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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations 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 veterans 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 VAs oversight and audit activities as part of VAs regular monitoring related to adequacy of loan servicing. If VA determines, during an audit, that a servicer did not follow VAs requirements when participating in the COVIDVAPCP, 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 VAs 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 veterans financial interest. As with proposed 36.4810, it includes an almost verbatim restatement of 38
U.S.C. 3704d. 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
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loans made by a lender or holder suspended, debarred, denied, or otherwise restricted from participation in FHAs insurance programs pursuant to a determination of the Secretary of Housing and Urban Development.
VA is also amending 38 CFR
36.4333a2 to ensure that records referenced in proposed 36.4336 and 36.4810 are included in VAs 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 36.4319a. 40 VA is deleting the phrase for which an incentive is paid in accordance with 36.4319a. To ensure that VAs 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 COVID19 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 36.4319a or the date the veterans guaranteed loan is made current via the COVIDVAPCP, whichever is later.
Finally, VA is amending the specific authority for 36.4333 to include 38
U.S.C. 3704d, 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 COVID19 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 VAs 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 40 38

CFR 36.4333a2.
5 U.S.C. 553bB.

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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 VAs 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 FHAs 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 COVIDVAPCP via Circular, indicating that the rulemaking process was too slow to bring needed relief to veterans.
42 See
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5 U.S.C. 801a3A.
U.S.C. 801a3A; see also 5 U.S.C. 808.

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