Loan Guaranty: Advertising and Solicitation Requirements

AGENCY:

Department of Veterans Affairs.

ACTION:

Proposed rule.

SUMMARY:

This document proposes to amend the Department of Veterans Affairs (VA) loan guaranty regulations by prohibiting advertisements or solicitations from lenders that falsely state or imply that they were issued by or at the direction of VA or any other entity of the United States Government. These provisions appear to be necessary to ensure that lenders do not provide misleading information.

DATES:

Comments must be received on or before February 6, 2001.

ADDRESSES:

Mail or hand-deliver written comments to: Director, Office of Regulations Management (02D), Department of Veterans Affairs, 810 Vermont Ave., NW., Room 1154, Washington, DC 20420; or fax comments to (202) 273-9289; or e-mail comments to OGCRegulations@mail.va.gov. Comments should indicate that they are submitted in response to “RIN 2900-AJ86.” All comments received will be available for public inspection in the Office of Regulations Management, Room 1158, between the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday (except holidays).

FOR FURTHER INFORMATION CONTACT:

R. D. Finneran, Assistant Director for Loan Policy and Valuation (262), Loan Guaranty Service, Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue, NW, Washington, DC 20420, (202) 273-7368.

SUPPLEMENTARY INFORMATION:

Under the authority of 38 U.S.C. chapter 37, VA guarantees loans made by private lenders to eligible veterans to purchase, construct, improve, or refinance their homes (the term veteran as used in this document includes any individual defined as a veteran under 38 U.S.C. 101 and 3701 for the purpose of housing loans). This document proposes to amend VA's loan guaranty regulations for both manufactured homes and conventionally built homes by adding new advertising and solicitation disclosure requirements.

We have become aware of written advertisements and solicitations from private lenders that appear to falsely state or imply that they came from VA. For example, one solicitation from a private lender stated that it was from the “Government Loans Programs” and contained a reference to a VA case number. Another solicitation from a private lender stated that “[I]n accordance with regulations determined by the Department of Veterans Affairs this notice is officially issued to * * *” Another solicitation from a private lender stated that “The Veterans Benefit Administration known as VA, a division of the United States Department of Veterans Affairs is working with lenders to inform you * * *” Other solicitations from private lenders stated that they were from the “V.A. Loan Department,” “Veterans Department,” “Direct VA Streamline Department,” “Authorized VA Loan Center,” and “VA Conversion Center.” One solicitation from a private lender not only stated on the envelope that it was from the “Department of Veterans” but included the statement “Official Business, Penalty For Private Use, $300.”

Further, we have recently become aware of written advertisements and solicitations from private lenders that appear to falsely state or imply that they have been given special authority by VA to offer a unique loan product. For example, one solicitation from a private lender stated that “you are now eligible to take advantage of the Exclusive VA STREAMLINE refinance program.” Another solicitation from a private lender stated that “The Veterans Administration in conjunction with * * * Mortgage offers a unique program * * *”

To address these issues regarding advertisements and solicitations, we are proposing to establish advertising and solicitation requirements. We propose that any advertisement or solicitation in any form (e.g., written, electronic, oral) from private lenders concerning housing loans to be guaranteed or insured by the Secretary must not include information falsely stating or implying that it was issued by or at the direction of VA or any other department or agency of the United States and must not include information falsely stating or implying that the lender has an exclusive right to make loans guaranteed or insured by VA.

If the proposed requirements are adopted, noncompliance may lead to suspension, debarment, or limited denial of participation in the VA housing loan program pursuant to 38 CFR part 44. Also, under 38 CFR part 44, such action could affect the lender's ability to participate in other governmental programs.

Regulatory Flexibility Act

The Secretary hereby certifies that the adoption of the proposed rule would not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. The proposed rule would not have more than a minuscule effect on any small entities. Therefore, pursuant to 5 U.S.C. 605(b), the proposed rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Catalog of Federal Domestic Assistance Program number is 64.114.

List of Subjects in 38 CFR Part 36

• Condominiums
• Handicapped
• Housing
• Indians
• Individuals with disabilities
• Loan programs-housing and community development
• Loan programs-Indians
• Loan programs-veterans
• Manufactured homes
• Mortgage insurance
• Reporting and recordkeeping requirements
• Veterans

For the reasons set out in the preamble, 38 CFR part 36 is proposed to be amended as set forth below.

PART 36—LOAN GUARANTY

1. The authority citation for part 36 continues to read as follows:

Authority: 38 U.S.C. 501, 3701-3704, 3707, 3710-3714, 3719, 3720, 3729, 3762, unless otherwise noted.

2. Section 36.4227 is added immediately after the authority citation at the end of § 36.4226 to read as follows: