[Code of Federal Regulations]
[Title 38, Volume 2]
[Revised as of July 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 38CFR36.4280]

[Page 583-584]
 
            TITLE 38--PENSIONS, BONUSES, AND VETERANS' RELIEF
 
          CHAPTER I--DEPARTMENT OF VETERANS AFFAIRS (CONTINUED)
 
PART 36--LOAN GUARANTY--Table of Contents
 
Sec. 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 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.

[[Page 584]]

    (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
    (6) Documentation of the holder's records.

[36 FR 1253, Jan. 27, 1971, as amended at 58 FR 29116, May 19, 1993]