To repair, alter or improve a ig owned by the veteran pursu38 U.S.C. 3710(a) (4) or (7) if such to be secured by a first lien; To construct a dwelling or farm ce on land already owned or to uired by the veteran, provided e veteran did not or will not acthe land directly or indirectly builder or developer who will be icting such dwelling or farm res

To purchase a dwelling from a f sellers which the Secretary dees are legally precluded under cumstances from paying such a at if the best interest of the vetould be so served.

Computation of discounts-(i) itation of discount-loans seby a first lien. Unless otherwise red by the Secretary, the disif any, to be paid by the bormay not exceed the difference en the bid price, rounded to the whole number, and par value for A Government National MortAssociation) 90-day forward bid g price for pass through securià percent less than the face note of the loan. Unless the lender and wer negotiate a firm written coment for a maximum amount of int to be paid, the bid price to be in the computation must be the A 90-day forward bid closing quote ly day 1 to 4 business days prior to closing. "Loan closing" is defined his purpose as the date on which orrower's 3-day right of rescission ences pursuant to the Truth in ing Act. If the lender and borr choose to negotiate a firm dist commitment for a maximum int of discount to be paid, the bid to be used in establishing the mum discount must be the closing e for the business day prior to the of the commitment. Lenders negoing firm commitments must close loan at a discount no higher than firm commitment regardless of ges in the maximum allowable Dement of Veterans Affairs interest - If a lender's commitment expires r to loan closing, the lender and ower may negotiate a new firm mitment based on the procedure ined in this paragraph (d)(7)(i) or

may use the procedure for determining the discount based on the GNMA 90-day forward bid closing quote for any day 1 to 4 business days prior to loan closing.

(ii) Computation of discount-unsecured loans or loans secured by less than a first lien. The borrower, subject to the limitations set forth in paragraphs (d) (6) and (7) of this section, may pay a discount required by the lender when the proceeds of the loan will be used to repair, alter, or improve a dwelling owned by the veteran pursuant to 38 U.S.C. 3710(a)(4) or (7) if such loan is unsecured or secured by less than a first lien. No such discount may be charged unless:

(A) The loan is submitted to the Secretary for prior approval;

(B) The dollar amount of the discount is disclosed to the Secretary and the veteran prior to the issuance by the Secretary of the certificate of commitment. Said certificate of commitment shall specify the discount to be paid by the veteran, and this discount may not be increased once the commitment is issued without the approval of the Secretary;

(C) The discount has been determined by the Secretary to be reasonable in amount.

(iii) A veteran may pay the discount an acquisition and improvement loan (as defined in § 36.4301 provided:

on

(A) The veteran pays no discount on the acquisition portion of the loan except in accordance with paragraph (d)(6)(iv) of this section; and

(B) The discount paid on the improvements portion of the loan does not exceed the percentage of discount paid on the acquisition portion of the loan.

Acquisition and improvement loans may be closed either on the automatic or prior approval basis.

(iv) Unless the Under Secretary for Benefits otherwise directs, all powers of the Secretary under paragraphs (d) (6) and (7) of this section are hereby delegated to the officials designated by § 36.4342(b).

(Authority: 38 U.S.C. 3703, 3710; 42 U.S.C. 4001 note, 4012a)

(8) On any loan to which section 3714 of 38 U.S.C. chapter 37 applies, the holder may charge a reasonable fee,

not to exceed the lesser of (i) $300 and the actual cost of any credit report required, or (ii) any maximum prescribed by applicable State law, for processing an application for assumption and changing its records.

(Authority: 38 U.S.C. 3714)

(e) Subject to the limitations set out in paragraph (e)(4) of this section, a fee must be paid to the Secretary.

(1) The fee on loans to veterans shall be as follows:

(i) On all interest rate reduction refinancing loans guaranteed under 38 U.S.C. 3710(a)(8), (a)(9)(B)(i), and (a)(11), the fee shall be 0.50 percent of the total loan amount.

(ii) On all refinancing loans other than those described in paragraph (e)(1)(i) of this section, the funding fee shall be 2.75 percent of the loan amount for loans to veterans whose entitlement is based on service in the Selected Reserve under the provisions of 38 U.S.C. 3701(b)(5), and 2 percent of the loan amount for loans to all other veterans; provided, however, that if the veteran is using entitlement for a second or subsequent time, the fee shall be 3 percent of the loan amount.

(iii) Except for loans to veterans whose entitlement is based on service in the Selected Reserve under the provisions of 38 U.S.C. 3701(b)(5), the funding fee shall be 2 percent of the total loan amount for all loans for the purchase or construction of a home on which the veteran does not make a down payment, unless the veteran is using entitlement for a second or subsequent time, in which case the fee shall be 3 percent. On purchase or construction loans on which the veteran makes a down payment of 5 percent or more, but less than 10 percent, the amount of the funding fee shall be 1.50 percent of the total loan amount. On purchase or construction loans on which the veteran makes a down payment of 10 percent or more, the amount of the funding fee shall be 1.25 percent of the total loan amount.

(iv) On loans to veterans whose entitlement is based on service in the Selected Reserve under the provisions of 38 U.S.C. 3701(b)(5), the funding fee shall be 2.75 percent of the total loan amount on loans for the purchase or

construction of a home on which the 2 paj veteran does not make a down pay-a ment, unless the veteran is using entitlement for a second or subsequent time, in which case the fee shall be 3 percent. On purchase or construction loans on which veterans whose entitlement is based on service in the Selected Reserve make a down payment of 5 percent or more, but less than 10 percent, the amount of the funding fee shall be 2.25 percent of the total loan amount. On purchase or construction O loans on which such veterans make a down payment of 10 percent or more, r the amount of the funding fee shall be 2 percent of the total loan amount.

(v) All or part of the fee may be paid in cash at loan closing or all or part of the fee may be included in the loan without regard to the reasonable value of the property or the computed maximum loan amount, as appropriate. In computing the fee, the lender will disregard any amount included in the loan pai to enable the borrower to pay such fee. (Authority: 38 U.S.C. 3729)

01

e the a

(2) Subject to the limitations set out in this section, a fee of one-half of one percent of the loan balance must be paid to the Secretary in a manner pre-d scribed by the Secretary by a person assuming a loan to which section 3714 of title 38 U.S. Code applies. The in-ga strument securing such a loan shall contain a provision describing the or right of the holder to collect this fee as trustee for the Department of Veterans Affairs. The loan holder shall list the amount of this fee in every assumption statement provided and include a notice that the fee must be paid to the holder immediately following loan settlement. The fee must be transmitted to the Secretary within 15 days of the receipt by the holder of the notice of transfer.

(Authority: 38 U.S.C. 3714, 3729(d))

(3) The lender is required to pay to the Secretary the fee described in paragraph (e)(1) of this section within 15 days after loan closing. Any lender closing a loan, subject to the limitations set out in paragraph (e)(4) of this section who fails to submit timely payment of this fee will be subject to a late charge equal to 4 percent of the

e due. If payment of the fee dein paragraph (e)(1) of this secmade more than 30 days after osing, interest will be assessed ite set in conformity with the ment of Treasury's Fiscal Reents Manual. This interest is in addition to the 4 percent arge, but the late charge is not d in the amount on which interomputed. This interest charge is alculated on a daily basis beginn the date of closing, although terest will be assessed only on g fee payments received more ) days after closing.

he lender is required to pay to ecretary electronically through itomated Clearing House (ACH) the fees described in paragraphs and (e)(2) of this section and any ees and interest due on them. hall be paid to a collection agent perator-assisted telephone, terI entry, or CPU-to-CPU transon. The collection agent will be fied by the Secretary. The lender provide the collection agent with ollowing: authorization for payof the funding fee (including late nd interest) along with the folg information: VA lender ID numfour-digit personal identification er; dollar amount of debit; VA number; OJ (office of jurisdiction) closing date; loan amount; inforon about whether the payment ins a shortage, late charge, or interveteran name; loan type; sale int; downpayment; whether the an is a reservist; and whether this subsequent use of entitlement. For ransactions received prior to 8:15 on a workday, VA will be credited the amount paid to the collection nt at the opening of business the t banking day.

thority: 38 U.S.C. 3729(a))

The fees described in paragraph 1) and (e)(2) of this section shall not collected from a veteran who is reing compensation (or who but for receipt of retirement pay would be tled to receive compensation) or a surviving spouse described in

section 3701(b) of title 38, United States Code.

(Authority: 38 U.S.C. 3729(b))

(The information collection requirements in this section have been approved by the Office of Management and Budget under control numbers 2900-0474 and 2900-0516)

[13 FR 7275, Nov. 27, 1948]

EDITORIAL NOTE: For Federal Register citations affecting §36.4312, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and on GPO Access.

§36.4313 Advances and other charges.

(a) A holder may advance any amount reasonably necessary and proper for the maintenance or repair of the security, or for the payment of accrued taxes, special assessments, ground or water rents, or premiums on fire or other casualty insurance against loss of or damage to such property and any such advance so made may be added to the guaranteed or insured indebtedness. A holder may also advance the one-half of one percent funding fee due on a transfer under 38 U.S.C. 3714 when this is not paid at the time of transfer. All security instruments for loans to which 38 U.S.C. 3714 applies must include a clause authorizing the collection of an assumption funding fee and an advance for this fee if it is not paid at the time of transfer.

(Authority: 38 U.S.C. 3714)

(b) In addition to advances allowable under paragraph (a) of this section, the holder may charge against the proceeds of the sale of the security; against gross amounts collected; in any accounting to the Secretary after payment of a claim under the guaranty, in the computation of a claim under the guaranty, if lawfully authorized by the loan agreement and subject to § 36.4321(a), or, in the computation of an insurance loss, any of the following items actually paid:

(1) Any expense which is reasonably necessary for preservation of the security,

(2) Court costs in a foreclosure or other proper judicial proceeding involving the security,

(3) Other expenses reasonably necessary for collecting the debt, or repossession or liquidation of the security,

(4) Reasonable trustee's fees or commissions not in excess of those allowed by statute and in no event in excess of 5 percent of the unpaid indebtedness,

(5) Reasonable amount for legal services actually performed not to exceed 10 percent of the unpaid indebtedness as of the date of the first uncured default, or $850 whichever is less. In no event may the combined total of the amounts claimed for trustee's fees and legal services (paragraphs (b)(4) and (5) of this section) exceed $850.

(6) The cost of a credit report(s) on the debtor(s), which is (are) to be forwarded to the Secretary in connection with the claim,

(7) Reasonable and customary costs of property inspections,

(8) Any other expense or fee that is approved in advance by the Secretary.

(Authority: 38 U.S.C. 3720(a)(3))

(c) Any advances or charges enumerated in paragraph (a) or (b) of this section may be included as specified in the holder's accounting to the Secretary, but they are not chargeable to the debtor unless he or she otherwise be liable therefor.

(d) Advances of the type enumerated in paragraph (a) of this section and any other advances determined to be necessary and proper in order to preserve or protect the security may be authorized by employees designated

in

§ 36.4342(b) in the case of any property constituting the security for a loan acquired by the Secretary or constituting the security for the unpaid balance of the purchase price owing to the Secretary on account of the sale of such property. Such advances shall be secured to the extent legal and practicable by a lien on the property.

(e) Notwithstanding the provisions of paragraph (a) or (b) of this section, holders of condominium loans guaranteed or insured under 38 U.S.C. 3710(a)(6) shall not pay those assessments or charges allocable to the condominium unit which are provided for in the instruments establishing the condominium form of ownership in the

(a) Provided the debtor(s) is (a: reasonable credit risk(s), as determ by the holder based upon review of debtor's (s') creditworthiness, inc ing a review of a current credit port(s) on the debtor(s), the term repayment of any loan may by wr: agreement between the holder and debtor(s), be extended in the even default, to avoid imminent default in any other case where the prior proval of the Secretary is obtained cept with the prior approval of the S retary, no such extension shall se rate of amortization less than that! ficient to fully amortize at least 801 cent of the loan balance so exter within the maximum maturity scribed for loans of its class.

(b) In the event of a partial prep ment pursuant to §36.4310, the bala of the indebtedness may, by writ agreement between the holder and debtor(s), be reamortized, provided reamortization schedule will result full repayment of the loan within: original maturity, and provided t debtor(s) is (are) reasonable cre risk(s), as determined by the bad based upon review of the debtors creditworthiness, including a review a current credit report(s) on the de: or(s).

(c) In the event an additional loan proposed to be made pursuant §36.4351 for the repair, alteration. improvement of real property on whi there is an existing loan guaranteed insured under 38 U.S.C. chapter 37. t terms of repayment of the prior lo may, by written agreement betwe the holder and the debtor, be recast combine the schedule of repayments the two loans, provided the entire i debtedness is repayable within the p missible maximum maturity of t original loan.

Inless the prior approval of the ary has been obtained, any exn or reamortization agreed to by ler which relieves any obligor iability will release the liability Secretary under the guaranty or nce on the entire loan. However, I release of liability of an obligor through operation of law by of an extension or other act of rance, the liability of the Secas guarantor or insurer will not ected thereby, provided the relien is maintained and the title is and will remain liable for the nt of the indebtedness: And furovided, That if such extension or forbearance will result in the reof the veteran, all delinquent inents, plus any foreclosure ex3 which may have been incurred, have been fully paid.

The holder shall promptly forward Secretary an advice of the terms ny agreement effecting a retization or extension of a guaranor insured loan, together with a kies) of the credit report(s) obi on the debtor(s).

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

7276, Nov. 27, 1948, as amended at 19 12. July 1, 1954; 24 FR 2653, Apr. 7, 1959; 34296, Sept. 6, 1988]

315 Notice of default and acceptbility of partial payments.

Reporting of defaults. The holder of guaranteed or insured loan shall notice to the Secretary within 45 after any debtor:

Is in default by reason of nonment of any installment for a peof 60 days from the date of first red default (see § 36.4301(f)); or

Is in default by failing to comply 1 any other covenant or obligation such guaranteed or insured loan ich failure persists for a continuing iod of 90 days after demand for comince therewith has been made, ext that if the default is due to nonment of real estate taxes, the noshall not be required until the failto pay when due has persisted for a tinuing period of 180 days.

) Partial payments. A partial payat is a remittance on a loan in deIt (as defined in §36.4301(g)) of any

amount less than the full amount due under the terms of the loan and security instruments at the time the remittance is tendered.

(1) Except as provided in paragraph (b)(2) of this section, or upon the express waiver of the Secretary, the mortgage holder shall accept any partial payment and either apply it to the mortgagor's account or identify it with the mortgagor's account and hold it in a special account pending disposition. When partial payments held for disposition aggregate a full monthly installment, including escrow, they shall be applied to the mortgagor's account.

(2) A partial payment may be returned to the mortgagor, within 10 calendar days from date of receipt of such payment, with a letter of explanation only if one or more of the following conditions exist:

(i) The property is wholly or partially tenant-occcupied and rental payments are not being remitted to the holder for application to the loan account;

(ii) The payment is less than one full monthly installment, including escrows and late charge, if applicable, unless the lesser payment amount has been agreed to under a written repayment plan;

(iii) The payment is less than 50 percent of the total amount then due, unless the lesser payment amount has been agreed to under a written repayment plan;

(iv) The payment is less than the amount agreed to in a written repayment plan;

(v) The amount tendered is in the form of a personal check and the holder has previously notified the mortgagor in writing that only cash or certified remittances are acceptable;

(vi) A delinquency of any amount has continued for at least 6 months since the account first became delinquent and no written repayment plan has been arranged;

(vii) Foreclosure has been commenced by the taking of the first action required for foreclosure under local law;

(viii) The holder's lien position would be jeopardized by acceptance of the partial payment.