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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations
DEPARTMENT OF VETERANS
AFFAIRS
38 CFR Part 36
RIN 2900AR05

Loan Guaranty: COVID19 Veterans Assistance Partial Claim Payment Program Department of Veterans Affairs Final rule
AGENCY:
ACTION:

The Department of Veterans Affairs VA is establishing through this final rule the COVID19 Veterans Assistance Partial Claim Payment program COVIDVAPCP, 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 COVID19 national emergency.
DATES: This rule is effective July 27, 2021.
SUMMARY:

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 6328862.
This is not a toll-free telephone number.
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 VAs 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 Administrations FHAs COVID19 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 COVIDVAPCP more SUPPLEMENTARY INFORMATION:

1 See 85 FR 79142 Dec. 9, 2020; Public Law 116
136 Mar. 27, 2020.

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similar to FHAs COVID19 Standalone Partial Claim program.
In response to these comments, VA
has made several revisions to the COVIDVAPCP in this final rule. Those changes, along with VAs responses to the public comments including VAs 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 COVIDVAPCP is a temporary program that establishes a partial claim option to aid veterans with VA-guaranteed loans who suffer financial hardship due to the COVID19 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 Developments HUD FHA and the U.S. Department of Agricultures USDA Rural Housing Service. VAs final rule aligns even more closely with both FHAs and USDAs 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 COVID19
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 COVIDVAPCP 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 veterans financial interest.
As the COVID19 national emergency and the CARES Act pass their one-year anniversaries, VA stakeholders continue to confront decisions that have farreaching consequences. The COVID19
pandemic is still causing severe illness, death, and disruption in the economy on a significant scale. These effects have
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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 COVID19 national emergency enters its second year.
VAs 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. VAs COVIDVAPCP 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 nationaland 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
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