Loan Guaranty: Credit Underwriting Standards and Procedures for Processing VA Guaranteed Loans

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 36

RIN 2900-AF39

Loan Guaranty: Credit Underwriting Standards and Procedures for

Processing VA Guaranteed Loans

agency: Department of Veterans Affairs.

action: Final regulatory amendments.

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summary: The Department of Veterans Affairs (VA) is amending its loan

guaranty regulations by updating the credit underwriting standards and

procedures for processing VA guaranteed home loans. Updating the

standards and procedures to keep pace with current economic conditions

will increase the likelihood that a veteran obtaining a VA guaranteed

loan will be able to repay the loan.

effective date: These regulatory amendments are effective October 27,

1994.

for further information contact: Ms. Judith Caden, Assistant Director

for Loan Policy (264), Loan Guaranty Service, Veterans Benefits

Administration, Department of Veterans Affairs, 810 Vermont Avenue NW.,

Washington, DC 20420, (202) 273-7366.

supplementary information: On September 29, 1993, VA published in the

Federal Register (58 FR 50875) proposed regulatory amendments to 38 CFR

36.4337. VA proposed to amend the credit underwriting standards and

procedures for processing VA guaranteed home loans (1) by updating the

figures in the residual income guidelines; (2) by requiring that income

tax returns be submitted with applications for borrowers who are self-

employed, paid on a commission basis, employed in the building trades,

or have seasonal jobs; (3) by providing more specific time frames for

considering whether income from part-time employment, second jobs

overtime, self-employment, and commissions may be considered stable and

reliable; (4) by adding guidelines for underwriting cases involving

foreclosures and Federally-related debts; and (5) by deleting the

requirement that lenders check with VA regional offices on prior VA

loans. VA also proposed to delete union dues from items considered job-

related expenses because these dues are part of the residual income

figure. Please refer to the September 29, 1993 Federal Register for a

complete discussion of the proposed amendments. VA is adopting the

regulatory amendments as originally proposed except for the minor

editorial and terminology changes discussed below.

VA received three comments on the proposed amendments. One

commenter favored all the amendments. The second, a national

association representing certified public accountants, suggested that

more accurate accounting terms be used to describe VA's financial

requirements for self-employed borrowers. Specifically, the commenter

noted that ``compile'' is the correct term to use to describe the case

where an external accountant will ``prepare'' the financial statements,

as required by section 36.4337(f)(7)(i). The commenter also pointed out

that independent accountants do not ``certify the accuracy'' of

financial statements, rather, the technically correct usage is to say

that the accountant conducts an ``audit''. VA agrees that the

commenter's suggested terminology is more precise. Accordingly, we are

revising paragraph (f)(7)(i) of Sec. 36.4337 of the regulations to read

that the profit and loss statement and balance sheet required for self

employed applicants be ``compiled'', rather than ``prepared'', by an

accountant. The words ``certified as accurate'' are also being deleted

from the sentence which was proposed to read, ``In some cases the

nature of the business or the content of the financial statement may

necessitate an independent audit certified as accurate by the

accountant.''

The third commenter requested clarification of how a loan

underwriter determines the stability and reliability of a self-employed

applicant's income.

The proposed new paragraph (f)(7) of Sec. 36.4337 states that

``income from self-employment is generally considered stable when the

applicant has been in business for at least 2 years and that income

from less than 2 years of self-employment usually cannot be considered

stable unless the applicant has had previous related employment and/or

extensive specialized training.'' It also states that ``When an

applicant has been self-employed less than 1 year, it will rarely be

possible to demonstrate that the income is stable for qualifying

purposes * * * .''

As the regulations provide, VA does not require that in every case

the self-employed applicant have a two-year period of continuous

employment with no gaps. If the applicant has been self-employed for

less than two years, it is appropriate in underwriting the loan to also

consider the applicant's related employment or specialized training.

For example, sufficient weight might be given to the fact that the

applicant has had specialized training in his or her field of endeavor,

and that therefore, the income from self-employment should be viewed as

stable, even though it has been for less than 2 years. However, when

the self-employment has been for less than one year, it would be very

difficult to consider the income stable and reliable. In other words,

in cases where the loan applicant has been self-employed for less than

one year, it would not be possible to view his or her income as stable

unless the applicant's training and/or related experience is such as to

clearly show a very strong likelihood of success.

This commenter also asked ``If the two-year history of employment

applies, must it be continuous or should factors such as schooling or

training be considered during that time even if no income resulted?''

As noted above, the proposed regulations provide for the

consideration of training and schooling when determining the adequacy

of income from self-employment. Thus it is possible to consider income

as stable and reliable with less than 2 years of continuous employment,

provided gaps in employment are sufficiently explained by adequate

documentation of schooling or training. It is clear that the language

in paragraph (f)(7)(i) is adequate to prescribe the intended standard

and, therefore, the paragraph will be published as originally proposed.

VA is making an editorial change to paragraph (g) of the

regulations. Language now contained in paragraph (f)(1) of the

regulations explaining the requirements of the Equal Credit Opportunity

Act, is being repeated in paragraph (g) for the purposes of clarity.

Accordingly, except for the terminology and editorial changes

already discussed, VA is publishing these regulations as originally

proposed.

The information collection requirement contained in paragraphs

(f)(6), (f)(7) and (f)(9) of Sec. 36.4337 of these regulations has been

approved by the Office of Management and Budget (OMB) under OMB control

number 2900-0521.

The Secretary hereby certifies that the proposed regulatory

amendments will 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. These changes will not result in any

major new administrative or procedural burdens on lenders or other

program participants. They simply revise the criteria established by VA

in determining whether home loans for veterans will be guaranteed by VA

based on the veteran's income and credit history.

The Catalog of Federal Domestic Assistance Program numbers are

64.114 and 64.119.

List of Subjects in 38 CFR Part 36

Condominiums, Handicapped, Housing Loan program--housing and

community development, Manufactured homes, Veterans.

These amendments are made final under the authority granted the

Secretary by section 501(a) of title 38, United States Code.

Approved: August 15, 1994.

Jesse Brown,

Secretary for Veterans Affairs.

For the reasons set out in the preamble, 38 CFR part 36, is amended

as set forth below.

PART 36--LOAN GUARANTY

1. The authority citation for part 36 Secs. 36.4300 through 36.4375

is revised to read as follows:

Authority: Sections 36.4300 through 36.4375 issued under 38

U.S.C. 501(a).

2. Section 36.4337 is revised to read as follows:

Sec. 36.4337 Underwriting standards, processing procedures, lender

responsibility and lender certification

(a) Use of standards. Except for refinancing loans guaranteed

pursuant to 38 U.S.C. 3710(a)(8), the standards contained in paragraphs

(c) through (j) of this section will be used to determine that the

veteran's present and anticipated income and expenses, and credit

history are satisfactory.

(b) Waiver of standards. Use of the standards in paragraphs (c)

through (j) of this section for underwriting home loans will be waived

only in extraordinary circumstances when the Secretary determines,

considering the totality of circumstances, that the veteran is a

satisfactory credit risk.

(c) Methods. The two primary underwriting tools that will be used

in determining the adequacy of the veteran's present and anticipated

income are debt-to-income ratio and residual income analysis. They are

described in paragraphs (d) through (f) of this section. Ordinarily, to

qualify for a loan, the veteran must meet both standards. Failure to

meet one standard, however, will not automatically disqualify a

veteran. The following shall apply to cases where a veteran does not

meet both standards:

(1) If the debt-to-income ratio is 41 percent or less, and the

veteran does not meet the residual income standard, the loan may be

approved with justification, by the underwriter's supervisor, as set

out in paragraph (c)(4) of this section.

(2) If the debt-to-income ratio is greater than 41 percent, (unless

it is larger due solely to the existence of tax-free income which

should be noted in the loan file) the loan may be approved with

justification, by the underwriter's supervisor, as set out in paragraph

(c)(4) of this section.

(3) If the ratio is greater than 41 percent and the residual income

exceeds the guidelines by at least 20 percent the second level review

and statement of justification is not required.

(4) In any case described by paragraphs (c)(1) and (c)(2) of this

section, the lender must fully justify the decision to approve the loan

or submit the loan to the Secretary for prior approval in writing. The

lender's statement must not be perfunctory, but should address the

specific compensating factors, as set forth in paragraph (c)(5),

justifying the approval or submission of the loan. The statement must

be signed by the underwriter's supervisor. It must be stressed that the

statute requires not only consideration of a veteran's present and

anticipated income and expenses, but also that the veteran be a

satisfactory credit risk.

Therefore, meeting both the debt-to-income ratio and residual

income standards does not mean the loan is automatically approved. It

is the lender's responsibility to base the loan approval or disapproval

on all the factors present for any individual veteran. The veteran's

credit must be evaluated based on criteria set forth in paragraph (g)

of this section as well as a variety of compensating factors that

should be evaluated.

(5) The following are examples of acceptable compensating factors

to be considered in the course of underwriting a loan:

(i) Excellent long-term credit;

(ii) Conservative use of consumer credit;

(iii) Minimal consumer debt;

(iv) Long-term employment;

(v) Significant liquid assets;

(vi) Downpayment or the existence of equity in refinancing loans;

(vii) Little or no increase in shelter expense;

(viii) Military benefits;

(ix) Satisfactory homeownership experience;

(x) High residual income; and

(xi) Low debt-to-income ratio.

(6) The list in paragraph (c)(5) is not exhaustive and the items

are not in any priority order. Valid compensating factors should

represent unusual strengths rather than mere satisfaction of basic

program requirements. Compensating factors must be relevant to the

marginality or weakness.

(d) Debt-to-income-ratio. A debt-to-income ratio that compares the

veteran's anticipated monthly housing expense and total monthly

obligations to his or her stable monthly income will be computed to

assist in the assessment of the potential risk of the loan. The ratio

will be determined by taking the sum of the monthly Principal,

Interest, Taxes and Insurance (PITI) to the loan being applied for,

homeowners and other assessments such as special assessments,

condominium fees, homeowners association fees, etc., and any long-term

obligations divided by the total of gross salary or earnings and other

compensation or income. The ratio should be rounded to the nearest two

digits; e.g., 35.6 percent would be rounded to 36 percent. The standard

is 41 percent or less. If the ratio is greater than 41 percent, (unless

it is larger due solely to the existence of tax free income which

should be noted in the loan file) the steps cited in paragraphs (c)(1)

through (c)(6) of this section apply.

(e) Residual income guidelines. The guidelines provided in this

paragraph for residual income will be used to determine whether the

veteran's monthly residual income will be adequate to meet living

expenses after estimated monthly shelter expenses have been paid and

other monthly obligations have been met. The guidelines for residual

income are based on data supplied in the Consumer Expenditure Survey

(CES) published by the Department of Labor's Bureau of Labor

Statistics. Regional minimum incomes have been developed for loan

amounts up to $69,999 and for loan amounts of $70,000 and above. It is

recognized that the purchase price of the property may affect family

expenditure levels in individual cases. This factor may be given

consideration in the final determination in individual loan analyses.

For example, a family purchasing in a higher-priced neighborhood may

feel a need to incur higher than average expenses to support a

lifestyle comparable to that in their environment, whereas a

substantially lower-priced home purchase may not compel such

expenditures. It should also be clearly understood from this

information that no single factor is a final determinant in any

applicant's qualification for a VA guaranteed loan. Once the residual

income has been established, other important factors must be examined.

One such consideration is the amount being paid currently for rental or

housing expenses. If the proposed shelter expense is materially in

excess of what is currently being paid, the case may require closer

scrutiny. In such cases, consideration should be given to the ability

of the borrower and spouse to accumulate liquid assets; such as cash

and bonds, and to the amount of debts incurred while paying a lesser

amount for shelter. For example, if an application indicates little or

no capital reserves and excessive obligations, it may not be reasonable

to conclude that a substantial increase in shelter expenses can be

absorbed. Another factor of prime importance is the applicant's manner

of meeting obligations. A poor credit history alone is a basis for

disapproving a loan, as is an obviously inadequate income. When one or

the other is marginal, however, the remaining aspect must be closely

examined to assure that the loan applied for will not exceed the

applicant's ability or capacity to repay. Therefore, it is important to

remember that the figures provided below for residual income are to be

used as a guide and should be used in conjunction with the steps

outlined in paragraphs (c) through (j) of this section. The residual

income guidelines are as follows:

(1) Table of residual incomes by region (for loan amounts to

$69,999 and below):

Table of Residual Incomes by Region

[For loan amounts of $69,999 and below]

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Family size* Northeast Midwest South West

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1................................. $375 $367 $367 $409

2................................. 629 616 616 686

3................................. 758 742 742 826

4................................. 854 835 835 930

5................................. 886 867 867 965

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*For families with more than five members, add $75 for each additional

member up to a family of seven.

(2) Table of residual incomes by region (for loan amounts of

$70,000 and above):

Table of Residual Incomes by Region

[For loan amounts of $70,000 and above]

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Family size* Northeast Midwest South West

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1................................. $433 $424 $424 $472

2................................. 726 710 710 791

3................................. 874 855 855 952

4................................. 986 964 964 1074

5................................. 1021 999 999 1113

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*For families with more than five members, add $80 for each additional

member up to a family of seven.

(3) Geographic regions for residual income guidelines: Northeast--

Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York,

Pennsylvania, Rhode Island and Vermont; Midwest--Illinois, Indiana,

Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota,

Ohio, South Dakota and Wisconsin; South--Alabama, Arkansas, Delaware,

District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland,

Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina,

Tennessee, Texas, Virginia, West Virginia; West--Alaska, Arizona,

California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico,

Oregon, Utah, Washington and Wyoming.

(4) Military adjustments: For loan applications involving an

active-duty serviceperson or military retiree, the residual income

figures will be reduced by a minimum of 5 percent if there is a clear

indication that the borrower or spouse will continue to receive the

benefits resulting from the use of facilities on a nearby military

base. (This reduction applies to tables in paragraph (e).)

(f) Stability and reliability of income. Only stable and reliable

income of the veteran and spouse can be considered in determining

ability to meet mortgage payments. Income can be considered stable and

reliable if it can be concluded that it will continue during the

foreseeable future.

(1) Verification. Income of the borrower and spouse which is

derived from employment and which is considered in determining the

family's ability to meet the mortgage payments, payments on debts and

other obligations, and other expenses, must be verified. If the spouse

is employed and will be contractually obligated on the loan, the

combined income of both the veteran and spouse is considered when the

income of the veteran alone is not sufficient to qualify for the amount

of the loan sought. In other than community property States, if the

spouse will not be contractually obligated on the loan, Regulation B,

promulgated by the Federal Reserve Board pursuant to the Equal Credit

Opportunity Act prohibits any request for, or consideration of

information concerning the spouse (including income, employment,

assets, or liabilities), except that if the applicant is relying on

alimony, child support, or maintenance payments from a spouse or former

spouse as a basis for repayment of the loan, information concerning

such spouse or former spouse may be requested and considered (see

paragraph (f)(4) of this section). In community property States,

information concerning a spouse may be requested and considered in the

same manner as that for the applicant. The standards applied to income

of the veteran are also applicable to that of the spouse. There can be

no discounting of income on account of sex, marital status, or any

other basis prohibited by the Equal Credit Opportunity Act. Income

claimed by an applicant that is not or cannot be verified cannot be

given considered when analyzing the loan. If the veteran or spouse has

been employed by a present employer for less than 2 years, a 2-year

history covering prior employment, schooling or other training must be

secured. Any periods of unemployment must be explained. Employment

verifications and pay stubs must be no more than 90 days old to be

considered valid. For loans closed automatically, this requirement will

be considered satisfied if the date of the employment verification is

within 90 days of the date of the veteran's application to the lender.

(2) Active duty applicants. (i) In the case of an active duty

applicant, a military Leave & Earnings Statement is required and will

be used instead of an employment verification. The statement must be no

more than 90 days old and must be the original or a lender-certified

copy of the original. For loans closed automatically, this requirement

is satisfied if the date of the Leave and Earnings Statement is within

90 days of the date of the borrower's application to the lender.

(ii) For service members within 12 months of release from active

duty one of the following is also required:

(A) Documentation that the service member has in fact already

reenlisted or extended his/her period of active duty to a date beyond

the 12 month period following the projected closing of the loan.

(B) Verification of a valid offer of local civilian employment

following release from active duty. All data pertinent to sound

underwriting procedures (date employment will begin, earnings, etc.)

must be included.

(C) A statement from the service member that he/she intends to

reenlist or extend his/her period of active duty to a date beyond the

12 month period following the projected loan closing date, and a

statement from the service member's commanding officer confirming that

the service member is eligible to reenlist or extend his/her active

duty as indicated and that the commanding officer has no reason to

believe that such reenlistment or extension of active duty will not be

granted.

(D) Other unusually strong positive underwriting factors, such as a

downpayment of at least 10 percent, significant cash reserves, or clear

evidence of strong ties to the community coupled with a nonmilitary

spouse's income so high that only minimal income from the active duty

service member is needed to qualify.

(iii) Each active duty member who applies for a loan must be

counseled through the use of VA Form 26-0592, Counseling Checklist for

Military Homebuyers. Lenders must submit a signed and dated VA Form 26-

0592 with each prior approval loan application or automatic loan report

involving a borrower on active duty.

(3) Income reliability. Income received by the borrower and spouse

is to be used only if it can be concluded that the income will continue

during the foreseeable future and thus be properly considered in

determining ability to meet the mortgage payments. There can be no

discounting of income solely because it is derived from an annuity,

pension or other retirement benefit, or from part-time employment.

However, unless income from overtime work and part-time or second jobs

can be accorded a reasonable likelihood that it is continuous and will

continue in the foreseeable future, such income should not be used.

Generally, the reliability of such income cannot be demonstrated unless

the income has continued for 2 years. The hours of duty and other work

conditions of the applicant's primary job, and the period of time in

which the applicant was employed under such arrangement must be such as

to permit a clear conclusion as to a good probability that overtime or

part-time or secondary employment can and will continue. Income from

overtime work and part-time jobs not eligible for inclusion as primary

income may, if properly verified for at least 12 months, be used to

offset the payments due on debts and obligations of an intermediate

term, i.e., 6 to 24 months. Such income must be described in the loan

file. The amount of any pension or compensation and other income such

as dividends from stocks, interest from bonds, savings accounts, or

other deposits, rents, royalties, etc., will be used as primary income

if it is reasonable to conclude that such income will continue in the

foreseeable future. Otherwise, it may be used only to offset

intermediate-term debts, as above. Also, the likely duration of certain

military allowances cannot be determined, and therefore will be used

only to offset intermediate-term obligations. Such allowances are: Pro-

pay, flight or hazard pay, and overseas or combat pay, all of which are

subject to periodic review and/or testing of the recipient to ascertain

whether eligibility for such pay will continue. Only if it can be shown

that such pay has continued for a prolonged period and can be expected

to continue because of the nature of the recipient's assigned duties,

will such income be considered as primary income. For instance, flight

pay verified for a pilot can be regarded as probably continuous and

thus should be added to the base pay. Income derived from service in

the reserves or National Guard may be used if the applicant has served

in such capacity for a period of time sufficient to evidence good

probability that such income will continue. The total period of active

and reserve service may be helpful in this regard. Otherwise, such

income may be used to offset intermediate-term debts. There are a

number of additional income sources whose contingent nature precludes

their being considered as available for repayment of a long-term

mortgage obligation. Temporary income items such as VA educational

allowances and unemployment compensation do not represent stable and

reliable income and will not be taken into consideration in determining

the ability of the veteran to meet the income requirement of the

governing law. As required by the Equal Opportunity Act Amendments of

1976, Public Law 94-239, income from public assistance programs is used

to qualify a loan if it can be determined that the income will probably

continue for a substantial fraction of the term of the loan; i.e., one-

third or more. For instance, aid to dependent children being received

for a 5-year old child that will continue until the child achieves

majority would be used to qualify for a 30-year loan.

(4) Alimony, child support, maintenance payments. If an applicant

chooses to reveal income from alimony, child support, or maintenance

payments (after first having been informed that any such disclosure is

voluntary pursuant to the Federal Reserve Board's Regulation B), such

payments are considered as income to the extent that the payments are

likely to be consistently made. Factors to be considered in determining

the likelihood of consistent payments include, but are not limited to:

Whether the payments are received pursuant to a written agreement or

court decree; the length of time the payments have been received; the

regularity of receipt; the availability of procedures to compel

payment; and the creditworthiness of the payor, including the credit

history of the payor when available under the Fair Credit Reporting Act

or other applicable laws. However, the Fair Credit Reporting Act (15

U.S.C. 1681(b)) limits the permissible purposes for which credit

reports may be ordered, in the absence of written instructions of the

consumer to whom the report relates, to business transactions involving

the subject of the credit report or extensions of credit to the subject

of the credit report.

(5) Military quarters allowance. With respect to off-base housing

(quarters) allowances for service personnel on active duty, it is the

policy of the Department of Defense (DoD) to utilize available on-base

housing when possible. In order for a quarters allowance to be

considered as continuing income, it is necessary that the applicant

furnish written authorization from his or her commanding officer for

off-base housing. This authorization should verify that quarters will

not be made available and that the individual should make permanent

arrangements for nonmilitary housing. DD Form 1747, Status of Housing

Availability, is used by the Family Housing Office to advise personnel

regarding family housing. The applicant's quarters allowance cannot be

considered unless item b (Permanent) or d is completed on DD Form 1747,

dated October 1990. of course, if the applicant's income less quarters

allowance is sufficient, there is no need for assurance that the

applicant has permission to occupy nonmilitary housing provided that a

determination can be made that the occupancy requirements of the law

will be met. Also, authorization obtain off-base housing will not be

required when certain duty assignments would clearly qualify service

personnel with families for quarters allowance. For instance, off-base

housing authorizations need not be obtained for service personnel

stationed overseas who are not accompanied by their families,

recruiters on detached duty, or military personnel stationed in areas

where no on-base housing exists. In any case in which no off-base

housing authorization is obtained, an explanation of the circumstances

justifying its omission must be included with the loan application

except when it has been established by the VA facility of jurisdiction

that the waiting lists for on-base housing are so long that it is

improbable that individuals desiring to purchase off-base housing would

be precluded from doing so in the foreseeable future. If stations make

such a determination, a release shall be issued to inform lenders.

(6) Commissions. When all or a major portion of the veteran's

income is derived from commissions, it will be necessary to establish

the stability of such income if it is to be considered in the loan

analysis for the repayment of the mortgage debt and/or short-term

obligations. In order to assess the value of such income, lenders

should obtain written verification of the actual amount of commissions

paid to date, the basis for the payment of such commissions and when

commissions are paid; i.e., monthly, quarterly, semiannually, or

annually. Lenders should also obtain signed and dated individual income

tax returns, plus applicable schedules, for the previous 2 years, or

for whatever additional period is deemed necessary to properly

demonstrate a satisfactory earnings record. The length of the veteran's

employment in the type of occupation for which commissions are paid is

also an important factor in the assessment of the stability of the

income. If the veteran has been employed for a relatively short time,

the income should not normally be considered stable unless the product

or service was the same or closely related to the product or service

sold in an immediate prior position. Generally, income from commissions

is considered stable when the applicant has been receiving such income

for at least 2 years. Less than 2 years of income from commissions

cannot usually be considered stable. When an applicant has received

income from commissions for less than 1 year, it will rarely be

possible to demonstrate that the income is stable for qualifying

purposes; such cases would require in-depth development.

(7) Self-employment. Generally, income from self-employment is

considered stable when the applicant has been in business for at least

2 years. Less than 2 years of income from self-employment cannot

usually be considered stable unless the applicant has had previous

related employment and/or extensive specialized training. When an

applicant has been self-employed less than 1 year, it will rarely be

possible to demonstrate that the income is stable for qualifying

purposes; such cases would require in-depth development. The following

documentation is required for all self-employed borrowers:

(i) A profit and loss statement for the prior fiscal year (12-month

accounting cycle), plus the period year to date since the end of the

last fiscal year (or for whatever shorter period records may be

available), and a current balance sheet showing all assets and

liabilities. The profit and loss statement and balance sheet will be

compiled by an accountant based on the financial records. In some cases

the nature of the business or the content of the financial statement

may necessitate an independent audit by the accountant. Depending on

the situation, this data may be on the veteran and/or the business; and

(ii) Copies of signed individual income tax returns, plus all

applicable schedules for the previous 2 years, or for whatever

additional period is deemed necessary to properly demonstrate a

satisfactory earnings record, must be obtained. If the business is a

corporation or partnership, copies of signed federal business income

tax returns for the previous two years plus all applicable schedules

for the corporation or partnership must be obtained; and

(iii) If the business is a corporation or partnership, a list of

all stockholders or partners showing the interest each holds in the

business will be required. Some cases may justify a written credit

report on the business as well as the applicant. When the business is

of an unusual type and it is difficult to determine the probability of

its continued operation, explanation as to the function and purpose of

the business may be needed from the applicant and/or any other

qualified party with the acknowledged expertise to express a valid

opinion.

(8) Recently discharged veterans. Loan applications received from

recently discharged veterans who have little or no employment

experience other than their military occupation and from veterans

seeking VA guaranteed loans who have retired after 20 years of active

military duty require special attention. The retirement income of the

latter veterans in may cases may not be sufficient to meet the

statutory income requirements for the loan amount sought. Many have

obtained full-time employment and have been employed in their new jobs

for a very short time.

(i) It is essential in determining whether veterans in these

categories qualify from the income standpoint for the amount of the

loan sought, that the facts in respect to their present employment and

retirement income be fully developed, and that each case be considered

on its individual merits.

(ii) In most cases the veteran's current income or current income

plus his or her retirement income is sufficient. The problem lies in

determining whether it can be properly concluded that such income level

will continue for the foreseeable future. If the veteran's employment

status is that of a trainee or apprentice, this will, of course, be a

factor. In cases of the self-employed, the question to be resolved is

whether there are reasonable prospects that the business enterprise

will be successful and produce the required income. Unless a favorable

conclusion can be made, the income from such source should not be

considered in the loan analysis.

(iii) If a recently discharged veteran has no prior employment

history and the veteran's verification of employment shows he or she

has not been on the job a sufficient time in which to become

established, consideration should be given to the duties the veteran

performed in the military service. When it can be determined that the

duties a veteran performed in the service are similar or are in direct

relation to the duties of the applicant's present position, such duties

may be construed as adding weight to his or her present employment

experience and the income from the veteran's present employment thus

may be considered available for qualifying the loan, notwithstanding

the fact that the applicant has been on the present job only a short

time. This same principle may be applied to veterans recently retired

from the service. In addition, when the veteran's income from

retirement, in relation to the total of the estimated shelter expense,

long-term debts and amount available for family support, is such that

only minimal income from employment is necessary to qualify from the

income standpoint, it would be proper to resolve the doubt in favor of

the veteran. It would be erroneous, however, to give consideration to a

veteran's income from employment for a short duration in a job

requiring skills for which the applicant has had no training or

experience.

(iv) To illustrate the provisions of paragraph (f), it would be

proper to use short-term employment income in qualifying a veteran who

had experience as an airplane mechanic in the military service and the

individual's employment after discharge or retirement from the service

is in the same or allied field; e.g., auto mechanic or machinist. This

presumes, however, that the verification of employment included a

statement that the veteran was performing the duties of the job

satisfactorily, the possibility of continued employment was favorable

and that the loan application is eligible in all other respects. An

example of nonqualifying experience is that of a veteran who was an Air

Force pilot and has been employed in insurance sales on commission for

a short time. Most cases, of course, fall somewhere between those

extremes. It is for this reason that the facts of each case must be

fully developed prior to closing the loan automatically or submitting

the case to VA for prior approval.

(9) Employment of short duration. The provisions of paragraph

(f)(7) of this section are similarly applicable to applicants whose

employment is of short duration. Such cases will entail careful

consideration of the employer's confirmation of employment, probability

of permanency, past employment record, the applicant's qualifications

for the position, and previous training, including that received in the

military service. In the event that such considerations do not enable a

determination that the income from the veteran's current position has a

reasonable likelihood of continuance, such income should not be

considered in the analysis. Applications received from persons employed

in the building trades, or in other occupations affected by climatic

conditions, should be supported by documentation evidencing the

applicant's total earnings to date and covering a period of not less

than 1 year as well as signed and dated copies of complete income tax

returns, including all schedules for the past 2 years or for whatever

additional period is deemed necessary to properly demonstrate a

satisfactory earnings record. If the applicant works out of a union,

evidence of the previous year's earnings should be obtained together

with a verification of employment from the current employer.

(10) Rental-income. (i) Multi-unit subject property. When the loan

pertains to a structure with more than a one-family dwelling unit, the

prospective rental income will not be considered unless the veteran can

demonstrate a reasonable likelihood of success as a landlord, and

sufficient cash reserves are verified to enable the veteran to carry

the mortgage loan payments (principal, interest, taxes, and insurance)

without assistance from the rental income for a period of at least 6

months. The determination of the veteran's likelihood of success as a

landlord will be based on documentation of any prior experience in

managing rental units, or other collection activities. The amount of

rental income to be used in the loan analysis will be based on the

prior rental history of the units as verified by the seller's financial

records (e.g., prior years' tax returns) for existing structures or,

for proposed construction, the appraiser's opinion of the property's

fair monthly rental. Adjustments will be applied to reduce estimated

gross rental income by proper allowances for operating expenses and

vacancy losses.

(ii) Rental of existing home. Proposed rental of a veteran's

existing property may be used to offset the mortgage payment on that

property, provided there is no indication that the property will be

difficult to rent. If available, a copy of the rental agreement should

be obtained. It is the responsibility of the loan underwriter to be

aware of the condition of the local rental market. For instance, in

areas where the rental market is very strong the absence of a lease

should not automatically prohibit the offset of the mortgage by the

proposed rental income.

(iii) Other rental property. If income from rental property will be

used to qualify for the new loan, the documentation required of a self-

employed applicant should be obtained together with evidence of cash

reserves equaling 3 months PITI of the rental property. As for any

self-employed earnings (see paragraph (f)(7) of this section),

depreciation claimed may be added back in as income. In the case of a

veteran who has no experience as a landlord, it is unlikely that the

income from a rental property may be used to qualify for the new loan.

(ll) Taxes and other deductions. Deductions to be applied for

Federal income taxes ad Social Security may be obtained from the

Employer's Tax Guide (Circular E) issued by the Internal Revenue

Service (IRS). (For veterans receiving a mortgage credit certificate

(MCC), see paragraph (f)(12) of this section.) Any State or local taxes

should be estimated or obtained from charts similar to those provided

by IRS which may be available in those States with withholding taxes. A

determination of the amount paid or withheld for retirement purposes

should be made and used when calculating deductions from gross income.

In determining whether a veteran-applicant meets the income criteria

for a loan, some consideration may be given to the potential tax

benefits the veteran will realize if the loan is approved. This can be

done by using the instructions and worksheet portion of IRS Form W-4,

Employee's Withholding Allowance Certificate, to compute the total

number of permissible withholding allowances. That number can then be

used when referring to IRS Circular E and any appropriate similar State

withholding charts to arrive at the amount of Federal and State income

tax to be deducted from gross income.

(12) Mortgage credit certificates. (i) The Internal Revenue Code,

as amended by the Tax Reform Act of 1984, allows States and other

political subdivisions to trade in all or part of their authority to

issue mortgage revenue bonds for authority to issue MCCs. Veterans who

are recipients of MCCs may realize a significant reduction in their

income tax liability by receiving a Federal tax credit for a percentage

of their mortgage interest payment on debt incurred on or after January

1, 1985.

(ii) Lenders must provide a copy of the MCC to VA with the home

loan application. The MCC will specify the rate of credit allowed and

the amount of certified indebtedness; i.e., the indebtedness incurred

by the veteran to acquire a principal residence or as a qualified home

improvement or rehabilitation loan.

(iii) For credit underwriting purposes, the amount of tax credit

allowed to a veteran under an MCC will be treated as a reduction in the

monthly Federal income tax. For example, a veteran having a $600

monthly interest payment and an MCC providing a 30-percent tax credit

would receive a $180 (30% x $600) tax credit each month. However,

because the annual tax credit, which amounts to $2,160 (12 x $180),

exceeds $2,000 and is based on a 30-percent credit rate, the maximum

tax credit the veteran can receive is limited to $2,000 per year (Pub.

L. 98-369) or $167 per month ($2,00012). As a consequence of

the tax credit, the interest on which a deduction can be taken will be

reduced by the amount of the tax credit to $433 ($600-$167). This

reduction should also be reflected when calculating Federal income tax.

(iv) For underwriting purposes, the amount of the tax credit is

limited to the amount of the veteran's maximum tax liability. If, in

the example in paragraph (f)(12)(iii), the veteran's tax liability for

the year were only $1,500, the monthly tax credit would be limited to

$125 ($1,50012).

(g) Credit. The conclusion reached as to whether or not the

borrower and spouse are satisfactory credit risks must also be based on

a careful analysis of the available credit data. Regulation B (Equal

Credit Opportunity Act) requires that lenders include, in evaluating

creditworthiness on a veteran's request, the credit history, when

available, of any account reported in the name of the veteran's spouse

or former spouse which the veteran can demonstrate reflects accurately

the veteran's willingness or ability to repay. In other that community

property States, if the spouse will not be contractually obligated on

the loan, Regulation B, promulgated by the Federal Reserve Board

pursuant to the Equal Credit Opportunity Act prohibits any request for,

or consideration of information about the spouse concerning income,

employment, assets or liabilities. In community property States,

information concerning a spouse may be requested and considered in the

same manner as that for the applicant.

(1) Adverse data. If the analysis develops any derogatory credit

information and, despite such facts, it is determined that the borrower

and spouse are satisfactory credit risks, the basis for the decision

must be explained. If a borrower and spouse have debts outstanding

which have not been paid timely, or which they have refused to pay, the

fact that the outstanding debts are paid after the acceptability of the

credit is questioned or in anticipation of applying for new credit does

not, of course, alter the fact that the record for paying debts has

been unsatisfactory. With respect to unpaid debts, lenders may take

into consideration a veterans's claim of bona fide or legal defenses.

This is not applicable when the debt has been reduced to judgment.

(2) Bankruptcy. When the credit information shows that the borrower

or spouse has been discharged in bankruptcy under the ``straight''

liquidation and discharge provisions of the bankruptcy law, this would

not in itself disqualify the loan. However, in such cases it is

necessary to develop complete information as to the facts and

circumstances concerning the bankruptcy. Generally speaking, when the

borrower or spouse, as the case may be, has been regularly employed

(not self-employed) and has been discharged in bankruptcy within the

last 2 or 3 years, it probably would not be possible to determine that

the borrower or spouse is a satisfactory credit risk unless both of the

following requirements are satisfied:

(i) The borrower or spouse has obtained credit subsequent to the

bankruptcy and has met the credit payments in a satisfactory manner

over a continued period, and

(ii) The bankruptcy was caused by circumstances beyond control of

the borrower or spouse, e.g., unemployment, prolonged strikes, medical

bills not covered by insurance. The circumstances alleged must be

verified. If a borrower or spouse is self-employed, has been

adjudicated bankrupt, and subsequently obtains a permanent position, a

finding as to satisfactory credit risk may be made provided there is no

derogatory credit information prior to self-employment, there is no

evidence of derogatory credit information subsequent to the bankruptcy,

and the failure of the business was not due to misconduct. A bankruptcy

discharged more than 5 years ago may be disregarded. A bankruptcy

discharged between 3 and 5 years ago may be given some consideration,

depending upon the circumstances of the bankruptcy and submission of

evidence that the veteran has been paying his or her obligations in a

timely manner.

(3) Petition under Chapter 13 of Bankruptcy Law. A wage earner's

petition under chapter 13 of the Bankruptcy Law filed by the borrower

or spouse is indicative of an effort to pay their creditors. Some plans

may provide for full payment of debts while others arrange for payment

of scaled down debts. Regular payments are made to a court-appointed

trustee over a 2- to 3-year period (or up to 5 years in some cases).

When the borrowers have made all payments in a satisfactory manner,

they may be considered as having reestablished satisfactory credit.

When they apply for a home loan before completion of the payout period,

favorable consideration may nevertheless be given if at least three-

fourths of the payments have been made satisfactorily and the Trustee

or Bankruptcy Judge (Referee) approves of the new credit.

(4) Foreclosures. (i) When the credit information shows that the

veteran or spouse has had a foreclosure on a prior mortgage, e.g., a VA

guaranteed, or HUD insured mortgage, this will not in itself disqualify

the borrower from obtaining the loan. Lenders and field station

personnel should refer to the preceding guidelines on bankruptcies for

cases involving foreclosures. As with a borrower who has been

adjudicated bankrupt, it is necessary to develop complete information

as to the facts and circumstances of the foreclosure.

(ii) When VA pays a claim on a VA guaranteed loan as a result of a

foreclosure, the original veteran may be required to repay any loss to

the Government. In some instances VA may waive the veteran's debt, in

part or totally, based on the facts and circumstances of the case.

However, guaranty entitlement cannot be restored unless the

Government's loss has been repaid in full, regardless of whether or not

the debt has been waived, compromised, or discharged in bankruptcy.

Therefore, a veteran who is seeking a new VA loan after having

experienced a foreclosure on a prior VA loan will in most cases have

only remaining entitlement to apply to the new loan. The lender should

assure that the veteran has sufficient entitlement for its secondary

marketing purposes.

(5) Federal debts. An applicant for a Federally-assisted loan will

not be considered a satisfactory credit risk for such loan if the

applicant is presently delinquent or in default on any debt to the

Federal Government, e.g., a Small Business Administration loan, a U.S.

Guaranteed Student loan, a debt to the Public Health Service, or where

there is a judgment lien against the applicant's property for a debt

owed to the Government. The applicant may not be approved for the loan

until the delinquent account has been brought current or satisfactory

arrangements have been made between the borrower and the Federal agency

owed, or the judgment is paid or otherwise satisfied. Of course, the

applicant must also be able to otherwise qualify for the loan from an

income and remaining credit standpoint. Refinancing under VA's interest

rate reduction refinancing provisions, however, is allowed even if the

borrower is delinquent on the VA guaranteed mortgage being refinanced.

Prior approval processing is required in such cases.

(6) Absence of credit history. The fact that recently discharged

veterans may have had no opportunity to develop a credit history will

not preclude a determination of satisfactory credit. Similarly, other

loan applicants may not have established credit histories as a result

of a preference for purchasing consumer items with cash rather than

credit. There are also cases in which individuals may be genuinely wary

of acquiring new obligations following bankruptcy, consumer credit

counseling (debt proration), or other disruptive credit occurrence. The

absence of the credit history in these cases will not generally be

viewed as an adverse factor in credit underwriting. However, before a

favorable decision is made for cases involving bankruptcies or other

derogatory credit factors, efforts should be made to develop evidence

of timely payment of non-installment debts such as rent and utilities.

It is anticipated that this special consideration in the absence of a

credit history following bankruptcy would be the rare case and

generally confined to bankruptcies which occurred over 3 years ago.

(7) Long-term v. Short-term-debts. All known debts and obligations

including any alimony and/or child support payments of the borrower and

spouse must be documented. Significant liabilities to be deducted from

the total income in determining ability to meet the mortgage payments

are accounts that, generally, are of a relatively long-term; i.e., 6

months or over. Other accounts for terms of less than 6 months must, of

course, be considered in determining ability to meet family expenses.

Certainly any account with less than 6 months' duration which requires

payments so large as to cause a severe impact on the family's resources

for any period of time must be considered in the loan analysis. For

example, monthly payments of $300 on an auto loan with a remaining

balance of $1,500 would be included in those obligations to be deducted

from the total income regardless of the fact that the account can be

expected to pay out in 5 months. It is clear that the applicant will,

in this case, continue to carry the burden of those $300 payments for

the first, most critical, months of the home loan. Similarly, when the

credit information shows open accounts of several years' duration which

are clearly of a revolving or open-end type, the regular monthly

payment for such accounts should be considered as a long-term

obligation to be deducted from income.

(8) Requirements for verification. If the credit investigation

reveals debts or obligations of a material nature which were not

divulged by the applicant, lenders must be certain to obtain

clarification as to the status of such debts from the borrower. A

proper analysis is obviously not possible unless there is total

correlation between the obligations claimed by the borrower and those

revealed by a credit report or deposit verification. Conversely,

significant debts and obligations reported by the borrower must be

dated. If the credit report fails to provide necessary information on

such accounts, lenders will be expected to obtain their own

verifications of those debts directly from the creditors. Credit

reports and verifications must be no more than 90 days old to be

considered valid. For loans closed automatically, this requirement will

be considered satisfied if the date of the credit report or

verification is within 90 days of the date of the veteran's application

to the lender. Of major significance are the applicant's rental history

and outstanding, assumed, or recently retired mortgages, if any,

particularly prior VA loans. Lenders should be sure ratings on such

accounts are obtained; a written explanation is reburied when ratings

are not available. A determination is necessary as to whether alimony

and/or child support payments are required. Verification of the amount

of such obligations should be obtained, although documentation

concerning an applicant's divorce should not be obtained automatically

unless it is necessary to verify the amount of any alimony or child

support liability indicated by the applicant. If in the routine course

of processing the loan application, however, direct evidence is

received (e.g., from the credit report) that an obligation to pay

alimony or child support exists (as opposed to mere evidence that the

veteran was previously divorced), the discrepancy between the loan

application and credit report can and should be fully resolved in the

same manner as any other such discrepancy would be handled.

(9) Job-related expenses. Known job-related expenses should be

documented. This will include costs for any dependent care, significant

commuting costs, etc. When a family's circumstances are such that

dependent care arrangements would probably be necessary, it is

important to determine the cost of such services in order to arrive at

an accurate total of deductions.

(10) Credit reports. Credit reports obtained by lenders on VA

guaranteed loan applications must be in conformance with the

Residential Mortgage Credit Report Standards formulated jointly by the

Department of Veterans Affairs, Federal National Mortgage Association,

Federal Home Loan Mortgage Corporation, Federal Housing Administration,

Farmers Home Administration, credit repositories, repository affiliated

consumer reporting agencies and independent consumer reporting

agencies. The Residential Mortgage Credit Report is a detailed account

of the credit, employment, and residence history as well as public

records information concerning an individual. All credit reports

obtained by the lender must be submitted to VA.

(h) Borrower's personal and financial status. The number and ages

of dependents have an important bearing on whether income after

deduction of fixed charges is sufficient to support the family. Type

and duration of employment of both the borrower and spouse are

important as an indication of stability of their employment. The amount

of liquid assets owned by the borrower or spouse, or both, is an

important factor in determining that they have sufficient funds to

close the loan, as well as being significant in analyzing the overall

qualifications for the loan. (It is imperative that adequate cash

assets from the veteran's own resources are verified to allow the

payment of any difference between the sales price of the property and

the loan amount, in addition to that necessary to cover closing costs,

if the sales price exceeds the reasonable value established by VA (38

CFR 36.4336(a)(3)). Verifications must be no more than 90 days old to

be considered valid. For loans closed on the automatic basis, this

requirement will be considered satisfied if the date of the deposit

verification is within 90 days of the date of the veteran's application

to the lender. Current monthly rental or other housing expense is an

important consideration when compared to that to be undertaken in

connection with the contemplated housing purchase.

(i) Estimated monthly shelter expenses. It is important that

monthly expenses such as taxes, insurance, assessments and maintenance

and utilities be estimated accurately based on property location and

type of house; e.g., old or new, large or small, rather than using or

applying a ``rule of thumb'' to all properties alike. Maintenance and

utility amounts for various types of property should be realistically

estimated. Local utility companies should be consulted for current

rates. The age and type of construction of a house may well affect

these expenses. In the case of condominiums or houses in a planned unit

development (PUD), the monthly amount of the maintenance assessment

payable to a homeowners association should be added. If the amount

currently assessed is less than the maximum provided in the covenants

or master deed, and it appears likely that the amount will be

insufficient for operation of the condominium or PUD, the amount used

will be the maximum the veteran could be charged. If it is expected

that real estate taxes will be raised, or if any special assessments

are expected, the increased or additional amounts should be used. In

special flood hazard areas, include the premium for any required flood

insurance.

(j) Lender responsibility. (1) Lenders are fully responsible for

developing all credit information; i.e., for obtaining verifications of

employment and deposit, credit reports, and for the accuracy of the

information contained in the loan application.

(2) Verifications of employment and deposits, and requests for

credit reports and/or credit information must be initiated and received

by the lender.

(3) In cases where the real estate broker/agent or any other party

requests any of this information, the report(s) must be returned

directly to the lender. This fact must be disclosed by appropriately

completing the required certification on the loan application or report

and the parties must be identified as agents of the lender.

(4) Where the lender relies on other parties to secure any of the

credit or employment information or otherwise accepts such information

obtained by any other party, such parties shall be construed for

purposes of the submission of the loan documents to VA to be authorized

agents of the lender, regardless of the actual relationship between

such parties and the lender, even if disclosure is not provided to VA

under paragraph (j)(3) of this section. Any negligent or willful

representation by such parties shall be imputed to the lender as if the

lender had processed those documents and the lender shall remain

responsible for the quality and accuracy of the information provided to

VA.

(5) All credit reports secured by the lender or other parties as

identified in paragraphs (j)(3) and (j)(4) of this section shall be

provided to VA. If updated credit reports reflect materially different

information than that in other reports such discrepancies must be

explained by the lender and the ultimate decision as to the effects of

the discrepancy upon the loan application fully addressed by the

underwriter.

(k) Lender certification. Lenders originating loans are responsible

for determining and certifying to VA on the appropriate application or

closing form that the loan meets all statutory and regulatory

requirements. Lenders will affirmatively certify that loans were made

in full compliance with the law and loan guaranty regulations as

prescribed in this section.

(1) Definitions. The definitions contained in part 42 of this

chapter and the following definitions are applicable in this section.

(i) Another appropriate amount. In determining the appropriate

amount of a lender's civil penalty in cases where the Secretary has not

sustained a loss or where two times the amount of the Secretary's loss

on the loan involved does not exceed $10,000, the Secretary shall

consider:

(A) The materiality and importance of the false certification to

the determination to issue the guaranty, or to approve the assumption;

(B) The frequency and past pattern of such false certifications by

the lender; and,

(C) Any exculpatory or mitigating circumstances.

(ii) Complaint includes the assessment of liability served pursuant

to this subsection.

(iii) Defendant means a lender named in the complaint.

(iv) Lender includes the holder approving loan assumptions pursuant

to 38 U.S.C. 3714.

(2) Procedures for certification.

(i) As a condition to VA issuance of a loan guaranty on all loans

closed on or after October 27, 1994, and as a prerequisite to an

effective loan assumption on all loans assumed pursuant to 38 U.S.C.

3714 on or after October 27, 1994, the following certification shall

accompany each loan closing or assumption package:

``The undersigned lender certifies that the (loan) (assumption)

application, all verifications of employment, deposit, and other income

and credit verification documents have been processed in compliance

with 38 CFR part 36; that all credit reports obtained or generated in

connection with the processing of this borrower's (loan) (assumption)

application have been provided to VA; that, to the best of the

undersigned lender's knowledge and belief the (loan) (assumption) meets

the underwriting standards recited in chapter 37 of title 38 United

States Code and 38 CFR part 36; and that all information provided in

support of this (loan) (assumption) is true, complete and accurate to

the best of the undersigned lender's knowledge and belief.''

(ii) The certification shall be executed by an officer of the

lender authorized to execute documents and act on behalf of the lender.

(3) Any lender who knowingly and willfully makes a false

certification required pursuant to Sec. 36.4337(k)(2) shall be liable

to the United States Government for a civil penalty equal to two times

the amount of the Secretary's loss on the loan involved or to another

appropriate amount, not to exceed $10,000, whichever is greater.

(l) Assessment of liability. (1) Upon an assessment confirmed by

the Under Secretary for Benefits, in consultation with the

Investigating Official, that a certification, as required in this

section, is false, a report of findings of the Under Secretary for

Benefits shall be submitted to the Reviewing Official setting forth:

(i) The evidence that supports the allegations of a false

certification and of liability;

(ii) A description of the claims or statements upon which the

allegations of liability are based;

(iii) The amount of the VA demand to be made; and,

(iv) Any exculpatory or mitigating circumstances that may relate to

the certification.

(2) The Reviewing Official shall review all of the information

provided and will either inform the Under Secretary for Benefits and

the Investigating Official that there is not adequate evidence, that

the lender is liable, or serve a complaint on the lender stating:

(i) The allegations of a false certification and of liability;

(ii) The amount being assessed by the Secretary and the basis for

the amount assessed;

(iii) Instructions on how to satisfy the assessment and how to file

an answer to request a hearing, including a specific statement of the

lender's right to request a hearing by filing an answer and to be

represented by counsel; and

(iv) That failure to file an answer within 30 days of the complaint

will result in the imposition of the assessment without right to appeal

the assessment to the Secretary.

(m) Hearing procedures. A lender hearing on an assessment

established pursuant to this section shall be governed by the

procedures recited at 38 CFR 42.8 through 42.47.

(n) Additional remedies. Any assessment under this section may be

in addition to other remedies available to VA, such as debarment and

suspension pursuant to 38 U.S.C. 3704 and part 44 of this title or loss

of automatic processing authority pursuant to 38 U.S.C. 3702, or other

actions by the Government under any other law including but not limited

to title 18, U.S.C. and 31 U.S.C. 3732. (Authority: (38 U.S.C. 3710).

(Information collection requirements contained in 36.4337 were

approved by the Office of Management and Budget under control number

2900-0521)

[FR Doc. 94-23753 Filed 9-26-94; 8:45 am]

BILLING CODE 8320-01-P-M