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of the Secretary under the guaranty on the entire loan. However, if such release of liability of an obligor results through operation of law by reason of an extension or other act of forbearance, the liability of the Secretary as guarantor will not be affected thereby, Provided, The required lien is maintained and the title holder is and will remain liable for the payment of the indebtedness: And further provided, That if such extension or act of forbearance will result in the release of the veteran, all delinquent installments, plus any foreclosure expenses which may have been incurred, shall have been fully paid.

(d) The holder shall promptly forward to the Secretary an advice of the terms of any agreement effecting a amortization or extension of a guaranteed loan, together with cop(y)(ies) of the credit report(s) obtained on the debtor(s). (Authority: 38 U.S.C. 3712) (36 FR 1253, Jan. 27, 1971, as amended at 53 FR 34295, Sept. 6, 1988]

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$36.4280 Reporting of defaults.

The holder of any guaranteed loan shall give notice to the Secretary within 15 days after any debtor:

(a) Is in default by reason of nonpayment of two full installments; or

(b) Is in default by failing to comply with any other covenant or obligation of such guaranteed loan which failure persists for a continuing period of 60 days after demand for compliance therewith has been made, except that if the default is due to nonpayment of real estate taxes, the notice shall not be required until the failure to pay when due has persisted for a continuing period of 120 days.

(c) In the event any failure of the months or for more than 1 month on an extended loan, the holder may then or thereafter give the notice in the manner described in paragraph (e) of this section.

(d) The notice prescribed in paragraph (e) of this section may be submitted prior to the time prescribed in paragraph (c) of this section in any case where any material prejudice to

etermine how its VA delinand foreclosure rates compare tes in various reports published industry, investors and others;

nalyze significant variances bets foreclosure and delinquency nd those found in available rend publications and take approorrective action. Iolders shall provide available cal data on delinquency and jure rates and their analysis of ata to the Secretary upon re

pd by the Office of Management and inder Control Number 2900–0530) 0114, May 19, 1993]

9 Extensions and reamortiza

ns.

'rovided the debtor(s) is (are) a able credit risk(s), as determined holder based upon review of the r's (s') creditworthiness, includreview of a current credit re) on the debtor(s), the terms of nent of any loan may, by written nent between the holder and (8), be extended in the event of , to avoid imminent default, or other case where the prior apof the Secretary is obtained. Exith the prior approval of the Seci no such extension shall set a I amortization less than that sufto fully amortize at least 80 perof the loan balance so extended

the maximum maturity prei for loans of its class. in the event of a partial prepaypursuant to g 36.4211, the balance indebtedness may, by written nent between the holder and the Ms), be reamortized, provided the Irtization schedule will result in epayment of the loan within the hal maturity, and provided the IT() is (are) a reasonable credit 3), as determined by the holder | upon review of the debtor's (s') worthiness, including a review of rent credit report(s) on the debt

Unless the prior approval of the tary has been obtained, any exin or reamortization agreed to by lder which relieves any obligor liability will release the liability

(6) Documentation of the 1 records. [36 FR 1253, Jan. 27, 1971, as amerd FR 29116, May 19, 1993)

$36.4281 Refunding of loans in

Upon receiving a notice of defa Secretary may at any time prior termination of the borrower's i in the property require the holde penalty of otherwise losing the anty to transfer and assign th and the security therefor to th retary or to another designated 1 or her upon receipt of payment balance of the indebtedness rem unpaid to the date of such assigi Such assignment may be made w recourse but the transferor sha thereby be relieved from the pro of 836.4286. [36 FR 1253, Jan. 27, 1971, as amende FR 37474, Sept. 12, 1990]

the rights of the holder or to the Secretary or hazard to the security warrants more prompt action.

(e) Except upon the express waiver of the Secretary, a holder shall not begin proceedings in court or give notice of sale under power of sale, repossess the security, or accelerate the loan, or otherwise take steps to terminate the debtor's rights in the security until the expiration of 30 days after delivery by certified mail to the Secretary of a notice of intention to take such action; provided, that immediate action as required under 38 CFR 36.4278(i) may be taken if the property to be affected thereby has been abandoned by the debtor, or has been or may be otherwise subjected to extraordinary waste or hazard.

(f) The notice required under subparagraph (e) of this paragraph shall also be provided to the original veteran-borrower and any other liable obligors by certified mail within 30 days after such notice is provided to the Secretary in all cases in which the current owner of the property is not the original veteran-borrower. A failure by the holder to make a good faith effort to comply with the provisions of this subparagraph may result in a partial or total loss of guaranty pursuant to VA Regulation 36.4286(b), but such failure shall not constitute a defense to any legal action to terminate the loan. A good faith effort will include:

(1) A search of the holder's automated and physical loan record systems to identify the name and current or last address of the original veteran and any other liable obligors;

(2) A search of the holder's automated and physical loan record systems to identify sufficient information (e.g., Social Security Number) to perform a routine trace inquiry through a major consumer credit bureau;

(3) Conducting the trace inquiry using an in-house credit reporting terminal;

(4) Obtaining the results of the inquiry;

(5) Mailing the required notices and concurrently providing the Secretary with the names and addresses of all obligors identified and sent notice; and

$36.4282 Legal proceedings (not

repossession). (a) When the holder institutes s otherwise becomes a party in any or equitable proceeding brought in connection with the guarante debtedness, or involving title other lien on, the security, such 1 within the time that would be re if the Secretary were a party proceeding, shall deliver to the retary, by mail or otherwise, by ing such delivery to the loan gu officer at the office which grant guaranty, or other office to whic holder has been notified the 1 transferred, a copy of every prodi paper filed on behalf of holder shall also so deliver, as prompt possible, a copy of each similar ing served on holder or filed : cause by any other party theret tice of, or motion for, continuan orders thereon are excepted fro foregoing.

(b) A copy of a notice of sale power by a holder or one acting or her behest (e.g., trustee or pub ficial) shall be similarly deliver the Secretary at or before the d first publication, posting, or oth tice, but in any event, except in gency or when waived by the retary, not less than 10 days pri

I sale. Copy of any other notice amount for legal services, against the served on the holder or of which guaranteed indebtedness, or the proshe has knowledge shall be simi- ceeds of the sale of the security to the delivered to the Secretary, in- same extent as the holder (see 836.4276), 8 any such notice of sale under or otherwise collect from the holder other superior lien or any judi- any such expenses incurred by the Secle.

retary because of the neglect or failure The procedure prescribed in para- of the holder to take or complete prop(a) and (b) of this section shall er action. The rights and remedies applicable in any proceeding to herein reserved are without prejudice the Secretary is a party, after to any other rights, remedies, or decretary's appearance shall have fenses, in law or in equity, available to ntered therein by a duly author

the Secretary. torney.

(g) The holder, no later than 10 days In any legal or equitable pro- after it has repossessed a property, g (including probate and bank- must advise the Secretary of such reproceedings) to which the Sec- possession. The holder shall proceed is a party, original process and

thereafter, within a reasonable time ther process prior to appearance,

after repossession, to terminate the to be served on the Secretary, debtors' rights in the property. If it is be delivered to the loan guaranty

a legal requirement or if the Secretary r of the office of the Department requires that the debtors' rights be terterans Affairs having jurisdiction minated by public sale, the holder shall area in which the court is situ- follow the procedures set forth in paraWithin the time required by ap

graph (b) of this section. Otherwise, the ble law, or rule of court, the Sec- holder shall proceed in the manner set y will cause appropriate special or

forth in $36.4283(f). al appearance to be entered in the

[36 FR 1253, Jan. 27, 1971, as amended at 47 by the Secretary's authorized at- FR 12965, Mar. 26, 1982; 53 FR 34296, Sept. 6, V.

1988] After appearance of the Secretary orney, all process and notice oth- $36.4283 Foreclosure or repossession. proper to serve on the Secretary (a) Upon receipt by the Secretary of or after judgment, if served on notice of a judicial or statutory sale, or cretary's attorney of record shall other public sale under power of sale the same effect as if the Sec- contained in the loan instruments, to 1 were personally served within liquidate any security for a guaranteed risdiction of the court.

loan, the Secretary may specify in adI following a default the holder

of such sale the minimum lot begin appropriate action with- amount which shall be credited to the lays after requested in writing by indebtedness of the borrower on ecretary to do so, or does not count of the value of the security to be ute such action with reasonable sold, subject to the provisions of parance, the Secretary shall have the graphs (a)(1), (2), (3), and (4) of this seca to intervene in, or begin and tion: cute to completion any action or (1) If a minimum amount has been eding, in the Secretary's name or specified in relation to a sale of the le name of the holder, which the property and the holder is the successstary deems necessary or appro- ful bidder at the sale for an amount not e, and may fix a date beyond in excess of such specified amount the h no further charges may be in- holder shall dispose of the property in d in the computation of the guar- the manner set forth in paragraph (f) claim. The Secretary shall pay, in and the amount realized from the reIce if necessary, any court costs sale of the property shall govern in the her expenses incurred by the Sec- final accounting for determining the y, or properly taxed against the rights and liabilities of the holder and tary, in any such action to which the Secretary. Secretary is a party, but may (2) If a minimum amount has been e the same, and also a reasonable specified by the Secretary and:

vance

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(i) A third party is the successful bidder at the sale for an amount equal to or in excess of that specified, the holder shall credit to the indebtedness the net proceeds of the sale.

(ii) A third party is the successful bidder at the sale for an amount less than that specified, the holder shall credit to the indebtedness the amount specified less expenses allowable under 8 36.4276.

(iii) The holder is the successful bidder at the sale for an amount in excess of the specified amount the indebtedness shall be credited with the net proceeds of the sale or an amount established in accordance with paragraph (f) of this section, whichever is the greater, unless the bid in excess of the specified amount was made pursuant to paragraph (d) of this section.

(3) If a minimum amount has not been specified by the Secretary under paragraph (a)(1) or (2) of this section, and the Secretary advised the holder that it did not intend to specify an amount, and the property is purchased at the sale by a third party, the holder shall credit against the indebtedness the net proceeds of the sale except as provided in paragraph (d) of this section. However, if the property is purchased at the sale by the holder, the indebtedness will be credited with the net proceeds of the sale or an amount established in accordance with paragraph (f) of this section, whichever is greater.

(4) The holder shall notify the Secretary of the results of the sale within 10 days after the sale is completed.

(b) In the event that any real property which is security for a guaranteed loan is to be acquired by a holder in a manner other than as provided in paragraph (a) or (c) of this section (e.g., by strict foreclosure or by the termination without a public sale of the purchaser's interest in a land sale contract), the holder shall notify the Secretary of the acquisition within 15 days thereafter and account to the Secretary for the proceeds of the liquidation of the security in accordance with paragraph (f) of this section.

(C) When a debtor proposes to convey or transfer any property to a holder to avoid foreclosure or other judicial, contractual, or statutory disposition of

the obligation or of the security, consent of the Secretary to the ter of such proposal shall be obtained advance of such conveyance or trii fer. If the Secretary consents there the holder may acquire the prope and account to the Secretary for proceeds of the liquidation of the so rity in accordance with paragraph (11 this section.

(d) If a minimum bid is requis under applicable State law, or decree foreclosure or order of sale, or ot] lawful order or decree, the holder ni bid an amount not exceeding su amount legally required. If an amou has been specified by the Secretary a the holder is the successful bidder an amount not exceeding the amor legally required, such specified amou shall govern for the purpose of this si tion.

(e) If the Secretary has specified amount as provided in this section, a the holder learns of any material da age to the property occurring prior the foreclosure sale or to the accej ance of a deed in lieu of foreclosure prior to any other event to which su specified amount is applicable, t holder shall promptly advise the Se retary of such damage. Also, if t holder acquires or repossesses the pro erty and the holder learns of any ma rial damage to it, the holder sh: promptly advise the Secretary of su damage.

(f) When the security for a guara teed loan is acquired by the hold through foreclosure or otherwise, t holder shall resell the property with a reasonable time and may thereaft submit its claim under the guarant The Secretary, upon receipt of a noti of acquisition, shall determine the cu rent reasonable value of the proper and advise the holder of the minimu selling price that will be acceptable any accounting with the Secreta upon liquidation of the security.

(1) If the holder resells the proper for an amount at least equal to t. minimum selling price, it shall cred the indebtedness with the proceeds the sale.

(2) If the holder is unable to rese the property for an amount at lea equal to the minimum selling pri

posure to the market for a rea- demnity agreement is in the best interperiod of time, the holder may est of the Government, and the holder to the Secretary a written ad- has obtained the prior approval of the ting forth the price, terms, con- Secretary; and expenses of any offer re- (B) The terms of repayment of the The Secretary shall thereupon: proposed loan bear a proper relationsent to the resale of the prop- ship to the borrower's present and anpon the terms of such offer, in ticipated income and expenses, and the event the holder will credit the borrower is a satisfactory credit risk; dness with the proceeds of the (C) The borrower executes an agree

ment establishing liability to the SecReview the minimum selling retary for the amount of any claim reviously established and, if ap- paid under the indemnity agreement; ite, provide the holder with a re- (D) The term of the proposed loan minimum selling price at which does not exceed the maximum term aloperty shall be further exposed lowable under $36.4204(c)(4); market.

(E) The interest rate charged the borthe holder resells the property rower does not exceed the maximum hances the sale under the terms

rate allowable under $36.4212 as of the ew security agreement and note,

date of closing pursuant to the indemscretary may, pursuant to para

nity agreement; (1)(3)(iv) of this section, agree to

(F) The holder agrees to comply with nify the holder against loss on

VA manufactured home regulations as ew loan.

if the original loan had not been termiThe Secretary's maximum liabil

nated. under the indemnity agreement be the percentage of the loan

(Authority: 38 U.S.C. 3712(g)) nally guaranteed applied to the indness as of the date of claim com

(4) If the holder has not resold the ion as set forth in $36.4284(a), or property, it may elect to submit its mount originally guaranteed, or

claim under Loan Guaranty within 60 mount of the Secretary's liability

days of the date of the Secretary's a preexisting indemnity agree- written advice of the minimum selling , whichever is less.

price. In the event the proceeds of sale (i) For purposes of computation of a ess than the total indebtedness,

claim submitted pursuant to this paraecretary may pay a partial claim graph, and subject to the limitation he difference between the indebt

that the maximum amount of claim s and the proceeds of sale and

payable shall in no event exceed the after agree to indemnify the hold- amount originally guaranteed, the the amount of the maximum li

amount payable on a claim for the y as of the date of claim com- guaranty shall be the percentage of the hon, less the amount of claim loan originally guaranteed applied to

the indebtedness computed as of the ) Subject to the limitation that date the holder acquired the security. total amount payable under an in

Further: nity agreement shall in no event (A) The minimum selling price detered the Secretary's maximum li- mined by the Secretary and provided to ity, the remaining liability will be the holder shall be credited to the intinued as a percentage of the new debtedness as proceeds of sale; or | amount increasing or decreasing (B) If no minimum selling price is rata with any increase or decrease provided then the current reasonable le balance of the loan obligation. value of the property as determined by ) The Secretary shall execute an the Secretary and provided to the holdmnity agreement evidencing the er shall be credited to the indebtedness ant and terms of the indemnity li- as proceeds of sale; and ty, provided:

The amount payable on the claim ) The Secretary has determined shall in no event exceed the remaining i resale of the security under an in- balance of the indebtedness.

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