82_FR_17862 82 FR 17792 - Loan Guaranty: Revisions to Allowable Charges and Fees Assessed Incident to VA-Guaranteed Home Loans

82 FR 17792 - Loan Guaranty: Revisions to Allowable Charges and Fees Assessed Incident to VA-Guaranteed Home Loans

DEPARTMENT OF VETERANS AFFAIRS

Federal Register Volume 82, Issue 70 (April 13, 2017)

Page Range17792-17793
FR Document2017-07492

The Department of Veterans Affairs (VA) Loan Guaranty Service (LGY) is currently reviewing its regulations governing the allowable expenses that a veteran may pay or be charged in connection with obtaining a VA-guaranteed home loan. By issuing this advanced notice of proposed rulemaking, LGY seeks comments on how the public believes VA should approach this undertaking. Although LGY identifies specific issues for discussion below, it encourages commenters to discuss any issue related to improving these specific regulations.

Federal Register, Volume 82 Issue 70 (Thursday, April 13, 2017) 
[Federal Register Volume 82, Number 70 (Thursday, April 13, 2017)]
[Proposed Rules]
[Pages 17792-17793]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-07492]



[[Page 17792]]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 36

RIN 2900-AP62


Loan Guaranty: Revisions to Allowable Charges and Fees Assessed 
Incident to VA-Guaranteed Home Loans

AGENCY: Department of Veterans Affairs.

ACTION: Advanced notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Department of Veterans Affairs (VA) Loan Guaranty Service 
(LGY) is currently reviewing its regulations governing the allowable 
expenses that a veteran may pay or be charged in connection with 
obtaining a VA-guaranteed home loan. By issuing this advanced notice of 
proposed rulemaking, LGY seeks comments on how the public believes VA 
should approach this undertaking. Although LGY identifies specific 
issues for discussion below, it encourages commenters to discuss any 
issue related to improving these specific regulations.

DATES: Comments must be received on or before June 12, 2017.

ADDRESSES: Written comments may be submitted through 
www.regulations.gov; by mail or hand-delivery to Director, Regulation 
Policy and Management (00REG), Department of Veterans Affairs, 810 
Vermont Avenue NW., Room 1068, Washington, DC 20420; or by fax to (202) 
273-9026. Comments should indicate that they are submitted in response 
to ``RIN 2900-AP62--Loan Guaranty: Revisions to Allowable Charges and 
Fees Assessed Incident to VA-Guaranteed Home Loans.'' Copies of 
comments received will be available for public inspection in the Office 
of Regulation Policy and Management, Room 1068, between the hours of 
8:00 a.m. and 4:30 p.m., Monday through Friday (except holidays). 
Please call (202) 461-4902 for an appointment. (This is not a toll-free 
number.) In addition, during the comment period, comments may be viewed 
online through the Federal Docket Management System (FDMS) at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: John Bell, III, Assistant Director for 
Loan Policy and Valuation, Loan Guaranty Service (262), Veterans 
Benefits Administration, Department of Veterans Affairs, 810 Vermont 
Avenue NW., Washington, DC 20420, (202) 632-8786. (This is not a toll-
free number.)

SUPPLEMENTARY INFORMATION:

I. Background

    VA has promulgated a list of permissible charges and fees a 
borrower may be charged or may pay incident to obtaining a VA-
guaranteed home loan. See 38 CFR 36.4313. In 1948, VA published its 
rule regulating charges and fees which was codified at the former 38 
CFR 36.4312. See 13 FR 7275, Nov. 27, 1948. That rule set forth the 
costs and expenses that loan proceeds could be used to pay, but was 
silent on whether a veteran might be allowed to pay such costs and 
expenses out of his or her own cash reserves. Id. Under the rule, 
borrowers could use proceeds from the loan to pay any cost or expense 
normally paid under local lending customs, except for certain brokerage 
and service charges. Id.
    In 1954, VA substantially altered the rule's regulatory scheme. 
Instead of permitting lenders to charge costs and expenses normally 
paid under local lending customs, VA restricted the types of charges 
and fees veterans were allowed to pay by expressly enumerating the 
types allowed. See 19 FR 6717, Oct. 19, 1954. VA instituted this rule 
amendment in order to protect veterans from what are commonly known as 
``junk fees''.
    The current charges and fees rule, now codified at 38 CFR 36.4313, 
is substantially similar to the 1954 version. While VA has amended the 
rule to modify the types of permissible charges and fees in the 
intervening years, the rule still retains the express enumeration 
scheme established by the 1954 version. In other words, the current 
rule protects veterans from having to satisfy any charge or fee not 
expressly allowed by the schedule codified at 38 CFR 36.4313(d). The 
rule, however, does allow a lender to charge a veteran, and for the 
veteran to pay, an origination fee of up to 1 percent of the loan 
amount, provided that the 1 percent fee be charged in lieu of all other 
fees permitted by the schedule. See 38 CFR 36.4313(d)(2). Compared with 
a conventional housing loan transaction, the fees the rule permits to 
be charged to veterans are relatively limited. Consequently, in 
transacting a sale with a VA-guaranteed loan borrower, sellers and 
lenders must bear many of the customary real estate transaction 
expenses.
    Since implementation, the rule has protected many veterans from 
having to incur unreasonable closing costs. However, the home buying 
process has changed significantly since VA last implemented substantive 
changes to the permissible fee schedule. In recent years, some veterans 
and their representatives have complained to VA that certain provisions 
of the rule can be detrimental to veterans' bargaining position during 
real estate negotiations. These parties have asserted that VA-
guaranteed loan borrowers are sometimes unable to compete with other 
offerors whose financing options are not restricted by similar 
regulatory constraints. VA recognizes that these constraints can 
contribute to sellers' decisions to accept other offers or lead lenders 
to charge higher interest rates to offset losses.
    VA will continue to safeguard the best interests of veteran 
homebuyers by protecting them from excessive and unreasonable closing 
costs. However, VA recognizes that an overly restrictive list of 
permissible charges and fees might, in certain circumstances, motivate 
market participants to avoid financing or selling homes to veterans.

II. Questions for Comment

    In order to strike the appropriate balance between making it easier 
for veterans to utilize their home loan benefits and protecting them 
from unreasonable charges and fees, VA is considering ways to revise 
the list of acceptable charges and fees specified by the schedule 
codified at 38 CFR 36.4313(d). VA invites responses to the following 
questions:
    1. What are ways that VA can protect veterans from incurring 
excessive closing costs, without being overly restrictive?
    2. Under the current rule, VA distinguishes between a ``fee'' and a 
``charge'' but does not define the terms. VA invites comments as to 
whether the public finds the distinction meaningful. Should VA 
eliminate the distinction? If not, how should VA define the terms?
    3. Does the term ``origination fee'' accurately reflect what a 
borrower would pay to a lender in order to originate a loan? What do 
veterans and lenders view as the purpose of an origination fee?
    4. How should VA identify which closing costs are acceptable for 
the veteran to pay, which are acceptable for another party but not a 
veteran to pay, and which, if any, should be prohibited?
    5. To what extent, if at all, should VA limit third-party charges 
or fees to the actual costs of the service provided? Alternatively, 
should VA permit borrowers, sellers, and lenders to negotiate their own 
bargains?

[[Page 17793]]

    6. To what extent, if at all, should local real estate customs 
affect (i) the types and amounts of closing costs that VA allows and 
(ii) which party is responsible for paying such costs?
    7. In a non-VA-guaranteed loan transaction, how are attorneys' fees 
usually paid when the attorney is not representing the veteran? Should 
VA allow a borrower to pay an attorney fee if the attorney does not 
have a fiduciary duty to the borrower?
    8. Should VA allow lenders to charge veterans differently depending 
upon the type of transaction (e.g., purchase, cash-out refinance, 
streamlined refinance, etc.)? If so, what are the justifications for 
the different pricing?
    9. What other lending programs, whether public or private, might VA 
consider as models in considering amendments to VA's charges and fees 
rule? What characteristics make these programs useful analogs to the 
VA-guaranteed loan program?
    10. What other information should VA consider in determining the 
types of expenses a veteran should be expected to pay to close a VA-
guaranteed loan?
    11. What charges or fees should VA allow veterans to pay in order 
to close a construction or rehabilitation/renovation loan?

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Gina S. 
Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, 
approved this document on March 17, 2017, for publication.

    Dated: March 17, 2017.
Jeffrey Martin,
Office Program Manager, Office of Regulation Policy & Management, 
Office of the Secretary, Department of Veterans Affairs.
[FR Doc. 2017-07492 Filed 4-12-17; 8:45 am]
BILLING CODE 8320-01-P

17792 Federal Register / Vol. 82, No. 70 / Thursday, April 13, 2017 / Proposed Rules DEPARTMENT OF VETERANS I. Background years, some veterans and their AFFAIRS VA has promulgated a list of representatives have complained to VA permissible charges and fees a borrower that certain provisions of the rule can be 38 CFR Part 36 detrimental to veterans’ bargaining may be charged or may pay incident to obtaining a VA-guaranteed home loan. position during real estate negotiations. RIN 2900–AP62 See 38 CFR 36.4313. In 1948, VA These parties have asserted that VA- published its rule regulating charges guaranteed loan borrowers are Loan Guaranty: Revisions to Allowable and fees which was codified at the sometimes unable to compete with other Charges and Fees Assessed Incident former 38 CFR 36.4312. See 13 FR 7275, offerors whose financing options are not to VA-Guaranteed Home Loans Nov. 27, 1948. That rule set forth the restricted by similar regulatory costs and expenses that loan proceeds constraints. VA recognizes that these AGENCY: Department of Veterans Affairs. constraints can contribute to sellers’ could be used to pay, but was silent on ACTION:Advanced notice of proposed whether a veteran might be allowed to decisions to accept other offers or lead rulemaking. pay such costs and expenses out of his lenders to charge higher interest rates to or her own cash reserves. Id. Under the offset losses. SUMMARY: The Department of Veterans rule, borrowers could use proceeds from VA will continue to safeguard the best Affairs (VA) Loan Guaranty Service the loan to pay any cost or expense (LGY) is currently reviewing its interests of veteran homebuyers by normally paid under local lending protecting them from excessive and regulations governing the allowable customs, except for certain brokerage expenses that a veteran may pay or be unreasonable closing costs. However, and service charges. Id. VA recognizes that an overly restrictive charged in connection with obtaining a In 1954, VA substantially altered the VA-guaranteed home loan. By issuing list of permissible charges and fees rule’s regulatory scheme. Instead of might, in certain circumstances, this advanced notice of proposed permitting lenders to charge costs and rulemaking, LGY seeks comments on motivate market participants to avoid expenses normally paid under local financing or selling homes to veterans. how the public believes VA should lending customs, VA restricted the types approach this undertaking. Although of charges and fees veterans were II. Questions for Comment LGY identifies specific issues for allowed to pay by expressly discussion below, it encourages enumerating the types allowed. See 19 In order to strike the appropriate commenters to discuss any issue related FR 6717, Oct. 19, 1954. VA instituted balance between making it easier for to improving these specific regulations. this rule amendment in order to protect veterans to utilize their home loan DATES: Comments must be received on veterans from what are commonly benefits and protecting them from or before June 12, 2017. known as ‘‘junk fees’’. unreasonable charges and fees, VA is The current charges and fees rule, considering ways to revise the list of ADDRESSES: Written comments may be now codified at 38 CFR 36.4313, is acceptable charges and fees specified by submitted through www.regulations.gov; substantially similar to the 1954 the schedule codified at 38 CFR by mail or hand-delivery to Director, version. While VA has amended the rule 36.4313(d). VA invites responses to the Regulation Policy and Management to modify the types of permissible following questions: (00REG), Department of Veterans Affairs, 810 Vermont Avenue NW., charges and fees in the intervening 1. What are ways that VA can protect Room 1068, Washington, DC 20420; or years, the rule still retains the express veterans from incurring excessive by fax to (202) 273–9026. Comments enumeration scheme established by the closing costs, without being overly should indicate that they are submitted 1954 version. In other words, the restrictive? in response to ‘‘RIN 2900–AP62—Loan current rule protects veterans from having to satisfy any charge or fee not 2. Under the current rule, VA Guaranty: Revisions to Allowable distinguishes between a ‘‘fee’’ and a Charges and Fees Assessed Incident to expressly allowed by the schedule codified at 38 CFR 36.4313(d). The rule, ‘‘charge’’ but does not define the terms. VA-Guaranteed Home Loans.’’ Copies of VA invites comments as to whether the comments received will be available for however, does allow a lender to charge a veteran, and for the veteran to pay, an public finds the distinction meaningful. public inspection in the Office of Should VA eliminate the distinction? If Regulation Policy and Management, origination fee of up to 1 percent of the loan amount, provided that the 1 not, how should VA define the terms? Room 1068, between the hours of 8:00 a.m. and 4:30 p.m., Monday through percent fee be charged in lieu of all 3. Does the term ‘‘origination fee’’ Friday (except holidays). Please call other fees permitted by the schedule. accurately reflect what a borrower (202) 461–4902 for an appointment. See 38 CFR 36.4313(d)(2). Compared would pay to a lender in order to (This is not a toll-free number.) In with a conventional housing loan originate a loan? What do veterans and addition, during the comment period, transaction, the fees the rule permits to lenders view as the purpose of an comments may be viewed online be charged to veterans are relatively origination fee? through the Federal Docket Management limited. Consequently, in transacting a 4. How should VA identify which System (FDMS) at www.regulations.gov. sale with a VA-guaranteed loan borrower, sellers and lenders must bear closing costs are acceptable for the FOR FURTHER INFORMATION CONTACT: John many of the customary real estate veteran to pay, which are acceptable for Bell, III, Assistant Director for Loan another party but not a veteran to pay, nlaroche on DSK30NT082PROD with PROPOSALS transaction expenses. Policy and Valuation, Loan Guaranty and which, if any, should be prohibited? Since implementation, the rule has Service (262), Veterans Benefits protected many veterans from having to 5. To what extent, if at all, should VA Administration, Department of Veterans incur unreasonable closing costs. limit third-party charges or fees to the Affairs, 810 Vermont Avenue NW., However, the home buying process has actual costs of the service provided? Washington, DC 20420, (202) 632–8786. changed significantly since VA last Alternatively, should VA permit (This is not a toll-free number.) implemented substantive changes to the borrowers, sellers, and lenders to SUPPLEMENTARY INFORMATION: permissible fee schedule. In recent negotiate their own bargains? VerDate Sep<11>2014 17:28 Apr 12, 2017 Jkt 241001 PO 00000 Frm 00025 Fmt 4702 Sfmt 4702 E:\FR\FM\13APP1.SGM 13APP1

Federal Register / Vol. 82, No. 70 / Thursday, April 13, 2017 / Proposed Rules 17793 6. To what extent, if at all, should ACTION: Request for comment. (i) Eliminate jobs, or inhibit job local real estate customs affect (i) the creation; types and amounts of closing costs that SUMMARY: In accordance with Executive Order 13777, ‘‘Enforcing the Regulatory (ii) are outdated, unnecessary, or VA allows and (ii) which party is ineffective; responsible for paying such costs? Reform Agenda,’’ EPA is seeking input 7. In a non-VA-guaranteed loan on regulations that may be appropriate (iii) impose costs that exceed benefits; transaction, how are attorneys’ fees for repeal, replacement, or modification. (iv) create a serious inconsistency or usually paid when the attorney is not DATES: Comments must be received on otherwise interfere with regulatory representing the veteran? Should VA or before May 15, 2017. reform initiatives and policies; allow a borrower to pay an attorney fee ADDRESSES: Submit your comments, if the attorney does not have a fiduciary identified by Docket ID No. EPA–HQ– (v) are inconsistent with the duty to the borrower? OA–2017–0190 at http:// requirements of section 515 of the 8. Should VA allow lenders to charge www.regulations.gov. Follow the online Treasury and General Government veterans differently depending upon the instructions for submitting comments. Appropriates Act, 2001 (44 U.S.C. 3516 type of transaction (e.g., purchase, cash- Once submitted, comments cannot be note), or the guidance issued pursuant out refinance, streamlined refinance, edited or removed from Regulations.gov. to that provision in particular those etc.)? If so, what are the justifications for The EPA may publish any comment regulations that rely in whole or in part the different pricing? received to its public docket. Do not on data, information, or methods that 9. What other lending programs, submit electronically any information are not publicly available or that are whether public or private, might VA you consider to be Confidential insufficiently transparent to meet the consider as models in considering Business Information (CBI) or other standard of reproducibility; or amendments to VA’s charges and fees information whose disclosure is (vi) derive from or implement rule? What characteristics make these restricted by statute. Multimedia Executive Orders or other Presidential programs useful analogs to the VA- submissions (audio, video, etc.) must be directives that have been subsequently guaranteed loan program? accompanied by a written comment. rescinded or substantially modified.’’ 10. What other information should The written comment is considered the VA consider in determining the types of official comment and should include Section 3(e) of the E.O. calls on the expenses a veteran should be expected discussion of all points you wish to Task Force to ‘‘seek input and other to pay to close a VA-guaranteed loan? make. The EPA will generally not assistance, as permitted by law, from 11. What charges or fees should VA consider comments or comment entities significantly affected by Federal allow veterans to pay in order to close contents located outside of the primary regulations, including State, local, and a construction or rehabilitation/ submission (i.e. on the web, cloud, or tribal governments, small businesses, renovation loan? other file sharing system). For consumers, non-governmental Signing Authority additional submission methods, the full organizations, and trade associations’’ EPA public comment policy, on regulations that meet some or all of The Secretary of Veterans Affairs, or the criteria above. Through this notice, information about CBI or multimedia designee, approved this document and EPA is soliciting such input from the submissions, and general guidance on authorized the undersigned to sign and public to inform its Task Force’s making effective comments, please visit submit the document to the Office of the http://www2.epa.gov/dockets/ evaluation of existing regulations. EPA Federal Register for publication commenting-epa-dockets. requests that commenters be as specific electronically as an official document of FOR FURTHER INFORMATION CONTACT: For as possible, include any supporting data the Department of Veterans Affairs. Gina S. Farrisee, Deputy Chief of Staff, further information on this document, or other information such as cost Department of Veterans Affairs, please contact Sarah Rees, Director, information, provide a Federal Register approved this document on March 17, Office of Regulatory Policy and (FR) or Code of Federal Regulations 2017, for publication. Management, Office of Policy, 1200 (CFR) citation when referencing a Pennsylvania Avenue NW., Mail Code specific regulation, and provide specific Dated: March 17, 2017. 1803A, Washington, DC 20460, Phone: suggestions regarding repeal, Jeffrey Martin, (202) 564–1986; Laws-Regs@epa.gov. replacement or modification. Although Office Program Manager, Office of Regulation the agency will not respond to SUPPLEMENTARY INFORMATION: On Policy & Management, Office of the Secretary, February 24, 2017, President Trump individual comments, the EPA values Department of Veterans Affairs. signed Executive Order 13777, public feedback and will give careful [FR Doc. 2017–07492 Filed 4–12–17; 8:45 am] ‘‘Enforcing the Regulatory Reform consideration to all input that it BILLING CODE 8320–01–P Agenda,’’ which established a federal receives. EPA will also be conducting policy ‘‘to alleviate unnecessary outreach on this same topic. Information regulatory burdens’’ on the American about opportunities for engagement ENVIRONMENTAL PROTECTION people. Section 3(a) of the EO directs with the agency will be available on AGENCY federal agencies to establish a https://www.epa.gov/laws-regulations/ 40 CFR Chapters I, IV, V, VI, and VII Regulatory Reform Task Force (Task regulatory-reform. Force). One of the duties of the Task Dated: April 10, 2017. [EPA–HQ–OA–2017–0190; FRL–9961–60– Force is to evaluate existing regulations OP] Samantha K. Dravis, nlaroche on DSK30NT082PROD with PROPOSALS and ‘‘make recommendations to the agency head regarding their repeal, Regulatory Reform Officer and Associate Evaluation of Existing Regulations Administrator, Office of Policy. replacement, or modification.’’ The EO AGENCY: Environmental Protection further asks that each Task Force [FR Doc. 2017–07500 Filed 4–12–17; 8:45 am] Agency (EPA). ‘‘attempt to identify regulations that: BILLING CODE 6560–50–P VerDate Sep<11>2014 14:43 Apr 12, 2017 Jkt 241001 PO 00000 Frm 00026 Fmt 4702 Sfmt 9990 E:\FR\FM\13APP1.SGM 13APP1


Document Created: 2017-04-13 01:09:03
Document Modified: 2017-04-13 01:09:03
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionProposed Rules
ActionAdvanced notice of proposed rulemaking.
DatesComments must be received on or before June 12, 2017.
ContactJohn Bell, III, Assistant Director for Loan Policy and Valuation, Loan Guaranty Service (262), Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue NW., Washington, DC 20420, (202) 632-8786. (This is not a toll- free number.)
FR Citation82 FR 17792 
RIN Number2900-AP62
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR