. At this stage, VA does not have 

enough information to warrant the 

dismantling of a model that achieved 

one of the lowest foreclosure rates on 

the market for most of the past decade 

(even with most veterans not making a 

down payment). VA is also concerned 

that mandating the partial claim option 

could increase upfront costs for some 

servicers, which could in turn impede 

them from helping the veterans they 

would otherwise be able to serve. VA 

understands this approach may differ 

from both FHA’s and USDA’s partial 

claim programs, but VA also notes that 

those agencies and their servicers have 

been working with more prescriptive 

waterfalls for quite some time, as 

servicers have less ‘‘skin-in-the-game’’ 

in those agencies’ programs than they 

do in VA’s. 

VA is amending the final rule to 

clarify that a servicer may consider a 

partial claim option in the same way 

that a servicer may consider any of VA’s 

other home retention options. VA is also 

adopting changes to the final rule to 

clarify that servicers may elect to offer 

the partial claim payment instead of 

other options. While VA’s amendments 

promote a more streamlined application 

process, VA wants to ensure that 

servicers are still keeping veterans’ 

financial interests in mind. Therefore, 

VA is also adopting changes to the final 

rule to remind servicers that the 

COVID–VAPCP should only be offered 

if the option is in the veteran’s financial 

interest. 

Servicers that participate in VA’s 

home loan program have significant 

experience determining what home 

retention option(s) to consider and offer 

when assisting veterans whose loans are 

in default. Through the changes in this 

final rule, VA is empowering servicers 

to continue making decisions that align 

with both veterans’ interests and the 

capabilities of a servicer’s business 

model. VA is dispensing with the last 

resort characterization and will not, for 

example, require servicers to keep a 

written record of the servicer’s 

justification that the partial claim option 

was superior to each and every other 

home retention option. However, a 

servicer’s decision to utilize the partial 

claim option will be subject to VA’s 

oversight, audit, and review. 

Furthermore, and with consideration of 

commenters’ reflections on home 

retention policies and the Great 

Recession, VA believes that it is crucial 

to allow servicers flexibility to use 

informed business judgment to 

determine whether a veteran is well 

suited for participation in the COVID– 

VAPCP, without the burdens of a formal 

evaluation or consideration process. As 

such, if a veteran exiting forbearance 

requests a partial claim payment, the 

servicer may be able to immediately 

proceed to executing the partial claim 

payment after determining that the 

veteran’s case meets program 

requirements. Similarly, servicers will 

be able to evaluate their existing 

forbearance portfolios to determine 

28696 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

14HAF is the Homeowner Assistance Fund, 

which provides States with funding to provide 

relief to our country’s most vulnerable 

homeowners. For more information, visit https://

home.treasury.gov/policy-issues/coronavirus/ 

assistance-for-state-local-and-tribal-governments/ 

homeowner-assistance-fund (last accessed May 1, 

2021). 

15 VA Circular 26–21–04. Approving Forbearance 

Requests for Veterans Affected by COVID–19, (Feb. 

16, 2021), https://www.benefits.va.gov/ 

HOMELOANS/documents/circulars/26_21_04.pdf. 

16See HUD Mortgagee Letter 2021–05. Extensions 

of Single Family Foreclosure and Eviction 

Moratorium, Start Date of COVID–19 Initial 

Forbearance, and HECM Extension Period; 

Expansion of COVID–19 Loss Mitigation Options, 

(Feb. 16, 2021), https://www.hud.gov/sites/dfiles/ 

OCHCO/documents/2021-05hsgml.pdf. See also 

USDA Extends Evictions and Foreclosure 

Moratorium to June 30, 2021 and Provides 

Additional Guidance for Servicing Loans Impacted 

by COVID–19, (Feb. 16, 2021), https://

www.usda.gov/media/press-releases/2021/02/16/ 

biden-administration-announces-anotherforeclosure-moratorium-and. 

whether the COVID–VAPCP can assist 

borrowers in bringing their loans 

current when the forbearance periods 

end. 

To illustrate: A veteran is about to exit 

a 360-day COVID–19 forbearance 

period. In working with the veteran, the 

servicer learns that, but for having to 

repay the COVID indebtedness, the 

veteran’s income would allow the 

veteran to return to the normal monthly 

payment. Assuming there were no other 

prohibitive aspects of the case, the 

COVID–VAPCP would seem to be in the 

veteran’s financial interest. VA would 

not expect the servicer to expend 

resources on evaluating all other home 

retention options, solely to determine 

that the COVID–VAPCP was the option 

of last resort. Similarly, because the 

COVID–VAPCP would be in the 

veteran’s financial interest, offering a 

loan modification to ‘‘see how things 

go’’ would likely not be the optimal 

outcome for the veteran because even if 

the modification succeeds, the COVID– 

19 indebtedness would be capitalized 

into the loan modification, resulting in 

thousands of dollars of additional 

interest being charged to the veteran. 

If, however, the servicer learns at the 

outset that a veteran’s income could no 

longer support a return to the monthly 

payment, even with the COVID–VAPCP 

assistance covering the COVID–19 

indebtedness, it could be difficult to 

show how offering the COVID–VAPCP 

would be in the veteran’s financial 

interest. This would be especially 

apparent if the veteran could retain the 

home through a modification to the 

interest rate and, for example, a 

principal reduction from the infusion of 

HAF 14 funds. 

In other words, while VA has not 

prescribed a waterfall of home retention 

options, in cases where the servicer 

determines that the partial claim option 

is an optimal method, the servicer 

should pursue it, rather than another 

option. This will help shield the veteran 

from delaying the veteran’s financial 

recovery and help prevent the expensive 

and labor-intensive burdens that could 

be posed by an unnecessary series of 

home retention strategies. 

In sum, VA’s final rule clarifies that 

the COVID–VAPCP is available in cases 

where other home retention options are 

feasible, ensures a more streamlined 

application process, and provides 

flexibility such that servicers can 

implement home retention options that 

fit within their business capabilities. VA 

believes that such changes are 

consistent with VA’s longstanding 

servicing regulations and policies and 

will enable more borrowers to utilize 

this temporary assistance program while 

mitigating burdens to veterans and 

servicers. 

(Note: VA continues to explore ways 

to help veterans as they exit their 

COVID–19 forbearances and as 

foreclosure/eviction moratoriums end. 

VA expects the upcoming weeks to 

provide critical information in 

evaluating the COVID–VAPCP and 

additional measures to help veterans. In 

fact, VA anticipates additional 

rulemaking will be urgently necessary to 

keep pace with the evolving financial 

needs of veterans.) 

E. Expiration of the COVID–VAPCP (38 

CFR 36.4809) 

Three commenters, including the joint 

trade and consumer group, did not agree 

with VA’s proposed COVID–VAPCP 

expiration date of September 9, 2021. 

All three commenters noted that current 

information suggests that many veterans 

will remain in forbearance beyond 

September 9, 2021. The commenters 

suggested that if VA does not extend the 

sunset date, such borrowers would not 

be able to receive assistance. 

Commenters recommended that VA 

consider changes to the final rule that 

would ensure all veterans who enter a 

COVID–19 forbearance can take 

advantage of the program. One 

commenter specifically requested that 

VA commit to accepting partial claim 

requests for at least 15 months beyond 

the date the COVID–19 national 

emergency ends. The commenter noted 

that this timeline would allow veterans 

to utilize up to 12 months of forbearance 

and provide an additional 90 days to 

complete the paperwork required for a 

partial claim. This commenter also 

requested that VA consider changing the 

permissive language in proposed 

§ 36.4809(b) from ‘‘the Secretary may 

still accept a request for a partial claim 

payment’’ to ‘‘the Secretary shall accept 

a request for a partial claim payment,’’ 

thereby requiring the Secretary to accept 

a request within 90 days of a veteran 

exiting a COVID–19 forbearance. 

VA Response: VA agrees in part. VA 

believes that the permissive element of 

proposed § 36.4809(b) should instead be 

mandatory upon the Secretary. If the 

COVID–19 national emergency ends 

while a veteran is under a COVID–19 

forbearance, the permissive language in 

the proposed rule could lead the veteran 

to question whether it is necessary to 

cut short the forbearance period in order 

to take advantage of the COVID–VAPCP. 

This is not an outcome VA intended. 

Accordingly, VA has revised this final 

rule to require the Secretary to accept a 

request for a partial claim payment if it 

is submitted timely. 

VA notes that acceptance of a request 

for a partial claim payment is not 

synonymous with approval of that 

request. Thus, this change only requires 

the Secretary to accept, but not 

necessarily approve, a request that is 

received before the requisite deadline. 

In other words, even though this final 

rule prohibits the Secretary from 

refusing to consider a request that is 

submitted before the deadline, timely 

submission is not tantamount to 

approval. 

VA also agrees with commenters that 

the September 9, 2021 sunset date 

should be extended, given the potential 

for COVID–19 forbearances extending 

beyond that date. VA is adjusting the 

sunset date in the final rule to align 

with the expectation that no veteran 

will be in a COVID–19 forbearance after 

June 30, 2022. 

On February 16, 2021, VA published 

guidance stating that VA expects 

servicers to approve initial COVID–19 

forbearances if the request is made on or 

before June 30, 2021. VA’s guidance also 

stated that certain COVID–19 

forbearance periods may extend through 

June 30, 2022. Additionally, the 

guidance stated that VA expects that, if 

needed, a veteran may request, and the 

servicer will approve, up to two 

additional three-month forbearance 

periods, after twelve months of COVID– 

19 forbearance.15 VA also stated that 

neither of the two additional threemonth forbearance periods may extend 

beyond December 31, 2021. These 

timeframes align with both FHA’s and 

USDA’s COVID–19 forbearance 

guidance.16

Considering the factors mentioned 

above, and that VA is extending the 

timeframe during which a servicer can 

request a partial claim payment from 90 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28697 

17 85 FR 79142 (Dec. 9, 2020). 

18 85 FR 79142, 79154 (Dec. 9, 2020). 

19See HUD Mortgagee Letter 2021–05. Extension 

of Single Family Foreclosure and Eviction 

Moratorium, Start Date of COVID–19 Initial 

Forbearance, and HECM Extension Period; 

Expansion of COVID–19 Loss Mitigation Options, 

(Feb. 16, 2021), https://www.hud.gov/sites/dfiles/ 

OCHCO/documents/2021-05hsgml.pdf. 

20The commenter explained that, ‘‘ . . . some 

options could require a borrower to make trial 

payments for a 90-day period before finalizing a 

modification.’’ If the servicer must wait out the trial 

period to ensure that the COVID–VAPCP is indeed 

the option of last resort, it places ‘‘both the Veteran 

and the servicer in a difficult situation.’’ 

days to 120 days post-forbearance (as 

explained below), this final rule notice 

sets a new sunset date of October 28, 

2022. In establishing this date, VA notes 

that June 30, 2022 is the last date on 

which VA expects a veteran to exit a 

COVID–19 forbearance. Given that a 

servicer will now have 120 days from 

the date a veteran exits a COVID–19 

forbearance to request a partial claim, 

October 28, 2022 will be the deadline 

for servicers to request a partial claim. 

VA notes that if there are additional 

extensions of forbearance periods in 

VA’s home loan programs, VA may 

consider a new rulemaking to adjust the 

sunset date. 

VA does not agree at this time to 

commit to accepting partial claim 

requests for at least 15 months beyond 

the date the COVID–19 national 

emergency ends. As the proposed rule 

explained, the COVID–VAPCP is 

intended as a temporary program.17

Thus, it is reasonable for VA to set a 

program sunset date that, at the time of 

this writing, aligns with federal 

guidance signaling that COVID–19 

forbearances should end by June 30, 

2022. Also under that guidance, 

servicers must assist veterans in 

bringing their loans current as they exit 

COVID–19 forbearances. While VA, the 

servicer, and the veteran may undertake 

certain actions after the 120-day 

deadline, the servicer will need to make 

a decision about what home retention 

option is in the veteran’s financial 

interest close to the time when the 

veteran’s forbearance ends. Such actions 

will be necessary to assist veterans 

regardless of whether the COVID–19 

national emergency is still in effect. 

F. 90-Day Timeline To Submit Partial 

Claim Payment Request (38 CFR 

36.4805(a)) 

In the proposed rule, VA requested 

comments as to whether ‘‘the servicer’s 

90-day deadline as proposed by 

§ 36.4805 to submit the request for 

partial claim payment [is] 

reasonable.’’ 18 VA also requested 

comments on whether there is a more 

reasonable timeframe. 

Only three commenters specifically 

responded to VA’s question. One 

commenter suggested that servicers 

should be given 12 months after the end 

of the COVID–19 national emergency 

within which to complete an evaluation 

of the veteran’s post-forbearance options 

and submit a request for partial claim 

payment. The commenter noted that 

servicers will need ‘‘unquantifiable 

additional time and resources’’ to 

address the significant numbers of 

borrowers exiting forbearance in 2021 

and that time would be needed to 

‘‘engage in thoughtful review of every 

individual’s financial situation and 

identify the most suitable path to cure.’’ 

Another commenter indicated that a 

longer time period could be necessary 

due to unforeseen delays in 

communicating with the veteran or in 

trying other loss-mitigation options first, 

such as a trial loan modification. In 

consideration of these realities, the 

commenter suggested that VA require 

servicers to request a partial claim ‘‘90 

days from the final loss mitigation 

option being fully evaluated prior to 

consideration of COVID–VAPCP.’’ 

The third commenter indicated that 

the 90-day timeframe was too short 

considering the burdens associated with 

the financial evaluation and additional 

paperwork and certifications. The 

commenter suggested that 180 days was 

more reasonable, especially if VA chose 

not to streamline the COVID–VAPCP to 

mirror FHA’s less burdensome program. 

Additionally, other commenters 

communicated general concerns with 

the significant operational costs and 

delay associated with executing VA’s 

proposed rule. As previously discussed, 

several commenters were concerned 

that participating in the COVID–VAPCP 

was, in most cases, more work for 

servicers than other traditional VA 

home retention options. Such comments 

did not specifically address or mention 

VA’s proposed 90-day timeframe for 

servicers to execute and submit a 

request for partial claim payment. 

However, the commenters implied that 

VA’s timeframe was not feasible given 

the increased burden associated with 

the COVID–VAPCP. 

VA Response: VA agrees in part and 

is adjusting the requirement that 

servicers execute and submit a request 

for partial claim payment. Rather than 

the requirement being not later than 90 

days after the veteran exits the COVID– 

19 forbearance, VA is extending it to not 

later than 120 days after the veteran 

exits the COVID–19 forbearance. FHA 

recently increased from 90 days to 120 

days the timeframe in which a servicer 

must complete a partial claim option for 

borrowers affected by COVID–19.19

Because VA has streamlined the process 

to align more squarely with FHA, VA 

believes that servicers should have a 

similar timeframe to request a partial 

claim payment from VA. 

As to the suggestion that VA should 

allow servicers to submit a request for 

up to 12 months after the national 

emergency ends, VA believes that the 

end of the veteran’s forbearance period, 

as opposed to the end of the national 

emergency, is the more appropriate 

starting point. As mentioned above, VA 

believes the key is to act quickly for 

veterans who are exiting their COVID– 

19 forbearances. Moreover, VA 

acknowledges that servicers will be 

processing many cases where borrowers 

exit forbearance in the coming year. 

This upcoming influx of cases is one of 

the primary reasons that VA is 

streamlining the COVID–VAPCP 

process. VA believes that streamlining 

the process will lessen servicers’ 

workload in evaluating, executing, and 

requesting a partial claim payment. 

Regarding the comment that VA start 

the 90-day period from the date the 

servicer evaluates ‘‘the final loss 

mitigation option . . . [before] 

consideration of [the] COVID–VAPCP,’’ 

it appears that the commenter may have 

understood the proposed rulemaking’s 

last resort characterization as a 

requirement that servicers should 

attempt several home retention options 

(and that all such options must fail) 

before servicers can resort to the 

COVID–VAPCP.20

VA did not intend to imply that 

servicers should test other home 

retention options and only arrive at the 

COVID–VAPCP if such measures fail. 

Regardless, as explained in this final 

rule notice, VA is extending the 

submission timeframe (from 90 to 120 

days) and is eliminating the last resort 

characterization, allowing instead for 

servicers to consider a partial claim 

option in the same way a servicer may 

consider any of VA’s other home 

retention options. VA believes these 

changes have addressed the 

commenter’s concerns. 

G. Taxes and Insurance Premiums (38 

CFR 36.4805) 

In the proposed rule, VA requested 

comments regarding VA’s proposal to 

limit inclusion of taxes and/or 

insurance amounts due and paid by the 

servicer, on the veteran’s behalf, in the 

case of a veteran who pays real estate 

taxes and/or insurance premiums 

directly to a tax authority or insurance 

28698 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

21See 85 FR 79142, 79154 (Dec. 9, 2020). 

provider.21 VA expressed interest in 

determining whether the partial claim 

payment should include amounts 

corresponding to what will be due for 

such items, where the bills were not due 

and payable during the COVID–19 

forbearance. VA also sought input 

regarding how best to calculate and 

disburse such amounts, as well as how 

to conduct oversight to ensure the 

monies were directed to the appropriate 

tax authority or insurance provider. 

VA received three comments related 

to the issue of real estate tax and 

insurance payments. One commenter 

supported VA’s proposal to include in 

the partial claim amount certain 

scheduled but missed monthly escrow 

payments for real estate taxes and 

insurance premiums, noting that such a 

policy was also consistent with FHA’s 

COVID–19 Standalone Partial Claim. 

The commenter did not specifically 

address whether VA should include 

scheduled but missed real estate taxes 

and insurance premiums in cases where 

the guaranteed loan documents do not 

provide for monthly escrowing. 

Another commenter suggested that, if 

the veteran has remitted timely 

payments of real estate taxes and/or 

property insurance premiums directly to 

the tax authority and insurance 

provider, the partial claim payment 

should only include principal and 

interest. However, the commenter 

recommended that, if the veteran fell 

behind on such payments or such 

payments were not due during the 

forbearance period, the partial claim 

payment should include such real estate 

taxes and insurance premiums, or a pro 

rata portion of such amounts. The 

commenter further recommended that 

VA create an escrow account for holding 

and disbursing these funds on behalf of 

the veteran ‘‘in a manner that complies 

with the provisions of RESPA’s 

implementing Regulation X.’’ 

A third commenter, acknowledged 

that ‘‘only a small percentage of Veteran 

homeowners directly pay taxes and 

insurance.’’ However, to account for 

these cases, the commenter 

recommended that prorated amounts for 

missed taxes and insurance premiums 

should be included in the partial claim 

payment regardless of whether the 

servicer remitted payment on the 

veteran’s behalf during the COVID–19 

forbearance. The commenter also 

opined that requiring the servicer to 

manage a temporary escrow account for 

such unpaid items would be too 

complex. The commenter suggested that 

the funds should instead be sent 

directly to veterans, provided that the 

veterans sign a document 

acknowledging that the funds are to be 

used to satisfy the delinquent taxes and 

insurance premiums. 

VA Response: The varied responses to 

VA’s question demonstrate the 

complexities associated with assisting 

veterans who do not utilize an escrow 

account to pay real estate taxes and/or 

insurance premiums. After considering 

the comments received, and given that 

less than one percent of guaranteed 

loans do not provide for escrowing, VA 

declines to change how the partial claim 

payment will be calculated in the final 

rule. VA believes that implementing a 

requirement for temporary escrow 

accounts would be overly burdensome 

when measured against the nominal 

improvement such a provision would 

bring to the COVID–VAPCP. VA is 

concerned that the burden associated 

with establishing, maintaining, 

adjusting, and closing temporary escrow 

accounts, would discourage servicers 

from participating in the program. VA 

believes that such a requirement is not 

necessary to help veterans whose loan 

documents do not provide for escrowing 

because the final rule still requires 

servicers to include amounts the 

servicer advanced on the veteran’s 

behalf. VA is also concerned that 

requiring veterans to receive and then 

redirect such funds to tax authorities 

and insurance providers would place an 

undue burden on veterans who may 

already be facing challenges on several 

fronts due to the pandemic. Such a 

policy would also raise a significant risk 

of delay, confusion, and error. 

As mentioned, the final rule retains 

the requirement that, where the 

guaranteed loan documents do not 

provide for monthly escrowing, 

servicers must include all payments the 

servicer made to real estate tax 

authorities and insurance providers, on 

the veteran’s behalf during the COVID– 

19 forbearance. Additionally, in cases of 

veterans who do pay taxes and 

insurance premiums through an escrow 

account, servicers must still include all 

scheduled but missed monthly escrow 

payments in the partial claim. 

H. Inclusion of Payments Due Within 31 

Days (38 CFR 36.4805(e)) 

One commenter recommended that 

VA remove the requirement in proposed 

38 CFR 36.4805(e) whereby servicers 

must include scheduled monthly 

payments that are due within 31 days of 

the date the veteran executes the note 

and security instrument. The 

commenter noted that 31 days was 

insufficient based on experience in 

FHA’s partial claim program. The 

commenter noted that servicers have 

limited control over when the veteran 

executes the note and security 

instrument, as well as when the veteran 

returns such items to the servicer. 

VA Response: VA acknowledges the 

commenter’s concern but is uncertain 

how eliminating the 31-day timeframe 

would assist borrowers and servicers. In 

proposing to require such amounts be 

included in the partial claim payment, 

VA sought to avoid cases where 

veterans are asked to make a mortgage 

payment only days after executing the 

note and security instrument. 

Nevertheless, VA does understand 

that servicers face difficulty in 

preparing and delivering a note that 

contains the correct partial claim 

amount, when the servicer has no 

control over when the veteran executes 

the note. If the veteran was unable to 

sign the note before a certain number of 

days passed, under VA’s proposed rule, 

the servicer could be required to waive, 

for example, the first mortgage payment 

that would have been due when the 

veteran returns to normal repayment. 

To address this concern, VA is 

adopting changes in the final rule to 

require servicers to include all 

scheduled monthly payments 

(comprising principal, interest, and 

escrow payments for real estate taxes 

and insurance premiums) due within 31 

days of the date the servicer provides to 

the veteran the note and security 

instrument described in § 36.4806. This 

will ensure that the servicer can include 

the correct partial claim payment 

amount on the note and security 

instrument. 

Similarly, VA is amending the 

requirement at 38 CFR 36.4807(c) that 

servicers report a partial claim event to 

VA through VA’s existing electronic 

loan servicing system within seven days 

of the borrower’s execution of the note. 

Since the servicer may not know the 

exact date the note is executed, VA will 

instead require the servicer to report the 

partial claim event to VA within seven 

days of the date the veteran returns the 

executed note to the servicer, but not 

later than 90 days after the date the 

veteran exits the COVID–19 forbearance. 

I. Servicer Incentives 

Two commenters requested that VA 

consider including a servicer incentive 

for executing a partial claim payment. 

One commenter noted that servicers 

will lose servicing fee revenue as a 

result of the partial claim payment, 

while undertaking additional servicing 

responsibilities in the form of additional 

certifications and financial evaluations 

in advance of completing the partial 

claim payment. Another commenter 

wrote that executing the partial claim 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28699 

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

19 Loss Mitigation Option for CARES Act 

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

vbaw.vba.va.gov/HOMELOANS/docs/hot_topics/ 

26_20_33.pdf. 

23 85 FR 79142, 79145 (Dec. 9, 2020). 

24See 85 FR 79142, 79152 (Dec. 9, 2020). 

25See, for example, 38 U.S.C. 3703 and 3732. 

26See 38 U.S.C. 3703(d)(3)(A). 

27See 38 U.S.C. 3710(e)(1)(C) (prescribing that the 

amount of an IRRRL may not exceed an amount 

equal to the sum of the balance of the loan being 

refinanced, closing costs, and, if applicable, energy 

efficient improvements). 

payment will likely be more work for 

servicers than the other five servicer 

actions for which VA already pays 

incentives pursuant to 38 CFR 36.4319. 

That commenter also recommended that 

VA pay an incentive equivalent to a 

loan modification under § 36.4319 as 

the work required to execute a partial 

claim payment corresponded closely to 

the work required to execute a loan 

modification. 

VA Response: VA does not agree with 

the commenters that a servicer incentive 

is needed for the COVID–VAPCP. As 

discussed above, this final rule makes 

several improvements and streamlines 

the partial claim process. More salient, 

the partial claim payment itself should 

constitute a significant infusion of 

liquid cash to the servicers that 

participate. This immediate cash 

infusion can be used to help 

participating servicers cover their shortterm obligations. It also affords these 

servicers the opportunity to take 

advantage of the time value of money; 

without the partial claim payment, 

certain servicers may need to wait years, 

or perhaps decades, to receive 

repayment of forborne amounts. Given 

the scope of the pandemic, some 

servicers might never be repaid the 

forborne amounts without the COVID– 

VAPCP, and indeed, a servicer’s refusal 

to participate in the COVID–VAPCP 

could cause the servicer a foreclosure 

loss that could have easily been avoided 

by taking advantage of the COVID– 

VAPCP option. VA believes that this 

significant financial support already 

poses enough incentive to servicers. VA 

also believes that FHA’s COVID–19 

Standalone Partial Claim option, which 

does not provide for incentives, further 

evidences that an incentive is not 

necessary to promote servicers’ use of 

the COVID–VAPCP. 

J. Combined Deferral and Partial Claim 

Program 

One commenter recommended that 

VA consider offering a combined 

deferral and partial claim program. The 

commenter noted that offering a 

deferment consistent with VA Circular 

26–20–33 22 presents, in many cases, the 

best option for both veteran and 

servicer, but, according to the 

commenter, the one limiting factor is 

whether a servicer has the financial 

capacity to defer the forborne payments 

for such an extended period. The 

commenter stated that this issue could 

be solved if servicers were able to 

receive a partial claim payment when a 

COVID–19 forbearance period ends. 

VA Response: VA declines to modify 

the proposed rulemaking in this way. 

The COVID–VAPCP is a fundamental 

shift for all stakeholders in VA’s home 

loan program. Moreover, as VA 

explained in the proposed rule, the 

authorization of loan deferment is a 

‘‘novel home retention option,’’ one 

that, ‘‘[o]rdinarily, VA’s regulation at 38 

CFR 36.4310(a) would prohibit.’’ 23 VA 

is being asked to change the position VA 

took in the proposed rulemaking when 

the proposed rule and VA’s temporary 

loan deferment policy already constitute 

significant changes within VA’s home 

loan program. Assuming VA were to do 

so, VA would likely need to insert new 

guardrails, which would require even 

further departure from what was 

proposed. 

As mentioned above, VA is 

continuing to explore ways to help 

veterans as they exit their COVID–19 

forbearances and as foreclosure/eviction 

moratoriums end. VA expects the 

upcoming weeks to provide critical 

information in evaluating the COVID– 

VAPCP and additional measures to help 

veterans. In fact, VA anticipates 

additional rulemaking could be 

necessary. Given the potential for 

another rulemaking in upcoming weeks, 

the concerns about departing too far 

from the proposed rule, and the 

immediate need to publish this final 

rule notice, VA is not making any 

changes to the rule based on this 

comment. 

K. Effect on Secondary Markets 

One commenter requested that VA 

address whether loans bought out of a 

Government National Mortgage 

Association (Ginnie Mae) security will 

be eligible for re-pooling once a veteran 

has resumed making payments and the 

servicer has otherwise complied with 

Ginnie Mae requirements. The 

commenter noted that the proposed rule 

states that a partial claim payment does 

not affect the guaranty percentage 

established at the time the guaranteed 

loan was made; thus, it was the 

commenter’s understanding that such 

loans will be eligible for re-pooling. 

VA Response: VA notes that it does 

not set eligibility requirements for 

Ginnie Mae securities. Therefore, VA 

cannot state whether such loans will be 

eligible for re-pooling under the 

circumstances described by the 

commenter. However, VA reiterates 24

that a partial claim does not affect the 

guaranty percentage on the guaranteed 

loan. In other words, VA will not deduct 

the amount of any partial claim 

payment from any future guaranty 

claim. VA will continue to honor the 

requisite guaranty percentage 

established by existing law.25

L. Other Comments 

One commenter posed several 

questions regarding refinance loans and 

future loan modifications. First, the 

commenter requested that VA clarify 

whether the security interest on the new 

loan can be subordinated to a VAguaranteed Interest Rate Reduction 

Refinancing Loan (IRRRL). The 

commenter also asked that VA clarify 

whether the new loan can be paid off 

through an IRRRL. Finally, the 

commenter requested that VA advise 

whether the new loan can be paid off 

through a subsequent loan modification 

of the VA-guaranteed loan. 

VA Response: VA notes that under 

both the proposed and final rules, 

repayment in full will be required 

immediately upon the refinancing or 

payment in full otherwise of the 

guaranteed loan with which the partial 

claim payment is associated. As such, 

there is no instance in which the new 

loan created under the COVID–VAPCP 

would continue to exist after the veteran 

refinances through an IRRRL. A veteran 

seeking to refinance with an IRRRL will 

be required to repay the new COVID– 

VAPCP loan in full, meaning the lien 

subordination issue raised by the 

commenter should not arise in such 

cases. However, VA reminds servicers 

that the guaranteed loan must remain in 

first lien position.26 Similarly, under the 

plain text of 38 U.S.C. 3710(e)(1)(C), a 

COVID–VAPCP loan would be excluded 

from the balance that could be 

refinanced as an IRRRL.27 Finally, the 

new COVID–VAPCP loan cannot be 

paid off through a loan modification of 

the guaranteed loan. Nevertheless, since 

a loan modification is neither a 

refinance nor payment-in-full of the 

guaranteed loan, the new COVID– 

VAPCP loan would continue in effect, 

after modification of the guaranteed 

loan. 

Another commenter encouraged VA 

to expedite use of the COVID–VAPCP 

outside of finalizing the proposed rule. 

The commenter suggested VA utilize its 

Circular process to offer this home 

retention option. 

28700 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

28 38 CFR 36.4320. 

29 ‘‘VA proposes to initiate a temporary program 

that would establish a partial claim option to aid 

veterans who suffer financial hardship due to 

COVID–19.’’ 85 FR 79142 (Dec. 9, 2020). 

30See Fact Sheet: Biden Administration 

Announces Extension of COVID–19 Forbearance 

and Foreclosure Protections for Homeowners, (Feb. 

16, 2021), https://www.whitehouse.gov/briefingroom/statements-releases/2021/02/16/fact-sheetbiden-administration-announces-extension-ofcovid-19-forbearance-and-foreclosure-protectionsfor-homeowners/. See also VA Circular 26–21–04. 

Approving Forbearance Requests for Veterans 

Affected by COVID–19, (Feb. 16, 2021), https://

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

circulars/26_21_04.pdf. 

31 85 FR 79142, 79160 (Dec. 9, 2020). 

32See 85 FR 79142, 79150 (Dec. 9. 2020). 

VA Response: VA agrees with the 

commenter that swift implementation of 

the COVID–VAPCP is necessary. 

However, VA believes that 

consideration of public comments is 

crucial to ensure that the program is 

tailored to meet veterans’ needs. VA has 

worked to finalize this rule as quickly 

as possible and, as discussed further 

below, is setting an effective date in 

consideration of the fact that veterans 

now have increased opportunities to 

receive COVID–19 forbearances and that 

servicers will require some lead time to 

prepare for implementation. 

Finally, VA received two comments 

regarding existing home retention and 

loan servicing policies. One of these 

comments was that VA should clarify 

whether the VA option to purchase a 

guaranteed loan upon a borrower’s 

default (a process VA commonly refers 

to as a loan refund 28) occurs before a 

short sale or deed in lieu of foreclosure, 

or before a servicer initiates a 

foreclosure. Another commenter 

suggested that VA revise a monthly 

payment reduction requirement 

associated with VA’s Streamline 

Modification option. 

VA Response: VA declines to respond 

to these comments as they are beyond 

the scope of this rule. 

III. Clarifying Amendments to the Final 

Rule Based on Comments 

In addition to the changes discussed 

above, VA is adopting the following 

revisions to address technical issues 

that arose when considering comments. 

A. Definitions (38 CFR 36.4801) 

In the proposed rule, VA proposed a 

definition of ‘‘CARES Act forbearance’’ 

to mean forbearance of scheduled 

monthly guaranteed loan payments, as 

granted to a veteran under section 4022 

of the Coronavirus Aid, Relief, and 

Economic Security Act (Pub. L. 116– 

136). At that time, VA only referenced 

forbearance periods granted to a veteran 

under section 4022 of the CARES Act. 

The purpose of the COVID–VAPCP 

was not to limit assistance to the 

protections afforded under the CARES 

Act, but instead to establish a temporary 

program to help veterans who are 

experiencing financial hardship due, 

directly or indirectly, to the COVID–19 

national emergency.29 As noted above, 

the COVID–19 national emergency has 

now entered its second year. In 

consideration of the fact that the 

pandemic has imposed a prolonged 

financial hardship for many individuals, 

VA has been part of the coordinated 

federal response that extends 

protections for borrowers with federally 

backed mortgages.30 For example, 

certain veterans can now receive 

COVID–19 forbearances that can remain 

in effect until as late as June 30, 2022. 

Additionally, certain veterans who may 

have already reached the end of their 

initial periods of forbearance can now 

receive up to two additional threemonth COVID–19 forbearance periods, 

which can remain in effect until as late 

as December 31, 2021. To ensure it is 

clear that veterans who receive COVID– 

19 forbearances can take advantage of 

the COVID–VAPCP, VA is replacing the 

term ‘‘CARES Act forbearance’’ with 

‘‘COVID–19 forbearance’’ and adding a 

sentence clarifying that this term can 

‘‘include any forbearance of scheduled 

monthly guaranteed loan payments, 

granted to a veteran for a financial 

hardship due, directly or indirectly, to 

the COVID–19 national emergency.’’ For 

consistency, VA is also changing the 

term ‘‘CARES Act indebtedness’’ to 

‘‘COVID–19 indebtedness’’ in the final 

rule. The definition remains unchanged 

but for replacing ‘‘CARES Act 

forbearance’’ with ‘‘COVID–19 

forbearance’’. 

B. Guaranteed Loans Made On or After 

March 1, 2020 (38 CFR 36.4803(a)) 

In the proposed rule, § 36.4803(a) 

stated that ‘‘[t]he loan for which a 

partial claim payment is requested must 

be a guaranteed loan that was, on March 

1, 2020, either current or less than 30 

days past due.’’ The implication could 

be that VA meant for the rule to exclude 

from the COVID–VAPCP veterans who 

obtained new guaranteed loans on or 

after March 1, 2020. This is not what VA 

intended. Therefore, to ensure that the 

text of the final rule leaves no doubt that 

such veterans can receive assistance 

under the COVID–VAPCP, VA is 

implementing a technical change to 

§ 36.4803(a). The revised text now 

expressly allows veterans whose 

guaranteed loans were made on or after 

March 1, 2020 to receive COVID– 

VAPCP assistance, provided all other 

requirements are met. 

C. Additional Technical Edits (38 CFR 

36.4805(e)(3)(ii) and (e)(4)) 

In the proposed rule, 

§ 36.4805(e)(3)(ii) stated that the 

servicer must include ‘‘if applicable, all 

scheduled monthly payments 

(comprising principal, interest, and 

escrow payments for real estate taxes 

and insurance premiums) that were 

missed after March 1, 2020, but before 

the veteran was granted the CARES Act 

forbearance’’.31 The purpose of this 

paragraph was to allow individuals who 

may have been late in requesting 

forbearance under the CARES Act, but 

nevertheless missed their guaranteed 

loan payment(s) due to circumstances 

related to the COVID–19 national 

emergency, to include such amounts in 

the partial claim, provided the 

guaranteed loan was current or less than 

30 days past due on March 1, 2020.32

VA is amending this section in the 

final rule to add ‘‘on or’’ before the 

phrase ‘‘after March 1, 2020’’. VA 

believes this technical change is 

necessary because most mortgage 

payments are due on the first of each 

month, meaning the original text might 

have inadvertently excluded a payment 

that a veteran missed on March 1, 2020. 

This revision will also promote 

consistency with the final version of 

§ 36.4803(a)(1), which limits the 

program, in relevant part, to cases where 

the guaranteed loan was current or less 

than 30 days past due on March 1, 2020. 

Moreover, VA believes that because the 

COVID–VAPCP is designed to mitigate 

the effects of the COVID–19 national 

emergency, which is effective as of 

March 1, 2020, it is prudent to allow for 

the possibility that a payment missed on 

that date could be included in the 

partial claim amount. 

The need for this technical 

amendment is even clearer when 

considering that the CARES Act was 

signed into law by the President on 

March 27, 2020. It is highly likely that 

some veterans had already been affected 

by the pandemic on March 1, 2020, and 

thus could not make their mortgage 

payment. Such veterans may not have 

called their servicer to request a 

COVID–19 forbearance until, for 

example, April 1, 2020, that is, the date 

the April payment was due. In such 

cases, the guaranteed loans would have 

been less than 30 days past due on 

March 1, 2020. However, the text of the 

proposed rule would have prohibited 

servicers from including such a 

payment because it was missed on 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28701 

33See 85 FR 79142, 79160 (Dec. 9, 2020) 

(emphasis added). 

34See 85 FR 79142 (Dec. 9, 2020). 

35 85 FR 79142, 79148 (Dec. 9, 2020). 

36 85 FR 79142 (Dec. 9, 2020). 

March 1, 2020 not ‘‘after March 1, 

2020.’’ 33

In § 36.4805(e)(4), VA is replacing the 

term ‘‘borrower’’ with the term 

‘‘veteran’’ to remain consistent with 

other sections in Subpart F. With the 

exception of references that include coborrowers or non-borrowers who may 

hold title to the property, VA’s intention 

is to use the term ‘‘veteran’’ throughout. 

IV. Section-by-Section Analysis of the 

Final Regulatory Amendments 

As discussed in the proposed rule, the 

COVID–VAPCP is a temporary program 

to help veterans return to making 

normal loan payments on their 

guaranteed loans after exiting a COVID– 

19 forbearance period.34 The proposed 

rule further noted that VA’s existing 

home retention, loss-mitigation, 

alternatives to foreclosure, and other 

servicing regulations and policies 

remain in effect.35 Thus, to avoid 

confusion, VA is adding a new subpart 

F to part 36 of the Code of Federal 

Regulations (CFR) to contain the 

regulations that govern this temporary 

program.36

The following outlines the new 

subpart F, as prescribed under this final 

rule, with further explanation of each 

individual section, as appropriate. 

A. § 36.4800 Applicability 

In § 36.4800, VA notes that this 

subpart applies to all loans guaranteed 

by VA, to the extent such loans are 

affected by the COVID–19 national 

emergency. 

There is no change from the proposed 

rule to this section. 

B. § 36.4801 Definitions 

In § 36.4801, VA sets forth the 

definitions applicable to new subpart F. 

VA defines ‘‘alternative to 

foreclosure’’, ‘‘COVID–19 forbearance’’, 

‘‘COVID–19 indebtedness’’, 

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

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

set out in the regulatory text below. 

Changes in this section replace certain 

references to the CARES Act with 

COVID–19. These changes align the 

scope of the COVID–VAPCP with the 

coordinated federal response to 

veterans’ prolonged financial hardship, 

as discussed in section III.A. above. 

C. § 36.4802 General Purpose of the 

COVID–19 Veterans Assistance Partial 

Claim Payment Program 

In § 36.4802, VA sets forth the general 

purpose of the COVID–VAPCP. 

Intending to provide some introductory 

context for this novel option within 

VA’s home loan program, VA states that 

the COVID–VAPCP is a temporary 

program to help veterans who have 

suffered a COVID–19 financial hardship. 

Notwithstanding the requirements 

elsewhere in part 36 regarding payment 

of a guaranty claim or refunding a loan, 

this section allows VA to assist a 

veteran exiting a COVID–19 forbearance 

by purchasing from the servicer the 

veteran’s COVID–19 indebtedness. Such 

a purchase is called a partial claim 

payment. In exchange for VA’s partial 

claim payment on behalf of the veteran, 

the veteran must agree to repay the 

Secretary, in the amount of such partial 

claim payment, upon loan terms 

established by the Secretary. 

The only changes to this section from 

the proposed rule include conforming 

amendments associated with the 

definitional changes in § 36.4801. See 

section IV.B. above. 

D. § 36.4803 General Requirements of 

the COVID–19 Veterans Assistance 

Partial Claim Payment Program 

In § 36.4803, VA sets forth the general 

requirements of the COVID–VAPCP. 

First, VA requires that the loan for 

which a partial claim payment is 

requested must be a guaranteed loan 

that was either current or less than 30 

days past due on March 1, 2020, or was 

made on or after March 1, 2020. Second, 

VA requires that the veteran on whose 

behalf VA will pay a partial claim 

payment both received a COVID–19 

forbearance and missed at least one 

scheduled monthly payment. Third, VA 

requires that there remains unpaid at 

least one scheduled monthly payment 

that the veteran did not make while 

under a COVID–19 forbearance. Fourth, 

VA requires the veteran to indicate that 

the veteran can resume making 

scheduled monthly payments, on time 

and in full, and that the veteran 

occupies, as the veteran’s residence, the 

property securing the guaranteed loan 

for which the partial claim is requested. 

Lastly, VA requires the veteran to 

execute, in a timely manner, all loan 

documents necessary to establish an 

obligation to repay the Secretary for the 

partial claim payment. 

This section incorporates changes VA 

is making in response to commenter 

concerns about the COVID–VAPCP 

evaluation and application process. As 

discussed in section II of this final rule, 

veterans must only indicate, not certify, 

as to their ability to resume making 

scheduled monthly payments and their 

occupancy of the property securing the 

guaranteed loan. Similarly, servicers are 

not required to certify as to the 

adequacy of the veteran’s monthly 

residual income based on a financial 

evaluation. Also, in response to 

comments discussed above, VA is 

clarifying that the final rule expressly 

allows veterans whose loans were made 

on or after March 1, 2020 to receive 

assistance, provided all other 

requirements are met. See section III.B. 

above. VA is also making conforming 

amendments associated with the 

definitional changes in § 36.4801. See 

section IV.B. above. 

E. § 36.4804 Partial Claim Payment as 

a Home Retention Option 

In § 36.4804, VA reiterates that the 

COVID–VAPCP is designed to address 

the financial hardships due, directly or 

indirectly, to the COVID–19 national 

emergency. This section states that a 

servicer may therefore use the partial 

claim payment option, even in cases 

where other home retention options are 

feasible, provided the partial claim 

payment option is in the veteran’s 

financial interest. This section also 

allows the servicer to immediately 

proceed to offering an alternative to 

foreclosure if the veteran notifies the 

servicer that the veteran does not want 

to retain ownership of the property 

securing the guaranteed loan. 

Changes in this section, including 

changes to the section heading, are in 

response to commenter concerns as 

discussed in section II.D. above. 

F. § 36.4805 Terms of the Partial Claim 

Payment 

In § 36.4805, VA sets forth the terms 

of the partial claim payment. In 

paragraph (a), in order for a partial 

claim payment to be payable, the 

servicer must submit to the Secretary, 

not later than 120 days after the date the 

veteran exits the COVID–19 forbearance, 

a request for such payment, as 

prescribed in § 36.4807. Paragraph (b) of 

this section states that the amount of the 

partial claim payment that VA will pay 

to the servicer, as calculated under 

paragraph (e), shall not exceed 30 

percent of the unpaid principal balance 

of the guaranteed loan. For the purposes 

of paragraph (b), the unpaid principal 

balance of the guaranteed loan means 

such balance as of the date the veteran 

entered into a COVID–19 forbearance. 

Paragraph (c) states that VA will pay 

only one partial claim payment per 

guaranteed loan. Paragraph (d) states 

28702 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

37 85 FR 79142, 79150 (Dec. 9, 2020). 

that VA will pay only one partial claim 

payment per veteran. 

In paragraph (e)(1), VA states that 

because VA will pay only one partial 

claim payment per guaranteed loan, and 

only one partial claim payment per 

veteran, a servicer must, when 

calculating the amount of partial claim 

payment to be paid by VA to the 

servicer, include the full amount of 

indebtedness that is necessary to bring 

the guaranteed loan current. In 

paragraph (e)(2), VA states that to bring 

the guaranteed loan current, servicers 

must include the full COVID–19 

indebtedness, comprising (i) all 

scheduled but missed monthly 

payments of principal and interest; and 

(ii) as applicable, all scheduled but 

missed monthly escrow payments for 

real estate taxes and insurance 

premiums, or where the guaranteed loan 

documents do not provide for monthly 

escrowing, all payments the servicer 

made to real estate tax authorities and 

insurance providers, on the veteran’s 

behalf, during the COVID–19 

forbearance. 

In paragraph (e)(3)(i), VA requires 

servicers to include all scheduled 

monthly payments (comprising 

principal, interest, and escrow 

payments for real estate taxes and 

insurance premiums) due within 31 

days of the date the servicer provides to 

the veteran the note and security 

instrument described in § 36.4806. VA 

notes that any such payment due within 

31 days of such date may be considered 

part of the veteran’s obligation to bring 

the guaranteed loan current. As such, 

VA is requiring servicers to include this 

amount in the partial claim payment. 

In paragraph (e)(3)(ii), VA requires 

servicers to include, if applicable, all 

scheduled monthly payments 

(comprising principal, interest, and 

escrow payments for real estate taxes 

and insurance premiums) that were 

missed on or after March 1, 2020, but 

before the veteran was granted a 

COVID–19 forbearance. As discussed in 

the notice of proposed rulemaking, VA 

included this feature to allow veterans 

who may have missed a payment before 

requesting forbearance, but who would 

otherwise meet the COVID–VAPCP 

requirements, to participate in the 

program.37 In such cases, however, the 

servicer must waive any late charges 

and fees associated with these missed 

payments. Additionally, under 

paragraph (e)(3)(iii), VA requires 

servicers to include the actual amount 

of recording fees, recording taxes, or 

other charges levied by the recording 

authority that must be paid in order to 

record the security instrument described 

in § 36.4806. 

In paragraph (e)(4), VA clarifies that 

servicers shall not include any amounts 

in the partial claim that are not listed by 

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

servicers cannot include any amounts 

(for example, fees, penalties, or interest) 

beyond the amounts scheduled or 

calculated as if the borrower made all 

contractual payments on time and in 

full under the terms of the guaranteed 

loan, or any late charges and fees that 

the veteran incurred between March 1, 

2020, and the date the veteran entered 

the COVID–19 forbearance. 

In paragraph (e)(5), VA states that 

nothing in § 36.4805 shall preclude a 

veteran from making an optional 

payment or a servicer from waiving a 

veteran’s indebtedness, such that the 

amount of partial claim payment would 

not exceed the 30 percent cap described 

in paragraph (b). 

In paragraph (e)(6), VA explains that 

if the servicer miscalculates the partial 

claim amount, resulting in an 

overpayment to the servicer, the amount 

of such overpayment shall constitute a 

liability of the servicer to the United 

States. The servicer will be required to 

remit the overpaid amount immediately 

to VA. In paragraph (e)(7), VA states that 

if the servicer miscalculates the partial 

claim amount, resulting in 

underpayment (i.e., an amount 

insufficient to bring the guaranteed loan 

current), the servicer must waive the 

difference. 

Finally, paragraph (e)(8) prohibits 

servicers from including any amounts 

for a monthly payment that is scheduled 

to be paid on a date that is more than 

31 days after the servicer provides to the 

veteran the note and security instrument 

described in § 36.4806. 

Under paragraph (f), the servicer is 

required to prepare a note and security 

instrument in favor of the ‘‘Secretary of 

Veterans Affairs, an Officer of the 

United States’’. Using the ‘‘Department 

of Veterans Affairs’’ or the ‘‘United 

States’’ is incorrect. Furthermore, 

certain states have their own 

Departments of Veterans Affairs, and 

without the explicit distinction made 

here, confusion could result. Therefore, 

it is critical that the note and security 

instrument read in favor of the 

‘‘Secretary of Veterans Affairs, an 

Officer of the United States’’. In cases 

where state law requires naming a real 

person, this final rule notice allows 

servicers to include the name of the 

incumbent Secretary. These provisions 

are consistent with VA’s property 

conveyance rule found at 38 CFR 

36.4323(d)(8). 

VA requires that the note be 

consistent with the terms described in 

§ 36.4806 and include all borrowers 

who are obligated on the guaranteed 

loan. The security instrument is also 

required to include all persons 

(borrowers, as well as non-borrowers) 

who hold a title interest in the property 

securing the guaranteed loan. In 

paragraph (g), subject to the requirement 

that the servicer submit the application 

for a partial claim payment to VA not 

later than 90 days after the date the 

veteran exits the COVID–19 forbearance, 

VA requires all loan documents to be 

fully executed not later than 90 days 

after the veteran exits the COVID–19 

forbearance. Paragraph (h) requires the 

servicer to record the security 

instrument timely, as prescribed in 

§ 36.4807. Finally, in paragraph (i), the 

servicer is prevented from charging, or 

allowing to be charged, to the veteran 

any fee in connection with the COVID– 

VAPCP. 

VA is making several changes to the 

final rule text in § 36.4805. First, there 

are technical conforming amendments 

in paragraphs (a), (b), (e)(2), (e)(2)(ii), 

(e)(3)(ii), and (g), related to definitional 

changes in § 36.4801. See section IV.B. 

above. VA is also incorporating a 

technical edit to paragraph (e)(4) that 

replaces ‘‘borrower’’ with ‘‘veteran’’ to 

remain consistent across Subpart F. See 

section III.C. above. In paragraph 

(e)(3)(ii), VA is revising the text to 

clarify VA’s intent that payments 

missed on March 1, 2020 can be 

included in the partial claim amount. 

See section III.C. above. 

Also in response to comments 

discussed above, VA is amending 

paragraph (a) to reflect the adjustment to 

the timeframe in which servicers must 

request a partial claim payment from 90 

days to 120 days, as discussed in section 

II.F. above. VA is also amending 

paragraphs (b) and (e)(5) to reflect the 

change in the maximum amount of 

available assistance, that is, from 15 

percent of the UPB to 30 percent of the 

UPB. This change is discussed in more 

detail in section II.B.3. above. 

Finally, VA is revising paragraph 

(e)(3)(i) such that the payments servicers 

must include in the partial claim 

amount will now be tied to the date the 

servicer provides the loan documents to 

the veteran, instead of the date the 

veteran executes such documents. As 

discussed in section III.H. above, this 

revision addresses industry concerns 

that servicers do not control when a 

veteran executes the note and security 

instrument, which increases the risk 

that servicers will miscalculate the 

partial claim payment amount. For 

example, under this final rule, a servicer 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28703 

38 85 FR 79142, 79160 (Dec. 9, 2020). 39 85 FR 79142, 79160 (Dec. 9, 2020). 

that provides a COVID–VAPCP note and 

security instrument to a veteran on June 

15, 2021, must include the July 1, 2021 

guaranteed loan payment in the partial 

claim payment amount, and the veteran 

will not need to make a guaranteed loan 

payment until August 1, 2021. 

VA is also making a conforming 

amendment to paragraph (e)(8) to 

account for the revisions to paragraph 

(e)(3)(i). VA is also making technical 

drafting edits to paragraph (f) to clarify 

that ‘‘Secretary of Veterans Affairs, an 

Officer of the United States’’ should 

appear on the note and security 

instrument and that the name of the 

incumbent Secretary should not be 

included unless State law requires 

naming a real person. 

G. § 36.4806 Terms of the Assistance 

to the Veteran 

If a veteran chooses to accept VA’s 

assistance (i.e., a partial claim payment 

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

the veteran, and all co-borrowers on the 

guaranteed loan, must execute a note 

and security instrument in favor of ‘‘the 

Secretary of Veterans Affairs, an Officer 

of the United States’’. In addition, all 

non-borrowers holding a title interest in 

the property are required to sign the 

security instrument. In paragraph (b), 

VA establishes specific terms of the note 

and security instrument. Specifically, 

VA requires the note and security 

instrument to include the amount to be 

repaid to the Secretary, by the veteran, 

to be the amount calculated under 

§ 36.4805(e). VA also requires 

repayment in full immediately upon the 

veteran’s transfer of title to the property, 

or the refinancing or payment in full 

otherwise, of the guaranteed loan with 

which the partial claim payment is 

associated. Finally, VA states that a 

veteran may make payments for the 

subordinate loan, in whole or in part, 

without charge or penalty. If the veteran 

makes a partial prepayment, there will 

be no changes in the due date unless VA 

agrees in writing to those changes. 

As discussed in section II above, VA 

is revising § 36.4806 to remove 

provisions that were in proposed 

paragraphs (b)(2) through (b)(5), which 

would have required repayment of the 

COVID–VAPCP loan within ten years 

and would have applied a 1.00 percent 

interest rate to the loan. VA is also 

redesignating proposed paragraph (b)(6) 

as paragraph (b)(2). VA is also adding 

new paragraph (b)(3) to expressly state 

that a veteran may make partial 

prepayments of the new COVID–VAPCP 

loan. This conforming amendment is 

necessary to preserve an element of the 

proposed rule which would have 

prohibited VA from charging veterans 

any fees for any prepayments made 

during the 60-month deferment term.38

As this final rule does not provide for 

a repayment term, and thus no 

deferment term, VA is preserving this 

crucial protection for veterans by 

expressly stating in new paragraph 

(b)(3) that veterans can make 

prepayments on the COVID–VAPCP 

loan, in whole or in part, without charge 

or penalty. VA is also making technical 

drafting edits to paragraph (a) to clarify 

that the ‘‘Secretary of Veterans Affairs, 

an Officer of the United States’’ should 

appear on the note and security 

instrument and the name of the 

incumbent Secretary should not be 

included unless State law requires 

naming a real person. VA is also making 

technical drafting edits to paragraph 

(b)(2), as redesignated, to remove 

unnecessary commas that appeared after 

‘‘refinancing’’ and ‘‘otherwise’’ in the 

proposed rule.39

H. § 36.4807 Application for Partial 

Claim Payment 

In § 36.4807, VA requires the servicer 

to provide VA with the original note 

required by § 36.4805. Also, not later 

than 180 days following the date the 

security instrument required by 

§ 36.4805 is fully executed, the servicer 

must provide VA with the original 

security instrument and evidence that 

the servicer recorded such instrument. If 

the recording authority causes a delay, 

the servicer may request an extension of 

time, in writing, from VA. 

Servicers will utilize VA’s existing 

loan servicing platform, the VA Loan 

Electronic Reporting Interface (VALERI) 

system, to report the partial claim 

payment event. Servicers must report 

the partial claim event within seven 

days of the date the veteran returns to 

the servicer the executed note required 

by § 36.4805, but not later than 120 days 

after the date the veteran exits the 

COVID–19 forbearance. Below, VA has 

identified the specific data elements 

that servicers must input into VALERI 

when reporting the partial claim event. 

DATA ELEMENT DEFINITIONS

Event name Data elements Business definition of data element 

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

§ 36.4805(e)(2)(i) and (e)(3)(ii), and all scheduled monthly payments of principal due within 31 

days of the date the servicer provides to the veteran the note and security instrument described in § 36.4806. 

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

§ 36.4805(e)(2)(i) and (e)(3)(ii), and all scheduled monthly payments of interest due within 31 

days of the date the servicer provides to the veteran the note and security instrument described in § 36.4806. 

Partial claim ........... Tax payments missed 

amount.

Total dollar amount of all scheduled but missed monthly escrow payments for real estate taxes, 

as described in § 36.4805(e)(2)(ii) and (e)(3)(ii), and all scheduled monthly escrow payments 

for real estate taxes due within 31 days of the date the servicer provides to the veteran the 

note and security instrument described in § 36.4806. 

Partial claim ........... Insurance payments 

missed amount.

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

payments for insurance premiums due within 31 days of the date the servicer provides to the 

veteran the note and security instrument described in § 36.4806. 

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

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

§ 36.4805(e)(2)(ii). 

Partial claim ........... Insurance advance 

amount.

Total dollar amount of all payments the servicer made to insurance providers on the veteran’s 

behalf, as described in § 36.4805(e)(2)(ii). 

28704 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

DATA ELEMENT DEFINITIONS—Continued 

Event name Data elements Business definition of data element 

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

in § 36.4805(e)(2)(ii). 

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

authority, that must be paid in order to record the security instrument, as described in 

§ 36.4805(e)(3)(iii). 

Partial claim ........... Partial claim origination 

date.

The date the borrower executes the note required by § 36.4805. 

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

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

Partial claim ........... Second borrower birth 

date.

The birth dates of all co-borrowers. 

To address stakeholder comments 

discussed in section II above, VA is 

adopting changes to § 36.4807 to 

eliminate the requirement that veterans 

and servicers complete and submit an 

application form. Thus, VA deleted 

proposed paragraph (a) and 

redesignated proposed paragraphs (b) 

and (c) as paragraphs (a) and (b). In 

newly redesignated paragraph (a), VA 

deleted the introductory phrase ‘‘Along 

with a complete application form,’’. In 

newly redesignated paragraph (b), VA 

amended the deadline for which 

servicers must report a partial claim 

event through VA’s electronic loan 

servicing system (VALERI). The revised 

deadline will now be measured from the 

date the borrower returns the executed 

note to the servicer, rather than the date 

the borrower executes the note. VA 

made this revision to address 

commenters’ concerns about servicers 

being unable to dictate the date on 

which a veteran executes the note. See 

section II above. VA also amended 

newly redesignated paragraph (b) to 

include a conforming technical edit that 

is related to VA’s decision to increase 

the timeframe in which servicers must 

request a partial claim payment from 90 

days to 120 days post-forbearance. See 

section II.F. above. 

Regarding the VALERI data elements 

outlined above, VA is deleting the 

following data elements as they are no 

longer necessary given the elimination 

of the ten-year repayment term: Partial 

claim first payment due date; partial 

claim maturity date; and partial claim 

P&I payment amount. VA is also 

updating the following data element 

definitions to align with changes to 

§ 36.4805(e)(3)(i): Principal amount; 

Interest amount; Tax payments missed 

amount; and Insurance payments 

missed amount. 

I. § 36.4808 No Effect on the Servicing 

of the Guaranteed Loan 

In § 36.4808, VA requires servicers to 

continue to service the guaranteed loan 

in accordance with subpart B of part 36. 

The liability of the United States for any 

guaranteed loan shall decrease or 

increase pro rata with any decrease or 

increase of the amount of the unpaid 

portion of the guaranteed loan. A partial 

claim payment does not affect the 

guaranty percentage established at the 

time the guaranteed loan was made. 

Receipt of a partial claim payment shall 

not eliminate a servicer’s option under 

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

Secretary the security for the guaranteed 

loan. 

There is no change from the proposed 

rule to this section. 

J. § 36.4809 Expiration of the COVID– 

19 Veterans Assistance Partial Claim 

Payment Program 

In § 36.4809, VA notes that the 

Secretary will not accept a request for a 

partial claim payment after the date that 

is 180 days after the date the COVID–19 

national emergency ends under the 

National Emergencies Act, unless a 

veteran’s COVID–19 forbearance does 

not end until after such date. In cases 

where a veteran’s COVID–19 

forbearance ends after the subject date, 

the Secretary shall accept a request for 

a partial claim payment, provided that 

such request is submitted to the 

Secretary not later than 120 days after 

the date the veteran exits the COVID–19 

forbearance. However, in no event will 

the Secretary accept a request for a 

partial claim payment after October 28, 

2022. 

VA is making several changes to the 

final rule text in § 36.4809 for reasons 

outlined in section II.E. above. First, 

there are technical conforming 

amendments in paragraph (b) related to 

definitional changes in § 36.4801. See 

section IV.B. above. VA is also adopting 

a change in paragraph (b) to replace 

‘‘may still’’ with ‘‘shall’’ in response to 

public comments. Also, VA is amending 

paragraph (b) to include a conforming 

technical edit that is related to VA’s 

decision to increase the timeframe in 

which servicers must request a partial 

claim payment from 90 days to 120 days 

post-forbearance. See section II.F. above. 

Additionally, in response to public 

comments, VA is replacing the date 

‘‘September 9, 2021’’ with ‘‘October 28, 

2022’’ in paragraph (c). 

K. § 36.4810 Oversight of the COVID– 

19 Veterans Assistance Partial Claim 

Payment Program 

In § 36.4810, VA sets forth the 

parameters for oversight of the COVID– 

VAPCP. It is an almost verbatim 

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

Specifically, subject to notice and 

opportunity for a hearing, whenever the 

Secretary finds with respect to a partial 

claim payment that any servicer has 

failed to maintain adequate loan 

accounting records, or to demonstrate 

proper ability to service loans 

adequately or to exercise proper credit 

judgment or has willfully or negligently 

engaged in practices otherwise 

detrimental to the interest of veterans or 

of the Government, the Secretary may 

refuse either temporarily or 

permanently to guarantee or insure any 

loans made by such servicer and may 

bar such servicer from servicing or 

acquiring guaranteed loans. 

Notwithstanding the above, but subject 

to § 36.4328, the Secretary will not 

refuse to pay a guaranty or insurance 

claim on a guaranteed loan theretofore 

entered into in good faith between a 

veteran and such servicer. The Secretary 

may also refuse either temporarily or 

permanently to guarantee or insure any 

loans made by a lender or holder 

suspended, debarred, denied, or 

otherwise restricted from participation 

in FHA’s insurance programs pursuant 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28705 

40 38 CFR 36.4333(a)(2). 

41See 5 U.S.C. 553(b)(B). 

42See 5 U.S.C. 801(a)(3)(A). 

43 5 U.S.C. 801(a)(3)(A); see also 5 U.S.C. 808. 

to a determination of the Secretary of 

Housing and Urban Development. 

As noted in both the proposed and 

final rule notices, VA will utilize its 

existing loan refund process to handle 

applications for partial claim payments 

via VALERI. Upon receipt of an 

application, VA will conduct a two-tier 

review and approval of the partial claim 

payment, utilizing information already 

in its VALERI systems to verify that the 

servicer has brought the veteran’s 

guaranteed loan current, that the 

amount requested is consistent with 

other requirements, and that VA has 

received all necessary documentation. 

Partial claim payments will also be 

subject to VA’s oversight and audit 

activities as part of VA’s regular 

monitoring related to adequacy of loan 

servicing. If VA determines, during an 

audit, that a servicer did not follow 

VA’s requirements when participating 

in the COVID–VAPCP, § 36.4810 

expressly authorizes appropriate 

enforcement actions. 

There is no substantive change from 

the proposed rule to this section. Rather, 

VA has included revisions to clarify the 

different forms of restrictions on 

participation in FHA programs 

encompassed by this section. 

L. Conforming Technical Amendments 

VA is adding new section 38 CFR 

36.4336 that reiterates VA’s parameters 

for oversight of loan servicing. This 

technical amendment is necessary to 

ensure that servicers adhere to the 

parameters outlined in § 36.4804, 

wherein the servicer must ensure that 

the partial claim option is in the 

veteran’s financial interest. As with 

proposed § 36.4810, it includes an 

almost verbatim restatement of 38 

U.S.C. 3704(d). Under this new section, 

subject to notice and opportunity for a 

hearing, whenever the Secretary finds 

that any servicer has failed to maintain 

adequate loan accounting records, or to 

demonstrate proper ability to service 

loans adequately or to exercise proper 

credit judgment or has willfully or 

negligently engaged in practices 

otherwise detrimental to the interest of 

veterans or of the Government, the 

Secretary may refuse either temporarily 

or permanently to guarantee or insure 

any loans made by such servicer and 

may bar such servicer from servicing or 

acquiring guaranteed loans. 

Notwithstanding the above, but subject 

to § 36.4328, the Secretary will not 

refuse to pay a guaranty or insurance 

claim on a guaranteed loan theretofore 

entered into in good faith between a 

veteran and such servicer. The Secretary 

may also refuse either temporarily or 

permanently to guarantee or insure any 

loans made by a lender or holder 

suspended, debarred, denied, or 

otherwise restricted from participation 

in FHA’s insurance programs pursuant 

to a determination of the Secretary of 

Housing and Urban Development. 

VA is also amending 38 CFR 

36.4333(a)(2) to ensure that records 

referenced in proposed §§ 36.4336 and 

36.4810 are included in VA’s 

maintenance of record requirements. 

Currently, holders are required to 

‘‘maintain records supporting their 

decision to approve any loss-mitigation 

option for which an incentive is paid in 

accordance with § 36.4319(a).’’ 40 VA is 

deleting the phrase ‘‘for which an 

incentive is paid in accordance with 

§ 36.4319(a).’’ To ensure that VA’s 

partial claim payment option is covered, 

VA is adding a sentence noting that the 

holder is required to maintain records 

supporting their decision to pursue a 

partial claim payment under the 

COVID–19 Veterans Assistance Partial 

Claim Payment program as established 

by proposed subpart F. Regarding the 

length of the recordkeeping 

requirement, VA is retaining an element 

of the status quo, namely that such 

records shall be retained a minimum of 

three years from the date of any 

incentive paid in accordance with 

§ 36.4319(a) or the date the veteran’s 

guaranteed loan is made current via the 

COVID–VAPCP, whichever is later. 

Finally, VA is amending the specific 

authority for § 36.4333 to include 38 

U.S.C. 3704(d), as this section requires 

the maintenance of adequate loan 

accounting records. 

There is no substantive change from 

the proposed rule to this section. Rather, 

VA has included revisions to clarify the 

different forms of restrictions on 

participation in FHA programs 

encompassed by this section. 

V. Effective Date of Final Rule 

In the notice of proposed rulemaking, 

VA repeated its commitment to bringing 

financial relief to veterans with VAguaranteed home loans affected by the 

COVID–19 national emergency. VA also 

noted that it considered whether ‘‘good 

cause’’ existed to dispense with noticeand-comment rulemaking under the 

Administrative Procedure Act (APA).41

However, despite the need for certainty 

that VA’s partial claim program would 

be available to veterans as they exit 

forbearance, VA believed the novel legal 

policies warranted an opportunity for 

public input. 

As evident from this final rule notice, 

public input was valuable to ensuring 

that VA implements a partial claim 

payment program that delivers on its 

commitment. VA is now faced with 

determining whether it should 

accelerate the effective date of this 

program beyond statutory timeframes 

outlined in the Congressional Review 

Act.42 Specifically, absent a showing of 

‘‘good cause,’’ this final rule (which is 

a ‘‘major rule’’ under the CRA, see infra) 

will become effective the later of the 

date occurring 60 days after the date on 

which Congress receives the report, or 

the date the rule is published in the 

Federal Register.43 For reasons 

discussed below, VA does not believe 

acceleration of the effective date is 

necessary. 

In the proposed rule, VA requested 

specific input from VA stakeholders as 

to the amount of time needed to 

implement VA’s final rule. Anticipating 

that industry participants would require 

some amount of time to review, 

understand, and implement the COVID– 

VAPCP, VA sought additional 

information as to whether increased 

burdens or costs would accompany any 

accelerated timetables. VA also 

requested input as how a 30- or 60-day 

delay in the effective date might 

negatively impact veterans, servicers, 

and other stakeholders. 

VA received four comments 

responding to its request. Three of the 

four commenters indicated that the 

seven-day timeframe suggested by VA in 

its request for comments would be 

insufficient for servicers to 

operationalize the proposed rule. One 

commenter noted that even a 60-day 

timeframe was unlikely to be enough. 

Another commenter suggested that VA 

consider a 90-day timeframe to allow 

servicers to upgrade technology 

systems, develop operational 

procedures, and train staff. The third 

commenter echoed those sentiments, 

indicating that several months would 

likely be needed if VA were to finalize 

the rule as proposed. However, the third 

commenter also suggested that a shorter 

implementation timeframe would be 

needed if VA were to adopt changes to 

the final rule to align the COVID– 

VAPCP with FHA’s partial claim 

program, thereby allowing servicers 

familiar with that program to adapt 

quickly and to utilize existing 

documents. Finally, as previously 

discussed, one commenter 

recommended that VA implement the 

COVID–VAPCP via Circular, indicating 

that the rulemaking process was too 

slow to bring needed relief to veterans. 

28706 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

44See Fact Sheet: Biden Administration 

Announces Extension of COVID–19 Forbearance 

and Foreclosure Protections for Homeowners, (Feb. 

16, 2021), https://www.whitehouse.gov/briefingroom/statements-releases/2021/02/16/fact-sheetbiden-administration-announces-extension-ofcovid-19-forbearance-and-foreclosure-protectionsfor-homeowners/. See also VA Circular 26–21–04. 

Approving Forbearance Requests for Veterans 

Affected by COVID–19, (Feb. 16, 2021), https://

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

circulars/26_21_04.pdf. 

45See 5 U.S.C. 553(b)(B). 

46 VA uses data from InfoUSA and Factiva to 

determine the industry (as identified by the primary 

NAICS code) for the active VA-guaranteed loan 

servicers. For industries where size standards are 

determined by the average annual revenue, VA 

compares the revenue of each servicer in these 

industries, as reported in InfoUSA and Factiva, to 

the SBA annual revenue threshold for small 

businesses. For industries where size standards are 

determined by assets, VA compares the relevant 

SBA threshold for small businesses to asset data 

from the FDIC for servicers with primary NAICS 

codes 522110 (Commercial Banking) and 522120 

(Savings Institutions), and asset data from the 

NCUA for lenders with a primary NAICS code of 

522130 (Credit Unions). 

47U.S. Small Business Administration, SBA 

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

www.sba.gov/sites/default/files/2019-08/SBA%20

Table%20of%20Size%20Standards_Effective%20

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

48 VA averages the sales volumes from Factiva for 

all servicers considered small, including those 

primarily considered commercial banks, savings 

institutions, and credit unions. 

VA understands the concerns of its 

stakeholders on this issue. VA also 

remains committed to ensuring 

veterans’ timely access to a partial claim 

payment home retention option. In 

consideration of the comments received, 

VA believes the 60-day statutory 

timeframe under the Congressional 

Review Act provides time for servicers 

to implement the final rule without 

significant impact to veterans. For 

reasons discussed immediately below, 

VA also believes the 60-day timeframe 

will not cause undue harm to veterans. 

An internal assessment indicates that 

approximately half of VA-guaranteed 

loans in forbearance will reach 360 days 

of forbearance sometime during the 

months of May and June of 2021. 

However, as discussed above, VA has 

been a part of the coordinated federal 

response that extends protections for 

borrowers with federally backed 

mortgages.44 For example, certain 

veterans can now receive COVID–19 

forbearances that can remain in effect 

until as late as June 30, 2022. 

Additionally, certain veterans who may 

have already reached the end of their 

initial periods of forbearance can now 

receive up to two additional threemonth COVID–19 forbearance periods, 

which can remain in effect until as late 

as December 31, 2021. Given these 

additional protections, VA now 

anticipates that most veterans currently 

in a COVID–19 forbearance will remain 

in such forbearance until at least late 

June 2021. VA also expects that most 

COVID–19 forbearance periods will now 

end in November 2021. 

In light of the factors mentioned 

above, VA believes that allowing a 60- 

day timeframe between the publication 

date and effective date of this final rule 

is not ‘‘impracticable, unnecessary, or 

contrary to the public interest.’’ 45 VA 

notes that certain veterans who will exit 

forbearance in late June or early July of 

2021 will still be able to take advantage 

of the partial claim option, especially 

since VA has provided servicers with an 

additional 30 days (for a total of 120 

days post-forbearance) in which to 

complete certain actions and request a 

partial claim. VA has sought to publish 

this final rule as quickly as possible to 

ensure that the COVID–VAPCP will be 

effective in time to assist the majority of 

veterans whose loans are currently in 

forbearance without sacrificing the time 

needed to ensure servicers are able to 

prepare for assisting veterans coming 

out of forbearance. 

Executive Orders 12866 and 13563 

Executive Orders 12866 and 13563 

direct agencies to assess the costs and 

benefits of available regulatory 

alternatives and, when regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, and other advantages; 

distributive impacts; and equity). 

Executive Order 13563 (Improving 

Regulation and Regulatory Review) 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. The Office of 

Information and Regulatory Affairs of 

the Office of Management and Budget 

(OMB) has determined that this rule is 

a significant regulatory action under 

Executive Order 12866. 

VA’s impact analysis can be found as 

a supporting document at http://

www.regulations.gov, usually within 48 

hours after the rulemaking document is 

published. Additionally, a copy of the 

rulemaking and its Regulatory Impact 

Analysis (RIA) are available on VA’s 

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

following the link for ‘‘VA Regulations 

Published From FY 2004 Through Fiscal 

Year to Date.’’ 

Regulatory Flexibility Act 

The Secretary hereby certifies that 

this final rule will not have a significant 

economic impact on a substantial 

number of small entities as they are 

defined in the Regulatory Flexibility Act 

(5 U.S.C. 601–612). To assess whether 

the final rule can be expected to have a 

‘‘significant economic impact’’ on small 

entities, VA considers the annual cost of 

the rule for small entities compared to 

their annual revenue. VA was able to 

determine the size of 127 out of 151 

companies that service VA-guaranteed 

loans in COVID–19 forbearances, where 

the borrowers could likely receive 

assistance via a partial claim. VA made 

this determination using the size 

standards from the Small Business 

Administration (SBA).46 47 VA used data 

from InfoUSA and Factiva (two business 

data providers) along with data from the 

Federal Deposit Insurance Corporation 

(FDIC) and the National Credit Union 

Administration (NCUA). Out of the 127 

servicers for which VA has sufficient 

data to determine their size, 36 (or 28.35 

percent) are considered small by SBA 

standards. The average annual revenue 

of those 36 small servicers is $13.04 

million.48

To determine the economic burden of 

the final rule on small entities, VA first 

compares the average annual costs of 

the rule that fall on small servicers to 

the average annual revenue of the small 

servicers. The costs of the rule come 

from rule familiarization and the 

Paperwork Reduction Act (PRA) costs, 

which include the costs for servicers to 

prepare and deliver to the veteran the 

original note and security instrument, 

and then deliver the executed note and 

security instrument to VA. The cost of 

rule familiarization is $99.90 for each 

guaranteed loan servicer, including the 

small servicers. The PRA cost estimates 

vary across servicers depending on how 

many COVID–19 forbearance loans they 

service that either meet or could 

potentially meet COVID–VAPCP 

requirements. 

As described in the impact analysis, 

the estimated number of borrowers who 

will likely meet the requirements for 

assistance via a partial claim is between 

101,132 and 151,812. VA estimates that 

15 percent of those loans are serviced by 

small entities, or between 15,170 and 

22,772 loans. Given the total PRA cost 

for servicers of $36.64 per loan, the total 

PRA cost to average small servicers is 

$15,439.49 at the lower bound and 

$23,176.84 at the upper bound. 

The total cost of this rule to average 

small VA-guaranteed loan servicer 

ranges from $15,539 ($99.90 + 

$15,439.49) to $23,277 ($99.90 + 

$23,176.84), while the average annual 

revenue to small servicers is $13.04 

million. VA generally considers a rule to 

have a ‘‘significant economic impact’’ 

when the total annual cost associated 

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28707 

49 126 Cong. Rec. S10,940–10,942 (Aug. 6, 1980) 

(discussing that determining whether an economic 

impact is ‘‘significant’’ is not an exact standard and 

that agencies should not be limited to considering 

easily quantifiable costs). 50See also 5 CFR 1320.8(b)(3)(vi). 

with the rule for a small entity is equal 

to or exceeds 1 percent of annual 

revenue. The total upper bound cost to 

small servicers is 0.18 percent of the 

average annual revenue to small 

servicers. This ratio is calculated using 

the total costs on small servicers, rather 

than the total annual costs. In 

subsequent years, absent the rule 

familiarization costs and with the 

dispersion of the PRA costs, the average 

annual cost to small servicers will be 

even below that level. 

VA has also considered whether other 

economic impacts that are not easily 

quantifiable would have a significant 

impact on small servicers.49 Ultimately, 

VA has determined that this final rule 

is not expected to have a significant 

economic impact on small servicers. 

The effect of the final rule is to provide 

servicers the opportunity to resolve 

COVID–19 forbearances through a home 

retention option that will both (1) help 

veterans return to making regular 

monthly mortgage payments to the 

servicer, and (2) recapitalize the servicer 

by purchasing veterans’ total forborne 

indebtedness from the servicer. As 

discussed above, VA has adopted 

several changes to the final rule in 

response to industry comments 

regarding burdens associated with VA’s 

proposed rule, including streamlining 

the process and requirements for 

requesting a partial claim payment. 

Additionally, and consistent with 

current VA servicing regulations and 

policies, servicers will not be required 

to offer the partial claim payment as a 

home retention option. Therefore, if a 

small servicer determines that 

participating in the COVID–VAPCP is 

not consistent with its business model, 

the final rule provides flexibility for the 

servicer to resolve forbearances using 

one of many existing home retention 

options. 

Regarding the economic impact, that 

is, the paperwork burden, to servicers 

associated with this rule, VA notes that 

the changes adopted in this rule 

resulted in a 33 percent reduction in the 

estimated per loan paperwork burden to 

servicers. VA further notes that the 

economic costs of paperwork associated 

with this rule cannot be considered 

additive. In that regard, under existing 

VA statute and regulations, servicers are 

required to consider options to resolve 

a VA-guaranteed loan’s delinquency 

once a veteran exits a COVID–19 

forbearance. Each home retention and 

alternative to foreclosure option, as well 

as foreclosure itself, imposes some cost 

to the servicer that is already 

contemplated in its current business 

model. Under this rule, the cost to 

request a partial claim payment replaces 

the cost of whichever other option 

would have been selected absent the 

COVID–VAPCP. 

Notably, one commenter stated that 

the cost to servicers to execute a partial 

claim payment under the proposed rule 

was roughly equivalent to the cost to 

execute a loan modification. As VA 

believes a loan modification would be 

the home retention option most likely to 

be used to resolve COVID–19 

forbearances absent this rule, the net 

impact of this rule on small servicers is 

likely to be insignificant for those that 

choose to participate. 

To assess whether the rule can be 

expected to affect a ‘‘substantial number 

of small entities,’’ VA considers a ratio 

that captures the incidence of small VA 

servicers in the potential universe of 

servicers. Specifically, VA uses the ratio 

of small VA servicers with guaranteed 

loans in COVID–19 forbearance that are 

likely to participate in the partial claim 

program to the total number of VA 

servicers with guaranteed loans in 

COVID–19 forbearance that are likely to 

participate in the partial claim program. 

As described above, 36 VA servicers out 

of the 127 servicers with sufficient data 

available are small (28.35 percent). 

Therefore, the final rule is expected to 

affect a substantial number of small 

entities. 

While the final rule is expected to 

affect a substantial number of small 

entities, the impact will not be 

economically significant. On this basis, 

the Secretary certifies that the adoption 

of this final rule will not have a 

significant economic impact on a 

substantial number of small entities as 

they are defined in the Regulatory 

Flexibility Act. Therefore, pursuant to 5 

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

regulatory flexibility analysis 

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

not apply. 

Unfunded Mandates 

The Unfunded Mandates Reform Act 

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

agencies prepare an assessment of 

anticipated costs and benefits before 

issuing any rule that may result in the 

expenditure by State, local, and tribal 

governments, in the aggregate, or by the 

private sector, of $100 million or more 

(adjusted annually for inflation) in any 

one year. This final rule will have no 

such effect on State, local, and tribal 

governments, or on the private sector. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521) requires that VA 

consider the impact of paperwork and 

other information collection burdens 

imposed on the public. Under 44 U.S.C. 

3507(a), an agency may not collect or 

sponsor the collection of information, 

nor may it impose an information 

collection requirement unless it 

displays a currently valid OMB control 

number.50

This final rule contains provisions 

that constitute a revised collection of 

information under 38 CFR 36.4333, 

which is currently approved under 

OMB control number 2900–0515. This 

rule also contains provisions that 

constitute a new collection of 

information under 38 CFR 36.4336 and 

38 CFR 36.4810, which will be added 

under OMB control number 2900–0515. 

This rule also contains provisions that 

constitute a new collection of 

information under 38 CFR 36.4807, 

which will be added under existing 

OMB control number 2900–0021. 

Finally, this rule contains provisions 

that constitute a new collection of 

information under 38 CFR 36.4803, 

36.4805, 36.4806, and 36.4807. 

As required by 44 U.S.C. 3507(d), VA 

has submitted to OMB for its review and 

approval the information collections 

(both new and as amended) that have 

not yet been approved. VA will publish 

in the Federal Register a notice when 

OMB approves these information 

collections. In the interim, VA has 

retained the placeholder control 

numbers that appeared in the proposed 

rule. If OMB does not approve the 

collections of information as requested, 

VA will immediately remove the 

provisions containing a collection of 

information or take such other action as 

is directed by the OMB. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance number and title for the 

program affected by this document is 

64.114, Veterans Housing—Guaranteed 

and Insured Loans. 

Congressional Review Act 

The Office of Information and 

Regulatory Affairs has determined that 

this regulatory action is a major rule 

under Subtitle E of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (known as the Congressional 

Review Act), 5 U.S.C. 801–808, because 

it is likely to result in an annual effect 

on the economy of $100 million or 

more. In accordance with 5 U.S.C. 

801(a)(1), VA will submit to the 

28708 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

Comptroller General and to Congress a 

copy of this Regulation and the 

Regulatory Impact Analysis associated 

with the Regulation. 

List of Subjects in 38 CFR Part 36 

Condominiums, Housing, Individuals 

with disabilities, Loan programs— 

housing and community development, 

Loan programs—veterans, Manufactured 

homes, Mortgage insurance, Reporting 

and recordkeeping requirements, 

Veterans. 

Signing Authority 

Denis McDonough, Secretary of 

Veterans Affairs approved this 

document on April 8, 2021 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. 

Luvenia Potts 

Regulations Development Coordinator, Office 

of Regulation Policy & Management, Office 

of the Secretary, Department of Veterans 

Affairs. 

For the reasons stated in the 

preamble, the Department of Veterans 

Affairs amends 38 CFR part 36 as set 

forth below: 

PART 36—LOAN GUARANTY 

■ 1. The authority citation for part 36 

continues to read as follows: 

Authority: 38 U.S.C. 501 and 3720. 

■ 2. Amend § 36.4333 by revising 

paragraph (a)(2) and the two 

parenthetical sentences at the end of the 

section to read as follows: 

§ 36.4333 Maintenance of records. 

(a) * * * 

(2) The holder shall maintain records 

supporting their decision to approve 

any loss mitigation option. The holder 

shall maintain records supporting their 

decision to pursue a partial claim 

payment under the COVID–19 Veterans 

Assistance Partial Claim Payment 

program established under subpart F of 

this part. Such records shall be retained 

a minimum of 3 years from the date of 

any incentive paid in accordance with 

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

claim payment under the COVID–19 

Veterans Assistance Partial Claim 

Payment program, the date the veteran’s 

guaranteed loan is made current under 

such program, whichever is later, and 

shall include, but not be limited to, 

credit reports, verifications of income, 

employment, assets, liabilities, and 

other factors affecting the obligor’s 

credit worthiness, work sheets, and 

other documents supporting the 

holder’s decision. 

* * * * * 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–0515) 

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

■ 3. Add § 36.4336 to read as follows: 

§ 36.4336 Oversight of servicing. 

(a) Subject to notice and opportunity 

for a hearing, whenever the Secretary 

finds that any servicer has failed to 

maintain adequate loan accounting 

records, or to demonstrate proper ability 

to service loans adequately or to 

exercise proper credit judgment or has 

willfully or negligently engaged in 

practices otherwise detrimental to the 

interest of veterans or of the 

Government, the Secretary may refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

such servicer and may bar such servicer 

from servicing or acquiring guaranteed 

loans. 

(b) Notwithstanding paragraph (a) of 

this section, but subject to § 36.4328, the 

Secretary will not refuse to pay a 

guaranty or insurance claim on a 

guaranteed loan theretofore entered into 

in good faith between a veteran and 

such servicer. 

(c) The Secretary may also refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

a lender or holder suspended, debarred, 

denied, or otherwise restricted from 

participation in FHA’s insurance 

programs pursuant to a determination of 

the Secretary of Housing and Urban 

Development. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–0515) 

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

■ 4. Add subpart F, consisting of 

§§ 36.4800 through 36.4810, to read as 

follows: 

Subpart F—COVID–19 Recovery 

Measures 

Sec. 

36.4800 Applicability. 

36.4801 Definitions. 

36.4802 General purpose of the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

36.4803 General requirements of the 

COVID–19 Veterans Assistance Partial 

Claim Payment program. 

36.4804 Partial claim payment as a home 

retention option. 

36.4805 Terms of the partial claim 

payment. 

36.4806 Terms of the assistance to the 

veteran. 

36.4807 Application for partial claim 

payment. 

36.4808 No effect on the servicing of the 

guaranteed loan. 

36.4809 Expiration of the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

36.4810 Oversight of the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

§ 36.4800 Applicability. 

This subpart applies to all loans 

guaranteed by VA, to the extent such 

loans are affected by the COVID–19 

national emergency. 

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

§ 36.4801 Definitions. 

The following definitions of terms 

apply to this subpart: 

Alternative to foreclosure means an 

alternative to foreclosure for which the 

Secretary may pay an incentive under 

§ 36.4319. These alternatives include 

compromise sale (sometimes called a 

short sale) and deed-in-lieu of 

foreclosure. 

COVID–19 forbearance means any 

forbearance of scheduled monthly 

guaranteed loan payments, granted to a 

veteran under section 4022 of the 

Coronavirus Aid, Relief, and Economic 

Security Act (Public Law 116–136). It 

can also include any forbearance of 

scheduled monthly guaranteed loan 

payments, granted to a veteran for a 

financial hardship due, directly or 

indirectly, to the COVID–19 national 

emergency. 

COVID–19 indebtedness means the 

dollar amount the veteran is obligated to 

pay under the guaranteed loan terms, 

but that is not collected during a 

COVID–19 forbearance. 

Guaranteed loan means a loan 

guaranteed under chapter 37 of title 38, 

United States Code. 

Loss-mitigation option means a lossmitigation option for which the 

Secretary may pay an incentive under 

§ 36.4319. These options include a 

repayment plan, special forbearance, 

and loan modification. 

Secretary means the Secretary of 

Veterans Affairs, or any employee of the 

Department of Veterans Affairs (VA) 

authorized to act in the Secretary’s 

stead. 

Servicer means, for the purposes of 

this subpart, the holder, servicer, or 

servicing agent, as defined in § 36.4301. 

The terms can apply jointly or severally, 

or jointly and severally. 

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

Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 28709 

§ 36.4802 General purpose of the COVID– 

19 Veterans Assistance Partial Claim 

Payment program. 

The COVID–19 Veterans Assistance 

Partial Claim Payment program is a 

temporary program to help veterans 

who have suffered a COVID–19 

financial hardship. Notwithstanding the 

requirements elsewhere in this part 

regarding payment of a guaranty claim 

or refunding a loan, VA may assist a 

veteran exiting a COVID–19 forbearance 

by purchasing from the servicer the 

veteran’s COVID–19 indebtedness. Such 

a purchase is called a partial claim 

payment. In exchange for VA’s partial 

claim payment on behalf of the veteran, 

the veteran must agree to repay the 

Secretary, in the amount of such partial 

claim payment, upon loan terms 

established by the Secretary. 

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

§ 36.4803 General requirements of the 

COVID–19 Veterans Assistance Partial 

Claim Payment program. 

The following general requirements 

must be met before the Secretary will 

allow for participation in the COVID–19 

Veterans Assistance Partial Claim 

Payment program: 

(a) The loan for which a partial claim 

payment is requested must be a 

guaranteed loan that was either— 

(1) Current or less than 30 days past 

due on March 1, 2020; or 

(2) Made on or after March 1, 2020; 

(b) The veteran on whose behalf VA 

will pay a partial claim payment both 

received a COVID–19 forbearance and 

missed at least one scheduled monthly 

payment; 

(c) There remains unpaid at least one 

scheduled monthly payment that the 

veteran did not make while under a 

COVID–19 forbearance; 

(d) The veteran indicates that the 

veteran can resume making scheduled 

monthly payments, on time and in full, 

and that the veteran occupies, as the 

veteran’s residence, the property 

securing the guaranteed loan for which 

the partial claim payment is requested; 

and 

(e) The veteran executes, in a timely 

manner, all loan documents necessary 

to establish an obligation to repay the 

Secretary for the partial claim payment. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–XXXX) 

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

§ 36.4804 Partial claim payment as a home 

retention option. 

(a) The Veterans Assistance Partial 

Claim Payment program is designed to 

address the financial hardships due, 

directly or indirectly, to the COVID–19 

national emergency. A servicer may 

therefore use the partial claim payment 

option, even in cases where other home 

retention options are feasible, provided 

the partial claim payment option is in 

the veteran’s financial interest. 

(b) If the veteran notifies the servicer 

that the veteran does not want to retain 

ownership of the property securing the 

guaranteed loan, the servicer may 

immediately proceed to offering an 

alternative to foreclosure. 

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

§ 36.4805 Terms of the partial claim 

payment. 

(a) In order for a partial claim 

payment to be payable, the servicer 

must submit to the Secretary, not later 

than 120 days after the date the veteran 

exits the COVID–19 forbearance, a 

request for such payment, as prescribed 

in § 36.4807. 

(b) The amount of the partial claim 

payment that VA will pay to the 

servicer, as calculated under paragraph 

(e) of this section, shall not exceed 30 

percent of the unpaid principal balance 

of the guaranteed loan. For the purposes 

of this paragraph (b), the unpaid 

principal balance of the guaranteed loan 

means such balance as of the date the 

veteran entered into a COVID–19 

forbearance. 

(c) VA will pay only one partial claim 

payment per guaranteed loan. 

(d) VA will pay only one partial claim 

payment per veteran. 

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

partial claim payment per guaranteed 

loan, and only one partial claim 

payment per veteran, a servicer must, 

when calculating the amount of partial 

claim payment to be paid by VA to the 

servicer, include the full amount of 

indebtedness that is necessary to bring 

the guaranteed loan current. 

(2) To bring the guaranteed loan 

current, servicers must include the full 

COVID–19 indebtedness, comprising— 

(i) All scheduled but missed monthly 

payments of principal and interest; and 

(ii) As applicable, all scheduled but 

missed monthly escrow payments for 

real estate taxes and insurance 

premiums, or where the guaranteed loan 

documents do not provide for monthly 

escrowing, all payments the servicer 

made to real estate tax authorities and 

insurance providers, on the veteran’s 

behalf, during the COVID–19 

forbearance. 

(3) Also in bringing the guaranteed 

loan current, servicers must include— 

(i) All scheduled monthly payments 

(comprising principal, interest, and 

escrow payments for real estate taxes 

and insurance premiums) due within 31 

days of the date the servicer provides to 

the veteran the note and security 

instrument described in § 36.4806; 

(ii) If applicable, all scheduled 

monthly payments (comprising 

principal, interest, and escrow 

payments for real estate taxes and 

insurance premiums) that were missed 

on or after March 1, 2020, but before the 

veteran was granted the COVID–19 

forbearance; and 

(iii) The actual amount of recording 

fees, recording taxes, or other charges 

levied by the recording authority, that 

must be paid in order to record the 

security instrument described in 

§ 36.4806. 

(4) Except for amounts identified in 

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

servicers shall not include any amounts 

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

the amounts scheduled or calculated as 

if the veteran made all contractual 

payments on time and in full under the 

terms of the guaranteed loan. 

(5) Nothing in this section shall 

preclude a veteran from making an 

optional payment or a servicer from 

waiving a veteran’s indebtedness, such 

that the amount of partial claim 

payment would not exceed the 30 

percent cap described in paragraph (b) 

of this section. 

(6) If the servicer miscalculates the 

partial claim amount, resulting in an 

overpayment to the servicer, the amount 

of such overpayment shall constitute a 

liability of the servicer to the United 

States. The servicer must remit the 

overpaid amount immediately to VA. 

(7) If the servicer miscalculates the 

partial claim amount, resulting in 

underpayment (i.e., an amount 

insufficient to bring the guaranteed loan 

current), the servicer must waive the 

difference. 

(8) Servicers shall not include any 

amounts for a monthly payment that is 

scheduled to be paid on a date that is 

more than 31 days after the servicer 

provides to the veteran the note and 

security instrument described in 

§ 36.4806. 

(f) The servicer must prepare a note 

and security instrument in favor of the 

‘‘Secretary of Veterans Affairs, an 

Officer of the United States’’. The name 

of the incumbent Secretary should not 

be included unless State law requires 

naming a real person. 

(1) The note must be consistent with 

the terms described in § 36.4806 and 

include all borrowers who are obligated 

on the guaranteed loan; and 

(2) The security instrument must 

include all persons (borrowers, as well 

as non-borrowers) who hold a title 

interest in the property securing the 

guaranteed loan. 

28710 Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 

(g) Subject to paragraph (a) of this 

section, all loan documents must be 

fully executed not later than 90 days 

after the veteran exits the COVID–19 

forbearance. 

(h) The servicer must record the 

security instrument timely, as 

prescribed in § 36.4807. 

(i) The servicer must not charge, or 

allow to be charged, to the veteran any 

fee in connection with the COVID–19 

Veterans Assistance Partial Claim 

Payment program. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–XXXX) 

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

§ 36.4806 Terms of the assistance to the 

veteran. 

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

assistance (i.e., a partial claim payment 

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

the veteran, and all co-borrowers on the 

guaranteed loan, must execute a note 

and security instrument in favor of the 

‘‘Secretary of Veterans Affairs, an 

Officer of the United States’’. The name 

of the incumbent Secretary should not 

be included unless State law requires 

naming a real person. 

(b) Specific terms of the note and 

security instrument shall include the 

following: 

(1) The amount to be repaid to the 

Secretary, by the veteran, is the amount 

calculated under § 36.4805(e); 

(2) Repayment in full is required 

immediately upon— 

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

property; or 

(ii) The refinancing or payment in full 

otherwise of the guaranteed loan with 

which the partial claim payment is 

associated. 

(3) A veteran may make payments for 

the subordinate loan, in whole or in 

part, without charge or penalty. If the 

veteran makes a partial prepayment, 

there will be no changes in the due date 

unless VA agrees in writing to those 

changes. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–XXXX) 

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

§ 36.4807 Application for partial claim 

payment. 

(a) The servicer must provide VA with 

the original note required by § 36.4805. 

Not later than 180 days following the 

date the security instrument, required 

by § 36.4805, is fully executed, the 

servicer must provide VA with the 

original security instrument and 

evidence that the servicer recorded such 

instrument. If the recording authority 

causes a delay, the servicer may request 

an extension of time, in writing, from 

VA. 

(b) Servicers must report a partial 

claim event to VA through VA’s existing 

electronic loan servicing system within 

seven days of the date the veteran 

returns to the servicer the executed note 

required by § 36.4805, but not later than 

120 days after the date the veteran exits 

the COVID–19 forbearance. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

numbers 2900–0021 and 2900–XXXX) 

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

§ 36.4808 No effect on the servicing of the 

guaranteed loan. 

(a) Servicers must continue to service 

the guaranteed loan in accordance with 

subpart B of this part. 

(b) The liability of the United States 

for any guaranteed loan shall decrease 

or increase pro rata with any decrease 

or increase of the amount of the unpaid 

portion of the guaranteed loan. A partial 

claim payment does not affect the 

guaranty percentage established at the 

time the guaranteed loan was made. 

(c) Receipt of a partial claim payment 

shall not eliminate a servicer’s option 

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

Secretary the security for the guaranteed 

loan. 

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

§ 36.4809 Expiration of the COVID–19 

Veterans Assistance Partial Claim Payment 

program. 

(a) Subject to paragraph (b) of this 

section, the Secretary will not accept a 

request for a partial claim payment after 

the date that is 180 days after the date 

the COVID–19 national emergency ends 

under the National Emergencies Act, 50 

U.S.C.161. 

(b) If a veteran’s COVID–19 

forbearance does not end until after the 

date described in paragraph (a) of this 

section, the Secretary shall accept a 

request for a partial claim payment, 

provided that such request is submitted 

to the Secretary not later than 120 days 

after the date the veteran exits the 

COVID–19 forbearance. 

(c) Notwithstanding paragraphs (a) 

and (b) of this section, the Secretary will 

not accept a request for a partial claim 

payment after October 28, 2022. 

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

§ 36.4810 Oversight of the COVID–19 

Veterans Assistance Partial Claim Payment 

program. 

(a) Subject to notice and opportunity 

for a hearing, whenever the Secretary 

finds with respect to a partial claim 

payment that any servicer has failed to 

maintain adequate loan accounting 

records, or to demonstrate proper ability 

to service loans adequately or to 

exercise proper credit judgment or has 

willfully or negligently engaged in 

practices otherwise detrimental to the 

interest of veterans or of the 

Government, the Secretary may refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

such servicer and may bar such servicer 

from servicing or acquiring guaranteed 

loans. 

(b) Notwithstanding paragraph (a) of 

this section, but subject to § 36.4328, the 

Secretary will not refuse to pay a 

guaranty or insurance claim on a 

guaranteed loan theretofore entered into 

in good faith between a veteran and 

such servicer. 

(c) The Secretary may also refuse 

either temporarily or permanently to 

guarantee or insure any loans made by 

a lender or holder suspended, debarred, 

denied, or otherwise restricted from 

participation in FHA’s insurance 

programs pursuant to a determination of 

the Secretary of Housing and Urban 

Development. 

(The Office of Management and Budget has 

approved the information collection 

requirements in this section under control 

number 2900–0515) 

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

[FR Doc. 2021–11373 Filed 5–27–21; 8:45 am] 

BILLING CODE 8320–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Parts 51 and 52 

[EPA–R08–OAR–2021–0267; FRL–10024– 

01–Region 8] 

Clean Air Act New Source Review 

Operating Permit Program; Notice of 

Transfer of Permits to Wyoming 

Department of Environmental Quality 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Direct final rule. 

SUMMARY: The EPA is granting Wyoming 

Department of Environmental Quality’s 

(WDEQ) August 21, 2020 request to 

transfer to the State administrative 

authority over two existing federal 

permits that were issued by the EPA on 

June 26, 1973 under the federal new 

source review (NSR) permitting 

program. In addition, the EPA is 

agreeing with WDEQ’s analysis in its 

August 21, 2020 letter demonstrating 

that the current Wyoming regulations 

still meet the requirements of the federal