federal register /vol. 70, no. 33 / friday, february 18, 2005 / proposed rules

8/3/2019 Federal Register /Vol. 70, No. 33 / Friday, February 18, 2005 / Proposed Rules

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8472 Federal Register / Vol. 70, No. 33 / Friday, February 18, 2005 / Proposed Rules

DEPARTMENT OF VETERANSAFFAIRS

38 CFR Part 36

RIN 2900AL65

Loan Guaranty: Loan Servicing andClaims Procedures Modifications

AGENCY: Departmen t of Veterans Affairs.ACTION: Proposed rule.

SUMMARY: This documen t proposes toamend the Department of VeteransAffairs (VA) Loan Guaranty regulationsrelated to several aspects of theservicing and liquid ating of guaranteedhousing loans in default, and submittingof guaranty claims by loan holders.Specific topics addressed includ e:Increased authority of servicers toimplem ent loss-mitigation options,incentive paymen ts to servicers forsuccessful alternatives to foreclosureimplem ented, establishing a system of

measuring and ranking servicerperformance, permitting loan holders toreview liquidation app raisals, requiringholders to calculate the net value of thesecurity property p rior to foreclosure,establishing a timeframe for wh enforeclosure of a defaulted loan wou ld beexpected to have been completed,limiting the amount of interest andother fees and ch arges that m ay beincluded in a guaranty claim,establishing attorneys fees allowed to beincluded in the guaranty claim,establishing a dead line for thesubmission of guaranty claims,

modifying the requirements for titleevidence for properties conveyed to VAfollowing foreclosure, modifying therequirements for how long a holdermu st maintain records relating to loansfor which VA has paid a claim on theguaranty, and eliminating therequirement for the submission of legalprocedural p apers to VA.

DATES: Comm ents mu st be received onor before April 19, 2005.

ADDRESSES: Written comm ents may besubmitted by: mail or h and-delivery toDirector, Regulations Management(00REG1), Departmen t of VeteransAffairs, 810 Vermont Ave., NW., Room1068, Washin gton, DC 20420; fax to(202) 2739026; e-mail toVA regulations @m ail.va.gov; or, throughhttp://www.Regulations.gov. Commentsshould in dicate that they are submittedin resp ons e to RIN 2900AL65. Allcommen ts received will be available forpublic insp ection in th e Office ofRegulation Policy an d Management,Room 1063B, between the h ours of 8a.m. and 4:30 p.m., Monday throughFriday (except holidays). Please call(202) 2739515 for an appointment.

FOR FURTHER INFORMATION CONTACT:Richard P. Fyn e, Assistant Director forLoan Managemen t (261), VeteransBenefits Adm inistration, Department ofVeterans Affairs, 810 Vermon t Avenu e,NW., Washington, DC 20420, at 2022737380, e-mail [email protected].

SUPPLEMENTARY INFORMATION: Under 38U.S.C. chap ter 37, VA guaran tees loansmade by private lenders to veterans forthe purch ase, construction, andrefinancing of homes owned an doccupied by veterans.

In connection w ith this p rogram, VAis conducting an internal, in-depthreview of the entire LoanAdministration process. LoanAdministrationludes the servicing ofexisting loans, dealing with loans indefault and loans being terminated, andthe p rocessing of claims by loan holdersun der the guaranty after defaulted loanshave been foreclosed or oth erwiseterminated. Loan Administration also

includes efforts by VA and private loanholders to assist homeown ers whoseloans are in default to cure the d efault,retain their h ome if possible, or findother means short of foreclosure. VAhopes to revise the Loan Adm inistrationprocess to reflect changes in the loanservicing indu stry in recent years, aswell as ad vances in technology. VA ismoving toward placing greater relianceon private-sector servicing inaccordance with VA guidelines, withVA using advanced techn ology tooversee holder actions.

VA is now p roposing a num ber of

changes to current procedures,including: giving servicers increasedauthority to implem ent loss-mitigationalternatives to foreclosure and payingservicers an incentive bonus for eachsuccessful loss-mitigation interventionalternative to foreclosure implem ented;establishing a performance-based tier-ranking system for servicers; permittingqualified loan holders to reviewliquidation appraisals and establish thefair market value of the property;requiring loan holders to calculate thenet value of properties securing loansprior to foreclosure; establishingtimeframes for when VA would expectholders, exercising reasonable diligence,should be able to complete theforeclosure of defaulted loans; limitingthe amou nt of interest and other feesand ch arges that may be included in aguaranty claim; establishing reasonableand customary attorney fees allowed tobe claimed u nd er the guaranty;establishing a dead line for holders tosubmit claims und er the guaranty and torequest reconsideration of deniedclaims; modifying the requirements fortitle evidence su bmitted to VA when the

holder is conveying the p roperty to VAfollowing the liquidation sale;modifying the requirements for howlong a holder must maintain recordsrelating to loans for which VA has paida claim on the guaranty; modifying therequirements for holders to rep ort keyevents with regard to loans beingserviced; and rep ealing the requirement

for holders to p rovide VA withprocedural p apers in legal or equitableproceedings related to a loan on thesecurity property.

Loss Mitigation Options/Alternatives toForeclosure

VA has always stressed theimportance of loan holders andservicers finding alternatives toforeclosure. Under current regulations,however, holders generally need VAconsent before they could accept a d eed-in-lieu of foreclosure or approve acompromise sale. Further, holders have

limited auth ority to modify existingloans without prior app roval. VA isproposing to delegate more auth ority toservicers to approve th ese foreclosurealternatives by removing m any existingrestrictions on h olders with regard tosuch alternatives to foreclosure,publishin g clear rules for how holdersmay use su ch alternatives, andestablishing a hierarchy of alternativesto use in determinin g which alternativeshould be considered and un der whatconditions they should be pursued.

Loan Modification

VA is proposing to modify 36.4314

by removing restrictive and confusingconditions and providing clear andund erstandable rules to apply whenconsidering whether or n ot to modify aloan to avoid termination. The ind ustryhas ind icated that the current regulationis not in line with in dustry practicesand this has resulted in both un der useof this alternative to foreclosure andimprop er use in some cases.

VA is also prop osing to make aconforming amendm ent to 36.4311(c).That section currently p rohibits a loanholder from ch arging an interest rate inexcess of the rate reported by the lend er

when the loan was made, on anyadvance or in the event of delinquencyor default. The proposed amendm entwould m ake an exception to thatprohibition to allow such an increasedinterest rate as permitted und er theproposed amend ments to 36. 4314.

Refunding

VA is proposing to amend 36.4318by adding language that would requireservicers to provide VA with thenecessary loan transfer docum ents,includin g all loan assignm ents, within

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8473Federal Register / Vol. 70, No. 33 / Friday, February 18, 2005 / Proposed Rules

60 d ays from receipt of VAs decision torefund th e loan and further provid es fora penalty that may be imposed onservicers wh o continu ally fail to provideloan transfer docum ents timely. VAanticipates that the nu mber of loansrefund ed by VA will be dramaticallyredu ced because of the revisions beingmad e to the loan mod ification authority

and feels that 60 days is a reasonableamou nt of time for servicers to obtainand p rovide the documents required toVA.

VA also prop oses to amend 36.4330relating to records retention . See thediscussion un der the heading RecordsRetention an d Post-Audit, below.

Deeds-in-Lieu of Foreclosure andCompromise Sales

Under 36.4324(a), a holder currentlymay not, without the prior consent ofthe VA, release a lien on the p ropertysecuring the loan. There are, however,circumstance w here VA believes that itis in th e best interests of all concernedto permit a loan h older to take promp taction and allow a transfer of title to theprop erty securing the loan to resolve aserious default short of actualforeclosure.

One such case would be to allow thehold er to accept a deed to the propertytendered by the obligor. Anothersituation is w hat VA refers to as acompromise sale. This is when theproperty cannot be sold for an amoun tthat w ill generate proceeds su fficient torepay the entire loan balance. Undercurrent VA procedures, the holder must

obtain prior VA approval to accept adeed -in-lieu of foreclosure or condu ct acompromise sale.

VA believes the d elays caused by VAneeding to review and approve suchtransactions in advance have resulted,in a n um ber of cases, in m issedopp ortun ities to resolve defaults in aquick, cost-efficient m ann er. VA furtherbelieves that h olders, given app ropriateguidelines, can make proper decisionson approving deeds-in-lieu andcomp romise sales.

Accordingly, VA is proposin gparagraphs (f), (g), and (h) to the new 38

CFR 36.4319a. These p aragraph s w illdelegate authority to servicers toapp rove a compromise sale of theprop erty or accept a d eed-in-lieu offoreclosure and will specify theconditions und er which servicers mayexercise that authority.

Under the proposed 36.4319a(f), aholder would be permitted to app rove acomp romise sale if the holderdetermin es the loan is insoluble, the netsale proceeds will equal or exceed thenet value of the prop erty as compu tedby the hold er, and that the estimated

guaranty paymen t it wou ld receivefollowing the comp romise sale wouldnot exceed the guaranty paymentfollowing an actual foreclosure. Inaddition, the holder wou ld be requiredto ensure that the current own er of theprop erty will not share in any of thesales proceeds. Fin ally, certain obligorswill be required to execute a repaym ent

agreement before the hold er mayapp rove the comprom ise sale. (See discussion of the proposed 36.4319a(h), below.)

In the event all cond itions specifiedin this prop osed paragraph (f) cannot bemet, but the h older believes acomprom ise sale would be in the bestinterest of the veteran and the Secretary,the holder may request advanceapp roval from VA for a comprom isesale.

Under the proposed 36.4319a(g),holders would be permitted to acceptdeeds-in-lieu of foreclosure. VA regardscomprom ise sales as preferable todeeds-in-lieu of foreclosure. Und er acomprom ise sale, the property will besold at app roximately the fair marketprice, and VA will not be required toincur th e expenses of acquiring,managing, and reselling the prop erty.Therefore, the prop osed paragraph (g)wou ld require that, before a holder mayaccept a deed -in-lieu, the holder mu stconsider a comprom ise sale and find itis not practical. As with comp romisesales, the hold er would be required toestimate that the guaranty p ayment itwou ld receive following the deed-in-lieu would not exceed the guaranty

paymen t following an actualforeclosure. In ad dition, the h olderwould be required to determine that thecurrent own er can convey clear andmarketable title of the p roperty to VA.Finally, certain obligors will be requ iredto execute a repayment agreementbefore the holder may app rove the deed-in-lieu. (See discussion of the proposed 36.4319a(h), below.)

Also, as with com prom ise sales, in th eevent all conditions specified in thisprop osed paragraph (g) cannot be met,but the h older believes a deed-in-lieuwou ld be in the best interest of the

veteran and th e Secretary, the holdermay request advan ce approval from VAfor accepting a d eed-in-lieu.

VA also prop oses to add a n ew 36.4319a(h) regarding repaymen tagreements. Under curren t 36.4323,which is not being modified in thisregard by th is proposed rule, certainind ividuals are deemed to be liable tothe Governmen t if VA is required tomake a payment un der the guaranty.Generally, veterans w hose loans h aveclosed on or before December 31, 1989,and ind ividuals who have been

app roved to assume a veterans loan sothe veteran may be released from furtherliability on th e loan un der 38 U.S.C.3713 and 3714 h ave such liability. Theprop osed paragraph (h) defines the termliable obligor to include suchindividuals. The proposed paragraph (h)wou ld requ ire liable obligors to executean agreement to repay VA 50 percent of

the debt that would otherwise beassessed under existing 36.4323.Reducing the obligors debt to VAshou ld help in du ce liable obligors tocooperate with holders in compromisesales and deed s-in-lieu.

The repayment agreement w ouldrequire that the first payment wou ld bedu e on the first day of the first monthwh ich is one year after the d eed-in-lieuis executed or the comp romise sale isclosed. For examp le, if the d eed-in-lieuwere executed October 23, 2004, thefirst payment would be due November1, 2005. The obligation wou ld bear

interest as established by the Secretaryunder 38 U.S.C. 5315(b)(2). That statuteman dates collecting interest on VAbenefit debts. Interest wou ld accruefrom the date the first paymen t was du e.The agreement would require equalmonthly p ayments, with the total debtrepaid w ithin 5 years after the firstpayment was due.

The signing of the required rep aymentagreement wou ld not preclu de a veteranfrom seeking to have the d ebt waived byVA pursu ant to 38 U.S.C. 5302.

Finally, the proposed paragraph (h)wou ld require a written notice, sent byVA to the obligor by certified mail,

return receipt requ ested, of the actualamoun t of the debt, the rate of interest,the required monthly p ayment, the rateof interest, and the right of veterans torequest waiver. This notice will be sentafter VA pays th e guaranty claimbecause the amount paid un der theguaranty establishes the debt. In th iscase, the debt wou ld norm ally be 50percent of such claim p ayment, plusinterest.

VA is also proposin g to add a newdefinition to 38 CFR 36.4301 for theterm compromise sale. This term willmean a sale to a third p arty for an

amoun t less than is sufficient to repaythe unp aid balance on the loan wh erethe hold er has agreed in advance torelease the lien in exch ange for theproceeds of such sale. In add ition, VAis proposing a conforming amendmentto 36.4324.

Servicer Tier Rankings and Loss-Mitigation Incentive Payments

In new ly prop osed 38 CFR 36.4316VA proposes to rank servicers into fourtiers, depending on their performance,with tier one being the highest rated and



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tier four th e lowest. VA is modeling thetier ranking system after that used bythe Fed eral Home Loan MortgageCorporation (FHLMC), also kn own asFredd ie Mac. Specific criteria are notyet established. VA is solicitingcommen ts on criteria to be used indevelopin g the tier rankin gs. Aservicer s performance and tier ranking

will not be publicly disclosed.For at least th e first year, all servicers

will be presum ed to be in tier two, andeligible for loss-mitigation incentivespaid for that level.

After VA has collected data u nd er thenew rep orting requiremen ts (seediscussion und er Revised ReportingRequirements, below) for six month s,VA intend s to review the d ata anddevelop th e criteria for rankingservicers. Those criteria will th en bepublished in the Federal Register fornotice and com ment. VA expects thatthe computer system for such reporting

will be operational by Summ er 2005,and p roposed ru les for tier ranking willbe published in early calend ar year2006. Those projected d ates could besubject to adjustment d ue to technicaldelays in the developm ent of the newsystem.

Once VA has adop ted final rules fortier rankings, VA will mon itor and gradeservicer performan ce on a quarterlybasis, and an nu ally adjust the tierranking depending on the servicersperformance over the past four calendarquarters using those standard s. Allservicers will remain in tier two u ntil

their performance has been evaluatedfor four calendar quarters after final tierranking rules have been adopted.

VA is also proposing to add a new 38CFR 36.4317 which provides for makingincentive paym ents to loan servicers intier ranks one through three up on theirsuccessful comp letion of certainforeclosure avoidance, loss-mitigationoptions. Currently, loan servicersreceive incentive paym ents from theDepartment of Housing and UrbanDevelopm ent, Fannie Mae, Freddie Mac,and som e private mortgage insu rancecompanies for implementing variousforeclosure-avoidance procedu res onloans in serious d efault. As explainedbelow, VA curren tly pays suchincentives under limited circumstances.

In July 1995, VA admin istrativelyinstituted the Servicer Loss MitigationProgram (SLMP). Participation in SLMPhas been volun tary. Under SLMP, VApays p articipating servicers an incentivefor deeds-in-lieu of foreclosure andcomp romise sales. SLMP currentlyrequires servicers to obtain VA consen tbefore completing either of thesealternatives to foreclosure.

VA has received anecd otal evidencethat some servicers place less emphasison w idespread use of foreclosure-avoidance measures on VA loans due tothe fact that VA norm ally does not p aythe incentives which h ave become theindu stry standard.

A major goal of the VA housin g loanprogram is to assist veterans in

obtaining home financing, and doin g sowith th e least risk of loss upon defaultto both the veteran an d VA as guarantorof the loan and , ultimately, to theFederal Treasury. VA strives to avoidforeclosure wh enever reasonablypossible. If a means can be found tokeep a veteran and th e veteran s familyin th e hom e or, if that is not p ossible,to terminate the loan w ithoutforeclosure, VA wishes to pursu e thatalternative. This will be less costly toboth VA and the veteran, will preventthe veterans credit record fromreflecting a foreclosure, and if

necessary, allow the veteran areasonable time to volun tarily vacateand m ove from the home.

Therefore, VA is now p roposing toexpand the incentive payment programby increasing the num ber of options forwhich incentives will be paid,increasing the nu mber of servicers thatmay qu alify for incentives, andformalizing the rules regarding theamount of the incentive payments, thetiming of the paymen ts, and the tests forqualifying for such p ayments.

Under the proposed 36.4317, VAwill pay an y servicer in tiers one, two,and three an incentive payment for

successfully completing any of thefollowin g loss-mitigation op tions:repaymen t plan, special forbearance,loan mod ification, compromise sale,and deed-in-lieu of foreclosure. Onlyone incentive payment will be madewith respect to a default required to bereported to the Secretary un der theproposed new 36.4315a(d). Thatsection would requ ire reporting adefault to VA within 5 business daysafter a loan has been d elinquen t for 61days.

The amoun t of the incentive paymentis set forth in a chart contained in the

proposed 36.4317(b), and w ill depen dup on the servicers tier rankin g and thetype of loss-mitigation action. Th eincentive paym ent will range from$1,000 (to a servicer in tier one for acompromise sale) to $120 (for a servicerin tier three for a repayment p lan orspecial forbearance).

The criteria for wh en a loss-mitigationoption w ill be considered su ccessfullycompleted are contained in theproposed 36.4317(c). A repaymen tplan wou ld be deemed successful wh enfour consecutive payments und er the

plan have been made or wh en the totaldelinquency has been repaid, wh icheveroccurs soon er. Special forbearance willbe deemed su ccessful w hen the loanreinstates. A loan mod ification wou ldbe deemed completed wh en themod ification agreemen t is signed andthe loan reinstates. Finally, acomprom ise sale or deed-in-lieu of

foreclosure will be deem ed successfulwhen the servicer submits a claim und erthe guaranty.

Finally, 36.4317(d) provid es thatincentive paym ents for successfulrepaymen t plans, special forbearance,and loan m odifications will be made toeligible servicers month ly. Payments forcomprom ise sales and deed s-in-lieu offoreclosure will be paid w ith theguaranty claim.

No incentive paymen t will be mad e toa servicer in tier four. While, as statedabove, the exact criteria for rankingservicers are still being developed , VAanticipates that tier four w ill be reservedfor servicers whose p erformance hasbeen significantly and repeatedly belowacceptable VA and industry standards.VA does not believe additional reward sshould be provided to a servicer wh oseperformance has been consistentlybelow an acceptable level. Thesuccessful comp letion of loss-mitigationoptions by tier four servicers will,however, be considered in futurerankings. Thus tier four servicers willhave an in centive to successfullycomplete these options.

Revised Reporting Requirements

VA is also prop osing to significantlyrevise the requirements for holders toreport the status of all guaranteed loansin their p ortfolio and also to reportsignificant events in the servicing andtermination of such loans.

Currently, 36.4315(a) requires th ehold er to notify VA within 45 days afterthe debtor is 60 days in default on apaymen t (in effect, not later than 105days after the borrow er fails to m ake apaymen t due). This section also requiresreporting within 45 days after theobligor h as failed to p ay real estate taxeswhen d ue and such taxes have remained

un paid for at least 180 days, or theobligor has been in d efault on any otherobligation un der th e loan for at least 90days after receiving notice from thelender to comply with suchrequirement.

Currently, 36.4316 establishesconditions und er which servicers may,at their option , file the n otice prescribedin 36.4317, Notice of Intention toForeclose. This section, as w ell as therelated 36.4317, are being eliminatedin their entirety because they will nolonger be necessary und er the reporting



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requirements defined in the new 36.4315(a).

VA is proposing to delete the currentdefault and foreclosure reportingrequiremen ts cited in paragraph (a) of 36.4315, and 36.4316, 36.4317. VAis proposing to add a new 36.4315awh ich will establish the new servicerreporting requiremen ts for all

outstanding guaranteed loans.This new section will require all

hold ers to report informationelectronically to VA by use of acomp uter. VA is currently developing acomp uter-based system for this pu rpose.It is contemplated th at holders will havethe option of using a variety of methodsto inpu t data to VAs system. Theseinclude:

Data file exchan ge.Direct system interface.Direct inpu t to VA through th e

Internet.More specific information regarding

the use of this system will be providedlater through ind ustry releases,conferences, and trainin g provided byVA prior to imp lementation. Holderswill need to obtain a user iden tificationand p assword from VA. Procedures forthis will be annou nced at a later date.

The existing p aragraph (b) of 36.4315, pertaining to acceptance ofpartial paymen ts by a holder, willremain in a renamed 36.4315, withminor, non-substantive editorialrevisions.

Procedural Papers

Currently, paragraph (a) of 36.4319

requires that, when a loan holderinitiates or becomes a p arty to a legal orequitable proceeding involving aguaranteed housing loan or the propertysecuring such loan, the holder provideVA with copies of all legal procedu ralpap ers related to su ch action. Paragraph(b) of that section requires the h older toprovid e VA with a copy of the notice ofsale with respect to the propertysecuring such loans at least 30 daysprior to the liquidation sale or within 5days after first publication, wh ichever islater. Paragraphs (c) through (e) of thatsection relate to service of such p apers

wh en th e Secretary is a party to a legalproceeding.VA believes the requiremen t to

provide VA with all such p apers whenVA is not a p arty to the litigationimposes an u nnecessary paperworkburden on holders and their counsel.The vast m ajority of papers filed in legalproceedin gs are ordinarily of littlebenefit to VA. Should VA have a needto review certain docum ents, VA canmake a sp ecific request to the h older forcopies of any specific docu men ts VAneeds to review. In addition, und er the

proposed reporting requirements,discussed above, holders would berequired to inform VA within 5 bu sinessdays after any bankrup tcy or other legal,equitable, or adm inistrative proceedingis filed th at wou ld m aterially affect theloan termination , the lien, or thesecurity property.

Accordingly, VA is p roposing to

delet e paragrap hs (a), (b), and (c) of 36.4319. VA is further p roposing torewrite the existing paragraph (d) of 36.4319, which w ould becomeparagraph (a), by requiring th at any legalprocess in an action to wh ich VA is aparty, prior to VA entering anapp earance, shall be served on the VARegional Coun sel, the Attorney General,and th e United States Attorney having

jurisdiction over th e area where thecourt is located. Currently, thisparagraph requ ires service on the LoanGuaranty Officer. VA believes thesepleadin gs shou ld be served on VAs

coun sel rather than th e program official.Service on the Attorney General andUnited States Attorney are required bythe Fed eral Rules of Civil Procedure.The existing paragraph (e), relating toservice of papers after the Secretarysattorney in a legal proceeding hasentered an ap pearance, is beingredesignated as p aragraph (b).

Paragraph (f) of 36.4319 does notpertain to proced ural pap ers. It is beingdeleted for the reasons explained und erthe h eading, Time for Loan Termin ationand Limit on Interest and Charges,below.

Calculation o f Net Value

Und er the governin g statute, 38 U.S.C.3732(c)(3), when VA receives a noticethat a guaranteed loan in d efault isabout to be termin ated, VA is requiredto compute the net value of theprop erty securin g the guaranteed loan.The term net value is defined in 38CFR 36.4301. Genera lly, net value isthe fair market value of the prop ertyminu s the costs VA estimates it wouldincur to acquire and d ispose of theprop erty. Those costs are comp utedusing the methodology contained in thatdefinition. Currently, VA calculates thenet value and provides this value inwriting to the holder along withinstructions regarding the holders bidat the liquidation sale. Und er detailedformulae contain ed in 38 U.S.C. 3732(c),the relationship between the veteranstotal indebtedn ess at time of foreclosure,the net value of the prop erty, and th eamoun t that the holder bids or receivesat the foreclosure sale determines th eamount that VA will pay the loan holderon a guaranty claim and whether or notthe holder has the option to convey theprop erty to VA following foreclosure.

The comp utation of the net value fora specific prop erty involves a simplemathem atical compu tation. All that isrequired is know ing the fair marketvalue of the prop erty and the p ercentagefactor used by VA to represent the costto VA of acquiring and disposin g of theprop erty. Multiplying the fair marketvalue by the cost factor prod uces the

amoun t to subtract from the fair marketvalue and arrive at the net value. Thatpercentage is determined annually byVA pursu ant to 38 CFR 36.4301(definition of net value) and pu blishedin the Federal Register. Currently, thatfactor is 11.87 percent. If the p ropertyhas a fair market valu e of $100,000, thenet value would be calculated asfollows:

Fair market value ... .. .. .. .. .. .. .. .. .. $100,000Cost factor (11.87 percent of

$100,000) . .. .. .. .. .. .. .. .. .. .. .. .. .. .. . (11,870)Net Valu e ... .. ... .. ... ... .. ... .. ... .. .. 8 8,13 0

Program participan ts have

complain ed that VA has not beenproviding bidding instructions in atimely fashion. Program p articipantshave also advised that delays on the p artof the agency h ave resulted in d elayedor postpon ed foreclosure sales andultimately increased costs of loantermination to VA, the veteran, and theloan holder.

Accordingly, VA is prop osing to adda new 36.4319a, entitled LoanTermination. This new section willrequire loan hold ers to calculate the netvalue of the security p roperty for eachloan being terminated . Under the

prop osed rule, at least 30 days prior tothe schedu led or anticipated date of theliquidation sale, the loan hold er mustrequest that VA assign an app raiser toconduct a liquidation appraisal.

Und er existing regulations, 36.4301,the term liquidation sale includesvolun tary deeds-in-lieu of foreclosure.VA is proposin g to amend the definitionofliquidation sale to clarify that su chterm includes a compromise sale (seethe discussion u nder the heading,Deeds-in-lieu of Foreclosure an dCompromise Sales, above). Following acomprom ise sale, the hold er will submita claim un der the guaran ty to VA for theunp aid balance on the loan.

The liquidation appraisal willordin arily be valid for 6 month s. VAmay, how ever, specify a shorter validityperiod on th e appraisal if rapidly-changing market conditions make suchshorter period in th e best fiscal interestsof the United States.

At this poin t, one of two scenarioswill occur. VA is prop osing to permitcertain loan holders, within guidelinesbeing established by VA, to review theapp raisal report and d etermine the fair



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market value of the prop erty (see thediscussion under the heading, ServicerApp raisal Processing Program, below).

If the h older is n ot eligible toparticipate in the Servicer AppraisalProcessin g Program (SAPP), VA willreview the liquidation appraisal reportand d etermine the fair market value ofthe prop erty. VA will then in form the

hold er of such fair market value inwriting.

Once the hold er has either beenadvised of or determined th e fair marketvalue of the security property, thehold er will then calculate the net valueusin g the publish ed p ercentage-factor.The holder will then d etermine wh at tobid on the p roperty at the liquidationsale, taking into account th e net valueof the property the holder hascalculated, the obligors totalindebtedness, and the formulaecontained in 38 U.S.C. 3732(c).

The loan holders accounting recordswill contain su fficient information toenable the hold er to determine the totalind ebtedness. VA also proposes to insertin 36.4301 a definition of the termTotal Ind ebtedness. For purposes of38 U .S.C. 3732(c), Total Indebtednesswill mean the sum of the unp aidprin cipal on the loan as of the date ofthe liquidation sale, accrued unpaidinterest, subject to the maximu minterest allowable (wh ich is discu ssedbelow un der the h eading Time for LoanTermination an d Limit on Interest andCharges) and fees and charges permittedto be includ ed in the guaranty claim bythe regulations.

Because th e statute contains clearguidance regarding how th e guaranty iscalculated and wh en the holder mayconvey the security to VA, there is noneed for VA to provide biddin ginstructions in each case where there isan actual foreclosure proceeding orother liquid ation sale. VA will,how ever, provid e periodic training forall loan holders and servicers regardin gnet value calculation and biddingprocedures.

VA is also proposin g a clarifyingamendmen t to 36.4321 regarding claimpayments when the holder accepts avolun tary conveyance of the prop erty inlieu of foreclosure. Under the formulaecontained in 38 U.S.C. 3732(c), in orderfor VA to comp ute th e guaranty claimpayable to the h older, it is necessary toknow the amoun t for which the holderacquired the prop erty at the liquidationsale. Unlike a tradition al foreclosuresale, wh en a holder accepts such avoluntary conveyance there is no publicbid or exchange of fund s. Therefore, VAis prop osing to add language to 36.4321(c)(2) stating that, in the caseof a voluntary conveyan ce in lieu of

foreclosure, the hold er shall be deemedto have acquired the prop erty at theliquidation sale for the lesser of the netvalue of the prop erty or the obligorstotal indebtedness.

Editorial chan ges are also prop osed tobe made to 36.4320 to reflect that thehold er will be comp uting the net valueand to remove un necessary language

that merely repeats, without furtherelaboration, the formulae contain ed in38 U.S.C. 3732(c). In add ition, VA isprop osing to delete the provision in 36.4320(c), wh ich requires a h older toobtain advan ce approval from VA beforeaccepting a d eed-in-lieu of foreclosure.

Servicer Appraisal Processing Program

Under current p rocedures, prior to theliquidation sale loan holders requestthat VA assign an app raiser from th e VAfee pan el to perform a liquidationapp raisal. VA then reviews thisapp raisal and d etermines the fair marketvalue of the property. As explainedabove, this fair market value is u sed tocalculate the net value of the prop erty.

As discussed above, industryrepresentatives have complained thatVA does not furnish timely bidd inginformation. VA believes that perm ittinghold ers to comp lete the net valuecompu tation will help alleviate thissituation. VA recognizes, however, thatdelays can still occur wh en VA obtainsand reviews the liquidation appraisal.VA has received su ggestions that VAmove to another method of valuingprop erties at liquidation, such as brokerprice opinions and automated valuation

mod els. VA carefully consid ered suchalternatives, and concluded not to adop tan alternative valuation meth od at thistime. VA believes by random lyassignin g the valuation to a member ofVAs fee panel, the opp ortun ity forfraud and undue influence is greatlyredu ced. Further, VA already has apan el of app raisers in place. VA willcontinu e to monitor th e work of its feeapp raisers, and em ph asize the necessityof performing liquid ation app raisals ina timely manner.

Public Law 100198, enactedDecember 21, 1987, authorized th e

Lend er App raisal Processing Program(LAPP) where VA could p ermitqualified lenders, under guidelinesissued by VA, to review loan -originationapp raisals, ensu re adheren ce to VA-published minimum propertyrequiremen ts, and set the reasonablevalue of properties for purposes ofdetermining the maximum loan VAcould guarantee. VAs experience is thatthe LAPP has worked w ell and oftenexpedites the loan-origination process.

Accordingly, VA is also p roposing toestablish a Servicer Appraisal

Processing Program (SAPP), modeledafter the LAPP guidelines, wh ich arecontained in 36.4344.

Und er the prop osed SAPP, VA isprop osing to delegate authority toqualified emp loyees of the servicer toreview liquidation appraisals and issueNotices of Value that establish the fairmarket value of the prop erty for use

when determining the net value of theproperty for liquidation purposes. Theprop osed SAPP will be similar to thecurrent LAPP guidelines and w illrequire th e same qualifications for StaffApp raisal Reviewer app roval.

Time for Loan Termination and Limiton Interest and Charges

In compu ting the guaranty claim, asexplained above und er the headingCalculation of Net Value, when VAcomputes the amount payable under theguaranty, one of the statutory factorsaffecting this calculation is the obligor stotal ind ebtedness. Und er the legalinstrum ents evidencin g the loan, anobligors total debt wou ld ordin arilyinclude all accrued bu t unp aid interestthrou gh the date of the liquid ation sale.In addition, 36.4313 allows a h older toadvance and includ e as part of the totalind ebtedness certain reasonable costsand charges. VA is permitted by 38U.S.C. 3732(a)(3), ho wever , to establisha date not later than the date of

jud gment or d ecree of foreclosure orsale, up on w hich th e accrual of interestand other ch arges shall cease. Curren tly, 36.4319(f) provid es that if the h olderdoes not bring app ropriate action to

terminate the loan with in 30 days afterbeing requested to d o so by VA, than VAmay fix a date after which interest andother charges will no longer accrue.

As part of the Loan Ad min istrationredesign process, VA has conclud ed thathold ers should be given a reasonably-objective stand ard for determinin g whenthe foreclosure of a defaulted loanwou ld be expected to have beencompleted. VA furth er has concludedthat the accrual of interest and othercharges, for pu rposes of a guarantyclaim, should cease after the hold er hashad su ch reasonable time to complete

loan termination.VA is therefore prop osing to repealthe existing 36.4319(f) wh ich cu rrentlyprovid es for an in terest cut-off date.

VA is also proposin g to add a new 36.4319a that would require a holderof a loan in serious d efault toexpeditiously and diligently pu rsueforeclosure as permitted un der law oncethe decision to foreclose has been mad e.This section contain s a table stating thelength of time a hold er, exercisingreasonable diligence, should be able tocomplete th e foreclosure in each State.



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In formulating that table, VA willconsider the published foreclosuretimeframes for similar loans used by theU.S. Departmen t of Housing and UrbanDevelopm ent (HUD), Fann ie Mae, andFredd ie Mac. VA will p eriodicallyreview the continued reasonableness ofsuch timeframes, and p roposeadjustmen ts if needed , especially if

changes in State law h ave a significantimpact on the continued ability ofhold ers to meet such timeframes.

VA is also prop osing to requirehold ers to notify VA five business daysprior to th e foreclosure of any loanwh ere the veteran has substantial equityin the prop erty securing the loan.Holders will determine the equity bysubtracting the total indebtedn ess on theguaranteed loan plu s the balance owedon oth er liens of record from the fairmarket value of the prop erty securingthe loan . If the equ ity equals at least25% percent of the fair market value of

the security, this notice will be required.VA expects loan h olders to

aggressively work with veterans indefault wh o have significant equity andattempt to find w ays to avoidforeclosure. As d iscussed above, VA isalso proposin g to provide servicersincentives for the successfulimp lementation of loss-mitigationalternatives to foreclosure op tions. VAbelieves these loss-mitigation servicingefforts are an d will be generallysuccessful. Nevertheless, VA isprop osing to require this notice as afinal effort to try to prevent a veteran

needlessly losing substantial equitythrou gh foreclosure. This notice willenable VA to review the servicinghistory and en sure that every reasonableeffort was m ade to avoid foreclosure.

Once the hold er has given VA thisnotice, the holder m ay proceed with theforeclosure u nless sp ecificallyinstructed by VA to do oth erwise. VAdoes not intend that this requirementwill give veterans who h ave substantialequity in the p roperty any special rightsor treatment, or that the notice willautomatically trigger any delay in th eforeclosure. It merely provid es VA the

opp ortun ity to take one last look andintervene in cases where VA, in its sole

jud gment, considers such action to beappropriate.

This prop osal will also define theterm business day to be Mond ay

through Friday, inclusive, excludingFederal holidays.

In lieu of the current proced ure wh ereVA notifies holders on a case-by-casebasis of a cut-off date after w hichinterest and fees will no lon ger be paid ,VA is prop osing to amen d 36.4321 toprovide that the maximum u npaidinterest which w ill be allowed und er a

guaranty claim w ill be the lesser of totalun paid in terest as of the liquidation saleor interest for the tim eframe VAspecified un der the p roposed 36.4319a(a) plus 180 d ays. VA is alsoproposing to amend 36.4313 to statethat advances and p roperty expensesaccruing more than the n umber ofmon ths VA specifies for liquidation tobe completed p lus 180 days from thedate of the first un cured d efault may notbe included in the claim.

VA may, how ever, perm it additionalinterest, fees, and ch arges if the h olderwas un able to comp lete the foreclosuredu e to bankru ptcy of the debtor, appealsof the foreclosure jud gments,forbearance in excess of 30 days grantedat the request of VA, or other factorsbeyond th e control of the hold er. Thedetermination of whether to permitadd itional interest and charges to beincluded in the claim w ill be made bythose officials specified in 36.4342(b).This rule will furth er provide that theLoan Guaranty Officer is authorized toredelegate the au thority to makedeterminations to allow additionalinterest and other costs.

VA wishes to note th at establishin g amaximum amount of interest allowable

in a claim is not intended to be adeadlin e for initiating foreclosure. VAwill includ e sufficient time in theforeclosure comp letion timeframes toallow a hold er exercising reasonablediligence to complete the foreclosurewithou t losing the right to include inthe guaranty claim all unp aid interestand otherwise-allowable fees andcharges.

The proposed rule would also makeeditorial changes to paragraphs (b) and(c) of 36.4321 consistent with thisproposed rule.

Attorneys Fees

Currently, 36.4313(b)(5) permits ahold er that has foreclosed a VA-guaranteed loan to includ e as part oftheir guaranty claim a reasonableamoun t for legal services necessary toterminate the loan. The amount of

attorney fees which may be includ ed inthe claim may n ot exceed the lesser of10 percent of the outstand ingindebtedness or $850. The currentregulation also permits add itional feesapp roved in ad vance by VA. Byadm inistrative circular, VA h as givenblanket consen t to field officespermitting some ad ditional fees for

bankruptcy. In addition, the current rulerestricts the com bined total of attorneyfees and trustee fees allowed by 36.4313(b)(4) to $850.

It has been the position of VA that theallowance of legal fees w as neverintended to limit the amount th e loanhold er may pay for legal services. Itmerely limited the amou nt that VAwould reimburse the h older. As apractical matter, however, VA has beenadvised, on numerous occasions, thatman y loan hold ers effectively limit whatthey w ill pay cou nsel for legal servicesin conn ection with the termination of

VA guaranteed loans to wh at VA willreimburse th e hold er. The legal fees VApermits are often significantly less thanfees for similar services permitted un derother Federal hou sing programs or byfederally-chartered market investors. VAbelieves that, in som e instances,attorneys give less priority to workrelated to the termin ation of VAguaranteed loans than to loans whereattorney fees are greater. That can leadto costly delays.

Under the proposed rule, 36.4313will be amended to p ermit holders toinclud e in th eir claim legal fees not to

exceed the reasonable and cu stomarycharge for such services in the Statewh ere the prop erty is located. VA willpu blish at least annually followingpu blication of the final rule in th eFederal Register a schedu le listing thereasonable and customary fees forvarious services such as foreclosureactions, deed s-in-lieu of foreclosure,and bankru ptcies for each State. Informulating this schedu le, VA willconsider the published allowance forattorney fees perm itted for sin gle-familyloan termination s by HUD, Fann ie Mae,and Freddie Mac.

Upon pu blication of the final rule, thefollowin g schedu le of allowable fees forservices will be effective and willremain unless changed by publicationin the Federal Register as stated in th eabove paragraph :BILLING CODE 419102P



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The rule will retain the limit that thecombined total of attorney fees andtrustee fees may not exceed th emaximu m allowan ce for attorney fees.

Submitting Claims Under the Guaranty

Under current regulations, the holderdoes n ot have any d eadline for filing aclaim with resp ect to a terminated

guaranteed housing loan.The Fed eral Credit Reform Act of1990, 2 U.S.C. 661, requires all Federalagencies to determine the actual cost ofmaking and guaranteeing loans. Forbud getary purp oses, the cost isattributed to the cohort year in whichthe loan is guaranteed or made. Forexample, all costs related to a loanguaranteed by VA in Fiscal Year 2002are attributed to the fund s approp riatedfor that year, regardless of wh en aparticular loan is terminated or when aspecific cost is actually paid . Agenciesare required to re-estimate the costsann ually of all loans guaranteed ormad e for each coh ort year. The fact thata certain nu mber of loans for aparticular cohort year were terminatedand the Government w as required topay a claim or acquire a prop erty isimportant information n eeded to m akethe ann ual re-estimate.

To ensure accuracy in the Fed eralbud get process, VA needs to knowwithin a reasonable time that specificloans for particular cohort years havebeen terminated and that costs will beincurred.

VA recognizes that h olders cann ot filea claim immediately upon termination

because the hold ers need time to receiveall bills and reconcile their accounts.VA believes, however, that hold ersshou ld be able to ascertain all necessaryinformation and submit a claim within1 year of the comp letion of the loantermination process.

Accordingly, VA is proposin g toamend 36.4321 to require a hold er tosubm it a guaranty claim electronicallywithin 1 year of the comp letion of theliquidation sale. For purp oses of thisrequiremen t, the liquidation sale will beconsidered completed w hen the last actrequired u nd er state law is taken to

either make the liquid ation sale final, orobtain a judgmen t, a confirmation, or anapp roval of the sale, exclud ing anyredemption period.

When th e holder accepts a voluntaryconveyance in lieu of foreclosure, theliquidation sale will be deemedcompleted w hen th e owner executes adeed to the holder or the holdersdesignee. In th e case of a compromisesale, the liquid ation sale will be deemedcomp leted on the d ate of settlement.

With respect to any loan wh ere theliquidation sale was completed prior to

the effective date of the final rule, theguaranty claim must be subm ittedwithin 1 year after the effective date ofthe final rule.

If a hold er files a claim with in th isone-year period and new informationsubsequen tly comes to light, thisproposal would also permitsupp lemental claims based on this new

information, provided that thesup plemen tal claims are filed withinthis one-year wind ow. No claims will beconsidered if they are filed after thisone-year period has elapsed.

This section will also permit a holderto request that the Loan GuarantyOfficer reconsider any item in th e claimthat was denied, provided that such arequest for reconsideration is mad eelectronically within 30 d ays after thehold er is advised that one or more itemsin their claim have been denied. Thisrule will further provid e that the LoanGuaranty Officer is auth orized toredelegate the auth ority to make adetermination on a reconsideration.

Records Retention and Post-Audit

In order to exped ite claim paymen t,VA will not ordinarily require theroutine submission and review ofsupp orting documen tation, such ascopies of bills and receipts, prior topaym ent of guaranty claims. In order toensu re the fiscal integrity of theprogram, VA will, however, perform afull review, on a post-audit basis, of arand om samp le of claims filed by eachservicer to ensure th at amoun ts claimedare proper and fully supp orted. The size

of the sample audited and the frequencyof audits m ay be increased if VA find sa greater frequency of errors in claimsubm issions by a particular holder. VAanticipates that the size of the sampleand the frequency of audit would beredu ced for servicers in tier one, andincreased for servicers in tiers three andfour. In all cases, however, the size an dfrequency of audit will be based on astatistically valid samplin gmethod ology, and th e size of the sampleand the frequency of audit would beimm ediately adjusted if significanterrors or irregularities were d iscovered.

Likewise, VA will not require h oldersto submit back-up documentationregarding their credit underwritingwhen holders modify existing loansun der the proposed revision to 36.4314. However, VA will review theback-up docu men tation for a samp le ofmod ified loans as part of the routinepost-audit process.

Accordingly, in order to ensu re VA isable to perform such audits and ensurethe fiscal integrity of the loan guarantyprogram, VA is prop osing to amend 36.4330, wh ich pertains to

mainten ance of records. Curren tly, thissection requires holders to maintainrecords of payments received on a loanand d isbursemen ts chargeable to suchloan un til the Secretary is no longerliable as guaran tor of such loan. It alsorequires the lend er to retain copies of allloan origination records for at least twoyears after loan closing. This section

also grants VA the right to insp ect,examine, or aud it these records at areasonable time and p lace.

VA is prop osing to modify thatsection to require th at, if the Secretarypays a claim on a guaranty, the recordscurrently required to be maintained by 36.4330(a) relating to paym entsreceived and disbursements chargeableto the loan be maintained electronicallyun til 3 years after the Secretary madesuch claim payment.

Pursuant to the proposedamendmen ts to 36.4314, VA is alsoproposing to require holders wh omod ify loans to maintain the recordssupporting their decision to modify theloan for 3 years after the mod ificationagreement is executed. Such record swould include credit reports,verifications of income, employm ent,assets, liabilities, and other factorsaffecting th e obligors credit worthiness,work sheets, and any other documentssupp orting the holders decision tomod ify the loan.

Title Evidence

VA is proposin g to standard ize thedocumentation required as evidence ofacceptable title to the Secretary.

Currently, the documentation requiredmay vary significantly depend ing on theprop erty jurisdiction. In m any cases, VAis requiring servicers to obtain titlepolicies insurin g the Secretary followingthe foreclosure. VAs experience has notdem onstrated that obtaining titleinsuran ce is cost effective and thisrequiremen t is therefore beingeliminated. VA is proposin g that titleevidence p resented for conveyance of aprop erty be stand ardized across all

jurisdictions and reducing the amountof documen tation required. VA willaccept as evidence of title conveyance:

a copy of the original mortgage, deed oftrust, or other security instrumen t usedfor the terminated guaranteed loan , acopy of the deed or docum entevidencin g transfer of interest and titleat the foreclosure sale, and a SpecialWarranty Deed conveying title to theSecretary. The hold er will be deemed towarrant m arketability of the title to theproperty for 3 years after transfer to VA.

VA is prop osing to add a p rovisionthat, when prop erty is conveyed to VA,title shou ld be conveyed to theSecretary of Veterans A ffairs, an



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Officer of the United States. The nameof the curren t incum bent Secretaryshould n ot be included un less State lawrequires namin g a real person. Thiscomplies with internal guidancecurrently contained in VA operatingmanuals.

VA is also proposin g to delete, asobsolete, the language in 36.4320(h)(5)

(redesignated as paragraph (c)(5) in thisprop osed rule) stating that a violation ofa restriction based on race, color, creed,or national origin will not cause theconveyance of the property to beun acceptable to VA. Court d ecisionsand fair housin g laws enacted since thecurrent ru le was originally issuedshortly after World War II have mad eclear that any deed restrictions orrecorded covenants p urporting torestrict the ownership or occupancy ofhou sing based up on race, color, religion,national origin, or any other p rohibitedclassification are absolutely void and

un enforceable, and any attempt toenforce such a restriction or otherwisediscrimin ate in the sale, rental,financing, or p roviding of brokerageservices with regard to residential realprop erty is un lawful. Therefore, VA seesno n eed to continu e to refer to suchun fortunate historical relics in the titleregulations.

Miscellaneous Servicing Procedures

VA is also proposin g to amend 36.4346 which p ertains to servicingprocedures for holders.

VA proposes to amend p aragraph (c)of that section to require the h older to

provid e an annu al statement of interestpaid, and taxes disbursed within 30days following the end of the calendaryear. This rule currently requires suchstatement within 60 d ays of the end ofthe calendar year. This amendment willconform 36.4346 to the requiremen tsof 12 U.S.C. 2601, et. seq., the RealEstate Settlement Procedu res Act(RESPA). Because VA assumes holdersare now comp lying with RESPArequiremen ts, VA does n ot believe thisproposed change will have any imp acton holders.

VA is also proposin g to amend

paragraph (g)(1) of that section. Thatparagraph sets forth minimumcollection actions holders mu stund ertake when a guaranteed loan is indefault. VA is prop osing to delete thecurrent requirement that the holdersend a w ritten notice to any borrower ifa loan installment paymen t is notreceived within 17 d ays after the duedate. The current rule requires that thisnotice be mailed no later than the 20thday of the delinquency.

VA is also prop osing to requirehold ers to send a n ew letter to certain

delinquent borrowers. This new letterwou ld be required to be sent if, withinthe first 6 months following the loanclosing or the execution of amodification agreement under theproposed revision to 36.4314, theborrower is 45 days delinquent on aloan p ayment, or, in the case of anyother default, a payment is 75 days

delinqu ent. This letter mu st be mailedwithin 5 business days after thepayment is d elinquent for the timeperiod stated in the preceding sentence.The letter shall contain at least thefollowing information:

(1) A toll-free telephon e nu mber and ,if available, an e-mail address forcontacting the servicer;

(2) Explain the loss mitigation op tionsthat may be available to the borrow er;an d

(3) Emph asize that the inten t of loanservicing is to retain hom e ownersh ipwhen ever possible.

In addition, this letter must containthe following lan guage:

The d elinquency of your mortgage loan isa serious matter that could result in the lossof your home. If you are the veteran whoseentitlement w as used to obtain this loan, youcan also lose your entitlemen t to a future VAhome loan guaranty. If you are not alreadyworking with us to resolve the delinqu ency,please call us to discuss your w orkoutoptions. You m ay be able to make specialpayment arrangements that will reinstateyour loan . You m ay also qualify for arepayment plan or loan modification.

VA has guaranteed a portion of your loanand w ants to ensure that you receive everyreasonable opportunity to bring your loan

current and retain your home. VA can alsoanswer any questions you h ave regardingyour entitlement. If you have access to theInternet and would like to obtain moreinformation, you may access th e VA Web siteat http://www.va.gov . You ma y also learnwhere to sp eak to a VA Loan Adm inistrationrepresentative by calling 1800 827 1000.

In addition, VA is prop osing to amendthe last sen tence of p aragraph (i)(2) of 36.4346, which concerns proceduresfor wh en a h older learns that theprop erty securing a guaranteed loanmay have been abandoned. Currently,this provision requires that, with respect

to a loan more than 30 days d elinquent,if the hold er confirms that the propertyis abandoned, the h older must so n otifyVA within 15 d ays. VA is proposin g torevise this provision to require thehold er to report to VA within 5 businessdays of confirmin g that the p roperty hasbeen aband oned or subjected toextraordinary waste or hazard, and toimmed iately initiate action to protectthe property and terminate the loan.

Minor editorial and conformingamend ments are also being made to thissection.

Processing Release of Liability

VA is also prop osing to authorize allhold ers or their servicing agent who areauthorized to process loans un der theautomatic processing authority toprocess releases of liability for loansoriginated p rior to March 1, 1988.Auth ority has already been given tothose certain holders or their servicingagents to process releases of liability forloans originating after March 1, 1988.

Paperwo rk Reduction Act of 199 5

Under th e Paperwork Reduction Actof 1995 (44 U.S.C. 35013521), acollection of in formation is set forth inthe provisions of 36.4314, 36.4315a,36.4317, 36.4318, 36.4319, 36.4320,36.4321, 36.4323, 36.4324, and36.4344a.

OMB assigns control nu mbers tocollections of information it ap proves.VA may not conduct or sponsor, and aperson is not required to respond to, a

collection of information u nless itdisplays a curren tly valid OMB controlnumber.

Comments on th e collections ofinformation should be submitted to theOffice of Management an d Budget,Attentio n: Desk Officer for theDepartm ent o f Veteran s Affairs, Officeof Information and Regulatory Affairs,Washington, DC 20503, with copies tothe Director, Regulations Management(00REG1)), Departm ent of VeteransAffairs, 810 Vermont Avenu e, NW.,Washington, DC 20420. Comm entsshou ld ind icate that they are subm itted

in response to RIN 290 0AL65.Title: Loan GuarantyLoan Servicing

and Claims Procedu res Modifications.Sum m ary of Collection of

Information: Under these proposedregulatory amend men ts, partiesservicing VA guaranteed loans m ustcomply w ith the following programchanges (broken down by regulation):

Section 36.4314 Under thissection, VA proposes requirem ents thatloan servicers must apply to processloan mod ifications. Curren t provisionsare ambiguous as to wh en servicers arerequired to process documentation ofloan mod ifications.

Section 36.4315a Proposedchanges to this section wou ld increasethe reportin g burden for (a) currentloans, (b) loss mitigation actions, an d (c)foreclosure alternatives consid ered fordelinquent loans and certain specificloan events (e.g., servicing tran sfer) asthey may occur. While these proposedchanges wou ld most likely result in anincrease in the nu mber of defaults beingreported, du e to chan ges in reportingprocesses attributable to techn ologicaladvances, the current reporting burden



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for 36.4315a(d) with regard to defaultreporting would be reduced from 10minutes per loan to about 1 second p erloan. As a result, the overall burd enimposed by this section w ould besignificantly reduced .

Section 36.4317This sectionprop oses to establish an incentivesystem to en courage servicers to

perform certain loss mitigation andforeclosure avoidance actions in stead ofVA performing these actions.Elimination of the currently-requiredNotice of Intention to Foreclose wou ldeliminate an ann ual reporting burden of15,075 hours.

Section 36.4318This proposedchan ge provid es for the possibletemporary suspension of p ropertyacquisition and claim paym ents, at thediscretion of the Secretary, for certainservicers wh o continu ally fail to providethe loan transfer legal docu men ts to VAin a timely man ner. VA expects toexercise its auth ority to refun d a loanonly infrequently because of proposedchanges discussed elsewhere in thispu blication. Therefore, we estimate thatthere will be a 95% reduction in thenu mber of refund ing cases completedannually. Since the refunding requestcarries certain paperwork burdens,estimated at 5 minutes p er case, weestimate that there will be a net decreasein this burden by 197 hours.

Section 36.4319Proposed changesto this section wou ld result in asignificant reduction in th e reportingand recordkeeping burden to the pu blic.First, under existing requiremen ts, loan

servicers are required to p rovide a copyof all legal notices o r filings to theSecretary in all legal proceedin gs,including bankruptcy and foreclosure.VA proposes to eliminate thisrequirement. In addition, this proposalwould also eliminate the requirementthat a servicer send VA a completed VAFL 26567 in every poten tial loantermination. The net decrease in thepublics reporting and recordkeepingburd en is estimated at just over 26,000hours.

Section 36.4320This sectionprop oses a modification in the w ay in

wh ich servicers may file an election toconvey a prop erty to VA and red ucesthe amou nt of information VA currentlyobtains from a servicer when p ropertiesare conveyed to VA. As a result of thisproposed ch ange, the n et reportingburden would be decreased by 2,500hours annu ally.

Section 36.4321This proposalwould chan ge the manner in wh ichclaims are filed from pap er submissionto electronic data transfer, wou ld redu cethe amount of data and documentationrequired for servicers to file claims, and

would limit the amoun t of time aservicer has to file a claim un derguaranty. This proposal would n otrequire any add itional data collectionbeyond what is currently beingcollected, but wou ld chan ge the transfermedia from p aper to electronic. VAestimates that this change would red ucethe annu al net reporting burden by

22,297 hours. Section 36.4323The proposed

amendmen t to this section wouldextend au thority to servicers who areauthorized to process loans un der theautomatic processing authority toprocess releases of liability for loansoriginated p rior to March 1, 1988. Thechange also allows servicers to collectprocessing fees at the same rate asauthorized for processing releases ofliability for loans originating afterMarch 1, 1988. Current processesrequire servicers to complete andsubmit a statemen t of accoun t to VA on

each case (VA FL 26559). This OMB-app roved form letter carries arespondent burden of 10 minutes. Sincethis form letter will no lon ger berequired, the existing respondentburden w ould be reduced. However,since servicers wou ld have to processreleases of liabilities un der th isprop osal, there w ill be an increasednu mber of occurrences. We estimate anannual increased respond ent burden of2,067 hours.

Section 36.4324Pursuant to theprop osed chan ge to this section, VAwou ld d elegate authority to servicers toprocess partial releases without p rior

VA approval if specific cond itions aremet. Currently, servicers must p rovideVA with p aper copies of all docum entsrequired for VA to make the d ecision.Under the p roposed process, theservicer will not be obtaining andforwarding those docum ents to VAsince the servicer will be making thedecision. In those cases in which th eservicer wou ld have to obtain anappraisal and review and make adecision, there will be a new respondentburd en. We anticipate an increasedannual burden of 160 hours.

Section 36.4344aProposed

changes to this section would exten dauthority to those servicers currentlyauthorized to process originationappraisals un der the Lender Ap praisalProcessing Program (LAPP) to processliquidation app raisals und er the newServicer App raisal Processing Program(SAPP). All requiremen ts curren tly inplace for LAPP will also be in p lace forSAPP. Durin g Fiscal Year 2003 VAprocessed a total of 43,504 liquid ationapp raisals. We estimate that 75% ofthose app raisals (32,628) wou ld be ableto be processed by servicers meeting the

eligibility criteria and estimate theprocessing and rep orting time at onehour p er case. This would result in anestimated annu al burden of 32,628hours.

Description of N eed for Inform ationand Proposed Use of Inform ation: Th ecollections of information are necessaryto meet the program requirem ents for

servicing VA guaranteed h ome loans.Description of Likely Respondents:

Companies who service housing loansguaranteed or insu red by VA.

Estimated Nu m ber of Respondents:150.

Estimated Frequency of Responses:2,539,200.

Estimated Average Burden PerCollection: 1 minute.

Estimated T otal Ann ual Reportingand Record Keeping Burden: 42,320.

The Department considers commentsby the public on prop osed collections ofinformation in

Evaluating whether the proposedcollections of information are necessaryfor the prop er performance of thefunctions of the Departmen t, includ ingwhether the information will havepractical utility;

Evaluating the accuracy of theDepartments estimate of the burd en ofthe prop osed collections of information,includ ing the validity of themethodology and assumptions used;

Enhancin g the quality, usefulness,and clarity of the information to becollected; an d

Minimizing the burd en of thecollections of information on those wh o

are to respond , including through theuse of appropriate automated,electronic, mechanical, or othertechnological collection techn iques orother forms of information techn ology,e.g., permitting electronic submission ofresponses.

Unfunded Mandates

The Unfun ded Man dates Reform Actrequ ires, at 2 U.S.C. 1532, that agenciesprep are an assessment of anticipatedcosts and ben efits before developing anyrule that may result in an expenditureby State, local, or tribal governments, in

the aggregate, or by the private sector, of$100 million or more in any given year.This final rule would have no sucheffect on State, local, or tribalgovernments, or the p rivate sector.

Executive Order 12866

This document h as been reviewed bythe Office of Management an d Bud getun der Executive Order 12866.

Regulatory Flexibility Act

The Secretary h ereby certifies thatthis proposed rule would n ot have a



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significant economic imp act on asubstantial nu mber of small entities asthey are defined in the RegulatoryFlexibility Act, 5 U.S.C. 601612. Thevast majority of VA loans are servicedby very large finan cial compan ies. Onlya han dful of small entities service VAloans and they service only a very smallnu mber of loans. This proposal, which

only impacts veterans, other individualsobligors with guaran teed loans, andcomp anies that service VA loans, willhave very minor imp act on a very smallnu mber of small entities servicing suchloans. Therefore, pursu ant to 5 U.S.C.605(b), the proposed ru le is exemp tfrom the in itial and final regulatoryflexibility analysis requiremen ts ofsections 603 and 604.

The Catalog of Federal DomesticAssistance Program n um ber is 64.114.

List of Subjects in 38 CFR Part 36

Condominiums, Handicapped ,

Housing, Ind ians, Ind ividuals withdisabilities, Loan p rograms-hou sing andcommunity development, Loanprograms-Ind ians, Loan p rograms-veterans, Manufactured homes,Mortgage insuran ce, Reporting andrecord keepin g requirements, Veterans.

Approved: March 1, 2004.

Anthony J. Principi,

Secretary of Veterans A ffairs.

Editorial Note: This document wasreceived at t he Office of the Fed eral RegisterFebruary 14, 2005.

For the reasons set out in thepreamble, 38 CFR part 36 is prop osed tobe amend ed as set forth below.

PART 36LOAN GUARANTY

1. The auth ority citation for part 36continu es to read as follows:

Authority: 38 U.S.C. 501, 37013704, 3707,37103714, 3719, 3720, 3729, 3762, un lessotherwise noted.

2. Section 36.4301 is amend ed by:A. Addin g the term Compromise

sale.B. Revisin g the term Holder (the

authority citation remains unchanged).C. Add ing a sentence at the end of the

term Liquidation Sale.D. Removing the term Specified

amount.E. Add ing the term Total

Indebtedness.The revisions and additions read as

follows:

36.4301 Definitions.

* * * * *Compromise sale. A sale to a third

party for an amoun t less than issufficient to repay the un paid balanceon the loan wh ere the holder has agreed

in ad vance to release the lien inexchange for the proceeds of such sale.

* * * * *Holder. The lender or any subsequent

assignee or transferee of the guaranteedobligation or the au thorized servicingagent (also referred to as the servicer)of the lend er or of the assignee ortransferee.

* * * * *Liquidation sale. * * * Th is ter m also

includes a compromise sale.

* * * * *Total indebtedness: For purposes of

38 U.S.C. 3732(c), the veter ans totalindebtedness shall be the sum of: theun paid principal on the loan as of thedate of the liquid ation sale, accruedun paid interest permitted by 36.4321(a), and fees and chargespermitted to be included in the guarantyclaim by 36.4313.

* * * * *3. Section 36.4311 is amend ed by

revising paragraph (c) to read as follows.The auth ority citation followin gparagraph (c) remains unchanged.

36.4311 Interest rates.

* * * * *(c) Except as provided in 36.4314,

interest in excess of the rate reported bythe lender w hen requesting evidence ofguaranty or insurance shall not bepayable on any advan ce, or in the eventof any delinquen cy or default: Provided,that a late charge not in excess of anamount equal to 4 percent on anyinstallment paid m ore than 15 days after

du e date shall not be considered aviolation of this limitation.

* * * * *4. Section 36.4313 is amend ed by:A. Revising paragrap h (b)(5).B. Addin g paragraph (f).The revision and addition read as

follows:

36.4313 Advances and other charges.

* * * * *(b) * * *(5)(i) Fees for legal services actu ally

performed, not to exceed the reasonableand customary fees for such services inthe State where the prop erty is located,as determined by the Secretary.

(ii) In d etermining wh at constitutesthe reasonable and customary fees forlegal services, the Secretary shall reviewallowances for legal fees in conn ectionwith the foreclosure of single-familyhousing loans, including bankrup tcy-related services, issued by HUD, FannieMae, and Fred die Mac. The Secretaryshall publish annually in the FederalRegister a table setting forth th eamounts determined to be reasonableand customary for such fees.

(iii) In n o event may th e combinedtotal paid for legal fees und er paragraph(b)(5)(i) of this section and trustees feespu rsuant to paragraph (b)(4) of thissection exceed the app licable maximu mallowance for legal fees establishedun der paragraph (b)(5)(ii) of this section.

* * * * *(f)(1) Fees and charges otherwise

allowable by this section that accrueafter the d ate specified in paragraph(f)(2) of this section may n ot be inclu dedin a claim un der the guaranty.

(2) The d ate referenced in paragraph(f)(1) of this section will be com pu ted byadd ing to the date of the first un cureddefault the reasonable period that theSecretary has determined, pursuant to 36.4319a(a) of this p art, it should havetaken to complete the foreclosure, plus180 days. There will also be added tothe time period specified in theprevious sentence such add itional timeas the Secretary determines was

reasonably necessary to complete theforeclosure if the Secretary determin esthe holder w as unable to complete theforeclosure with in the tim e specified inthat section due to Bankru ptcyproceedin gs, app eal of the foreclosureby the debtor, the holder grantingforbearance in excess of 30 days at th erequest of the Secretary, or other factorsbeyond th e control of the hold er.

(Authority: 38 U.S.C. 3703(c))

5. Section 36.4314 is revised to readas follows:

36.4314 Loan modifications.

(a) Subject to the p rovisions of thissection, the terms of any guaranteedloan may be mod ified by writtenagreement between the holder and theborrower, without p rior approval of theSecretary, if all of the followingconditions are met:

(1) The loan is in d efault or default isimminent.

(2) The event or circum stances thatcaused th e default has been or will beresolved and it is not expected to re-occur.

(3) The obligor is consid ered to be areasonable credit risk, based on a reviewby the h older of the obligorscreditworthiness under the criteriaspecified in 36.4337, includ ing acurrent cred it report. The fact of therecent default will not preclud e thehold er from determinin g the obligor isnow a satisfactory credit risk providedthe hold er determines that the obligor isable to resum e regular mortgageinstallments when the modificationbecomes effective based u pon a reviewof the obligors current and anticipatedincome, expenses, and oth er obligationsas provided in 36.4337.



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(4) At least 12 mon ths mu st haveelapsed since th e closing date of theloan.

(5) The current own er occupies theprop erty securin g the loan and isobligated to repay the loan .

(6) All current own ers of the p ropertyare parties to, and have agreed to theterms of, the loan mod ification.

(7) The loan w ill be reinstated toperforming status by virtue of the loanmodification.

(b) A loan can be mod ified n o morethan once in a 3-year period and nomore than three times durin g the life ofthe loan.

(c) All modified loans mu st bear afixed-rate of interest, which may n otexceed the lesser of

(1) A rate wh ich is 100 basis poin tsabove the interest rate in effect on th isloan just prior to the execution of themod ification agreement, or

(2) The Governmen t National

Mortgage Association (GNMA) currentmon th coup on rate that is closest to par(100) in effect at the close of bu sine ss onthe business day immediately precedingthe d ate the modification agreement isexecuted by the obligor plus 50 basispoints.

(d) The unp aid balance of themod ified loan m ay be re-amortized overthe remain ing life of the loan. The loanterm may extend the matu rity date tothe shorter of

(1) 360 month s from the due d ate ofthe first installment required under themod ification, or

(2) 120 mon ths after the original

maturity date of the loan.(e) Only un paid p rincipal, accrued

interest, and d eficits in the taxes andinsurance impound accounts may beincluded in the modified in debtedness.Late fees and other charges may n ot becapitalized.

(f) Holders will en sure th e first lienstatus of the modified loan. No currentown er of the p roperty will be releasedfrom liability as a result of executing themodification agreement without priorapp roval from VA. Releasing a currentown er obligor from liability withou tprior ap proval w ill release the Secretary

from liability und er the guaranty.(g) The dollar amou nt of the guaranty

may n ot exceed the greater of theoriginal guaranty amou nt of the loanbeing modified or 25 percen t of the loanbeing modified su bject to the statutorymaximu m sp ecified at 38 U.S.C.3703(a)(1)(B).

(h) The obligor may n ot receive anycash back from the mod ification.

(Authority: 38 U.S.C. 3703(c)(1))

6. Section 36.4315 is revised to readas follows:

36.4315 Acceptability of partialpayments.

A partial paymen t is a remittance ona loan in d efault (as defined in 36.4301) of any amoun t less than th efull amount d ue un der the terms of theloan and security instruments at thetime the remittance is tendered .

(a) Except as p rovided in p aragraph

(b) of this section, or up on th e expresswaiver of th e Secretary, the mortgageholder shall accept any partial paymentand either app ly it to the mortgagorsaccount or identify it with th emortgagors account and hold it in aspecial account p ending d isposition.When p artial payments held fordisp osition aggregate a full month lyinstallment, includ ing escrow, theyshall be app lied to the mortgagorsaccount.

(b) A partial paymen t may be returnedto the mortgagor, within 10 calendardays from d ate of receipt of such

paym ent, with a letter of explan ationonly if one or more of the followingconditions exist:

(1) The p roperty is wh olly or partiallytenant-occupied and rental paymentsare not being remitted to the h older forapp lication to the loan account;

(2) The p ayment is less than on e fullmonthly installment, including escrowsand late charge, if applicable, unless thelesser payment amou nt has been agreedto under a documented repayment plan;

(3) The p ayment is less than 50percent of the total amount then d ue,un less the lesser payment amoun t hasbeen agreed to und er a documentedrepayment plan;

(4) The paym ent is less than th eamount agreed to in a documentedrepayment plan;

(5) The amount tend ered is in theform of a personal check and the hold erhas p reviously notified the mortgagor inwriting that on ly cash or certifiedremittances are acceptable;

(6) A delinqu ency of any amoun t hascontinu ed for at least 6 months since theaccount first became delinquent and nowritten repayment plan h as beenarranged;

(7) Foreclosure has been comm enced

by the taking of the first action requ iredfor foreclosure un der local law; or

(8) The h olders lien position wouldbe jeopard ized by acceptance of thepartial payment.

(c) A failure by th e hold er to comp lywith th e provisions of this paragraphmay resu lt in a p artial or total loss ofguaranty or insurance p ursuant to 36.4325(b), but such failure shall n otconstitute a d efense to any legal actionto terminate the loan.

(Authority: 38 U.S.C. 3703(c)(1))

7. Section 36.4315a is added to readas follows:

36.4315a Servicer reportingrequirements.

(a)(1) Servicers of loans guaranteed bythe Secretary shall report theinformation required by th is section tothe Secretary electronically. The

Secretary shall assign a useridentification and p assword for accessto each entity currently servicing loansguaranteed u nd er 38 U.S.C., chapter 37on [effective date of final rule to beinserted]. Each rep ort to the Secretaryrequired by this section shall includ ethe VA-assigned Servicer IdentificationNumber.

(2) Any oth er servicer may app ly fora Servicer Iden tification Num ber andpassword by following the procedu res athttp://www.homeloans.va.gov.

(b) Not later than the fifth businessday of each m onth each servicer shallreport to the Secretary the followinginformation for each loan guaranteed bythe Secretary curren tly being servicedby that entity:

(1) The VA loan nu mber;(2) The ser vicers loan nu mber;(3) The original veteran s name and

social security num ber;(4) The un paid p rincipal balance; and(5) The next paym ent du e date.(c) Servicers shall report to th e

Secretary within five business d ays afterany of the following events occur:

(1) Transfer of servicing;(2) Loan is assumed by an other party;(3) An obligor has been released from

liability;(4) Property taxes and hazard

insurance has been paid;(5) Loans have been mod ified

pursuant to 36.4314;(6) Any obligor on th e loan requests

or is deemed to be entitled to relief withregard to the loan un der theServicemembers Civil Relief Act;

(7) Any obligor files a petition u nd erthe Bankruptcy Code, and when anysignificant events imp acting theguaranteed loan or th e security thereforeoccurs in a pend ing bankruptcy,includ ing but not limited to a contested

action, the approval of a plan, anyhearing on relief from the au tomaticstay, the granting of a discharge to thedebtor, dismissal of the bankru ptcycase, and other orders of the court;

(8) The h older receives notice of anylegal, equitable, or ad min istrativeproceedin g that m ight materially affectthe termination of the loan, the lien, orthe security for the loan;

(9) The h older has released the lien ona part of the security for the loanpursuant to 36.4324; or

(10) The loan h as been paid in full.



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(d) The holder shall report to theSecretary within 5 bu siness days afterany loan has been delinqu ent for 61days. This report will inclu de the:

(1) Information specified inpar agraph s (b)(1) throu gh (b)(3) of thissection;

(2) Date of first paymen t on the loan;(3) Date of last unp aid installmen t;

(4) Names an d social securitynu mbers of present own ers of theproperty;

(5) Mailing address of present ow nersif different from the p roperty;

(6) Current or last known add ress ofthe original veteran;

(7) Interest rate on the loan ;(8) Amou nt and details of the current

required installment; i.e., how much isallocated for principal and interest, howmuch for taxes, how m uch forinsurance, and how m uch for any otherpurpose;

(9) Late charges d ue;

(10) Total delinquen cy amoun t, andhow mu ch is allocated for each itemspecified in p aragraph (d)(8) of thissection;

(11) Sum mary of servicing actionstaken since the loan went into default,includ ing dates of actions, actionstaken, and d escription of results orresponses by obligors;

(12) Property occup ancy status;(13) Dates of property in spections an d

the results and find ings of suchinspections;

(14) Income and credit information forall curren t obligors;

(15) Obligors contact information,

including home and work phon enu mbers and e-mail addresses, ifknown; and

(16) Reason (s) the obli gor(s) defau lted.(e)(1) With resp ect to any default

reported pursuant to paragraph (d) ofthis section, the servicer shall provideup dates to the Secretary within fivebusin ess days after any of the followin gevents occur:

(i) Contact with th e borrower;(ii) Default cured;(iii) A repayment p lan is und er

consideration by th e servicer;(iv) A repaymen t plan h as been

den ied by the servicer;(v) A repaymen t plan h as beenapp roved by the servicer;

(vi) A partial paym ent h as beenreturned to the borrower;

(vii) A loan mod ification is un derconsideration by th e servicer;

(viii) A loan m odification has beenden ied by the servicer;

(ix) A loan m odification has beenapp roved by the servicer;

(x) The servicer determin es the loandefault is insoluble;

(xi) The servicer consid ers, denies, orapp roves any other loss mitigationoptions defined in 36.4317 of this part;

(xii) The servicer referred the loan tolegal cou nsel for foreclosure;

(xiii) The date of a judicial foreclosureproceedin g or a liquidation sale hasbeen set;

(xiv) The liquid ation sale was held;

an d(xv) Any oth er event or occurrence

that m aterially affects the loan or thesecurity prop erty over the course ofservicing the default.

(2) Such rep ort shall include theinformation specified in paragraphs(b)(1) throu gh (b)(3) of this sectio n, p lusa brief description of the event or actiontaken, the date such action w as taken orevent occurred, a statement of thereasons wh y the holder approved orrejected a p articular course of action,the results of any contact with th eobligor, judicial proceedin g, the terms of

any repayment plan or loanmod ification, and any other materialfact concernin g such event oroccurrence.

(f) When the hold er determines thatequity of at least 25% exists (see 36.4319a(e)), the h older sh all report itsequity calculations to the Secretary atleast 5 busin ess days prior to theforeclosure d ate. The equity calculationswill inclu de the fair market value of theproperty, the total indebtedness on theloan guaranteed by th e Secretary, andthe un paid balan ce of all other liens ofrecord on the property.

(g) The servicer shall report to theSecretary not later than 15 calendardays after the liquidation sale was h eld.Such report shall include theinformation specified in paragraphs(b)(1) throu gh (b)(3) of this sectio n, p lusa brief description of the results of thesale, includ ing the amoun t of saleproceeds, whether the h older acquiredthe prop erty, and , if the hold er acquiredthe property, whether the holder electsto convey the p roperty to the Secretarypu rsuant to 36.4320.

(Authority: 38 U.S.C. 3703(c))

8. Section 36.4316 is revised to read

as follows:

36.4316 Servicer Tier RankingTemporary Procedures.

(a) The Secretary shall assign eachservicer to a Tier Rankin g based up onthe servicers performance in servicingguaranteed loans. There sh all be fourtiers, known as tier one, tier two, tierthree, and tier four, with tier one bein gthe highest rated and tier four thelow est. Effective July 1, 2005, everyservicer of loans guaranteed by the

Secretary shall be presu med to be inservicer tier two, and sh all remain intier two un til the date specified inparagraph (c)(2) of this section.

(b) For pu rposes of this section, theterm calendar quarter shall mean the3-month periods ending on March 31,Jun e 30, September 30, and December31 .

(c)(1) No later than 30 d ays after thelast business d ay of the first calendarquarter occurrin g after the ru les fordetermin ing tier rankin gs take effect,and th en not later than 30

federal register /vol. 70, no. 33 / friday, february 18, 2005 / proposed rules

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