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installment due date, but not later than 30 days after such prepayment.

(2) The right of Veterans' Administration to accelerate the maturity of the entire indebtedness in the event of default.

(3) The right of Veterans' Administration to foreclose or otherwise proceed to liquidate or acquire property which is the security for the loan in the event of the borrower's delinquency in the repayment of his obligation or in the event of his default in any other provisions of the loan contract.

(c) Veterans Administration shall have the right to accelerate the entire indebtedness and to foreclose or otherwise proceed to Uquidate, or acquire the security for the loan, in the event the veteran is adjudged a bankrupt, or if the property has been abandoned by the borrower or subjected to waste or hazard, or in the event conditions exist which warrant the appointment of a receiver by court.

(d) 11, subsequent to the closing of the loan, title to the property which is security for such loan is restricted against sale or occupancy on the ground of race, color, or creed, by restrictions created and filed of record by the borrower, such action, at the election of Veterans' Administration, shall constitute an event of default entitling Veterans Administration to declare the unpaid balance of the loan immediately due and payable. (16 F. R. 6289, Sept. 20, 1950, as amended at 20 F.R. 6260, Aug. 26, 1955; 24 F.R. 2658, Apr. 7, 1959) § 36.4511 Advances after loan closing.

(a) The Veterans Administration may at any time advance any sum or sums as are reasonably necessary and proper for the maintenance, repair, alteration, or improvement of the security for a loan or for the payment of taxes, assessments, ground or water rights, or casualty insurance thereon: Provided, That no advance shall be made for alterations or improvements which are not necessary for the maintenance or repair of the security if such advance will increase the indebtedness to an amount in excess of $25,000.

(b) All sums disbursed incident to the making of advances under this section shall be added to the indebtedness. Veterans' Administration may require any such advances to be secured ratably and on a parity with the principal indebted. ness, or otherwise secured. The sum so

advanced shall be evidenced by & supplemental note or otherwise as may be required by Veterans' Administration.

(c) Veterans' Administration may pay and charge against the indebtedness, or against the proceeds of the sale of any security therefor, any expense which is reasonably necessary for collection of the debt, protection, repossession, preservation, or liquidation of the security or of the lien thereon, including a reasonable amount for trustees' and legal fees. (15 FR 6289, Sept. 20, 1950, as amended at; 38 FR 33772, Dec. 7, 1973] & 36.4512 Taxes and insurance.

(a) In addition to the monthly installment payments of principal and interest payable under the terms of the loan agreement, the borrower will be required to make payments monthly to Veterans' Administration in such amounts as may be determined by Veterans' Administration from time to time to be necessary for the purpose of accumulating funds sufficient for the pay. ment of taxes and assessments, ground rents, insurance premiums, and similar levies or charges on the security property.

(b) The borrower shall maintain insurance against fire and such other hazards as may be required by the Veterans Administration, in such type or types and in such amounts as may be satisfactory to the Veterans Administration, covering the improvements then or thereafter on the property securing the loan. Flood insurance will be required in respect to any loan closed on and after March 2, 1974, if the security is located in an area identified by the Secretary of Housing and Urban Development as having special flood hazards and in which the sale of flood insurance is available under the national flood insurance program. The amount of flood insurance required will be equal to the outstanding balance of the loan or the maximum limit of coverage available for the particular type of property under the national flood insurance program, whichever is less. All such hazard and flood insurance shall be carried with a company or companies satisfactory to the Veterans Administration and the policies and renewals thereof shall be held in the possession of the Veterans Administration and have attached thereto a mortgagee loss payable clause in favor of and in form satisfactory to the Veterans Administration.

(c) The borrower at loan closing shall pay in cash to Veterans' Administration

such sum as it estimates may be neces- cant with the certification requirements sary as the initial deposit to the borrow- prescribed in 38 U.S.C. 1804(c). er's tax and insurance reserve account. (g) The applicant has certified, in (15 FR 6289, Sept. 20, 1950, as amended at such form as the Administrator shall 39 FR 7785, Feb. 28, 1974)

prescribe, that

(1) Neither he, nor anyone authorized 8 36.4513 Foreclosure and liquidation.

to act for him, will refuse to sell or In the event of a foreclosure sale or rent, after the making of a bona fide other liquidation of the security for a offer, or refuse to negotiate for the sale loan, Veterans Administration shall or rental of, or otherwise make unavailcredit upon the indebtedness the greater able or deny the dwelling or property of:

covered by this loan to any person be(a) The net proceeds of the sale, or cause of race, color, religion, or national

(b) The current market value of the origin; property as determined by Veterans Ad- (2) He recognizes that any restrictive ministration, less the costs and expenses covenant on the property relating to of liquidation

race, color, religion, or national origin is In no event shall the credit pursuant to

illegal and void and any such covenant paragraph (b) of this section exceed

is specifically disclaimed; and

(3) He understands that civil action the amount of the gross indebtedness, nor shall such credit be less than the

for preventive relief may be brought by

the Attorney General of the United amount legally required to be credited to the indebtedness under local law. I

States in any appropriate U.S. District

Court against any person responsible for a deed in lieu of foreclosure is accepted, the consideration will be a full and com

a violation of the applicable law.

(15 F.R. 6290, Sept. 20, 1950, as amended at plete release of liability of the obligors,

20 F.R. 6260, Aug. 26, 1955; 24 F.R. 2668, or such lesser amount as may be agreed

Apr. 7, 1959; 36 F.R. 13032, July 13, 1971) upon between the obligors and Veterans Administration.

§ 36.4515 Estate of veteran in real [23 F, R. 2340, Apr. 10, 1958)

property. 8 36.4514 Eligibility requirements.

(a) The estate in the realty acquired

by the veteran, wholly or partly with the Prior to making a loan, or a commit

proceeds of a loan hereunder, or owned ment therefor, Veterans' Administration by him and on which improvements on shall determine that:

& farmhouse are to be financed by such (a) The applicant is an eligible vet- loan, shall be not less than: eran.

(1) A fee simple estate therein, legal (b) The applicant has full capacity or equitable; or under local law to enter into binding (2) A leasehold estate running or recontracts.

Dewable at the option of the lessee for (c) The applicant is a satisfactory a period of not less than 14 years from credit risk and has the ability to repay the maturity of the loan, or to any earlier the obligation proposed to be incurred date at which the fee simple title will by him and that the proposed payments vest in the lessee, which is assignable or on such obligation bear a proper rela- transferable, if the same be subjected tionship to his present and anticipated to the len; however, & leasehold estato income and expenses.

which is not freely assignable and trans(d) Private capital is not available in ferable will be considered an acceptable the area at an interest rate not in excess estate if it is determined by the Chief of the rate authorized for guaranteed Benefits Director, or the Director, Loan home loans for a loan for which the Guaranty Service, (1) that such type of veteran is qualified under 38 U.S.C. 1810. leasehold is customary in the area where

(e) The applicant is unable to obtain the property is located; (11) that & veta loan for such purpose from the Secre- eran or veterans will be prejudiced if tary of Agriculture, under the Bank- the requirement for free assignability is head-Jones Farm Tenant Act, as adhered to and (ill) that the assignamended, or under the Housing Act of ability and other provisions applicable 1949.

to the leasehold estate are suficient to (f) In respect to a loan application protect the interests of the veteran and received on or after September 15, 1956, the Government and are otherwise acthere has been compliance by the appli- ceptable; or

(3) A life estate, provided that the remainder and reversionary interests are subjected to the lien. The title to such estate shall be such as is acceptable to informed buyers, title companies, and attorneys, generally, in the community in which the property is situated, except as modified by paragraph (b) of this section.

(b) Any such property or estate will not fail to comply with the requirements in paragraph (a) of this section by reason of the following:

(1) Encroachments;
(2) Easements;
(3) Servitudes;

(4) Reservations for water, timber, or subsurface rights;

(5) Right in any grantor or cotenant in the chain of title, or a successor of either, to purchase for cash, which right by the terms thereof is exercisable only if

(1) An owner elects to sell,

(11) The option price is not less than the price at which the then owner is willing to sell to another, and

(iii) Exercised within 30 days after notice is mailed by registered mail to the address of optionee last known to the then owner, of the then owner's election to sell, stating his price and the identity of the proposed vendee;

(6) Building and use restrictions whether or not enforceable by a reverter clause if there has been no breach of the conditions affording & right to an exercise of the reverter;

(7) Violation of a restriction based on race, color, creed, or national origin, whether or not such restriction provides for reversion or forfeiture of title or a llen for liquidated damages in the event of a breach;

(8) Any other covenant, condition, restriction, or limitation approved by Veterans Administration in the particular case. The limitations on the quantum or quality of the estate or property that are indicated in this paragraph, insofar as they may materially affect the value of the property for the purpose for which it is used, shall be taken into account in the appraisal of reasonable value. (15 F.R. 6290, Sept. 20, 1950, as amended at 24 F.R. 2658, Apr. 7, 1959: 28 FR. 11506. Oct. 29, 1963; 33 F.R. 18027, Dec, 4, 1968; 34 F.R. 11095, July 1, 1969)

& 36.4516 Lien requirements.

(a) Loans for the purchase of a dwelling or for the purchase of a farm on which there is a farm residence shall be secured by a first lien on the property or estate. Loans for the construction of a farm residence or other dwelling shall also be secured by a first lien.

(b) Loans for the repair, alteration, or improvement of a farm residence or other dwelling shall be secured by a first lien except as may be approved by the Administrator, the Chief Benefits Director, or the Director, Loan Guaranty Service, in an individual case: Provided, That if the Veterans Administration is the holder of a first lien on the property such loans may be secured by a second lien.

(c) Tax liens, special assessment liens, and ground rent shall be disregarded with respect to any requirement that loans shall be secured by a llen of specified dignity. With the prior approval of the Administrator, Chief Benefits Director, or Director, Loan Guaranty Service, liens retained by nongovernmental entities to secure assessments or charges for municipal type services and facilities clearly within the public purpose doctrine may be disregarded. In determining whether a loan for the purchase or construction of a home is secured by a first len the Administrator may also disregard a superior lien created by a duly recorded covenant running with the realty in favor of a private entity to secure an obllgation to such entity for the homeowner's share of the costs of the management, operation, or maintenance of property, services or programs within and for the benefit of the development or community in which the veteran's realty is located, if he determines that the interests of the veteran-borrower and of the Government will not be prejudiced by the operation of such covenant. In respect to any such superior lien to be created after June 6, 1969, the Administrator's determination must have been made prior to the recordation of the covenant. 120 FR 6261, Aug. 26, 1955, as amended at 20 FR 9180, Dec. 10, 1955; 23 FR 2340, Apr. 10, 1958; 34 FR 9561, June 18, 1969) § 36.4517 Incorporation by reference.

The regulations concerning direct loans to veterans in effect on the date a loan is closed shall govern the rights, duties, and liabilities of the parties to such loan during the period Veterans' Administration is the holder thereof, and any provisions of the loan instruments inconsistent with such regulations are hereby amended and supplemented to conform thereto. (15 FR 6290, Sept. 20, 1950) 8 36.4518 Supplementary administrative

action. Notwithstanding any requirement condition, or limitation stated in or imposed by the regulations in this part concerning direct loans to veterans, the Chief Benefits Director, or the Director, Loan Guaranty Service, within the limitations and conditions prescribed by the Administrator, may take such action es may be necessary or appropriate to relieve any undue prejudice to a debtor, or other person, which might otherwise result, provided such action shall not impair the vested rights of any person affected thereby. If such requirement, condition, or limitation is of an administrative or procedural nature, such action may be taken by any employee authorized to act under $ 36.4520. 123 F. R. 2340, Apr. 10, 1958) $36.4519 Eligible purposes and reason

able value requirements. (a) A loan may be made only for the purpose hereinafter set forth in this paragraph, and the loan may not exceed the reasonable value of the property as established by Veterans Administration:

(1) To purchase or construct a dwellIng to be owned and occupied by the veteran as a home;

(2) To purchase a farm on which there is a farm residence to be occupied by the veteran as his home;

(3) To construct on land owned by the veteran a farm residence to be occupied by him as his home;

(4) To repair, alter, or improve a farm residence or other dwelling owned by the veteran and occupied by him as his home; Provided, The veteran certifies, in such form as the Administrator may prescribe, that he has paid in cash from his own resources on account of such purchase, construction, alteration, repair, or improvement a sum equal to the difference, if any, between the purchase price or cost of the property and its reasonable value.

(b) In the case of a loan for the construction of a farm residence or other

dwelling on land owned by the veteran, a portion of the loan proceeds may be expended to liquidate an indebtedness secured by a lien against such land, but only if the reasonable value of the land is equal to or in excess of the amount of the indebtedness secured by such lien and if the liquidation of such indebtedness will permit the loan to be secured by a first lien. Except as provided in § 36.4507, no portion of the proceeds of a loan for repairs, alterations or improvements to a farm residence or other dwelling may be expended to liquidate & prior lien against the property. [20 F.R. 6261, Aug. 26, 1955, as amended at 33 F.R. 6976, May 9, 1968; 35 F.R. 17181, Nov. 7, 1970) & 36.4520 Delegation of authority.

(a) Except as hereinafter provided, each employee of the Veterans Administration heretofore or hereafter appointed to, or otherwise lawfully filling, any position designated in paragraph (b) of this section is hereby delegated authority, within the limitations and conditions prescribed by law, to exercise the powers and functions of the Administrator with respect to the making of loans and the rights and liabilities arising therefrom, including but not limited to the collection or compromise of amounts due, in money or other property, the extension, rearrangement, or sale of loans, the management and disposition of secured or unsecured notes and other property. In connection with direct loans made and held by the Veterans Administration, such designated employees may take any action which they are authorized to consent to or approve in respect to guaranteed or insured loans under the regulations prescribed therefor by the Administrator. Incidental to the exercise and performance of the powers and functions hereby delegated, each such employee is authorized to execute and deliver (with or without acknowledgment) for, and on behalf of, the Administrator evidence of guaranty and such certificates, forms, conveyances, and other instruments as may be appropriate in connection with the acquisition, ownership, management, sale, transfer, assignment, encumbrance, rental, or other disposition of real or personal property or of any right, title, or interest therein, including, but not limited to, contracts of sale, installment contracts, deeds,

leases, bills of sale, assignments, and re- ans Administration as an area in which leases; and to approve disbursements to private capital is not available under 38 be made for any purpose authorized by U.S.C. Ch. 37 to eligible veterans for 38 U.S.C. Ch. 37.

financing of the purchase, construction, (b) Designated positions:

repairs, alterations, or improvement of a Chief Benefits Director.

farm residence or other dwelling, as the Director, Loan Guaranty Service.

case may be. Director, Regional Office.

(24 PR. 2659, Apr. 7, 1959) Director, Veterans Benefits Omice, Washington, D.O.

8 36.4524 Sale of loans. Loan Guaranty Oncer.

In the event a direct loan is purchased Assistant Loan Guaranty Officer.

from Veterans Administration at any The authority hereby delegated to em- time pursuant to the provisions of 38 ployees of the positions designated in U.S.C. 1811(g), Veterans Administration this paragraph may, with the approval may issue a guaranty in connection of the Chief Benefits Director, be therewith within the maximums appliredelegated.

cable to loans guaranteed under 38 U.S.C. (c) Nothing in this section shall be 1810 and such loans shall thereafter be construed to authorize any such em- subject to the applicable provisions of ployee to exercise the authority vested the regulations governing the guaranty in the Administrator under 38 U.S.C. or insurance of loans to veterans, and 210(c) or 1815(b) or to sue or enter ap- such part of the regulations concerning pearance for and on behalf of the Ad- direct loans to veterans as may be inconministrator or confess judgment against sistent therewith or variant therefrom him in any court without his prior au- shall no longer govern the subsequent thorization,

disposition of the rights and liabilities (23 F.R. 2340, Apr. 10, 1958, as amended at of any interested parties. 35 F.R. 17181, Nov. 7, 1970)

(24 FR. 2659, Apr. 7, 1959) 8 36.4521 Minimum property and con- & 36.4525 Requirement of a construcstruction requirements.

tion warranty. No loan for the purchase or construc

Any commitment to make a direct loan tion of residential property shall be made

and any approval of a direct loan appliunless such property complies or con

cation issued or made on or after May 2, forms with those standards of planning, 1955, shall, if the purpose of the loan is construction, and general acceptability

to finance the construction of a dwelling applicable thereto which have been pre

or farmhouse or to finance the purchase scribed by the Administrator.

of a newly constructed dwelling, be sub(28 F. R. 2840. Apr. 10, 1958)

ject to the express condition that the 8 36.4522 Waivers, consents and ap

builder, seller, or the real party in interprovals.

est in the transaction shall deliver to the

veteran constructing or purchasing such No waiver, consent, or approval re

dwelling with the aid of a direct loan & quired or authorized by the regulations

warranty, in the form prescribed by the concerning direct loans to veterans shall

Administrator, that the property has be valid unless in writing signed by Vet- been completed in substantial conformity erans' Administration.

with the plans and specifications upon (16 FR. 6291, Sept. 20, 1960)

which the Administrator based his valua8 36.4523 Geographical limits.

tion of the property, including any

modifications thereof, or changes or Any real property purchased, con- variations therein, approved in writing structed, or improved with the proceeds by the Administrator, and no direct loan of & loan under 38 U.S.C. 1811 shall be shall be disbursed in full unless a copy of situated in the United States, which for such warranty duly receipted by the purpurposes of 38 U.S.C. Ch. 37 18 here de- chaser is submitted to the Veterans' fined as the several States, Territories, Administration. and possessions, the District of Columbia

[20 FR 2463, Apr. 14, 1955) and the Commonwealth of Puerto Rico: Provided, That no loan shall be mado

8 36.4526 Issuance of fund reservation pursuant to 38 U.S.C. 1811 unless the real

commitments. property is located in one of the areas (a) Any builder or sponsor proposing designated from time to time by Veter. to construct one or more dwellings in an

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