[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: 38CFR36.4301]

[Page 592-596]
 
            TITLE 38--PENSIONS, BONUSES, AND VETERANS' RELIEF
 
          CHAPTER I--DEPARTMENT OF VETERANS AFFAIRS (CONTINUED)
 
PART 36--LOAN GUARANTY--Table of Contents
 
Sec. 36.4301  Definitions.

    Whenever used in 38 U.S.C. chapter 37 or Secs. 36.4300 to 36.4375 of 
this part, inclusive, and Secs. 36.4390 through 36.4393 of this part, 
unless the context otherwise requires, the terms defined in this section 
shall have the following meaning:
    A period of more than 180 days. For the purposes of sections 3707 
and 3702(a)(2)(C) of title 38 U.S.C., the term a period of more than 180 
days shall mean 181 or more calendar days of continuous active duty.
    Acquisition and improvement loan. A loan to purchase an existing 
property which includes additional funds for the purpose of installing 
energy conservation improvements or making other alterations, 
improvements, or repairs.


(Authority: 38 U.S.C. 3703(c)(1), 3710(a) (1), (4), and (7))

    Alterations. Any structural changes or additions to existing 
improved realty.
    Automatic lender. A lender that may process a loan or assumption \1/
4\without submitting the credit package to the Department of Veterans 
Affairs for underwriting review. Pursuant to 38 U.S.C. 3702(d) there are 
two categories of lenders who may process loans automatically: (1) 
Entities such as banks, savings and loan associations, and mortgage and 
loan companies that are subject to examination by an agency of the 
United States or any State and (2) lenders approved by the Department of 
Veterans Affairs pursuant to standards established by the Department of 
Veterans Affairs.


(Authority: 38 U.S.C. 3702(d))

    Condominium. Unless otherwise provided by State law, a condominium 
is a form of ownership where the buyer receives title to a three 
dimensional air space containing the individual living unit together 
with an undivided interest or share in the ownership of common elements.
    Cost means the entire consideration paid or payable for or on 
account of the application of materials and labor to tangible property.
    Credit package. Any information, reports or verifications used by a 
lender, holder or authorized servicing agent to

[[Page 593]]

determine the creditworthiness of an applicant for a Department of 
Veterans Affairs guaranteed loan or the assumer of such a loan.


(Authority: 38 U.S.C. 3710 and 3714)

    Date of first uncured default means the due date of the earliest 
payment not fully satisfied by the proper application of available 
credits or deposits.
    Default means failure of a borrower to comply with the terms of a 
loan agreement.
    Designated appraiser means a person requested by the Secretary to 
render an estimate of the reasonable value of a property, or of a 
specified type of property, within a stated area for the purpose of 
justifying the extension of credit to an eligible veteran for any of the 
purposes stated in 38 U.S.C. Chapter 37. An appraiser on a fee basis is 
not an agent of the Secretary.
    Discharge or release. For purposes of basic eligibility a person 
will be considered discharged or released if the veteran was issued a 
discharge certificate under conditions other than dishonorable (38 
U.S.C. 3702(c)). The term discharge or release includes (1) retirement 
from the active military, naval, or air service, and (2) the 
satisfactory completion of the period of active military, naval, or air 
service for which a person was obligated at the time of entry into such 
service in the case of a person who, due to enlistment or reenlistment, 
was not awarded a discharge or release from such period of service at 
the time of such completion thereof and who, at such time, would 
otherwise have been eligible for the award of a discharge or release 
under conditions other than dishonorable.


(Authority: 38 U.S.C. 101(18))

    Dwelling. Any building designed primarily for use as a home 
consisting of not more than four family units plus an added unit for 
each veteran if more than one eligible veteran participates in the 
ownership, except that in the case of a condominium housing development 
or project within the purview of 38 U.S.C. 3710(a)(6) and Secs. 36.4356 
through 36.4360(a) of this part the term is limited to a one single-
family residential unit. Also, a manufactured home, permanently affixed 
to a lot owned by a veteran and classified as real property under the 
laws of the State where it is located.


(Authority: 38 U.S.C. 3710(a)(9) and (f))

    Economic readjustment means rearrangement of an eligible veteran's 
indebtedness in a manner calculated to enable the veteran to meet 
obligations and thereby avoid imminent loss of the property which 
secures the delinquent obligation.
    Energy conservation improvement. An improvement to an existing 
dwelling or farm residence through the installation of a solar heating 
system, a solar heating and cooling system, or a combined solar heating 
and cooling system or through application of a residential energy 
conservation measure as prescribed in 38 U.S.C. 3710(d) or by the 
Secretary.


(Authority: 38 U.S.C. 3710(a)(7))

    Full disbursement. Payment by a lender of the entire proceeds of a 
loan or the purposes described in the report of the lender in respect of 
such loan to the Secretary either:
    (1) By payment to those contracting with the borrower for such 
purposes, or
    (2) By payment to the borrower, or
    (3) By transfer to an account against which the borrower can draw at 
will, or
    (4) By transfer to an escrow account, or
    (5) By transfer to an earmarked account if
    (i) The amount is not in excess of 10 percent of the loan, or
    (ii) The loan is an Acquisition and Improvement loan pursuant to 
Sec. 36.4301, or
    (iii) The loan is one submitted by a lender of the class specified 
in 38 U.S.C. 3702(d) or 3703(a)(2).


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

    Graduated payment mortgage loan. A loan for the purpose of acquiring 
a single-family dwelling unit involving a plan for repayment in which a 
portion of the interest due is deferred for a period of time. The 
interest so deferred is added to the principal balance thus resulting in 
a principal amount greater

[[Page 594]]

than at loan origination (negative amortization). The monthly payments 
increase on an annual basis (graduate) for a predetermined period of 
time until the payments reach a level which will fully amortize the loan 
during the remaining loan term.


(Authority: 38 U.S.C. 3703 (c) and (d))

    Guaranty means the obligation of the United States, assumed by 
virtue of 38 U.S.C. Chapter 37, to repay a specified percentage of a 
loan upon the default of the primary debtor.
    Holder. The lender or any subsequent assignee or transferee of the 
guaranteed obligation or the authorized servicing agent of the lender or 
of the assignee or transferee if the obligation has been assigned or 
transferred.


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

    Home means place of residence.
    Improvements. Any alteration that improves the property for the 
purpose for which it is occupied.
    Indebtedness. The unpaid principal and interest plus any other 
amounts allowable under the terms of a loan including those authorized 
by statute and consistent with Secs. 36.4300 to 36.4393 of this part, 
inclusive, which have been paid and debited to the loan account as of 
the applicable date established pursuant to paragraph (f) of 
Sec. 36.4319 or Sec. 36.4321 of this part.


(Authority: 38 U.S.C. 3732)

    Insurance means the obligation assumed by the United States to 
indemnify a lender to the extent specified in Secs. 36.4300 to 36.4393, 
inclusive, for any loss incurred upon any loan insured under 38 U.S.C. 
3703(a)(2).
    Insurance account means the record of the amount available to a 
lender or purchaser for losses incurred on loans insured under 38 U.S.C. 
3703(a).
    Lender. The payee or assignee or transferee of an obligation at the 
time it is guaranteed or insured. This term also includes any sole 
proprietorship, partnership, or corporation and the owners, officers and 
employees of a sole proprietorship, partnership, or corporation engaged 
in the origination, procurement, transfer, servicing, or funding of a 
loan which is guaranteed or insured by VA.


(Authority: 38 U.S.C. 3704(d), 3712(g))

    Lien means any interest in, or power over, real or personal 
property, reserved by the vendor, or created by the parties or by 
operation of law, chiefly or solely for the purpose of assuring the 
payment of the purchase price, or a debt, and irrespective of the 
identity of the party in whom title to the property is vested, including 
but not limited to mortgages, deeds with a defeasance therein or 
collaterally, deeds of trust, security deeds, mechanics' liens, lease-
purchase contracts, conditional sales contracts, consignments.
    Liquidation sale. Any judicial, contractural or statutory 
disposition of real property, under the terms of the loan instruments 
and applicable law, to liquidate a defaulted loan that is secured by 
such property. This includes a voluntary conveyance made to avoid such 
disposition of the obligation or of the security.


(Authority: 38 U.S.C. 3732)

    Lot. A parcel of land acceptable to the Secretary as a manufactured 
home site.


(Authority: 38 U.S.C. 3710(a)(9))

    Manufactured home. A moveable dwelling unit designed and constructed 
for year-round occupancy by a single family, on land, containing 
permanent eating, cooking, sleeping and sanitary facilities. A double-
wide manufactured home is a moveable dwelling designed for occupancy by 
one family and consisting of: (1) Two or more units intended to be 
joined together horizontally when located on a site, but capable of 
independent movement or (2) a unit having a section or sections which 
unfold along the entire length of the unit. For the purposes of this 
section of VA regulations, manufactured home/lot loans guaranteed under 
the purview of Secs. 36.4300 to 36.4393, inclusive, must be for units 
permanently affixed to a lot and considered to be real property under 
the laws of the State where it is located. If the loan is for the 
purchase

[[Page 595]]

of a manufactured home and lot it must be considered as one loan.


(Authority: 38 U.S.C. 3710(a)(9))

    Net loss. (insured loans) means the indebtedness, plus any other 
charges authorized under Sec. 36.4313, remaining unsatisfied after the 
liquidation of all available security and recourse to all intangible 
rights of the holder against those obligated on the debt.
    Net value. The fair market value of real property, minus an amount 
representing the costs that the Secretary estimates would be incurred by 
VA in acquiring and disposing of the property. The number to be 
subtracted from the fair market value will be calculated by multiplying 
the fair market value by the current cost factor. The cost factor used 
will be the most recent percentage of the fair market value that VA 
calculated and published in the Notices section of the Federal Register 
(it is intended that this percentage will be calculated annually). In 
computing this cost factor, VA will determine the average operating 
expenses and losses (or gains) on resale incurred for properties 
acquired under Sec. 36.4320 which were sold during the preceding fiscal 
year and the average administrative cost to VA associated with the 
property management activity. The final net value derived from this 
calculation will be stated as a whole dollar amount (any fractional 
amount will be rounded up to the next whole dollar). The cost items 
included in the calculation will be:
    (1) Property operating expenses. All disbursements made for payment 
of taxes, assessments, liens, property maintenance and related repairs, 
management broker's fees and commissions, and any other charges to the 
property account excluding property improvements and selling expenses.
    (2) Selling expenses. All disbursements for sales commissions plus 
any other costs incurred and paid in connection with the sale of the 
property.
    (3) Administrative costs. (i) An estimate of the total cost for VA 
of personnel (salary and benefits) and overhead (which may include 
things such as travel, transportation, communication, utilities, 
printing, supplies, equipment, insurance claims and other services) 
associated with the acquisition, management and disposition of property 
acquired under Sec. 36.4320 of this part. The average administrative 
costs will be determined by:
    (A) Dividing the total cost for VA personnel and overhead salary and 
benefits costs by the average number of properties on hand and adjusting 
this figure based on the average holding time for properties sold during 
the preceding fiscal year; then
    (B) Dividing the figure calculated in paragraph (3)(i)(A) of this 
definition by the VBA ratio of personal services costs to total 
obligations.
    (ii) The three cost averages will be added to the average loss (or 
gain) on property sold during the preceding fiscal year (based on the 
average property purchase price) and the sum will be divided by the 
average fair market value at the time of acquisition for properties 
which were sold during the preceding fiscal year to derive the 
percentage to be used in estimating net value.


(Authority: 38 U.S.C. 3732)

    Purchase price. The entire legal consideration paid or payable upon 
or on account of the sale of property, exclusive of acquisition costs, 
or for the cost of materials and labor to be applied to the property.
    Real-estate loan. Any obligation incurred for the purchase of real 
property or a leasehold estate as limited in Secs. 36.4300 to 36.4393, 
inclusive, or for the construction of fixtures or appurtenances thereon 
or for alterations, improvements, or repairs thereon required by 
Secs. 36.4300 to 36.4393, inclusive, to be secured by a lien on such 
property or is so secured. Loans for the purpose specified in 38 U.S.C. 
3710(a)(5) (refinancing of mortgage loans or other liens on a dwelling 
or farm residence), loans for the purpose specified in 38 U.S.C. 
3710(a)(8) (refinancing of a VA guaranteed, insured or direct loan to 
lower the interest rate), loans for the purposes specified in 38 U.S.C. 
3710(a)(9) (purchase of manufactured homes/lots or the refinancing of 
such loans in order to reduce the interest rate or

[[Page 596]]

purchase a lot, in States in which manufactured homes, when permanently 
affixed to a lot, are considered real property, and loans to purchase 
one-family residential units in condominium housing developments or 
projects within the purview of 38 U.S.C. 3710(a)(6) and Secs. 36.4356 
through 36.4360a shall also be considered real estate loans.
    Reasonable value means that figure which represents the amount a 
reputable and qualified appraiser, unaffected by personal interest, 
bias, or prejudice, would recommend to a prospective purchaser as a 
proper price or cost in the light of prevailing conditions.
    Registered mail. The term registered mail wherever used in the 
regulations concerning guaranty or insurance of loans to veterans shall 
include certified mail.
    Repairs. Any alteration of existing improved realty or equipment 
which is necessary or advisable for protective, safety or restorative 
purposes.
    Repossession - repossessed means recovery or acquisition of such 
physical control of property (pursuant to the provisions of the security 
instrument or as otherwise provided by law) as to make further legal or 
other action unnecessary in order to obtain actual possession of the 
property or to dispose of the same by sale or otherwise.
    Residential property. (1) Any one-family residential unit in a 
condominium housing development within the purview of 38 U.S.C. 
3710(a)(6) and Secs. 36.4356 through 36.4360a, (2) any manufactured home 
permanently affixed to a lot owned or being purchased by a veteran and 
considered to be real property under the laws of the State where it is 
located, and (3) any improved real property (other than a condominium 
housing development or a manufactured home and/or lot) or leasehold 
estate therein as limited by Secs. 36.4300 to 36.4393, inclusive, the 
primary use of which is for occupancy as a home, consisting of not more 
than four family units, plus an added unit for each eligible veteran if 
more than one participates in the ownership thereof, or (4) any land to 
be purchased out of the proceeds of a loan for the construction of a 
dwelling, and on which such dwelling is to be erected.


(Authority: 38 U.S.C. 3710(f)(2) and (3))

    Secretary. The Secretary of Veterans Affairs, or any employee of the 
Department of Veterans Affairs authorized to act in the Secretary's 
stead.
    Servicing agent. An agent designated by the loan holder as the 
entity to collect installments on the loan and/or perform other 
functions as necessary to protect the interests of the holder.


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

    Specified amount. A sum, equal to the lesser of the net value of 
real property or the total indebtedness secured thereby, which the 
Secretary designates as the minimum amount to be credited to the 
indebtedness incident to a liquidation sale.


(Authority: 38 U.S.C. 3732)

    Unguaranteed portion of the indebtedness. The indebtedness computed 
as of the applicable date of under paragraph (f) of Sec. 36.4319 or 
Sec. 36.4321 of this part minus the amount of the guaranty payable as of 
such date.


(Authority: 38 U.S.C. 3732)

(Authority: 38 U.S.C. 501, 3703(c)(1))

[24 FR 2651, Apr. 7, 1959]

    Editorial Note: For Federal Register citations affecting 
Sec. 36.4301, see the List of CFR Sections Affected, which appears in 
the Finding Aids section of the printed volume and on GPO Access.

                           general provisions