Loan Guaranty: Maximum Allowable Fees for Legal Services

AGENCY:

Department of Veterans Affairs.

ACTION:

Notice.

SUMMARY:

This notice provides updated information to participants in the Department of Veterans Affairs (VA) Home Loan Guaranty program concerning the maximum allowable fees for legal services performed in connection with the foreclosure of single-family housing loans. This notice also provides updated information concerning the legal fees for bankruptcy-related services. The table in this notice contains the amounts the Secretary has determined to be reasonable and customary in all states, following an annual review of the amounts allowed by other Government-related home loan programs.

DATES:

The new maximum allowable fees for legal services will be allowed for all guaranty claims submitted to VA on or after December 8, 2021.

FOR FURTHER INFORMATION CONTACT:

Mr. Andrew Trevayne, Assistant Director for Loan and Property Management, Loan Guaranty Service (261), Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue NW, Washington, DC 20420, (202) 632-8795. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION:

The VA Home Loan Guaranty program authorized by title 38, United States Code, chapter 37, offers a partial guaranty against loss to lenders who make home loans to Veterans. VA regulations concerning the payment of loan guaranty claims are set forth at 38 CFR 36.4300, et seq. Computation of guaranty claims is addressed in 38 CFR 36.4324, which states that one part of the indebtedness upon which the guaranty percentage is applied is the “[a]llowable expenses/advances as described in [38 CFR 36.4314].” 38 CFR 36.4324(a)(2). Section 36.4314(b)(5)(ii) describes the procedures to be followed in determining what constitutes the reasonable and customary fees for legal services performed in connection with the foreclosure of single-family housing loans.

Pursuant to § 36.4314(b)(5)(ii), the Secretary is required to annually review allowances for legal fees in connection with the foreclosure of single-family housing loans, including bankruptcy-related services, issued by the Department of Housing and Urban Development (HUD), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). In March 2021, Fannie Mae issued revisions to their allowances for legal fees. Fannie Mae, Allowable Foreclosure Attorney Fees Exhibit, Servicing Guide (March 10, 2021), https://servicing-guide.fanniemae.com. The following month, HUD announced its plans to adopt Fannie Mae's fee structure by August. HUD, National Servicing Center Single Family Housing Policy Handbook 4000.1 Section III: Servicing and Loss Mitigation Key Changes (April 22, 2021), https://www.hud.gov/sites/dfiles/SFH/documents/sfh_hb_4000_1_sect_3_serv_loss_mit_04_22_21.pdf. Freddie Mac has also announced new allowances for legal fees, effective September 27, 2021. Freddie Mac, Approved Attorney Fees and Title Expenses, Seller/Servicer Guide Exhibit 57A (September 27, 2021), https://guide.freddiemac.com/app/guide/exhibitRev/57A,09-27-2021.

VA has reviewed and considered the legal fees allowed by each entity. Based on increases in fees for legal services announced by these Government-related home loan programs, the Secretary is publishing in the Federal Register a table setting forth the revised amounts the Secretary has determined to be reasonable and customary. The table reflects the primary method for foreclosing in each state, either judicial or non-judicial, with the exception of those states where either judicial or non-judicial is acceptable. The use of a method not authorized in the table will require prior approval from VA. This table will be available throughout the year at: https://www.benefits.va.gov/HOMELOANS/servicers_valeri_rules.asp.

There has been no change to the amounts VA will allow for bankruptcy filing fees. However, VA is clarifying that VA allows for a bankruptcy filing fee regardless of whether a bankruptcy release is obtained. VA notes that its current regulation at 38 CFR 36.4314(b)(5)(i) authorizes “[f]ees for legal services actually performed.” Regardless of whether a bankruptcy filing results in a release, legal services may have been performed in addressing the filing. Allowing fees for a bankruptcy filing is also consistent with the other Government-related home loan programs. See HUD, National Servicing Center Single Family Housing Policy Handbook 4000.1 Section III: Servicing and Loss Mitigation Key Changes (April 22, 2021), https://www.hud.gov/sites/dfiles/SFH/documents/sfh_hb_4000_1_sect_3_serv_loss_mit_04_22_21.pdf.;; Fannie Mae, Allowable Bankruptcy Attorney Fees Exhibit, Servicing Guide (September 11, 2019), https://servicing-guide.fanniemae.com;; Freddie Mac, Approved Attorney Fees and Title Expenses, Seller/Servicer Guide Exhibit 57A (September 27, 2021), https://guide.freddiemac.com/app/guide/exhibitRev/57A,09-27-2021. VA will continue to monitor fees for legal services on an annual basis and publish updates in the Federal Register as VA deems necessary.

The following table reflects the Secretary's determination of the reasonable and customary fees for legal services for the primary method for foreclosing in each state.

Signing Authority

Denis McDonough, Secretary of Veterans Affairs, approved this document on November 1, 2021 and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs.