At the same time, VA is concerned that certain lenders are exploiting cash-out refinancing as a loophole to the responsible refinancing Congress envisioned when enacting section 309 of the Act
VA recognizes there are certain advantages to a veteran who wants to obtain a cash-out refinance, and VA has no intention of unduly curtailing veterans' access to the equity they have earned in their homes. Nevertheless, some lenders are pressuring veterans to increase artificially their home loan amounts when refinancing, without regard to the long-term costs to the veteran and without adequately advising the veteran of the veteran's loss of home equity. In doing so, veterans are placed at a higher financial risk, and the lender avoids compliance with the more stringent requirements Congress mandated for less risky refinance loans.
Lender uncertainty and the potential loophole may also cause investors to devalue VA refinance loans until VA steps in to resolve the issues. Thus, VA believes that, unless VA promulgates rules quickly, a loss of investor optimism in the VA product could further restrict veterans from being able to utilize their earned VA benefits.
VA does not plan to dispense with the notice and comment requirements altogether. Section 309(a)(2)(A)(ii) and (iii) of the Act requires VA, 10 days before publication of the rule, to submit a notice of the waiver to the House and Senate Committees on Veterans' Affairs and publish the notice in the Federal Register. Public Law 115-174, 132 Stat. 1296. VA has complied with these requirements. Section 309(a)(2)(B) further requires VA to seek public notice and comment on this regulation if the regulation will be in effect for a period exceeding one year. Public Law 115-174, 132 Stat. 1296. VA anticipates the regulation will be in effect past the one-year mark. Therefore, VA is seeking public comment on this rulemaking.
Executive Orders 12866, 13563, and 13771
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action” requiring review by the Office of Management and Budget (OMB), unless OMB waives such review, as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”
The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined, and it has been determined to be an economically significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's website at by following the link for “VA Regulations Published From FY 2004 Through Fiscal Year to Date.” This interim final rule is considered an E.O. 13771 regulatory action. Details on the estimated costs of this interim final rule can be found in the rule's economic analysis.