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Federal Register / Vol. 86, No. 102 / Friday, May 28, 2021 / Rules and Regulations payment will likely be more work for servicers than the other five servicer actions for which VA already pays incentives pursuant to 38 CFR 36.4319.
That commenter also recommended that VA pay an incentive equivalent to a loan modification under 36.4319 as the work required to execute a partial claim payment corresponded closely to the work required to execute a loan modification.
VA Response: VA does not agree with the commenters that a servicer incentive is needed for the COVIDVAPCP. As discussed above, this final rule makes several improvements and streamlines the partial claim process. More salient, the partial claim payment itself should constitute a significant infusion of liquid cash to the servicers that participate. This immediate cash infusion can be used to help participating servicers cover their shortterm obligations. It also affords these servicers the opportunity to take advantage of the time value of money;
without the partial claim payment, certain servicers may need to wait years, or perhaps decades, to receive repayment of forborne amounts. Given the scope of the pandemic, some servicers might never be repaid the forborne amounts without the COVID
VAPCP, and indeed, a servicers refusal to participate in the COVIDVAPCP
could cause the servicer a foreclosure loss that could have easily been avoided by taking advantage of the COVID
VAPCP option. VA believes that this significant financial support already poses enough incentive to servicers. VA
also believes that FHAs COVID19
Standalone Partial Claim option, which does not provide for incentives, further evidences that an incentive is not necessary to promote servicers use of the COVIDVAPCP.
J. Combined Deferral and Partial Claim Program One commenter recommended that VA consider offering a combined deferral and partial claim program. The commenter noted that offering a deferment consistent with VA Circular 262033 22 presents, in many cases, the best option for both veteran and servicer, but, according to the commenter, the one limiting factor is whether a servicer has the financial capacity to defer the forborne payments for such an extended period. The commenter stated that this issue could be solved if servicers were able to 22 VA Circular 262033. Deferment as a COVID
19 Loss Mitigation Option for CARES Act Forbearance Cases, Sept. 14, 2020, https
vbaw.vba.va.gov/HOMELOANS/docs/hot_topics/
26_20_33.pdf.

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receive a partial claim payment when a COVID19 forbearance period ends.
VA Response: VA declines to modify the proposed rulemaking in this way.
The COVIDVAPCP is a fundamental shift for all stakeholders in VAs home loan program. Moreover, as VA
explained in the proposed rule, the authorization of loan deferment is a novel home retention option, one that, ordinarily, VAs regulation at 38
CFR 36.4310a would prohibit. 23 VA
is being asked to change the position VA
took in the proposed rulemaking when the proposed rule and VAs temporary loan deferment policy already constitute significant changes within VAs home loan program. Assuming VA were to do so, VA would likely need to insert new guardrails, which would require even further departure from what was proposed.
As mentioned above, VA is continuing to explore ways to help veterans as they exit their COVID19
forbearances and as foreclosure/eviction moratoriums end. VA expects the upcoming weeks to provide critical information in evaluating the COVID
VAPCP and additional measures to help veterans. In fact, VA anticipates additional rulemaking could be necessary. Given the potential for another rulemaking in upcoming weeks, the concerns about departing too far from the proposed rule, and the immediate need to publish this final rule notice, VA is not making any changes to the rule based on this comment.
K. Effect on Secondary Markets One commenter requested that VA
address whether loans bought out of a Government National Mortgage Association Ginnie Mae security will be eligible for re-pooling once a veteran has resumed making payments and the servicer has otherwise complied with Ginnie Mae requirements. The commenter noted that the proposed rule states that a partial claim payment does not affect the guaranty percentage established at the time the guaranteed loan was made; thus, it was the commenters understanding that such loans will be eligible for re-pooling.
VA Response: VA notes that it does not set eligibility requirements for Ginnie Mae securities. Therefore, VA
cannot state whether such loans will be eligible for re-pooling under the circumstances described by the commenter. However, VA reiterates 24
that a partial claim does not affect the guaranty percentage on the guaranteed 23 85

FR 79142, 79145 Dec. 9, 2020.
85 FR 79142, 79152 Dec. 9, 2020.

24 See
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loan. In other words, VA will not deduct the amount of any partial claim payment from any future guaranty claim. VA will continue to honor the requisite guaranty percentage established by existing law.25
L. Other Comments One commenter posed several questions regarding refinance loans and future loan modifications. First, the commenter requested that VA clarify whether the security interest on the new loan can be subordinated to a VAguaranteed Interest Rate Reduction Refinancing Loan IRRRL. The commenter also asked that VA clarify whether the new loan can be paid off through an IRRRL. Finally, the commenter requested that VA advise whether the new loan can be paid off through a subsequent loan modification of the VA-guaranteed loan.
VA Response: VA notes that under both the proposed and final rules, repayment in full will be required immediately upon the refinancing or payment in full otherwise of the guaranteed loan with which the partial claim payment is associated. As such, there is no instance in which the new loan created under the COVIDVAPCP
would continue to exist after the veteran refinances through an IRRRL. A veteran seeking to refinance with an IRRRL will be required to repay the new COVID
VAPCP loan in full, meaning the lien subordination issue raised by the commenter should not arise in such cases. However, VA reminds servicers that the guaranteed loan must remain in first lien position.26 Similarly, under the plain text of 38 U.S.C. 3710e1C, a COVIDVAPCP loan would be excluded from the balance that could be refinanced as an IRRRL.27 Finally, the new COVIDVAPCP loan cannot be paid off through a loan modification of the guaranteed loan. Nevertheless, since a loan modification is neither a refinance nor payment-in-full of the guaranteed loan, the new COVID
VAPCP loan would continue in effect, after modification of the guaranteed loan.
Another commenter encouraged VA
to expedite use of the COVIDVAPCP
outside of finalizing the proposed rule.
The commenter suggested VA utilize its Circular process to offer this home retention option.
25 See,
for example, 38 U.S.C. 3703 and 3732.
38 U.S.C. 3703d3A.
27 See 38 U.S.C. 3710e1C prescribing that the amount of an IRRRL may not exceed an amount equal to the sum of the balance of the loan being refinanced, closing costs, and, if applicable, energy efficient improvements.
26 See
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