Department of Veterans Affairs: Loan Guarantee: Revisions to Home Refinance Loans with VA Guaranteed or Insured Withdrawal




January 2, 2019

The Honorable Johnny Isakson
The Honorable Jon Tester
Ranking Member
Veterans Committee
United States Senate

The Honorable Phil Roe, MD
The Honorable Tim Walz
Ranking Member
Veterans Committee
House of Representatives

Matter: Department of Veterans Affairs: Loan Guarantee: Revisions to Home Refinance Loans with VA Guaranteed or Insured Withdrawal

Pursuant to Section 801 (a) (2) (A) of Title 5, United States Code, this is our report on a major rule promulgated by the Department of Veterans Affairs (VA) titled “Loan Guarantee: VA Revisions- Guarantee or Home Refinance Loans with Insured Withdrawal “(RIN: 2900-AQ42). We received the settlement on December 19, 2018. It was published in the Federal Register as an interim final rule on December 17, 2018. 83 Fed. Reg. 64 459. The effective date of the Interim Final Rule is February 15, 2019.

The interim final rule changes the rules on guaranteed or VA-insured cash refinance loans. The Economic Growth, Regulatory Relief, and Consumer Protection Act requires the VA to promulgate regulations governing cash refinancing loans. This interim final rule sets out the parameters for when VA will authorize cash refinance loans, including defining net tangible benefits, payback, and seasonality requirements.

The Congressional Review Act (CRA) requires a 60-day period for the effective date of a major rule from the date of publication in the Federal Register or receipt of the rule by Congress, whichever is later. 5 USC § 801 (a) (3) (A). This final rule was published in the Federal Register December 17, 2018. 83 Fed. Reg. 64 459. We received the settlement on December 19, 2018. The Congress Record does not indicate when it was received by either chamber of Congress. The effective date shown is February 15, 2019. Therefore, the final rule does not have the 60-day period required for its effective date.

Attached is our assessment of VA’s compliance with the procedural steps required by Section 801 (a) (1) (B) (i) through (iv) of Title 5 in relation to the rule. If you have any questions about this report or would like to contact the GAO officials responsible for the assessment work relating to the purpose of the rule, please contact Shirley A. Jones, Deputy General Counsel, at (202) 512-8156 .


Julia C. Matta

Associate Legal Director


cc: Jeffrey M. Martin
Deputy Director, Regulatory Office
Policy and management
Department of Veterans Affairs




Veterans Affairs Department

“Loan Guarantee: VA Guarantee Revisions
or home refinancing loans with guaranteed cash flow ”

(RIN: 2900-AQ42)

(i) Cost-benefit analysis

The Department of Veterans Affairs (VA) said that under the interim final rule, some veterans will no longer be able to obtain Type II cash loans as they previously did. VA also estimated that lenders would incur no more than $ 5.12 million in lost annual net production income from a reduced amount of Type I withdrawal refinances and no more than $ 50.21 million. dollars in annual net production revenue losses from Type II withdrawal refinances due to the rule. VA further stated that he estimated that he would see a mandatory cost program cost impact of $ 96.7 million for FY2019 through FY2021 due to the reduction in fundraising fees generated. by the decrease in the total of withdrawal refinancing.

VA said the interim final rule will ensure that veterans are well informed during the loan process and are not financially disadvantaged in taking the loan. Additionally, VA has stated that VA withdrawal loans will be of higher quality because all withdrawal loans will be in the financial interest of the borrower, resulting in fewer defaults and more competitive interest rates. for veteran borrowers because VA loans will be levied. as less risky. With respect to providers, VA says the interim final rule incorporates the appropriate mix of benefit utilization, lender compliance, and veteran financial benefits, which improves the overall integrity of the program to enable growth. and future sustainability. VA further states that the Interim Final Rule will create a level playing field among lenders.

(ii) Agency actions relating to the Regulatory Flexibility Act (RFA), 5 USC §§ 603-605, 607 and 609

VA said the RFA requirements do not apply because the secretary waived the notice and comment procedures.

(iii) Agency actions regarding sections 202-205 of the Unfunded Mandates Reform Act 1995, 2 USC §§ 1532-1535

VA says the interim final rule will not require spending of $ 100 million or more by state, local and tribal governments, or on the private sector.

(iv) Other relevant information or requirements under laws and decrees

Administrative Procedure Act, 5 USC §§ 551et seq.

VA has stated that it is invoking Section 309 (a) (2) of the Economic Growth, Regulatory Relief and Consumer Protection Act, Pub. L. No. 115-174, to waive the notice and comment procedures of 5 USC §§ 551-59 when the secretary determines that urgent or compelling circumstances make compliance with these requirements impractical or contrary to the public interest. VA said it was doing so because of concerns about a small group of lenders continuing to exploit legislative and regulatory loopholes, constraints in the availability of program liquidity, and lenders’ uncertainty about how to implement. a responsible refinancing program. VA also noted that the standard under Section 309 is separate from the more generally applicable “just cause” exception under the APA.

Red Tape Reduction Act (PRA), 44 USC §§ 3501-3520

VA said the interim final rule contains a collection of information that has been submitted to the Office of Management and Budget (OMB) for approval. VA estimated that collection would place a total annual burden of 12,906 hours on lenders to complete collection at a total annual cost of $ 483,458.76. VA also estimates that the collection would impose a one-time technology cost of $ 1,266,366.

Legal authorization of the rule

VA claims to have promulgated the Interim Final Rule under 38 USC §§ 501, 3720.

Executive Decree No. 12 866 (Planning and Revision of Regulations)

VA said the OMB has reviewed the interim final rule and that the regulatory impact assessment accompanies the rule.

Executive Decree No. 13 132 (Federalism)

The interim final rule does not deal with the order.


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