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38 U.S.C. § 3732 — Procedure on default

Federal law — U.S. Code and appendices · legal_authorities

38 U.S.C. § 3732 — Procedure on default

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Source location: Title 38, Chapter 37, § 3732; chapter-037-housing-and-small-business-loans.md

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**(a)** (1) In the event of default in the payment of any loan guaranteed under this chapter, the holder of the loan shall notify the Secretary of such default. Upon receipt of such notice, the Secretary may, subject to subsection (c) of this section, pay to such holder the guaranty not in excess of the pro rata portion of the amount originally guaranteed. Except as provided in [section 3703(e) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section3703/e&num=0&edition=prelim), if the Secretary makes such a payment, the Secretary shall be subrogated to the rights of the holder of the loan to the extent of the amount paid on the guaranty. (2) (A) The Secretary may, under terms and conditions determined by the Secretary— (i) pay the holder of a loan guaranteed under this chapter an amount necessary to avoid the foreclosure of such loan; (ii) require the holder of the loan and the veteran obligated on the loan to execute all documents necessary to ensure the Secretary obtains a secured interest in the property covered by the loan; and (iii) require the holder of the loan to take any actions necessary to carry out this paragraph, including preparing, executing, transmitting, receiving, and recording documents, and requiring the holder of the loan to place the loan in forbearance. (B) In the event that a housing loan guaranteed under this chapter is modified under the authority provided under [section 1322(b) of title 11](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title11-section1322/b&num=0&edition=prelim), the Secretary may pay the holder of the housing loan the unpaid principal balance of the housing loan due, plus accrued interest, as of the date of the filing of the petition under title 11, but only upon the assignment, transfer, and delivery to the Secretary (in a form and manner satisfactory to the Secretary) of all rights, interest, claims, evidence, and records with respect to the housing loan. (C) (i) Any decision by the Secretary under this paragraph is final and is not subject to judicial review. (ii) For purposes of [section 511 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section511&num=0&edition=prelim), any decision under this paragraph shall not be treated as a decision under a law that affects the provision of benefits. (D) (i) The Secretary may establish standards for processing payments under this paragraph based on a certification by a holder of a loan guaranteed under this chapter that the holder has complied with all applicable requirements established by the Secretary. (ii) The Secretary shall carry out, on a random-sampling basis, post-payment audits to ensure compliance with all requirements described in clause (i). (3) The Secretary may establish the date, not later than the date of judgment and decree of foreclosure or sale, upon which accrual of interest or charges shall cease. (4) (A) Upon receiving a notice pursuant to paragraph (1) of this subsection, the Secretary shall— (i) provide the veteran with information and, to the extent feasible, counseling regarding— (I) alternatives to foreclosure, as appropriate in light of the veteran’s particular circumstances, including possible methods of curing the default, conveyance of the property to the Secretary by means of a deed in lieu of foreclosure, and the actions authorized by paragraph (2) of this subsection; and (II) what the Department of Veterans Affairs’ and the veteran’s liabilities would be with respect to the loan in the event of foreclosure; and (ii) advise the veteran regarding the availability of such counseling; except with respect to loans made by a lender which the Secretary has determined has a demonstrated record of consistently providing timely and accurate information to veterans with respect to such matters. (B) The Secretary shall, to the extent of the availability of appropriations, ensure that sufficient personnel are available to administer subparagraph (A) of this paragraph effectively and efficiently. (5) In the event of default in the payment of any loan guaranteed or insured under this chapter in which a partial payment has been tendered by the veteran concerned and refused by the holder, the holder of the loan shall notify the Secretary as soon as such payment has been refused. The Secretary may require that any such notification include a statement of the circumstances of the default, the amount tendered, the amount of the indebtedness on the date of the tender, and the reasons for the holder’s refusal. **(b)** With respect to any loan made under section 3711 which has not been sold as provided in subsection (g) of such section, if the Secretary finds, after there has been a default in the payment of any installment of principal or interest owing on such loan, that the default was due to the fact that the veteran who is obligated under the loan has become unemployed as the result of the closing (in whole or in part) of a Federal installation, the Secretary shall (1) extend the time for curing the default to such time as the Secretary determines is necessary and desirable to enable such veteran to complete payments on such loan, including an extension of time beyond the stated maturity thereof, or (2) modify the terms of such loan for the purpose of changing the amortization provisions thereof by recasting, over the remaining term of the loan, or over such longer period as the Secretary may determine, the total unpaid amount then due with the modification to become effective currently or upon the termination of an agreed-upon extension of the period for curing the default. **(c)** (1) For purposes of this subsection: (A) The term “defaulted loan” means a loan that is guaranteed under this chapter, that was made for a purpose described in [section 3710(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section3710/a&num=0&edition=prelim), and that is in default. (B) The term “liquidation sale” means a judicial sale or other disposition of real property to liquidate a defaulted loan that is secured by such property. (C) The term “net value”, with respect to real property, means the amount equal to (i) the fair market value of the property, minus (ii) the total of the amounts which the Secretary estimates the Secretary would incur (if the Secretary were to acquire and dispose of the property) for property taxes, assessments, liens, property maintenance, property improvement, administration, resale (including losses sustained on the resale of the property), and other costs resulting from the acquisition and disposition of the property, excluding any amount attributed to the cost to the Government of borrowing funds. (D) Except as provided in subparagraph (D) of paragraph (10) of this subsection, the term “total indebtedness”, with respect to a defaulted loan, means the amount equal to the total of (i) the unpaid principal of the loan, (ii) the interest on the loan as of the date applicable under paragraph (10) of this subsection, and (iii) such reasonably necessary and proper charges (as specified in the loan instrument and permitted by regulations prescribed by the Secretary to implement this subsection) associated with liquidation of the loan, including advances for taxes, insurance, and maintenance or repair of the real property securing the loan. (2) (A) Except as provided in subparagraph (B) of this paragraph, this subsection applies to any case in which the holder of a defaulted loan undertakes to liquidate the loan by means of a liquidation sale. (B) This subsection does not apply to a case in which the Secretary proceeds under subsection (a)(2) of this section. (3) (A) Before carrying out a liquidation sale of real property securing a defaulted loan, the holder of the loan shall notify the Secretary of the proposed sale. Such notice shall be provided in accordance with regulations prescribed by the Secretary to implement this subsection. (B) After receiving a notice described in subparagraph (A) of this paragraph, the Secretary shall determine the net value of the property securing the loan and the amount of the total indebtedness under the loan and shall notify the holder of the loan of the determination of such net value. (4) A case referred to in paragraphs (5), (6), and (7) of this subsection as being described in this paragraph is a case in which the net value of the property securing a defaulted loan exceeds the amount of the total indebtedness under the loan minus the amount guaranteed under this chapter. (5) In a case described in paragraph (4) of this subsection, if the holder of the defaulted loan acquires the property securing the loan at a liquidation sale for an amount that does not exceed the lesser of the net value of the property or the total indebtedness under the loan— (A) the holder shall have the option to convey the property to the United States in return for payment by the Secretary of an amount equal to the lesser of such net value or total indebtedness; and (B) the liability of the United States under the loan guaranty under this chapter shall be limited to the amount of such total indebtedness minus the net value of the property. (6) In a case described in paragraph (4) of this subsection, if the holder of the defaulted loan does not acquire the property securing the loan at the liquidation sale, the liability of the United States under the loan guaranty under this chapter shall be limited to the amount equal to (A) the amount of such total indebtedness, minus (B) the amount realized by the holder incident to the sale or the net value of the property, whichever is greater. (7) In a case described in paragraph (4) of this subsection, if the holder of the defaulted loan acquires the property securing the loan at the liquidation sale for an amount that exceeds the lesser of the total indebtedness under the loan or the net value and— (A) (i) the amount was the minimum amount for which, under applicable State law, the property was permitted to be sold at the liquidation sale, the holder shall have the option to convey the property to the United States in return for payment by the Secretary of an amount equal to the lesser of the amount for which the holder acquired the property or the total indebtedness under the loan; or (ii) there was no minimum amount for which the property had to be sold at the liquidation sale under applicable State law, the holder shall have the option to convey the property to the United States in return for payment by the Secretary of an amount equal to the lesser of such net value or total indebtedness; and (B) the liability of the United States under the loan guaranty under this chapter is as provided in paragraph (6) of this subsection. (8) If the net value of the property securing a defaulted loan is not greater than the amount of the total indebtedness under the loan minus the amount guaranteed under this chapter— (A) the Secretary may not accept conveyance of the property from the holder of the loan; and (B) the liability of the United States under the loan guaranty shall be limited to the amount of the total indebtedness under the loan minus the amount realized by the holder of the loan incident to the sale at a liquidation sale of the property. (9) In no event may the liability of the United States under a guaranteed loan exceed the amount guaranteed with respect to that loan under [section 3703(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section3703/b&num=0&edition=prelim). All determinations under this subsection of net value and total indebtedness shall be made by the Secretary. (10) (A) Except as provided in subparagraphs (B) and (C) of this paragraph, the date referred to in paragraph (1)(D)(ii) of this subsection shall be the date of the liquidation sale of the property securing the loan (or such earlier date following the expiration of a reasonable period of time for such sale to occur as the Secretary may specify pursuant to regulations prescribed by the Secretary to implement this subsection). (B) (i) Subject to division (ii) of this subparagraph, in any case in which there is a substantial delay in such sale caused by the holder of the loan exercising forbearance at the request of the Secretary, the date referred to in paragraph (1)(D)(ii) of this subsection shall be such date, on or after the date on which forbearance was requested and prior to the date of such sale, as the Secretary specifies pursuant to regulations which the Secretary shall prescribe to implement this paragraph. (ii) The Secretary may specify a date under subdivision (i) of this subparagraph only if, based on the use of a date so specified for the purposes of such paragraph (1)(D)(ii), the Secretary is authorized, under paragraph (5)(A) or (7)(A) of this subsection, to accept conveyance of the property. (C) In any case in which there is an excessive delay in such liquidation sale caused— (i) by the Department of Veterans Affairs (including any delay caused by its failure to provide bidding instructions in a timely fashion); or (ii) by a voluntary case commenced under title 11, United States Code (relating to bankruptcy); the date referred to in paragraph (1)(D)(ii) of this subsection shall be a date, earlier than the date of such liquidation sale, which the Secretary specifies pursuant to regulations which the Secretary shall prescribe to implement this paragraph. (D) For the purpose of determining the liability of the United States under a loan guaranty under paragraphs (5)(B), (6), (7)(B), and (8)(B), the amount of the total indebtedness with respect to such loan guaranty shall include, in any case in which there was an excessive delay caused by the Department of Veterans Affairs in the liquidation sale of the property securing such loan, any interest which had accrued as of the date of such sale and which would not be included, except for this subparagraph, in the calculation of such total indebtedness as a result of the specification of an earlier date under subparagraph (C)(i) of this paragraph. **(d)** The Secretary shall prescribe loss mitigation procedures, including a mandatory sequence in which the holder of a loan guaranteed under this chapter shall offer loss mitigation options (including an option to enter into a partial claim agreement under the VA Home Loan Program Reform Act) to a veteran, to help prevent the foreclosure of such loan. The Secretary may not purchase an entire such loan until the veteran has completed such sequence.

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38 U.S.C. § 3701 — Definitions

**(a)** For the purpose of this chapter, the term “housing loan” means a loan for any of the purposes specified by sections 3710(a) and 3712(a)(1) of this title. **(b)** For the purposes of housing loans under this chapter— (1) The term “World War II” (A) means the period beginning on September 16, 1940, and ending on July 25, 1947, and (B) includes, in the case of any veteran who enlisted or reenlisted in a Regular component of the Armed Forces after October 6, 1945, and before October 7, 1946, the period of the first such enlistment or reenlistment. (2) The term “veteran” includes the surviving spouse of any veteran (including a person who died in the active military, naval, air, or space service) who died from a service-connected disability, but only if such surviving spouse is not eligible for benefits under this chapter on the basis of the spouse’s own active duty. The active duty or service in the Selected Reserve of the deceased spouse shall be deemed to have been active duty or service in the Selected Reserve by such surviving spouse for the purposes of this chapter. (3) The term “veteran” also includes, for purposes of home loans, the spouse of any member of the Armed Forces serving on active duty who is listed, pursuant to [section 556 of title 37](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title37-section556&num=0&edition=prelim), United States Code, and regulations issued thereunder, by the Secretary concerned in one or more of the following categories and has been so listed for a total of more than ninety days: (A) missing in action, (B) captured in line of duty by a hostile force, or (C) forcibly detained or interned in line of duty by a foreign government or power. The active duty of the member shall be deemed to have been active dut

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38 U.S.C. § 511 — Decisions of the Secretary; finality

**(a)** The Secretary shall decide all questions of law and fact necessary to a decision by the Secretary under a law that affects the provision of benefits by the Secretary to veterans or the dependents or survivors of veterans. Subject to subsection (b), the decision of the Secretary as to any such question shall be final and conclusive and may not be reviewed by any other official or by any court, whether by an action in the nature of mandamus or otherwise. **(b)** The second sentence of subsection (a) does not apply to— (1) matters subject to [section 502 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section502&num=0&edition=prelim); (2) matters covered by sections 1975 and 1984 of this title; (3) matters arising under chapter 37 of this title; and (4) matters covered by chapter 72 of this title.

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38 U.S.C. § 322 — Office of National Veterans Sports Programs and Special Events

**(a) Establishment.—** There is in the Department an Office of National Veterans Sports Programs and Special Events. There is at the head of the Office a Director, who shall report to an appropriate official of the Veterans Health Administration, as determined by the Secretary, or to the Deputy Secretary or Secretary. **(b) Responsibilities of Director.—** Subject to the direction of the Secretary, the Director— (1) shall establish and carry out qualifying programs and events; (2) may provide for sponsorship by the Department of qualifying programs and events; (3) may provide for, facilitate, and encourage participation by disabled veterans in qualifying programs and events; (4) shall, to the extent feasible, cooperate with entities with significant experience in managing large-scale adaptive sports programs; (5) shall seek sponsorships and donations from the private sector to defray costs of carrying out the responsibilities of the Director to the maximum extent feasible; and (6) may carry out such other responsibilities as the Secretary determines are appropriate. **(c) Qualifying Program or Event.—** For purposes of this section, a qualifying program or event is a sports program or other event in which disabled veterans and disabled members of the Armed Forces participate and that is approved by the Secretary as being consistent with the goals and missions of the Department. **(d) Monthly Assistance Allowance.—** (1) Subject to the availability of appropriations for such purpose, the Secretary may provide a monthly assistance allowance to— (A) a veteran with a disability invited by the United States Olympic & Paralympic Committee to compete for a slot on, or selected for, the Paralympic Team for any month in which the veteran is training or competing in

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38 U.S.C. § 1816 — Monetary allowance

**(a) Monetary Allowance.—** The Secretary shall pay a monthly allowance to any eligible child for any disability resulting from the covered birth defects of that child. **(b) Schedule for Rating Disabilities.—** (1) The amount of the monthly allowance paid under this section shall be based on the degree of disability suffered by the child concerned, as determined in accordance with a schedule for rating disabilities resulting from covered birth defects that is prescribed by the Secretary. (2) In prescribing a schedule for rating disabilities for the purposes of this section, the Secretary shall establish four levels of disability upon which the amount of the allowance provided by this section shall be based. The levels of disability established may take into account functional limitations, including limitations on cognition, communication, motor abilities, activities of daily living, and employability. **(c) Amount of Monthly Allowance.—** The amount of the monthly allowance paid under this section shall be as follows: (1) In the case of a child suffering from the lowest level of disability prescribed in the schedule for rating disabilities under subsection (b), $100. (2) In the case of a child suffering from the lower intermediate level of disability prescribed in the schedule for rating disabilities under subsection (b), the greater of— (A) $214; or (B) the monthly amount payable under [section 1805(b)(3) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section1805/b/3&num=0&edition=prelim) for the lowest level of disability prescribed for purposes of that section. (3) In the case of a child suffering from the higher intermediate level of disability prescribed in the schedule for rating disabilities under subsection (b)

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38 U.S.C. § 101 — Definitions

For the purposes of this title— (1) The terms “Secretary” and “Department” mean the Secretary of Veterans Affairs and the Department of Veterans Affairs, respectively. (2) The term “veteran” means a person who served in the active military, naval, air, or space service, and who was discharged or released therefrom under conditions other than dishonorable. (3) The term “surviving spouse” means (except for purposes of chapter 19 of this title) a person who was the spouse of a veteran at the time of the veteran’s death, and who lived with the veteran continuously from the date of marriage to the date of the veteran’s death (except where there was a separation which was due to the misconduct of, or procured by, the veteran without the fault of the spouse) and who has not remarried. (4) (A) The term “child” means (except for purposes of chapter 19 of this title (other than with respect to a child who is an insurable dependent under subparagraph (B) or (C) of section 1965(10) of such chapter) and [section 8502(b) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section8502/b&num=0&edition=prelim)) a person who is unmarried and— (i) who is under the age of eighteen years; (ii) who, before attaining the age of eighteen years, became permanently incapable of self-support; or (iii) who, after attaining the age of eighteen years and until completion of education or training (but not after attaining the age of twenty-three years), is pursuing a course of instruction at an approved educational institution; and who is a legitimate child, a legally adopted child, a stepchild who is a member of a veteran’s household or was a member at the time of the veteran’s death, or an illegitimate child but, as to the alleged father, onl

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38 U.S.C. § 3710 — Purchase or construction of homes

**(a)** Except as provided in [section 3704(c)(2) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section3704/c/2&num=0&edition=prelim), any loan to a veteran, if made pursuant to the provisions of this chapter, is automatically guaranteed if such loan is for one or more of the following purposes: (1) To purchase or construct a dwelling to be owned and occupied by the veteran as a home. (2) To purchase a farm on which there is a farm residence to be owned and occupied by the veteran as the veteran’s home. (3) To construct on land owned by the veteran a farm residence to be occupied by the veteran as the veteran’s home. (4) To repair, alter, or improve a farm residence or other dwelling owned by the veteran and occupied by the veteran as the veteran’s home. (5) To refinance existing mortgage loans or other liens which are secured of record on a dwelling or farm residence owned and occupied by the veteran as the veteran’s home. (6) To purchase a one-family residential unit in a condominium housing development or project, if such development or project is approved by the Secretary under criteria which the Secretary shall prescribe in regulations. (7) To improve a dwelling or farm residence owned by the veteran and occupied by the veteran as the veteran’s home through energy efficiency improvements, as provided in subsection (d). (8) To refinance in accordance with subsection (e) of this section an existing loan guaranteed, insured, or made under this chapter. (9) (A) (i) To purchase a manufactured home to be permanently affixed to a lot that is owned by the veteran. (ii) To purchase a manufactured home and a lot to which the home will be permanently affixed. (B) (i) To refinance, in accordance with the terms

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38 U.S.C. § 1832 — Definitions

In this chapter: (1) The term “child” means the following: (A) For purposes of subchapters I and II of this chapter, an individual, regardless of age or marital status, who— (i) is the natural child of a Vietnam veteran; and (ii) was conceived after the date on which that veteran first entered the Republic of Vietnam during the Vietnam era. (B) For purposes of [section 1821 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section1821&num=0&edition=prelim), an individual, regardless of age or marital status, who— (i) is the natural child of a veteran of covered service in Korea (as determined for purposes of that section); and (ii) was conceived after the date on which that veteran first entered service described in subsection (c) of that section. (C) For purposes of [section 1822 of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section1822&num=0&edition=prelim), an individual, regardless of age or marital status, who— (i) is the natural child of a veteran of covered service in Thailand (as determined for purposes of that section); and (ii) was conceived after the date on which that veteran first entered service described in subsection (c) of that section. (2) The term “covered child” means a child who is eligible for health care and benefits under this chapter. (3) The term “covered veteran” means an individual whose children are eligible for health care and benefits under this chapter. (4) The term “Vietnam veteran” means an individual who performed active military, naval, or air service in the Republic of Vietnam during the Vietnam era, without regard to the characterization of that individual’s service. (5) The term “Vietnam era” with respect to— (A) s

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38 U.S.C. § 1833 — Applicability of certain administrative provisions

**(a) Applicability of Certain Provisions Relating to Compensation.—** The provisions of this title specified in subsection (b) apply with respect to benefits and assistance under this chapter in the same manner as those provisions apply to compensation paid under chapter 11 of this title. **(b) Specified Provisions.—** The provisions of this title referred to in subsection (a) are the following: (1) Section 5101(c). (2) Subsections (a), (b)(3), (g), and (i) of section 5110. (3) Section 5111. (4) Subsection (a) and paragraphs (1), (6), (9), and (10) of subsection (b) of section 5112.

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38 U.S.C. § 3733 — Property management

**(a)** (1) Of the number of purchases made during any fiscal year of real property acquired by the Secretary as the result of a default on a loan guaranteed under this chapter for a purpose described in [section 3710(a) of this title](https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title38-section3710/a&num=0&edition=prelim), not more than 65 percent, nor less than 50 percent, of such purchases may be financed by a loan made by the Secretary. The maximum percentage stated in the preceding sentence may be increased to 80 percent for any fiscal year if the Secretary determines that such an increase is necessary in order to maintain the effective functioning of the loan guaranty program. (2) After September 30, 1990, the percentage limitations described in paragraph (1) of this subsection shall have no effect. (3) The Secretary may, beginning on October 1, 1990, sell any note evidencing a loan referred to in paragraph (1)— (A) with recourse; or (B) without recourse, but only if the amount received is equal to an amount which is not less than the unpaid balance of such loan. (4) (A) Except as provided in subparagraph (B), the amount of a loan made by the Secretary to finance the purchase of real property from the Secretary described in paragraph (1) may not exceed an amount equal to 95 percent of the purchase price of such real property. (B) (i) The Secretary may waive the provisions of subparagraph (A) in the case of any loan described in paragraph (5). (ii) A loan described in subparagraph (A) may, to the extent the Secretary determines to be necessary in order to market competitively the property involved, exceed 95 percent of the purchase price. (5) The Secretary may include, as part of a loan to finance a purchase of real proper

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38 U.S.C. § 3737 — Partial Claim Program

**(a) Establishment.—** The Secretary shall carry out a program, to be known as the “Partial Claim Program”, under which the Secretary may make a partial claim, described in subsection (b), with respect to a loan— (1) guaranteed under this chapter; (2) regarding the primary residence of the borrower; and (3) that the Secretary determines is in default or at imminent risk of default. **(b) Partial Claim Described.—** A partial claim described in this subsection, with respect to a loan described in subsection (a), is the purchase by the Secretary of a portion of indebtedness under the loan, through a transaction under which the Secretary— (1) pays to the holder of the loan the amount of indebtedness, subject to subsection (c), that the Secretary determines necessary to help prevent or resolve a default; and (2) receives a secured interest in the property that serves as collateral for the guaranteed loan, which is subordinate to the amount of indebtedness under the guaranteed loan that the Secretary does not purchase. **(c) Administration of Partial Claim.—** (1) (A) Subject to subparagraph (B), the amount of a partial claim under this section with respect to a loan guaranteed described in subsection (a) may not exceed 25 percent of the unpaid principal balance of the loan on the date on which the partial claim is made. (B) In the case of an individual who failed to make a payment on a loan guaranteed under this chapter during the period beginning on March 1, 2020 and ending on May 1, 2025, the amount of a partial claim under this section may not exceed 30 percent of the unpaid principal balance of the guaranteed loan as of the date that the initial partial claim is made. (2) (A) Subject to subparagraph (B), the Secretary may make only one partial claim p

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