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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations
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 COVID19
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 VAs 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 FHAs COVID19 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 RESPAs 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 veterans behalf during the COVID19
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 21 See
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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 VAs 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 COVIDVAPCP. 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 veterans 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 veterans 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.

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 commenters 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 VAs 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 36.4807c that servicers report a partial claim event to VA through VAs existing electronic loan servicing system within seven days of the borrowers 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 COVID19 forbearance.

H. Inclusion of Payments Due Within 31
Days 38 CFR 36.4805e One commenter recommended that VA remove the requirement in proposed 38 CFR 36.4805e 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 FHAs partial claim program. The commenter noted that servicers have
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
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