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area designated as eligible for direct loans may apply for a commitment for the reservation of direct loan funds to be used for the making of loans to eligible veterans for the purchase or construction of such dwellings. Such commitment may be issued on such conditions as the Veterans Administration determines to be proper in the particular case and will be valid for a period of 3 months: Provided, That the Veterans Administration may, for good and suficient reasons, extend the period of the commitment. No commitment shall be issued unless the builder or sponsor shall have paid an amount equivalent to 2 percent of the funds being reserved, which amount shall be nonrefundable. The commitment shall be nontransferable except with the written approval of the Veterans Administration.

(b) Notwithstanding that direct loan funds may be available for reservation when issuance of a reservation commitment is requested by a builder or sponsor, Veterans Administration may withhold issuance of such commitment in any case in which it determines that the experience or technical qualifications of the builder in respect to home construction are not acceptable, or that other factors bearing on the likelihood of the success of the proposed project are such as to justify withholding issuance of a fund reservation commitment. (28 F. R. 2840. Apr. 10, 1958] SALE OF LOANS, GUARANTEE OF PAYMENT & 36.4600 Sale of loans, guarantee of

payment. (a)

The Administrator of Veterans Affairs hereby guarantees, in accordance with the provisions of this section, the payment of all loans sold by the Veterans Administration.

(b) Wherever the term "holders appears in this section it shall mean the purchaser of a loan sold by the Administrator and any subsequent transferee or assignee of such loan.

(c) The holder of each loan sold subject to guaranty shall be deemed to have agreed with the Administrator follows:

(1) To furnish the Administrator with notice of default within 30 days after & loan has become two full installments in default.

(2) To maintain on the real estate a Lien of the dignity assigned or transferred to the purchaser by the Administrator.

(3) To maintain insurance in an amount sufficient to protect the security against risks or hazards to which it may be subjected to the extent customary in the locality, and to apply the proceeds of loss payments to the loan balance or to the restoration of the security, as the holder may in his discretion deem proper. 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 food insurance is available under the national food 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.

(4) To obtain a consideration equal to the fair market value of any real estate released from the first lien securing the loan, except where the loan will be paid in full, and to apply the entire consideration in reduction of the principal balance of the loan.

(5) To maintain the tax and insurance account as provided for in the loan instruments and to pay accrued taxes, special assessments, ground or water rents and premiums on fire or other insurance properly chargeable to the tax and insurance account.

(6) To submit to the Administrator notice of any suit or action or other legal or equitable proceeding to which the holder is a party (including a copy of every procedural paper filed on behalf of the holder or served on the holder), brought on or in connection with a loan sold under this section or involving title to, or other lien on, the property securing the loan, within the time that would be required if the Administrator were party to the proceeding.

(7) To submit to the Administrator for prior approval any proposal to recast or extend the repayment terms of the loan.

(8) To take no action to accelerate the indebtedness or terminate the debtor's interest in the property without the prior approval of the Administrator.

(9) To make advances only for the maintenance and repairs reasonably necessary for the preservation of the security, or for the payment of accrued taxes, special Assessments, ground or water rents, premiums on fire or other

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insurance against loss or damage to the (4) The Administrator determines, property, or for other purposes approved upon request of the holder to repurchase in advance by the Administrator.

any loan, that such repurchase is in (10) To furnish the Administrator the best interests of the Government prompt notice of the cancellation of any notwithstanding that the account is repurchase endorsement or notice on the ineligible for repurchase under subnote or bond upon the payment in full paragraphs (1) through (3) of this of any loan sold pursuant to this sec- paragraph. tion or of the release of the Adminis- (e) (1) A cash payment shall be made trator from liability to repurchase the to the holder upon the repurchase of & loan.

loan by the Administrator and shall be (11) To maintain adequate account- an amount equal to the price paid by the ing records and to provide the Adminis- purchaser when the loan was sold by trator with such data relating to the the Administrator, less repayments reloan as he may request incident to his ceived by the holder which are properly determination of the amount payable in applicable to the principal balance of connection with a request for the re- the loan, plus any advances made for purchase of the loan.

the purposes described in paragraph (c) (12) To service the loans properly in (9) of this section, but no payments accordance with established practices. shall be made for accrued unpaid in

(13) To permit the Administrator to terest, except that with respect to loans Inspect, examine or audit at reasonable sold by the Administrator after July 15, times and places the records of loans 1970, payment will be made for unpaid which are subject to repurchase under accrued interest from the date of the this section.

first uncured default to the date of the (14) To sell any loan to the Adminis- claim for repurchase, but not in excess trator for the amount specified in para- of interest for 90 days. If, however, there graph (e) (1) of this section upon re- has been a failure of any holder to comquest of the Administrator if the loan is ply with the provisions of paragraph (c) six (6) full installments or more in of this section the Administrator shall default.

be entitled to deduct from the repurchase NOTE: In any instance in which the holder

price otherwise payable such amount as desires Veterans Administration prior ap

he determines to be necessary to restore proval to a proposed action the holder may him to the position he would have ocsubmit the facts to the Loan Guaranty Offi- cupied upon repurchase of the loan in cer as provided in paragraph (i) of this the absence of any such failure. Incident section.

to the repurchase by the Administrator, (d) The Administrator's guaranty Il- the holder will pay to the Administrator ability under this section shall consist of an amount equal to the balance, if any, and be limited solely to liability to re

remaining in the tax and insurance purchase the loan from the holder account. thereof whenever,

(2) The holder shall be deemed to (1) The debtor is in default by reason have received as trustee for the benefit of nonpayment of not less than two full

of the Administrator any amounts reinstallments and default has continued ceived on account of the loan indebtedfor three months or more on the date ness subsequent to submitting its request the holder submits its written request for

to repurchase and shall pay such repurchase by the Administrator; or

amounts to the Veterans Administration (2) The property securing the loan upon the assignment and delivery of the has been abandoned by the debtor; or note, bond and security instruments to (3) The debtor has failed to comply

the Veterans Administration. with any other convenant or obligation

(3) The holder may be reimbursed at of his loan contract and on the date of

any time for any costs or expenses in

curred by him which are approved in adthe holder's request for repurchase such

vance by the Administrator as being failure has continued for more than 90

necessary to protect the Government's days after the holder's demand for com

interests. pliance with the covenant or obligation,

(f) Notwithstanding any other proviexcept that if the failure is due to non

sion of this section, the Administrator payment of real estate taxes the failure shall be released from liability and shall to pay when due has persisted for a con- not be obligated to repurchase any loan tinuing period of 180 days; or

in respect to which:

(1) An obligor has been released from personal liability by any act or omission of the holder without the prior approval of the Administrator, except that a holder shall not be under any duty to establish the debt as a valid claim against the assets of the estate of any deceased or bankrupt obligor when such failure will not impair the validity or effectiveness of the lien securing the loan; or

(2) The holder has instituted foreclosure action against the property securing the loan without the prior approval of the Administrator, and such action has proceeded to the point where the judicial sale or sale under the power in the deed of trust has been held or the owner's interest in the property has been terminated by the holder by strict foreclosure, acceptance of a voluntary deed, or by other liquidation action; or

(3) Any material alteration has been made to the note, bond, security Instrument, or installment sale contract after sale and delivery of the instruments by the Administrator to the purchaser.

(g) (1) Each employee of the Veterans Administration heretofore or hereafter appointed to or lawfully filling, any positio designated in subparagraph (2) of this paragraph 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 sale, assignment, transfer, and repurchase of loans, including, but not limited to the offering of such loans for sale, the acceptance of purchase offers, the assignment or transfer of notes or bonds and security instruments evidencing the loans sold, granting the prior approval of the Administrator under this section, determining the eligibility of the loans for repurchase and to calculate and pay the sum due the holder upon repurchase of the loan by the Veterans Administration.

(2) Designated positions:
Chief Benefits Director.
Director, Loan Guaranty Servico.
Director, Regional Omce.
Director, Center.

Director, Veterans Benefits Office, Washing

ton, D.O. Loan Guaranty Officer. Assistant Loan Guaranty Officer.

(h) No waiver, consent, or approval required or authorized by this section shall be valid unless in writing signed by an employee of the Veterans Administration authorized in this section to act for the Administrator.

(i) Whenever prior approval or consent of the Administrator is desired in respect to an action to be taken by a holder of a loan, the holder may address such request to the Loan Guaranty Officer in the Regional Office or Center having jurisdiction over the area in which the real estate security is located.

(j) Notwithstanding any requirement, condition, or limitation stated in or imposed by this section concerning the sale and repurchase of loans, the Chief Benefits Director, or the Director, Loan Guaranty Service, within the limitations and conditions prescribed by the Administrator may take such action as may be necessary or appropriate to relieve undue prejudice to a holder, debtor or other person, which might otherwise result, as long as 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 an employee authorized to act under paragraph (g) of this section.

(k) This section will apply to all loans sold by the Veterans Administration after the effective date of this section which were originated or acquired by the Administrator of Veterans Affairs under Chapter 37, Title 38, United States Code, or Title III of the Servicemen's Readjustment Act of 1944, as amended, except that it shall not apply to direct loans sold pursuant to section 1811(g) of Chapter 37, Title 38, United States Code. [27 FR 2686, Mar. 22, 1962, as amended at 35 FR 11553, July 18, 1970; 39 FR 7785, Feb. 28, 1974)

20-121-74-54

FINDING AIDS

A list of current CFR volumes, a list of superseded CFR volumes, and a list of CFR titles, subtitles, chapters, subchapters and parts are included in the subject index volume to the Code of Federal Regulations which is published separately and revised annually.

Table of CFR Titles and Chapters
Alphabetical List of CFR Subtitles and Chapters
List of CFR Sections Affected

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