Proposed Rule2022-22414
Loan Guaranty: Loss-Mitigation Options for Guaranteed Loans
Primary source
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Published
October 17, 2022
Issuing agencies
Veterans Affairs Department
Abstract
The Department of Veterans Affairs (VA) Loan Guaranty Service (LGY) is requesting public comment on expanding VA's incentivized loss- mitigation options available to servicers that assist veterans whose VA-guaranteed loans are in default. Although VA identifies, below, specific topics and questions for discussion, it encourages commenters to discuss any other topic that will help VA as it explores whether to expand the incentivized loss-mitigation options outlined in VA regulation.
Full Text
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<title>Federal Register, Volume 87 Issue 199 (Monday, October 17, 2022)</title>
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[Federal Register Volume 87, Number 199 (Monday, October 17, 2022)]
[Proposed Rules]
[Pages 62752-62753]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-22414]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 36
[2900-AR78]
Loan Guaranty: Loss-Mitigation Options for Guaranteed Loans
AGENCY: Department of Veterans Affairs.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Department of Veterans Affairs (VA) Loan Guaranty Service
(LGY) is requesting public comment on expanding VA's incentivized loss-
mitigation options available to servicers that assist veterans whose
VA-guaranteed loans are in default. Although VA identifies, below,
specific topics and questions for discussion, it encourages commenters
to discuss any other topic that will help VA as it explores whether to
expand the incentivized loss-mitigation options outlined in VA
regulation.
DATES: Comments must be received on or before January 17, 2023.
ADDRESSES: Comments must be submitted through <a href="http://www.regulations.gov">www.regulations.gov</a>.
Except as provided below, comments received before the close of the
comment period will be available at <a href="http://www.regulations.gov">www.regulations.gov</a> for public
viewing, inspection, or copying, including any personally identifiable
or confidential business information that is included in a comment. We
post the comments received before the close of the comment period on
the following website as soon as possible after they have been
received: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. VA will not post on
<a href="http://Regulations.gov">Regulations.gov</a> public comments that make threats to individuals or
institutions or suggest that the commenter will take actions to harm
the individual. VA encourages individuals not to submit duplicative
comments. We will post acceptable comments from multiple unique
commenters even if the content is identical or nearly identical to
other comments. Any public comment received after the comment period's
closing date is considered late and will not be considered in any
future proposed rulemaking or otherwise addressed by VA.
FOR FURTHER INFORMATION CONTACT: Andrew Trevayne, Assistant Director
for Loan and Property Management, and Stephanie Li, Chief of
Regulations, Loan Guaranty Service (26), Veterans Benefits
Administration, Department of Veterans Affairs, 810 Vermont Avenue NW,
Washington, DC 20420, 202-632-8862. (This is not a toll-free telephone
number.)
SUPPLEMENTARY INFORMATION: VA provides financial incentives to loan
servicers for helping veterans avoid the foreclosure of their VA-backed
loans. 38 CFR 36.4319. As VA continues to consider how best to serve
veterans, VA is requesting public comment on whether expanding VA's
incentivized loss-mitigation tools for servicers might help veterans
retain their homes. VA is also requesting specific comments on the
recent use of VA's loan refunding authority and loan deferment as
temporary home retention options to assist certain veteran borrowers.
In response to the COVID-19 pandemic, VA developed new, temporary
home retention options to assist veterans with VA-guaranteed loans who
were financially affected, either directly or indirectly, by the COVID-
19 National Emergency. Use of these new options, including loan
deferment,\1\ the Veterans Assistance Partial Claim Payment program
(VAPCP),\2\ and the COVID-19 Refund Modification,\3\ is limited to
certain guaranteed loans (i.e., those in which a veteran has
outstanding payments associated with a COVID-19 forbearance). A common
thread across these three temporary home retention options is the
veteran's ability to defer missed mortgage payments until the first of
the following occurs: (i) the maturity date of the VA-guaranteed loan,
(ii) the date of transfer of the property, or (iii) the date the
guaranteed loan is refinanced or otherwise paid in full. The major
difference is that VA does not act as a mortgage investor of last
resort for the loan deferment option but does for the VAPCP and the
COVID-19 Refund Modification. While VA has seen significant use of both
the VAPCP and the COVID-19 Refund Modification, fewer servicers have
opted for loan deferment.
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\1\ VA Circular 26-21-19, Loan Deferment as a COVID-19 Home
Retention Option (Sept. 29, 2021, expiring July 1, 2023 unless
otherwise renewed), <a href="https://www.benefits.va.gov/HOMELOANS/resources_circulars.asp">https://www.benefits.va.gov/HOMELOANS/resources_circulars.asp</a>.
\2\ 38 CFR 36.4800 et seq. (sunset date October 28, 2022).
\3\ VA Circular 26-21-13, COVID-19 Home Retention Waterfall and
COVID-19 Refund Modification (July 23, 2021, expiring July 1, 2023
unless otherwise renewed), <a href="https://www.benefits.va.gov/HOMELOANS/resources_circulars.asp">https://www.benefits.va.gov/HOMELOANS/resources_circulars.asp</a>.
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As VA explores changes to its incentivized loss-mitigation options,
VA is interested in understanding whether loan deferment would be a
viable incentivized loss-mitigation option. VA is also interested in
how changes to the VAPCP or COVID-19 Refund Modification programs might
affect veterans, servicers, and taxpayers. In sum, VA is requesting
public comment on whether expanding VA's incentivized loss-mitigation
tools, outlined at 38 CFR 36.4319, might further assist veterans who
have VA-backed loans to retain their homes, and is including the
following specific questions:
Questions Related to Flexibility/Adaptability of VA's Incentivized
Loss-Mitigation Options
1. Are VA's incentivized loss-mitigation options, outlined at 38
CFR 36.4319, flexible and adaptable, particularly for those
transitional times when the market is in flux (e.g., rising interest
rate environments, recession, etc.)? Please, where possible, provide
data and evidence in support of your response. What could VA do to
increase the flexibility and adaptability of section 36.4319's
incentivized loss-mitigation options?
Questions Related To Evaluating VA Loss-Mitigation Options
2. Should VA have a prescribed order of loss-mitigation options
that servicers must follow, or would stakeholders like to see VA's
regulation continue to provide VA's preferred order of consideration
(i.e., a hierarchy for review)? If VA were to incentivize options such
as loan deferment and/or a partial loan refunding option (e.g., VAPCP
or COVID-19 Refund), where should these options rank among other
options, and should they be either prescribed or preferred?
3. During the COVID-19 pandemic, veterans were given more
opportunity to
[[Page 62753]]
select the home retention option that they thought would be best for
them. Under what circumstances, if any, should veterans retain
opportunities to select from VA loss-mitigation options? How would
giving veterans the ability to select from VA loss-mitigation options
impact servicers? If VA were to switch to a prescribed order of loss-
mitigation options that servicers must follow, what limitations, if
any, should be placed on veterans' ability to select from them?
4. During the COVID-19 pandemic, certain loss-mitigation options
were offered without the requirement of collecting financial
information. Moving beyond the pandemic, under what circumstances
should VA require servicers to collect financial information before a
loss-mitigation option is selected? Under what circumstances might a
trial payment plan serve as a substitute for the collection of
financial information?
Questions Related to Loan Deferment, VAPCP, and COVID-19 Refund
Modifications
5. How should VA develop a loan deferment option that would assist
veterans without placing undue burden on servicers? For example, if VA
were to incentivize a hybrid loan deferment/repayment plan in which
servicers would defer the missed principal and interest and establish a
loan repayment plan for missed taxes and insurance, would that address
potential concerns related to short-term lost income from deferring
missed mortgage payments? For veterans, what consumer protection
concerns should VA be aware of in considering a loan deferment loss-
mitigation option?
6. In what way(s), if any, should VA use the VAPCP and/or COVID-19
Refund Modification after the COVID-19 national emergency? VA is
particularly interested in data and evidence showing whether the VAPCP
and/or COVID-19 Refund Modification programs have assisted veterans,
servicers, and taxpayers.
7. What challenges would exist for veterans, servicers, holders,
and VA, if VA were to develop a loss-mitigation option similar to the
VAPCP, but with a requirement for repayment at a low interest rate
(rather than the zero percent interest rate under the VAPCP)? What
hurdles might servicers face in executing such loan documents on behalf
of VA? What if VA required servicers to service such loans on VA's
behalf?
8. Would a low-interest second loan option similar to the VAPCP be
more helpful to veterans and/or servicers than a loan deferment loss-
mitigation option, and what data and evidence exist to support your
response? What sort of financial evaluation would be appropriate to
determine whether a low-interest second loan would be an appropriate
loss-mitigation option for a veteran, as opposed to VA's existing loss-
mitigation options at 38 CFR 36.4319?
9. What, if any, limitations should VA place on a deferment-style
loss-mitigation option, including minimum/maximum deferment amounts,
lifetime uses, etc.?
Questions Related to Incentive Payments
10. What kind of incentive payment might be appropriate to make
loan deferment a more viable option for servicers and VA? What kind of
incentive payment might be appropriate for a loss-mitigation option
similar to the VAPCP or COVID-19 Refund Modification?
11. How could VA structure an incentive payment that does not
encourage servicers to use one of these loss-mitigation options if more
financially feasible options are available to assist the veteran?
Questions Related to Investor Requirements
12. What, if any, Government National Mortgage Association (Ginnie
Mae) specific investor requirements should VA consider when evaluating
changes to VA loss-mitigation options, including the introduction of a
deferment-style loss-mitigation option?
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
costs and benefits of available regulatory alternatives and, when
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, and other advantages; distributive impacts;
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The Office of Information and Regulatory Affairs has determined that
this rule is a significant regulatory action under Executive Order
12866. The Regulatory Impact Analysis associated with this rulemaking
can be found as a supporting document at <a href="http://www.regulations.gov">www.regulations.gov</a>.
Signing Authority
Denis McDonough, Secretary of Veterans Affairs, approved this
document on October 11, 2022, and authorized the undersigned to sign
and submit the document to the Office of the Federal Register for
publication electronically as an official document of the Department of
Veterans Affairs.
Jeffrey M. Martin,
Assistant Director, Office of Regulation Policy & Management, Office of
General Counsel, Department of Veterans Affairs.
[FR Doc. 2022-22414 Filed 10-14-22; 8:45 am]
BILLING CODE 8320-01-P
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