[Federal Register Volume 62, Number 88 (Wednesday, May 7, 1997)]
[Proposed Rules]
[Pages 24872-24874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11807]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 36
RIN 2900-AH73
Loan Guaranty: Electronic Payment of Funding Fee
AGENCY: Department of Veterans Affairs.
ACTION: Proposed rule.
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SUMMARY: This document proposes to amend the VA loan guaranty
regulations to require that all funding fees (including late fees and
interest) for VA-guaranteed loans be paid electronically through the
Automated Clearing House (ACH) program. The adoption of the ACH program
would eliminate lost mail and eliminate data errors resulting from
manual recording. Further accounting reconciliation would be reduced.
In addition, banking costs would be reduced. This document also
corrects a typographical error in the ``Allowable fees and charges;
manufactured home unit'' section.
DATES: Comments must be received on or before July 7, 1997.
ADDRESSES: Mail or hand deliver written comments to: Director, Office
of Regulations Management (02D), Department of Veterans Affairs, 810
Vermont Avenue, NW, Room 1154, Washington, DC 20420. Comments should
indicate that they are submitted in response to ``RIN 2900-AH73.'' All
written comments received will be available for public inspection at
the above address 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: Ms. Judith Caden, Assistant Director
for Loan Policy (264), Loan Guaranty Service, Veterans Benefits
Administration, Department of Veterans Affairs, Washington, DC 20420,
(202) 273-7368.
SUPPLEMENTARY INFORMATION: This document proposes to amend the VA loan
guaranty regulations to require that all funding fees (including late
fees and interest) for VA-guaranteed loans be paid electronically
through the Automated Clearing House (ACH) program. The amounts are
paid by the veteran to VA through the mortgage lender. Since 1988, VA
has allowed lenders to use the ACH program on a voluntary basis, and
approximately one-half of VA's funding fees (including late fees and
interest) are paid through the ACH program. When the ACH program is not
used, the mortgage lender sends the amount due through the mail to VA
by check. The ACH program uses electronic transfer instead of the mail.
There are three methods for paying the VA funding fee (including
late fees and interest) through the ACH program: The operator-assisted
phone method, the terminal entry method, and the CPU-to-CPU
transmission method. All three methods provide for the transmission of
loan data to the collection agent and thereby allow the collection
agent to use the data to debit the lender's account for payment.
The operator assisted phone method does not require the lender to
use a computer. With this method, the lender calls the collection
agent's operator via a toll free number and orally provides the loan
information for each loan. With the terminal entry method and the CPU-
to-CPU method, the lender uses a terminal or personal computer with a
modem to connect with the collection agent's computer system. With the
terminal entry method, information is provided in response to questions
from the computer program of the collection agent. With the CPU-to-CPU
transmission, all of the information requested is provided in a pre-
programmed data file submitted to the collection agent.
Under the ACH program, the lending institution submits an
authorization for payment of the funding fee (including late fees and
interest) along with the following information: VA lender ID number;
four-digit personal identification number; dollar amount of debit; VA
loan number; OJ (office of jurisdiction) code; closing date; loan
amount; information about whether the payment includes a shortage, late
charge, or interest; veteran name; loan type; sale amount; downpayment;
whether the veteran is a reservist; and whether this is a subsequent
use of entitlement. This information is needed to identify the parties
and allow for the transfer of payment. Under all three methods, the
collection agent prepares the funding fee file based on the information
submitted.
In order to get set up under the ACH program so that the collection
agent would be able to debit the lender's account for the funding fee
payment, the lender would need to provide the following information:
The lender's name and address, the name and phone number of a lender
contact person, the lender's VA ID number, the transit routing number
of the bank the lender uses, and the lender's bank account number.
The adoption of this proposal would not impose any costs for using
the ACH program on veterans or lending institutions. Under the ACH
program, the Department of the Treasury contracts with a collection
agent who collects funding fees (including late fees and interest) for
VA, and the cost for the ACH program is borne by the Department of the
Treasury.
It appears that the adoption of the ACH program would be
advantageous to veterans and to VA. The adoption of the ACH program
would eliminate lost mail and eliminate data errors resulting from
[[Page 24873]]
manual recording. Also, accounting reconciliation would be reduced
because payments are computerized and cash application is more
automated than with systems where payment information must be manually
entered by VA personnel. In addition, banking costs would be reduced,
since overall electronic transfer costs less than paper check and wire
transfer, i.e., on the average $.25 per item electronically versus $.50
by check.
For all transactions received prior to 8:15 p.m. on a workday, VA
would be credited with the amount paid to the collection agent at the
opening of business the next banking day.
The provisions of Secs. 36.4232(a)(3), 36.4254(d)(3), and
36.4312(e)(3) relating to interest and late charges would not change
for payments made electronically. A four-percent late charge is
assessed if a payment is received 15 calendar days after the closing
date, and an interest charge is assessed on the late fee when payment
is received 30 calendar days after the closing date. The funding fee
receipt, which is mailed, notifies lenders of the amount of any late
fee and interest charge.
It is proposed that a final rule become effective January 1, 1998.
This would allow lenders time to become familiar with the ACH system.
Paperwork Reduction Act
The collection of information contained in this notice of proposed
rulemaking has been submitted to the Office of Management and Budget
(OMB) for review in accordance with the Paperwork Reduction Act (44
U.S.C. 3504(h)). Comments on the collection of information should be
sent to the Office of Management and Budget, Attention: Desk Officer
for the Department of Veterans Affairs, Office of Information and
Regulatory Affairs, Washington, DC 20503, with copies to the Director,
Office of Regulations Management (02D), Department of Veterans Affairs,
810 Vermont Avenue, NW, Washington, DC 20420.
The collection of information included in the proposed revision to
Secs. 36.4232, 36.4254, and 36.4312 in this rulemaking proceeding
concerns the requirement that lenders provide VA information necessary
to get set up on the ACH system to pay the funding fee electronically
and the existing requirement that lenders provide VA certain standard
information when submitting loan guaranty funding fees. The collection
of the latter information on VA Form 26-8986, Loan Guaranty Funding Fee
Transmittal, which is currently submitted with funding fee check
payments, has been approved by the Office of Management and Budget
through May 31, 1999, under approval No. 2900-0474.
The Department considers comments by the public on these proposed
collections of information in--
Evaluating whether the proposed collection(s) of
information are necessary for the proper performance of the functions
of the Department, including whether the information will have
practical utility;
Evaluating the accuracy of the Department's estimate of
the burden of the proposed collections of information, including the
validity of the methodology and assumptions used;
Enhancing the quality, usefulness, and clarity of the
information to be collected; and;
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, e.g., permitting
electronic submission of responses.
OMB is required to make a decision concerning the proposed
collections of information contained in this document between 30 and 60
days after publication of this document in the Federal Register.
Therefore, a comment to OMB is best assured of having its full effect
if OMB receives it within 30 days of publication. This does not affect
the deadline for the public to comment to the Department on the
proposed regulations.
Title: Loan Guaranty: Electronic Payment of Funding Fee.
Summary of collection of information: The information collection
subject to this rulemaking concerns information to get set up on the
ACH system to pay the funding fee for a VA-guaranteed loan
electronically and information to accompany the funding fee payment.
Description of the need for information and proposed use of
information: The collection of information subject to this rulemaking
is designed to obtain information about lenders to allow electronic
collection of the funding fee and standard identifying information and
loan details from lenders relating to the funding fee.
Description of likely respondents: lending institutions.
For information provided to get set up on the ACH system:
Estimated total annual reporting burden: 589 hours.
Estimated annual burden per respondent: 083 hour.
Estimated number of respondents: 7,100.
Estimated annual frequency of responses: 1 per episode.
For information collected with funding fee payments:
Estimated total annual reporting burden: 13,200 hours.
Estimated annual burden per respondent: .033 hour.
Estimated number of respondents: 400,000.
Estimated annual frequency of responses: 1 per episode.
Regulatory Flexibility Act
The Secretary hereby certifies that the adoption of these proposed
regulatory amendments 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 rule implements a
program that will enhance operations and be cost beneficial for all
participating lenders. Lenders will be able to participate by having
access to a personal computer, and personal computing is pervasive
within the industry. Lenders will also have the option of paying
funding fees by calling an operator who will enter the information into
the ACH system for them. Therefore, pursuant to 5 U.S.C. 605(b), this
final rule is exempt from the initial and final regulatory flexibility
analysis requirements of sections 603 and 604.
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 programs--housing and
community development, Manufactured homes, Veterans.
Approved: March 4, 1997.
Jesse Brown,
Secretary of Veterans Affairs.
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.
Sec. 36.4232 [Amended]
2. In Sec. 36.4232, paragraph (e)(1) is amended by removing
``(e)(4)'' and adding, in its place, ``(e)(5)''; paragraph (e)(2) is
amended by removing ``paragraphs (e)(4) and'' and adding, in its place,
``paragraph''; paragraph (e)(3)
[[Page 24874]]
is amended by removing ``paragraphs (e)(4) and'' and adding, in its
place, ``paragraph''; by redesignating paragraph (e)(4) as paragraph
(e)(5); and by adding a new paragraph (e)(4) to read as follows:
Sec. 36.4232 Allowable fees and charges; manufactured home unit.
* * * * *
(e) * * *
(4) The lender is required to pay to the Secretary electronically
through the Automated Clearing House (ACH) system the fees described in
paragraphs (e)(1) and (e)(2) of this section and any late fees and
interest due on them. This shall be paid to a collection agent by
operator-assisted telephone, terminal entry, or central processing
unit-to-central processing unit (CPU-to-CPU) transmission. The
collection agent will be identified by the Secretary. The lender shall
provide the collection agent with the following: authorization for
payment of the funding fee (including late fees and interest) along
with the following information: VA lender ID number; four digit
personal identification number; dollar amount of debit; VA loan number;
OJ (office of jurisdiction) code; closing date; loan amount;
information about whether the payment includes a shortage, late charge,
or interest; veteran name; loan type; sale amount; downpayment; whether
the veteran is a reservist; and whether this is a subsequent use of
entitlement. For all transactions received prior to 8:15 p.m. on a
workday, VA will be credited with the amount paid to the collection
agent at the opening of business the next banking day.
(Authority: 38 U.S.C. 3729(a).)
* * * * *
3. Section 36.4254 is amended by redesignating paragraphs (d)(4)
and (d)(5) as paragraphs (d)(5) and (d)(6), respectively; and by adding
a new paragraph (d)(4) to read as follows:
Sec. 36.4254 Fees and charges.
* * * * *
(d) * * *
(4) The lender is required to pay to the Secretary electronically
through the Automated Clearing House (ACH) system the fees described in
paragraphs (d)(1) and (d)(2) of this section and any late fees and
interest due on them. This shall be paid to a collection agent by
operator-assisted telephone, terminal entry, or CPU-to-CPU
transmission. The collection agent will be identified by the Secretary.
The lender shall provide the collection agent with the following:
authorization for payment of the funding fee (including late fees and
interest) along with the following information: VA lender ID number;
four-digit personal identification number; dollar amount of debit; VA
loan number; OJ (office of jurisdiction) code; closing date; loan
amount; information about whether the payment includes a shortage, late
charge, or interest; veteran name; loan type; sale amount; downpayment;
whether the veteran is a reservist; and whether this is a subsequent
use of entitlement. For all transactions received prior to 8:15 p.m. on
a workday, VA will be credited with the amount paid to the collection
agent at the opening of business the next banking day.
(Authority: 38 U.S.C. 3729(a).)
* * * * *
4. Section 36.4312 is amended by redesignating paragraph (e)(4) as
paragraph (e)(5); and by adding a new paragraph (e)(4) to read as
follows:
Sec. 36.4312 Charges and fees.
* * * * *
(e) * * *
(4) The lender is required to pay to the Secretary electronically
through the Automated Clearing House (ACH) system the fees described in
paragraphs (e)(1) and (e)(2) of this section and any late fees and
interest due on them. This shall be paid to a collection agent by
operator-assisted telephone, terminal entry, or CPU-to-CPU
transmission. The collection agent will be identified by the Secretary.
The lender shall provide the collection agent with the following:
authorization for payment of the funding fee (including late fees and
interest) along with the following information: VA lender ID number;
four-digit personal identification number; dollar amount of debit; VA
loan number; OJ (office of jurisdiction) code; closing date; loan
amount; information about whether the payment includes a shortage, late
charge, or interest; veteran name; loan type; sale amount; downpayment;
whether the veteran is a reservist; and whether this is a subsequent
use of entitlement. For all transactions received prior to 8:15 p.m. on
a workday, VA will be credited with the amount paid to the collection
agent at the opening of business the next banking day.
(Authority: 38 U.S.C. 3729(a).)
* * * * *
[FR Doc. 97-11807 Filed 5-6-97; 8:45 am]
BILLING CODE 8320-01-U